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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 3, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-8207
THE HOME DEPOT, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
IRS NO. 95-3261426
(I.R.S. Employer Identification No.)
2455 PACES FERRY ROAD, ATLANTA, GEORGIA
(Address of Principal Executive Offices)
30339-4024
(Zip Code)
Registrant's telephone number, including area code: (770) 433-8211
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, $.05 Par Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ______
The aggregate market value of the Common Stock of the Registrant held by
nonaffiliates of the Registrant on April 1, 2002, was $109,162,373,624. The
aggregate market value was computed by reference to the closing price of the
Common Stock on the New York Stock Exchange on such date. For the purposes of
this response, executive officers and directors are deemed to be the affiliates
of the Registrant and the holdings by nonaffiliates was computed at
2,263,840,183 shares.
The number of shares outstanding of the Registrant's Common Stock as of April 1,
2002 was 2,350,050,699 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 2001 Annual Report to Stockholders are incorporated
by reference in Part II.
Portions of the Registrant's Proxy Statement for the 2002 Annual Meeting of
Stockholders to be held on May 29, 2002, are incorporated by reference in Part
III.
INCORPORATION BY REFERENCE
Filings made by companies with the Securities and Exchange Commission sometimes
"incorporate information by reference." This means that the company is referring
you to information that was previously filed with the SEC, and this information
is considered to be part of the filing you are reading. The following materials
are incorporated by reference into this Form 10-K:
- Information contained in our Proxy Statement for the 2002
Annual Meeting of Stockholders is incorporated by reference in
response to Items 10 through 13 of Part III.
- Information contained on pages 24 through 35 of our 2001
Annual Report to Stockholders is incorporated by reference in
response to Item 8 of Part II.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
Certain statements we make in this report, and other written and oral statements
made by us or our authorized executive officers on our behalf may constitute
"forward-looking statements" within the meaning of the federal securities laws.
Words or phrases such as "should result," "are expected to," "we anticipate,"
"we estimate," "we project," "we believe" 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;
- - general economic conditions;
- - the impact of competition; and
- - regulatory and litigation matters.
You should not place undue reliance on forward-looking statements, since such
statements speak only as of the date they are made. Additional information
concerning the risks and uncertainties listed above and other factors you may
wish to consider are provided beginning on page 25 under "Item 7. Management's
Discussion and Analysis of Results of Operations and Financial Condition -
Forward-Looking Statements May Prove Inaccurate."
PART I
ITEM 1. BUSINESS
The Home Depot, Inc. is the world's largest home improvement retailer and the
second largest retailer in the United States based on net sales volume for
fiscal 2001. At the end of our 2001 fiscal year, we were operating 1,333 stores.
Most of our stores are either Home Depot(R) stores or EXPO Design Center(R)
stores. A description of each of these types of stores is as follows:
- HOME DEPOT STORES: Home Depot stores sell a wide assortment of
building materials and home improvement and lawn and garden
products and provide a number of services. Home Depot stores
average approximately 109,000 square feet of enclosed space,
with an additional approximately 22,000 square feet in the
outside garden area. At fiscal year end, we had 1,287 Home
Depot stores located throughout the United States, Canada,
Argentina and Mexico.
- EXPO DESIGN CENTER STORES: EXPO Design Center stores sell
products and services primarily for home decorating and
remodeling projects. Unlike Home Depot stores, EXPO Design
Center stores do not sell building materials and lumber.
Rather, EXPO Design Center stores offer interior design
products, such as kitchen and bathroom cabinetry, tile,
flooring and lighting fixtures and installation services. The
prototypical EXPO Design Center is approximately 101,000
square feet. At the end of fiscal 2001, we were operating 41
EXPO Design Center stores in the United States.
Additionally, at the end of fiscal 2001 we were operating four Villager's(SM)
Hardware test stores in New Jersey. Villager's Hardware stores offer products
for home enhancement and small projects. We also have one test store called The
Home Depot Floor Store(SM) in Texas that sells only flooring products. We also
began testing a new store format focused on the professional customer, and at
the end of fiscal 2001, we were operating two Home Depot Supply stores.
We offer products through two direct marketing subsidiaries. Maintenance
Warehouse(R), a wholly-owned subsidiary, is a direct marketer of maintenance,
repair and operations products serving primarily the multi-family housing and
lodging facilities management market. The company fills orders through its 21
distribution centers, which are located throughout the United States. National
Blinds & Wallpaper(SM), a wholly-owned subsidiary, is a mail order service for
wallpaper, custom window treatments and rugs.
We operate three other wholly-owned subsidiaries, Georgia Lighting, Inc., Apex
Supply Company, Inc. and Your "other" Warehouse, Inc. Georgia Lighting(R), a
specialty lighting designer, distributor and retailer, has seven retail
locations in Georgia. Apex Supply Company is a wholesale supplier of plumbing,
HVAC, appliances and other related professional products with 22 locations in
Florida, Georgia, South Carolina and Tennessee. In November 2001, Home Depot
acquired Your "other" Warehouse(R), which is a plumbing distributor that focuses
on special order fulfillment through its four facilities located in Louisiana
and Nevada.
On October 31, 2001, we completed the sale of our five stores in Chile to our
former joint venture partner, Falabella. In February 2002, the Company also sold
its four stores in Argentina.
During fiscal 2001, we acquired TotalHOME, Mexico's second largest home
improvement retailer that has three stores in Monterrey and one in Mexico City.
In March 2002, we announced that we have entered into an agreement to purchase
Del Norte, a four-store chain of home improvement stores in Juarez, Mexico. The
transaction is subject to approval by the Mexican government.
The Home Depot, Inc. is a Delaware corporation that was incorporated in 1978.
Our Store Support Center (corporate office) is located at 2455 Paces Ferry Road,
Atlanta, Georgia 30339-4024. The telephone number is (770) 433-8211.
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RETAIL BUSINESSES
HOME DEPOT STORES
OPERATING STRATEGY. The operating strategy for Home Depot stores is to offer a
broad assortment of high-quality merchandise and services at competitive prices
using highly knowledgeable, service-oriented personnel and aggressive
advertising. We believe that our associates' knowledge of products and home
improvement techniques and applications is very important to our marketing
approach and our ability to maintain customer satisfaction. We regularly check
our competitors' prices to ensure that our prices are competitive within each
market.
CUSTOMERS. Home Depot stores serve three primary customer groups:
- DO-IT-YOURSELF ("D-I-Y") CUSTOMERS: These customers are
typically homeowners who purchase products and complete their
own projects and installations. To complement the in-store
expertise of our associates, Home Depot stores offer many
D-I-Y "how-to" clinics taught by associates and merchandise
vendors.
- DO-IT-FOR-ME ("D-I-F-M") CUSTOMERS: These customers are
typically homeowners who purchase materials themselves and
hire third parties to complete the project and/or
installation. We offer these customers installation services
for a variety of products through third party contractors.
- PROFESSIONAL CUSTOMERS: These customers are professional
repair remodelers, general contractors and tradesmen. In many
stores we offer a variety of programs to these professional
customers, including additional delivery and will-call
services, dedicated staff, extensive merchandise selections
and expanded credit programs, all of which we believe increase
sales.
PRODUCTS. A typical Home Depot store stocks approximately 40,000 to 50,000
product items, including variations in color and size. Each store carries a wide
selection of high-quality and nationally advertised brand name merchandise. The
following table shows the percentage of sales of each major product group for
each of the last three fiscal years:
Percentage of Sales for
Fiscal Year Ended
------------------------------
Feb. 3, Jan. 28, Jan. 30,
2002 2001 2000
------- -------- --------
Product Group
Building materials, lumber and millwork.............. 23.6% 23.6% 24.7%
Plumbing, electrical and kitchen..................... 28.1 27.6 26.6
Hardware and seasonal................................ 27.6 28.3 28.5
Paint, flooring and wall coverings................... 20.7 20.5 20.2
----- ----- -----
Total................................................ 100.0% 100.0% 100.0%
===== ===== =====
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We buy our store merchandise from vendors located throughout the world. We are
not dependent on any single vendor. Most of our merchandise is purchased
directly from manufacturers, which eliminates "middleman" costs. We believe that
competitive sources of supply are readily available for substantially all of the
products we sell in Home Depot stores.
We maintain a global sourcing merchandise program to source high-quality
products directly from overseas manufacturers, which gives our customers a
broader selection of products and better values while enhancing our gross
margin. Our product development managers travel internationally to identify
opportunities to purchase items directly for our stores. This enables us to
improve product quality, to import products not currently available to our
customers and to offer at a lower price products that would otherwise be
purchased from third party importers. We currently source products from more
than 500 manufacturers in approximately 40 countries.
To complement the established national brand name products we offer, we have
formed strategic alliances with vendor partners to market products under brand
names that are only offered through The Home Depot. At the end of fiscal year
2001, we offered products under proprietary and other exclusive brands,
including Thomasville(R) kitchen and bathroom cabinets; RIDGID(R) power tools;
Behr Premium Plus(R) paint; Mill's Pride(R) cabinets; GE(R) SmartWater water
heaters; and Vigoro(R) fertilizer. In the future, we may consider additional
strategic alignments with other vendors to offer products under proprietary
brand names. Additionally, we will continue to assess opportunities to expand
the range of products available under existing proprietary brands.
AT-HOME SERVICES. Home Depot stores offer a variety of installed sales and home
maintenance programs through its At-Home Services(R) business. This service
targets the Do-It-For-Me customer who will select and purchase materials for a
project and prefers the Company to provide professional installation. We
implement our installed sales programs through independent qualified contractors
and strategic partners in the U.S. and Canada. These programs include the
installation of products that are sold in our stores, such as carpeting, hard
flooring, cabinets and solid surface countertops, as well as the installation by
strategic partners of sales initiated in our stores for products such as
roofing, generators and furnace and central air systems. Additionally, in
November 2001 we announced a strategic alliance with a national company to test
the sale of co-branded residential maintenance and repair services, such as lawn
care, termite and pest control, plumbing and drain cleaning, carpet and
upholstery cleaning and home warranties. The program is initially being tested
in approximately 30 stores in three markets.
STORE-RELATED PROGRAMS. We continually assess our business to find opportunities
to increase customer loyalty, thereby increasing sales. Accordingly, we
implemented or expanded a number of in-store initiatives in Home Depot stores
and programs aimed at supporting store operations during fiscal 2001, including:
- Professional Business Customer Initiative. We are committed to
being the supplier of choice to a variety of professional
customers, including certain repair remodelers, carpenters,
plumbers, painters, electricians, building maintenance
professionals and designers. During fiscal 2001, we continued
to expand our pro initiative, which adds service-related
programs to our stores that are designed to increase sales to
professional customers. Stores participating in the program
have added associates at a sales desk dedicated to providing
more personalized service to professional customers, including
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managing accounts and taking and filling orders for pick-up or
delivery. Additionally, during the hours when professionals
typically shop, these stores have assigned sales associates in
certain departments to assist these customers. To better serve
our professional customers, we have also increased quantities
of existing products typically purchased by professionals in
bulk quantities, and we offer certain items in each department
packaged in bulk to offer additional savings. While aimed at
the professional customer, this program also enables us to
better serve our D-I-Y customer with improved customer
service, including delivery and will-call services, expanded
credit programs and additional merchandise. Through this
initiative, we have identified best practices in serving our
professional customers that are being implemented in many of
our stores without material additional costs. By the end of
fiscal 2001, we had expanded the professional customer
initiative into approximately 535 stores, 370 of which were
added during the year. We anticipate that during fiscal 2002,
we will expand this initiative to more than 400 additional
stores.
- SPI Program. During fiscal 2001, we completed the roll-out of
our Service Performance Improvement, or "SPI," program. The
program focuses on making it easier to shop in our stores
while improving customer service. Through the program, some
associates are assigned specific tasks, allowing others to
focus on assisting customers. Additionally, we schedule
associates to receive shipments and stock merchandise when our
stores are closed or during hours when they have fewer
customers. We believe this separation of assignments allows us
to provide better customer service while improving labor
productivity, increasing transportation and receiving
efficiencies, managing inventory more efficiently and
increasing sales.
- Centralization of Merchandising. During fiscal 2001, we
centralized our merchandise buying decisions and vendor
selection processes while retaining merchandising groups in
our divisions in order to support the development of
"neighborhood store" product assortments. This structure
allows us to leverage the purchasing power of the Company,
while focusing on the needs of individual neighborhoods, and
to develop product mixes to satisfy neighborhood buying
preferences. Additionally, through centralized buying, we
believe we can more effectively manage our product assortments
and our pricing strategy.
- Appliance Sales. During fiscal 2000, we completed the roll-out
of our appliance sales program to most of our stores in the
U.S. Through this program we sell appliances manufactured by
General Electric(R), Maytag(R) and other manufacturers. We
display and stock the more popular appliances in our stores
and offer the ability to special order over 2,000 additional
products through computer kiosks located in the stores.
Through the computer kiosks we can check inventory and arrange
for delivery to the customer directly from the manufacturer as
soon as 48 hours after the order is placed. During fiscal
2002, we plan to continue to test an enhanced offering of
appliances through 1,500 to 2,000 feet of dedicated appliance
selling space in selected stores. About 50 of our stores had
appliance showrooms at the end of fiscal 2001, and we
anticipate adding them to up to 350 stores during fiscal 2002.
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- Tool Rental. As part of our efforts to satisfy a broad range
of the needs of our professional and D-I-Y customers, we offer
a tool rental service in certain stores. Under this program,
we rent approximately 200 commercial-quality tools in ten
categories, including saws, floor sanders, generators, gas
powered lawn equipment and plumbing tools. Customers can rent
the tools on an hourly, daily, weekly or monthly basis. Our
associates who work in the tool rental area receive special
training concerning the use and maintenance of the tools. As
of February 3, 2002, we offered tool rental service in
approximately 466 stores compared to 342 stores at the end of
fiscal 2000. By the end of fiscal 2002, we anticipate having
tool rental services in approximately 600 stores. We believe
that offering this service increases the sales of related
merchandise without reducing the sales of equipment similar to
that available for rental.
- Customer Contact Center. During fiscal 2001, we began testing
the use of a customer contact center to answer calls to
stores. In addition to handling store calls, the contact
center representatives assist with expediting special orders
and managing installation projects. The customer contact
center also supports the sale and installation of water
heaters and HVAC equipment nationwide. Calls come into the
center where customer service representatives assist customers
with product selection and scheduling installations. The
orders are then fulfilled through our stores. We believe that
the customer contact center will allow us to provide better
customer service, both in our stores and on the phone, while
reducing costs. We anticipate continuing this test during
fiscal 2002.
- Customer Education Programs. We offer several programs to
enhance the skills and confidence of our D-I-Y customers. Our
associates and vendors teach "how-to" clinics that focus on
D-I-Y projects, such as installing garbage disposals, laying
patio pavers or building a deck. In addition to the clinics,
we offer Home Depot University(SM), which presents four-week
modules allowing our customers to learn about several facets
of a home improvement topic. For example, a room enhancement
module may provide instruction on paint, wallpaper and window
treatments. Through The Home Depot's Kids Workshop(SM)
program, children are instructed in tool safety and complete a
small building project, such as a birdhouse or tool box. We
believe that these types of educational programs increase our
sales by encouraging our customers to undertake more projects,
differentiating us from our competition and reinforcing our
position as experts in home improvement.
STORE GROWTH
United States. At the end of fiscal 2001, we were operating 1,201 Home Depot
stores in the United States, including Puerto Rico. During fiscal 2001, we
opened 172 new Home Depot stores in the U.S. Although these new store openings
occurred primarily in existing markets, we continued our geographic expansion by
opening stores in a number of new markets.
To increase customer service levels, gain incremental sales and enhance
long-term market penetration, we often open new stores near the edge of the
market areas served by existing stores.
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While these openings may initially have a negative impact on comparable
store-for-store sales, we believe this "cannibalization" strategy increases
customer satisfaction and overall market share by reducing delays in shopping,
increasing utilization by existing customers and attracting new customers to
more convenient locations. During fiscal 2001, approximately 30% of our stores
were cannibalized by new store openings.
Canada. At the end of fiscal 2001, we were operating 78 Home Depot stores in
seven Canadian provinces. Of these stores, 11 were opened during fiscal 2001.
Our Canadian stores are operated through a wholly-owned Canadian subsidiary of
The Home Depot.
Mexico. During fiscal 2001, we acquired TotalHOME, Mexico's second largest home
improvement retailer, which has three stores in Monterrey and one in Mexico
City. In March 2002, we announced that we have entered into an agreement to
purchase Del Norte, a four-store chain of home improvement stores in Juarez,
Mexico. The transaction is subject to approval by the Mexican government. We
plan to build two additional stores in Mexicali and Tijuana during fiscal 2002
and are pursuing several additional locations.
During fiscal 2002, we currently plan to open 200 stores, including Home Depot
stores, EXPO Design Center stores and other formats.
EXPO DESIGN CENTER STORES
OPERATING STRATEGY. The operating strategy for our EXPO Design Center stores is
to be a complete home decorating and remodeling resource. Each of these stores
offers 10 specialty businesses under one roof and features design showrooms with
full-size displays to help customers visualize the end result of possible
interior design projects. To assist our customers, we also offer complete
project management and installation services. Accordingly, we employ associates
who have expertise in designing, planning and completing decorating and
remodeling projects.
CUSTOMERS. Typically, customers at EXPO Design Center stores are middle to upper
income D-I-F-M customers, who purchase merchandise for installation by others.
Accordingly, we offer installation services for most of the products we sell at
these stores. Additionally, our trade customers are custom builders, remodelers,
designers and architects.
PRODUCTS. EXPO Design Center stores offer interior design products and
installation services in the following core product categories:
- Kitchens
- Baths
- Lighting
- Tile, stone and wood
- Appliances
- Seasonal
- Decorative fabrics and window treatments
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- Carpets and rugs
- Accessories
- Home storage and organization
EXPO Design Center stores offer a broad range of merchandise in an effort to
meet all the needs of shoppers whose interior design preferences may go beyond
the items available in a Home Depot store. While there is minimal overlap
between the products offered in Home Depot stores and EXPO Design Center stores,
those products available at EXPO Design Center stores represent a broader and
more unique assortment of merchandise. In addition to nationally advertised
brand name products, we also offer items that must be special ordered or that
are typically offered through showrooms open only to design professionals.
STORE GROWTH. At the end of fiscal 2001, we were operating 41 EXPO Design Center
stores, 15 of which were opened that year. We currently anticipate growing the
number of EXPO Design Center stores by approximately 25% in fiscal 2002. We will
focus on expanding in the top 100 U.S. metropolitan markets. These new stores
are expected to average approximately 101,000 square feet and will incorporate a
showroom environment.
IN-STORE SERVICES. We have associates at our EXPO Design Center stores to assist
with every phase of a project. Certified kitchen and bath designers are on
staff, as well as design professionals to help our customers design lighting,
tile and flooring, custom upholstery and bedding, custom closets and window
treatments. Installation services are available for most products at EXPO Design
Center stores, including kitchens, baths, flooring, wallpaper, tile, lighting
fixtures and window treatments. Our project managers ensure that the products
are available and then schedule licensed third party contractors to complete the
work. We also offer special trade services, such as dedicated outside sales
people and designers who are dedicated to helping professional customers.
GEORGIA LIGHTING
We acquired our wholly-owned subsidiary Georgia Lighting in June 1999. Georgia
Lighting is a specialty lighting designer, distributor and retailer based in
Atlanta. The company, which has seven retail locations, offers an extensive
collection of decorative lighting fixtures, supplies, accents and accessories to
commercial and retail customers. We believe that the acquisition of Georgia
Lighting has allowed us to strengthen our sourcing, training and merchandising
in lighting for both The Home Depot and EXPO Design Center stores.
THE HOME DEPOT FLOOR STORE
During fiscal 2000, we opened a test store in Plano, Texas that offers flooring
products. The Floor Store's merchandise assortment includes carpet, ceramic,
wood, laminate and vinyl flooring. During fiscal 2002, we anticipate continuing
to analyze the results of this test.
HOME DEPOT URBAN STORES
We currently plan to open our first three urban stores in fiscal 2002. One will
be in Brooklyn with approximately 61,000 square feet; one will be in Staten
Island with approximately 79,000
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square feet and the other will be a two-level store with approximately 80,000
square feet in Chicago. These stores will carry approximately 20,000 items,
which will be selected depending upon the particular neighborhood in which the
store is located. We are continuing to analyze other urban and high density
suburban markets throughout the country for additional sites to test this
smaller store concept. Additionally, we will be re-branding our four Villager's
Hardware stores, which are located in New Jersey, as Home Depot urban stores.
OTHER BUSINESSES
APEX SUPPLY COMPANY
In January 2000, we acquired Apex Supply Company, a wholesale distributor of
plumbing, HVAC, appliances and other related products. The Company offers these
products through 22 locations in Florida, Georgia, South Carolina, and Tennessee
and employs approximately 580 associates. Apex assisted us with the development
of our HVAC program, and we believe this acquisition will help us to increase
our penetration of the professional plumbing trades.
YOUR "OTHER" WAREHOUSE
We acquired Your "other" Warehouse in November 2001. This subsidiary is a
plumbing distributor that focuses on decorative and commercial plumbing
products, including special orders. Your "other" Warehouse carries over 36,000
products from over 100 plumbing vendors, including Kohler(R), American
Standard(R) and other major manufacturers. The company operates three primary
distribution facilities and a call center. We believe this acquisition will
assist us by improving our competitive position and simplifying the special
order process in our stores.
HOME DEPOT SUPPLY
We are testing a new store format focused on the professional customer. These
Home Depot Supply stores offer personal service with experienced account
managers, expanded assortments, greater quantities of merchandise and expanded
delivery services. At the end of fiscal 2001, we were operating two of these
stores, and we currently anticipate opening three to five Home Depot Supply
stores during fiscal 2002.
MAINTENANCE WAREHOUSE
Our Maintenance Warehouse subsidiary is a leading provider of maintenance,
repair and operations products primarily to the multi-family housing and lodging
facilities management market. Through its catalog, which is published
semi-annually, Maintenance Warehouse offers approximately 13,000 items,
including variations in color and size. Maintenance Warehouse, which employs
approximately 1,300 people, emphasizes accurate order taking, delivery and
personalized service. Orders are typically placed over the telephone, through a
field sales representative or through the company's website at www.mwh.com.
Orders are filled through one of Maintenance Warehouse's 21 distribution centers
and are shipped for same-day or next-day delivery. During fiscal 2000,
Maintenance Warehouse expanded its operations in Texas, Arizona and Georgia
through the acquisition of N-E Thing Supply Company, Inc.
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NATIONAL BLINDS & WALLPAPER
National Blinds and Wallpaper sells decor products through telephone sales and
over the Internet. The company markets primarily through magazine advertising
aimed at customers seeking the lowest prices. The company maintains no
inventory, as orders are shipped directly from the supplier to the customer.
INTERNET
Our primary website is located at www.homedepot.com. The site offers information
about projects and our products, calculators to estimate the amount and kinds of
materials needed to complete a project, as well as information about our company
and links to our other on-line businesses. As with our stores, the focus of our
website is customer service. We believe our Internet site provides us with an
opportunity to build relationships with our customers, educate our customers,
improve service, provide convenient shopping from home and increase store sales.
Through www.homedepot.com, we offer approximately 20,000 items for sale. We
offer customers the products available at stores in their region on our website,
and the products are priced based on the region in which the customer lives.
Orders are fulfilled from certain stores that have been designated as Internet
fulfillment stores and are shipped through United Parcel Service(R). By
integrating Internet purchases with our stores, we hope to provide our customers
with greater flexibility and service. During fiscal 2001, we launched
www.EXPO.com through which customers can order select products from our EXPO
Design Center stores and obtain information about these stores and the products
and services they offer. We also began selling Home Depot clearance merchandise
through eBay(R). We anticipate continuing to test selling clearance merchandise
through the Internet during fiscal 2002.
We have included our website addresses only as inactive textual references. The
information contained on our websites is not incorporated by reference into this
Form 10-K.
STORE SUPPORT SERVICES
INFORMATION SYSTEMS. Each Home Depot, EXPO Design Center and Villager's Hardware
store is equipped with a computerized point of sale system, electronic bar code
scanning system and a UNIX server. Store information is communicated to the
Store Support Center's computers via a land-based Asynchronous Transfer Mode
("ATM") network in the U.S. and a frame relay network internationally. These
computers provide corporate, financial, merchandising and other back office
function support. We believe our systems provide efficient customer check-out
and returns, store-based inventory management, rapid order replenishment, labor
planning support and item movement information. Fast registers, credit
authorizations and check approvals expedite transactions in our stores at a pace
that we believe sets the standard for our industry. For example, to better serve
the increasing number of customers applying for credit while in our stores, the
charge card approval process time has been reduced to less than 30 seconds.
We have implemented a mobile ordering system in our Home Depot stores using
portable carts with computers to assist our associates in placing accurate
orders for inventory. Through the system, an
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associate on the sales floor can see the supply the store has for a given item,
review the suggested re-order quantities based on the store's historical
experience and place an order with the vendor. We believe the system increases
the efficiency and productivity of our associates because it requires less time
and fewer people to assess and order inventory. We have also implemented a
mobile signing system to help ensure that our signing is consistent with our
point-of-sale price data. Additionally, we are in the process of rolling out
additional systems tools to assist with labor scheduling to help ensure the best
possible customer service levels.
We are continuously assessing and upgrading our information systems to support
growth, reduce and control costs and enable our associates to make better
decisions. We continue to realize greater efficiency as a result of our
electronic data interchange ("EDI") program. Currently, most of our high volume
vendors are participating in the EDI program, which represents more than 70% of
our total transactional volume. EDI is a paperless system, which processes
orders from buying offices to vendors, alerts the stores when the merchandise is
to arrive and transmits invoice data from the vendors and freight carriers to
the Store Support Center. Additionally, we have implemented a web-based
invoicing system that, as of the end of the fiscal year, was being used by over
900 suppliers.
We continued to enhance our supply chain systems during fiscal 2001. In the
transportation area, we introduced the use of bid optimization tools to
less-than-truckload carriers that allow the carriers to analyze efficient route
combinations and thereby reduce our costs. In addition, we implemented a
truckload transportation management system and custom systems to support our
transit facilities. To support our growing import volume, we also developed and
implemented an advanced forecasting system and rolled out to our import
distribution centers common distribution systems, which provide for increased
speed, flexibility and consistency. In fiscal 2002, we plan to roll these
systems out to our lumber distribution centers.
During fiscal 2003, we plan to release a new system to support services such as
special orders and installations. The system will integrate the ordering,
delivery and installation of products to allow us to manage projects more
efficiently. We believe this system will increase accuracy and speed while
reducing costs.
ASSOCIATE DEVELOPMENT. As of February 3, 2002, we employed approximately 256,000
associates, of whom approximately 14,000 were salaried, with the remainder
compensated on an hourly basis. Approximately 65% of our associates are employed
on a full-time basis. To attract and retain qualified personnel, we seek to
maintain competitive salary and wage levels in each market area. Store managers
have access to information regarding competitive salary rates in their
respective markets.
We develop our training programs in a continuing effort to service the needs of
our associates. These programs are designed to increase associates' knowledge of
merchandising departments and products, including mandatory product knowledge
training classes, and to educate, develop and test the skills of those
associates who are interested in being promoted. Because we promote or relocate
current associates to serve as managers and assistant managers for new stores,
training and assessment of our associates is essential to our growth. Our
district managers and store managers typically meet with our human resources
associates to discuss the development of assistant managers and certain
department heads and consider possible candidates for promotion.
11
We have implemented programs in our stores and divisional offices to ensure we
hire and promote the most qualified associates in a non-discriminatory way. One
of the most significant programs we have is our annual HR Review process, which
assesses leaders and teams, reviews succession planning and executive pipeline,
high potential associates, staffing, retention, diversity, training and
compliance. The program is closely linked to our Performance Management Process,
which evaluates the performance, leadership and potential of all associates. We
also maintain a list of qualified associates who are interested in new
assignments and of qualified outside applicants that can be reviewed when
positions become available.
We believe that our employee relations are good.
MARKETING. We are one of the nation's largest retail advertisers, and we utilize
all forms of mass media and selected forms of highly targeted media. We also
incorporate major sponsorships into our marketing plan, such as NASCAR(R), the
Olympic(R) games, CBS(R) College Football and home and garden shows. We extend
our reach and educate our customers through proprietary publications, such as
the 1-2-3(SM) home improvement series and the Style Ideas(SM) magazine.
We execute our marketing campaigns on both a national and local basis. Because
the vast majority of our stores are located throughout the United States and
Canada, we can achieve greater efficiencies than smaller retailers by using
national advertising. At the same time, we tailor the majority of our
advertising locally to respond to market differences, both in terms of products
and the competitive environment.
CREDIT SERVICES. Home Depot offers credit purchase programs to both professional
customers and D-I-Y and D-I-F-M customers. In fiscal 2001, 2.9 million new Home
Depot credit accounts were opened, bringing the total number of Home Depot
account holders to almost 10 million. Proprietary credit card sales accounted
for approximately 21% of all Home Depot sales in fiscal 2001. We also offer an
unsecured Home Improvement Loan that gives our customers the opportunity to
purchase products and services in our stores. We believe that this loan program
not only increases large sales, such as kitchen and bath remodels, but also
generates incremental sales from our customers.
INTELLECTUAL PROPERTY. Through our wholly-owned subsidiary, Homer TLC, Inc., we
have registered or applied for registration of a variety of trade names, service
marks, trademarks and copyrights for use in our business, including The Home
Depot(R), the "Homer" (R) character, EXPO Design Center(R) stores, Hampton
Bay(R) fans, lighting and accessories, Glacier Bay(R) toilets, sinks and
faucets, Pegasus(TM) faucets and bath accessories, Traffic Master(R) carpet,
Commercial Electric(R) lighting fixtures, Workforce(R) tools, tool boxes and
shelving and PremiumCut(R) lumber. We regard our intellectual property as having
significant value and as being an important factor in the marketing of the
Company and our stores and direct marketing efforts. We are not aware of any
facts that could be expected to negatively impact our intellectual property.
QUALITY ASSURANCE PROGRAM. For our globally sourced products that we directly
import, we have a quality assurance program. Through this program, we have
established criteria for both vendor/factory and product performance, which
measure factors including product quality, timely shipments and fill rate. The
performance record is made available to the factories to allow them to strive
for improvement. This quality assurance program, which is applied to products
directly imported by Home Depot, has four components:
12
- we authorize laboratories to test products prior to purchase
to ensure compliance with requirements;
- we develop and document product requirements, based on test
results, applicable national and international standards and
features determined by our merchants;
- we assess the capability of factories to manufacture quality
products that meet the expectations we have developed, as well
as to assess their compliance with Home Depot policies; and
- we routinely assess product quality and factory performance by
conducting inspections at the factory on shipments to assure
continued compliance with our product requirements.
LOGISTICS. We use several mechanisms to lower distribution costs and increase
our efficiencies. Over 80% of our merchandise is shipped directly from our
vendors to the stores. We operate a number of facilities to distribute the
remaining merchandise to our stores. For example, certain import products
require the use of distribution centers. Accordingly, as of February 3, 2002, we
had seven import distribution centers, located in the United States and Canada.
Additionally, at the end of fiscal 2001, we had 29 lumber distribution
facilities in the United States and Canada to support the lumber demands of our
stores. We also operated three transit facilities at the end of 2001. At these
facilities, we receive merchandise from manufacturers and immediately cross dock
it onto trucks for delivery to our stores. As our store density increases, we
plan to continue adding transit facilities up to a nationwide network of 15-20
facilities. The distribution centers and transit facilities allow us to provide
high service levels to our stores at relatively low costs. Our current plans
call for seven additional transit facilities in fiscal 2002.
In addition to replenishing merchandise supplies at our stores, we also provide
delivery services directly to our customers. We continually assess opportunities
to improve our distribution network to better satisfy the needs of our stores
and our customers and to lower costs.
SAFETY. We are committed to maintaining a safe environment for our customers and
associates. Our Safety Department consists of a team of directors and managers
in the field focused primarily on education and training, as well as an
Atlanta-based team of dedicated safety professionals who evaluate and implement
policies and processes Company-wide. The goal of the Safety Department is to
implement a safety program designed to incorporate safety into the fabric of our
Company, establishing a "safety first" approach to all facets of our business.
Our Safety Department is responsible for managing the Company's safety program,
which is implemented in conjunction with store-level associates, store and
Division management, and the Human Resources and Merchandising Departments. The
primary focuses of our safety program are (1) to establish safety standards and
processes for all aspects of store operations and merchandising, (2) to
effectively train appropriate associates on all applicable standards and (3) to
monitor compliance with established safety standards.
COMPETITION. Our business is highly competitive, based in part on price, store
location, customer service and depth of merchandise. In each of the markets we
serve, there are a number of other home improvement stores, electrical, plumbing
and building materials supply houses and lumber
13
yards. With respect to some products, we also compete with discount stores,
local, regional and national hardware stores, mail order firms, warehouse clubs,
independent building supply stores and, to a lesser extent, other retailers. In
addition to these entities, our EXPO Design Center stores also compete with
specialty design stores or showrooms, some of which are only open to interior
design professionals. Due to the variety of competition we face, we are unable
to precisely measure our market share in existing market areas. We believe that
we are an effective and significant competitor in our markets.
EXECUTIVE OFFICERS
Executive officers of The Home Depot are elected by, and serve at the
pleasure of, the Board of Directors. The following provides information as of
February 3, 2002 concerning our executive officers:
ROBERT L. NARDELLI, age 53, has been President and Chief Executive
Officer since December 2000 and Chairman since January 1, 2002. Prior thereto,
Mr. Nardelli served as President and Chief Executive Officer of GE Power
Systems, a division of General Electric Company, since 1995. Mr. Nardelli serves
as a director of The Coca-Cola Company.
DENNIS J. CAREY, age 55, has been Executive Vice President - Business
Development, Strategy and Corporate Operations since May 2001. From May 1998
until that time he was Executive Vice President and Chief Financial Officer.
From 1994 to 1998, Mr. Carey was employed by AT&T Corp., most recently as Vice
President and General Manager - Corporate Productivity and Mergers and
Acquisitions. Prior to joining AT&T, Mr. Carey held a number of positions during
his 25 year tenure with General Electric Company, including Vice President and
General Manager of International Operations. In March 2002, Mr. Carey resigned
from The Home Depot.
DENNIS M. DONOVAN, age 53, has been Executive Vice President - Human
Resources since April 2001. From October 1998 until that time he served as
Senior Vice President - Human Resources of Raytheon Company, and from February
1986 until September 1998 he served as Vice President - Human Resources of GE
Power Systems, a division of General Electric Company.
FRANK L. FERNANDEZ, age 51, has been Executive Vice President -
Corporate Secretary & General Counsel since April 2001. From 1990 until that
time he was managing partner at Fernandez, Burstein, Tuckzinski and Collura,
P.C., in Albany, New York.
LARRY M. MERCER, age 55, is Executive Vice President of Operations. He
is responsible for the functional leadership across the entire Home Depot
enterprise, both domestically since March 1996 and internationally since January
2000. Prior to his promotion, Mr. Mercer was President of the Northeast Division
for five years. Mr. Mercer joined the Company in 1979 as an Assistant Store
Manager and has risen through the ranks to his current position.
CAROL B. TOME, age 45, has been Executive Vice President and Chief
Financial Officer since May 2001, and prior thereto had been Senior Vice
President - Finance and Accounting/ Treasurer since February 2000. From 1995
until 2000, she served as Vice President and Treasurer. From 1992 until 1995,
when she joined The Home Depot, Ms. Tome was Vice President and Treasurer of
Riverwood International Corporation.
14
Item 2. PROPERTIES
The following tables show locations of the 1,201 Home Depot stores in the United
States and the 86 stores outside of the United States as of February 3, 2002:
Number of Stores Number of Stores
Location in Location Location in Location
-------- ---------------- -------- ----------------
Alabama 14 Montana 3
Alaska 1 Nebraska 3
Arizona 33 Nevada 13
Arkansas 4 New Hampshire 8
California 155 New Jersey 46
Colorado 24 New Mexico 7
Connecticut 19 New York 67
Delaware 3 North Carolina 29
Florida 99 North Dakota 1
Georgia 53 Ohio 48
Hawaii 3 Oklahoma 9
Idaho 7 Oregon 13
Illinois 43 Pennsylvania 42
Indiana 7 Puerto Rico 7
Iowa 5 Rhode Island 3
Kansas 8 South Carolina 16
Kentucky 7 South Dakota 1
Louisiana 17 Tennessee 24
Maine 7 Texas 105
Maryland 31 Utah 12
Massachusetts 27 Vermont 1
Michigan 51 Virginia 32
Minnesota 19 Washington 23
Mississippi 6 Wisconsin 21
Missouri 22 Wyoming 2
International Number of Stores
Location in Location
------------- ----------------
Canada:
Alberta 10
British Columbia 11
Manitoba 3
Nova Scotia 2
Ontario 44
Quebec 6
Saskatchewan 2
Argentina: 4
Mexico:
Mexico City 1
Monterrey 3
15
The following table shows the location of the 41 EXPO Design Center stores by
state as of February 3, 2002:
Number of Stores
State In State
----- ----------------
California 10
Florida 5
Georgia 3
Illinois 4
Kansas 1
Maryland 1
Massachusetts 2
Michigan 3
Missouri 1
New Jersey 2
New York 3
Texas 5
Virginia 1
Additionally, as of February 3, 2002, we were operating four Villager's Hardware
test stores, all of which are located in New Jersey; seven Georgia Lighting
retail locations open to the public, all of which are located in Georgia; 22
Apex Supply locations, of which one is located in Florida, 15 are located in
Georgia, four are located in Tennessee and two are located in South Carolina;
one The Home Depot Floor Store location in Texas; and four Your "other"
Warehouse locations in Louisiana and Nevada.
Of our 1,333 Home Depot stores, EXPO Design Center stores, Villager's Hardware
stores and The Floor Store, at February 3, 2002, approximately 80% were owned
(including those owned subject to a ground lease) consisting of approximately
116,901,000 square feet and approximately 20% were leased consisting of
approximately 28,541,000 square feet. In recent years, we have increased the
relative percentage of new stores that are owned. Although we take advantage of
lease financing opportunities, we generally prefer to own stores because of
greater operating control and flexibility, generally lower occupancy costs and
certain other economic advantages. We believe that at the end of existing lease
terms, our current leased space can be either relet or replaced by alternate
space for lease or purchase that is readily available.
Our executive, corporate staff and financial offices occupy approximately
1,773,000 square feet of leased and owned space in Atlanta, Georgia. In
addition, as of February 3, 2002, we occupied an aggregate of approximately
3,358,000 square feet, of which approximately 704,000 square feet is owned and
approximately 2,654,000 square feet is leased, for divisional store support
centers and subsidiary customer support centers. At fiscal year end, these
support centers were located in Orange and San Leandro, California; Tampa and
Miami, Florida; Atlanta, Georgia; Arlington Heights, Illinois; Canton,
Massachusetts; Plymouth and Grand Haven, Michigan; South Plainfield, New Jersey;
Dallas, Texas; Tukwila, Washington; Scarborough, Ontario and Quebec, Canada; and
Buenos Aires, Argentina.
16
At February 3, 2002, we utilized approximately 9,122,000 square feet of
warehousing and distribution space, of which approximately 1,109,000 is owned
and approximately 8,013,000 is leased.
Item 3. LEGAL PROCEEDINGS
We have litigation arising from the normal course of business. In our opinion,
this litigation will not materially affect our consolidated financial position
or our results of operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of fiscal 2001.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Since April 19, 1984, our common stock has been listed on the New York Stock
Exchange under the symbol "HD." The table below sets forth the low and high
sales prices of our common stock on the New York Stock Exchange Composite Tape
as reported in The Wall Street Journal and the quarterly cash dividends declared
per share of common stock during the periods indicated.
CASH
PRICE RANGE
------------------------ DIVIDENDS
LOW HIGH DECLARED*
------ ------ ---------
FISCAL YEAR 2000
First Quarter ended April 30, 2000 $51.00 $70.00 $ .040
Second Quarter ended July 30, 2000 44.13 58.75 .040
Third Quarter ended October 29, 2000 34.69 60.00 .040
Fourth quarter ended January 28, 2001 35.44 52.50 .040
FISCAL YEAR 2001
First Quarter ended April 29, 2001 $38.11 $49.00 $ .040
Second Quarter ended July 29, 2001 44.60 53.73 .040
Third Quarter ended October 28, 2001 30.30 50.90 .050
Fourth quarter ended February 3, 2002 37.15 52.04 .050
- ---------
*The Company paid its first cash dividend on June 22, 1987, and has paid
dividends during each subsequent quarter. Future dividend payments will depend
on the Company's earnings, capital requirements, financial condition and other
factors considered relevant by the Board of Directors.
The number of record holders of The Home Depot's Common Stock as of April 1,
2002 was 206,988 (excluding individual participants in nominee security position
listings).
17
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data of The Home Depot, Inc. for and as of
the end of each of the periods indicated in the five-year period ended February
3, 2002 have been derived from the audited consolidated financial statements of
The Home Depot, Inc., which consolidated financial statements have been audited
by KPMG LLP. The selected consolidated financial data should be read in
conjunction with the consolidated financial statements of The Home Depot, Inc.,
including the notes to those consolidated financial statements, and the audit
reports of KPMG LLP, which are incorporated by reference elsewhere herein.
Fiscal Year(1)
--------------------------------------------------------------
2001 2000 1999 1998 1997
------- ------- ------- ------- -------
(amounts in millions, except per share data)
Net Sales.......................... $53,553 $45,738 $38,434 $30,219 $24,156
Net Earnings....................... 3,044 2,581 2,320 1,614 1,160(2)
Diluted Earnings per Share(3)...... 1.29 1.10 1.00 0.71 0.52(2)
Total Assets....................... 26,394 21,385 17,081 13,465 11,229
Long-Term Debt..................... 1,250 1,545 750 1,566 1,303
Cash Dividends per Share(3)........ 0.17 0.16 0.11 0.08 0.06
(1) Fiscal 2001, 2000, 1999, 1998 and 1997 refer to the fiscal years ended
February 3, 2002; January 28, 2001; January 30, 2000; January 31, 1999;
and February 1, 1998, respectively. Fiscal year 2001 consisted of 53
weeks; all other fiscal years noted consisted of 52 weeks.
(2) Includes the effect of a $104 million pre-tax non-recurring charge.
(3) All per share data have been adjusted for a three-for-two stock split
on December 30, 1999, a two-for-one stock split on July 2, 1998 and a
three-for-one stock split on July 3, 1997.
18
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
SELECTED CONSOLIDATED STATEMENTS OF EARNINGS DATA
The data below reflect 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 (DECREASE)
FISCAL YEAR(1) IN DOLLAR AMOUNTS
------------------------------------- -----------------------
2001 2000
2001 2000 1999 vs. 2000 vs. 1999
---------- -------- --------- -------- --------
NET SALES 100.0% 100.0% 100.0% 17.1% 19.0%
GROSS PROFIT 30.2 29.9 29.7 18.0 19.9
OPERATING EXPENSES:
Selling and Store Operating 19.0 18.6 17.8 19.4 24.8
Pre-Opening 0.2 0.3 0.3 (17.6) 25.7
General and Administrative 1.7 1.8 1.7 12.0 24.4
---------- -------- -------- ----- -----
Total Operating Expenses 20.9 20.7 19.8 18.2 24.8
---------- -------- -------- ----- -----
OPERATING INCOME 9.3 9.2 9.9 17.7 10.1
INTEREST INCOME (EXPENSE):
Interest and Investment Income 0.1 0.1 0.1 12.8 27.0
Interest Expense (0.1) (0.1) (0.1) 33.3 (48.8)
---------- -------- -------- ----- -----
Interest, net -- -- -- (3.8) 750.0
---------- -------- -------- ----- -----
EARNINGS BEFORE INCOME TAXES 9.3 9.2 9.9 17.5 10.9
Income Taxes 3.6 3.6 3.9 16.9 10.2
---------- -------- -------- ----- -----
NET EARNINGS 5.7% 5.6% 6.0% 17.9% 11.3%
---------- -------- -------- ----- -----
SELECTED SALES DATA (2)
Number of Transactions (000s) 1,090,975 936,519 797,229 16.5% 17.5%
Average Sale per Transaction $ 48.64 $ 48.65 $ 47.87 -- 1.6
Weighted Average Weekly Sales per Operating Store $ 812,000 $864,000 $876,000 (6.0) (1.4)
Weighted Average Sales per Square Foot(3) $ 387.93 $ 414.68 $ 422.53 (6.5) (1.9)
(1) Fiscal years 2001, 2000 and 1999 refer to the fiscal years ended
February 3, 2002; January 28, 2001; and January 30, 2000, respectively.
(2) Excludes Apex Supply Company, Georgia Lighting, Maintenance Warehouse,
Your "other" Warehouse and National Blinds and Wallpaper.
(3) Adjusted to reflect the first 52 weeks of the 53-week fiscal year in
2001.
RESULTS OF OPERATIONS
For an understanding of the significant factors that influenced our performance
during the past three fiscal years, the following discussion should be read in
conjunction with the consolidated financial statements and the notes to
consolidated financial statements presented in this annual report.
FISCAL YEAR ENDED FEBRUARY 3, 2002 COMPARED TO JANUARY 28, 2001. Fiscal year
2001 consisted of 53 weeks compared to 52 weeks in fiscal 2000. Net sales for
fiscal 2001 increased 17.1% to $53.6 billion from $45.7 billion in fiscal 2000.
This increase was attributable to, among other things, the 204 new stores opened
during fiscal 2001 and full year sales from the 204 new stores opened during
fiscal 2000. Approximately $880 million of the increase in sales was
attributable to the additional week in fiscal 2001. Comparable store-for-store
sales were flat in fiscal 2001 due to the weak economic environment resulting
from certain factors including, but not limited to, low consumer confidence and
high unemployment.
19
Gross profit as a percent of sales was 30.2% for fiscal 2001 compared to 29.9%
for fiscal 2000. The rate increase was primarily attributable to a lower cost of
merchandise resulting from product line reviews, purchasing synergies created by
our newly centralized merchandising structure and an increase in the number of
tool rental centers from 342 at the end of fiscal 2000 to 466 at the end of
fiscal 2001. We expect to have tool rental centers in approximately 600 stores
by the end of fiscal 2002.
Operating expenses as a percent of sales were 20.9% for fiscal 2001 compared to
20.7% for fiscal 2000. Selling and store operating expenses as a percent of
sales increased to 19.0% in fiscal 2001 from 18.6% in fiscal 2000. The increase
was primarily attributable to growth in store occupancy costs resulting from
higher depreciation and property taxes due to our investment in new stores,
combined with increased energy costs. Also, credit card transaction fees were
higher than the prior year due to increased penetration of total credit sales.
These increases were partially offset by a decrease in store payroll expense
caused by an improvement in labor productivity resulting from initiatives inside
the store and new systems enhancements.
Store initiatives include our Service Performance Improvement ("SPI") initiative
which was implemented in every Home Depot store in fiscal 2001. Under SPI our
stores receive and handle inventory at night, allowing our associates to spend
more time with customers during peak selling hours. In addition, our Pro program
was in 535 of our Home Depot stores at the end of fiscal 2001, providing
dedicated store resources to serve the specific needs of professional customers.
We expect to have our Pro initiative in more than 950 stores at the end of
fiscal 2002. SPI and Pro have resulted in improved operational efficiency,
safety and customer service.
Pre-opening expenses as a percent of sales were 0.2% for fiscal 2001 and 0.3%
for fiscal 2000. We opened 204 new stores in both fiscal 2001 and 2000.
Pre-opening expenses averaged $569,000 per store in fiscal 2001 compared to
$671,000 per store in fiscal 2000. The decrease in the average expense per store
was primarily due to shorter pre-opening periods as we reengineered our store
opening process.
General and administrative expenses as a percent of sales were 1.7% for fiscal
2001 compared to 1.8% in fiscal 2000. This decrease was primarily due to cost
savings associated with the reorganization of certain components of our general
and administrative structure, such as the centralization of our merchandising
organization, and our focus on expense control in areas such as travel.
Interest and investment income as a percent of sales was 0.1% for both fiscal
2001 and 2000. Interest expense as a percent of sales was 0.1% for both fiscal
2001 and 2000.
Our combined federal and state effective income tax rate decreased to 38.6% for
fiscal 2001 from 38.8% for fiscal 2000. The decrease in fiscal 2001 was
attributable to higher tax credits and a lower effective state income tax rate
compared to fiscal 2000.
Net earnings as a percent of sales were 5.7% for fiscal 2001 compared to 5.6%
for fiscal 2000, reflecting the increased gross profit rate, which was partially
offset by higher store operating expenses, as described above. Diluted earnings
per share were $1.29 for fiscal 2001 compared to $1.10 for fiscal 2000.
20
FISCAL YEAR ENDED JANUARY 28, 2001 COMPARED TO JANUARY 30, 2000. Net sales for
fiscal 2000 increased 19.0% to $45.7 billion from $38.4 billion in fiscal 1999.
This increase was attributable to, among other things, full year sales from the
169 new stores opened during fiscal 1999, a 4% comparable store-for-store sales
increase and 204 new store openings.
Gross profit as a percent of sales was 29.9% for fiscal 2000 compared to 29.7%
for fiscal 1999. The rate increase was primarily attributable to a lower cost of
merchandise resulting from product line reviews, benefits from global sourcing
programs and an increase in the number of tool rental centers from 150 at the
end of fiscal 1999 to 342 at the end of fiscal 2000.
Operating expenses as a percent of sales were 20.7% for fiscal 2000 compared to
19.8% for fiscal 1999. Selling and store operating expenses as a percent of
sales increased to 18.6% in fiscal 2000 from 17.8% in fiscal 1999. The increase
was primarily attributable to higher store selling payroll expenses resulting
from market wage pressures and an increase in employee longevity. In addition,
medical costs increased due to higher family enrollment in our medical plans,
rising health care costs and higher prescription drug costs. Finally, store
occupancy costs, including property taxes, property rent, depreciation and
utilities, increased due to new store growth and energy rate increases.
Pre-opening expenses as a percent of sales were 0.3% for both fiscal 2000 and
1999. We opened 204 new stores in fiscal 2000, compared to opening 169 new
stores in fiscal 1999. Pre-opening expenses averaged $671,000 per store in
fiscal 2000 compared to $643,000 per store in fiscal 1999. The higher average
expense was primarily due to the opening of more EXPO Design Center stores and
expansion of Home Depot stores into certain new markets including international
locations, which involved longer pre-opening periods and higher training, travel
and relocation costs.
General and administrative expenses as a percent of sales were 1.8% for fiscal
2000 compared to 1.7% for fiscal 1999. The increase was primarily due to
investments in Internet development and international operations, as well as a
full year of payroll and other costs associated with operating four new
divisional offices, which opened during the fourth quarter of fiscal 1999.
Interest and investment income as a percent of sales was 0.1% for both fiscal
2000 and 1999. Interest expense as a percent of sales was 0.1% for both
comparable periods.
Our combined federal and state effective income tax rate decreased to 38.8% for
fiscal 2000 from 39.0% for fiscal 1999. The decrease was attributable to higher
tax credits in fiscal 2000 compared to fiscal 1999.
Net earnings as a percent of sales were 5.6% for fiscal 2000 compared to 6.0%
for fiscal 1999, reflecting higher selling and store operating expenses as a
percent of sales partially offset by a higher gross profit rate as described
above. Diluted earnings per share were $1.10 for fiscal 2000 compared to $1.00
for fiscal 1999.
21
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated from operations provides us with a significant source of
liquidity. For fiscal 2001, cash provided by operations increased to $6.0
billion from $2.8 billion in fiscal 2000. The increase was primarily due to
significant growth in days payable outstanding from 23 days at the end of fiscal
2000 to 34 days at the end of fiscal 2001, a 12.7% decrease in average inventory
per store as of the end of fiscal 2001 and increased operating income. The
growth in days payable and decrease in average inventory per store are the
result of our efforts to improve our working capital position by extending our
payment terms to industry standards and enhancing inventory assortments.
Cash used in investing activities, primarily comprised of capital expenditures,
was $3.5 billion in both fiscal 2001 and 2000. We opened 204 new stores in both
fiscal 2001 and 2000. We own 188 of the stores opened in 2001 and lease the
remainder.
We plan to open 200 stores in fiscal 2002 and expect total capital expenditures
to be approximately $3.6 billion.
Cash used in financing activities in fiscal 2001 was $173 million compared with
cash provided by financing activities of $737 million in fiscal 2000. The
increase in cash used was primarily due to the net effect of repaying $754
million of commercial paper and issuing $500 million of 5 3/8% Senior Notes
during fiscal 2001.
We have a commercial paper program that allows borrowings up to a maximum of $1
billion. As of February 3, 2002, there were no borrowings outstanding under the
program. In connection with the program, we have a back-up credit facility with
a consortium of banks for up to $800 million. The credit facility, which expires
in September 2004, contains various restrictive covenants, none of which are
expected to impact our liquidity or capital resources.
We use capital, operating and other off-balance sheet leases to finance about
20% of our real estate. Off-balance sheet leases include three leases created
under structured financing arrangements to fund the construction of certain
stores, office buildings and distribution centers. Two of these lease agreements
involve a special purpose entity which meets the criteria established by
generally accepted accounting principles and is not owned by or affiliated with
the Company, its management or officers. Operating and off-balance sheet leases
are not reflected in our balance sheet in accordance with generally accepted
accounting principles. The net present value of capital lease obligations is
reflected in our balance sheet in long-term debt. As of the end of fiscal 2001,
our debt to equity ratio was 6.9%. If the estimated present value of future
payments under the operating and other off-balance sheet leases were
capitalized, our debt to equity ratio would increase to approximately 30%.
22
The following table summarizes our significant contractual obligations and
commercial commitments as of February 3, 2002 (amounts in millions):
Payments Due By Period
----------------------------------------------------------
Contractual Obligations(1) Total 2002 2003-2004 2005-2006 Thereafter
----- ---- --------- --------- ----------
Long-Term Debt $1,023 $ 1 $502 $502 $ 18
Capital Leases $ 791 $ 41 $ 85 $ 88 $ 577
Operating Leases $7,407 $517 $942 $809 $5,139
Amount of Commitment Expiration Per Period
----------------------------------------------------------
Commercial Commitments(2) Total 2002 2003-2004 2005-2006 Thereafter
----- ---- --------- --------- ----------
Letters of Credit $ 557 $551 $ 6 -- --
Guarantees $ 799 -- $504 $ 72 $ 223
(1) Contractual obligations consist of long-term debt comprised primarily
of $1 billion of Senior Notes further discussed in "Quantitative and
Qualitative Disclosures about Market Risk" and future minimum lease
payments under capital and operating leases, including off-balance
sheet leases, used in the normal course of business.
(2) Commercial commitments include letters of credit for certain business
transactions and guarantees provided under certain off-balance sheet
leases. We issue letters of credit for insurance programs, import
purchases and construction contracts. Under certain off-balance sheet
leases for retail locations, office buildings and distribution centers,
we have provided residual value guarantees. The estimated maximum
amount of the residual value guarantees at the end of the lease terms
is $799 million. The leases expire at various terms from 2004 through
2008 with some carrying renewal options through 2025. The expiration
date of the residual value guarantees in the table above is based on
the original lease terms; however, the expiration period will change if
the leases are renewed.
As of February 3, 2002, we had $2.5 billion in cash and cash equivalents. We
believe that our current cash position, internally generated funds, funds
available from the $1 billion commercial paper program and the ability to obtain
alternate sources of financing should be sufficient to enable us to complete our
capital expenditure programs through the next several fiscal years.
IMPACT OF INFLATION AND CHANGING PRICES
Although we cannot accurately determine the precise effect of inflation on
operations, we do not believe inflation has had a material effect on sales or
results of operations.
CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are disclosed in Note 1 to our consolidated
financial statements. The following discussion addresses our most critical
accounting policies, which are those that are most important to the portrayal of
our financial condition and results, and that require judgment.
REVENUE RECOGNITION. We recognize revenue, net of estimated returns, at the time
the customer takes possession of the merchandise or receives services. We
estimate the liability for sales returns based on the historical return levels.
The methodology used is consistent with other retailers. We believe that our
estimate for sales returns is an accurate reflection of future returns. When we
collect payment from customers before ownership of the merchandise has passed or
the service has been performed, the amount received is recorded as a deferred
revenue liability.
INVENTORY. Our inventory is stated at the lower of cost (first-in, first-out) or
market, with approximately 94% valued under the retail method and the remainder
under the cost method.
23
Under the retail method, inventory is stated at cost which is determined by
applying a cost-to-retail ratio to the ending retail value of inventory. As our
inventory retail value is adjusted regularly to reflect market conditions, our
inventory methodology approximates the lower of cost or market. Retailers with
many different types of merchandise at low unit cost with a large number of
transactions frequently use this method. In addition, we reduce our ending
inventory value for estimated losses related to shrink. This estimate is
determined based upon analysis of historical shrink losses and recent shrink
trends.
SELF INSURANCE. We are self-insured for certain losses related to general
liability, product liability and workers' compensation. We maintain stop loss
coverage with third party insurers to limit our total exposure. Our liability
represents an estimate of the ultimate cost of claims incurred as of the balance
sheet date. The estimated liability is not discounted and is established based
upon analysis of historical data and actuarial estimates, and is reviewed by
management and third party actuaries on a quarterly basis to ensure that the
liability is appropriate. While we believe these estimates are reasonable based
on the information currently available, if actual trends, including the severity
or frequency of claims or fluctuations in premiums, differ from our estimates,
our financial results could be impacted. In an attempt to mitigate our risks of
workers' compensation and general liability claims, we have significantly
enhanced our store safety procedures with SPI and other safety awareness
programs.
USE OF ESTIMATES. We have made a number of estimates and assumptions relating to
the reporting of assets and liabilities, the disclosure of contingent assets and
liabilities, and reported amounts of revenue and expenses in preparing our
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from these estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") 142, "Goodwill and Other Intangible
Assets." Under SFAS 142, which we will adopt on February 4, 2002, goodwill will
no longer be amortized and will instead be evaluated for impairment at least
annually. Without this change, amortization expense for goodwill in fiscal 2002
would have been approximately $11 million. We have reviewed our goodwill and
completed our impairment analysis and, accordingly, have determined that the
adoption of SFAS 142 will not have a material impact on our consolidated
financial statements.
In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which amends Accounting Principles Board Opinion
No. 30 ("APB 30"), "Reporting the Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." SFAS 144 retains the
fundamental provisions of SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," for recognizing and
measuring impairment losses on long-lived assets held for use and long-lived
assets to be disposed of by sale, while resolving significant implementation
issues. SFAS 144 retains the basic provisions of APB 30 on the presentation of
discontinued operations in the income statement, but expands the scope to
include all distinguishable components of an entity that will be eliminated from
ongoing operations in a disposal transaction. We plan to adopt SFAS 144 on
February 4, 2002 and do not expect the adoption to have a material impact on our
consolidated financial statements.
24
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
Certain statements we make in this report, and other written or oral statements
made by or on behalf of the Company, may constitute "forward-looking statements"
within the meaning of the federal securities laws. Words or phrases such as
"should result," "are expected to," "we anticipate," "we estimate," "we
project," "we believe," or similar expressions are intended to identify
forward-looking statements. Examples of such statements in this report include
descriptions of our plans with respect to new store openings and relocations,
our plans to enter new markets and expectations relating to our continuing
growth. 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. Management believes that
these forward-looking statements are reasonable; however, you should not place
undue reliance on such statements. Such statements speak only as of the date
they are made, and we undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of future events, new information
or otherwise.
The following are some of the factors that could cause the Company's actual
results to differ materially from the expected results described in the
Company's forward-looking statements:
- - Adverse or unanticipated weather conditions, which may affect the
Company's overall level of sales and sales of particular lines of
products, such as building materials, lumber and lawn and garden
supplies.
- - Instability of costs and availability of sourcing channels, which may
affect the prices that the Company pays for certain commodity products,
such as lumber and plywood, as well as the Company's ability to improve
its mix of merchandise. Our cost of sales is affected by our ability to
maintain favorable arrangements and relationships with our suppliers.
Our sources of supply may be affected by trade restrictions, tariffs,
currency exchange rates, transportation costs and capacity, and other
factors affecting domestic and international markets.
- - Our ability to attract, train and retain highly-qualified associates to
staff both existing and new stores.
- - Conditions affecting the availability, acquisition, development and
ownership of real estate, including local zoning and land use issues,
environmental regulations and general conditions in the commercial real
estate market.
- - General economic conditions, which affect consumer confidence and home
improvement and home-building spending, including interest rates, the
overall level of economic activity, the availability of consumer credit
and mortgage financing and unemployment rates.
- - The impact of competition, including competition for customers,
locations and products and in other important aspects of our business.
Our primary competitors include electrical, plumbing and building
materials supply houses, lumber yards, home improvement stores and
other local, regional or national hardware stores, as well as
25
discount department stores and any other channel of distribution that
offers products that we sell. Our business is highly competitive, and
we may face new types of competitors as we enter new markets or lines
of business.
- - Changes in laws and regulations, including changes in accounting
standards, tax statutes or regulations and environmental and land use
regulations, and uncertainties of litigation.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risks results primarily from fluctuations in interest
rates. Although we have international operating entities, our exposure to
foreign currency rate fluctuations is not significant to our financial condition
and results. Our objective for holding derivative instruments is to decrease the
volatility of earnings and cash flow associated with fluctuations in these
rates.
We have financial instruments that are sensitive to changes in interest rates.
These instruments include fixed rate debt and other contractual arrangements. We
issued $500 million of 5 3/8% Senior Notes in fiscal 2001 maturing on April 1,
2006 and $500 million of 6 1/2% Senior Notes in fiscal 1999 maturing on
September 15, 2004. As of February 3, 2002, the market values of the publicly
traded 5 3/8% and 61/2% Senior Notes were approximately $511 million and
$531 million, respectively. We have two interest rate swap agreements, both
designed to hedge the market risk associated with interest rate volatility.
We have one agreement in the notional amount of $300 million that swaps fixed
rate interest on $300 million of our $500 million 5 3/8% Senior Notes for a
variable interest rate equal to LIBOR plus 30 basis points and expires on
April 1, 2006. We have another agreement expiring January 31, 2003 in the
notional amount of $690 million that swaps a variable interest rate for a
fixed rate of 6 3/4%, designed to mitigate the interest rate risk related to
the portfolio of our proprietary credit card, which is serviced by a third
party.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
We refer you to the "Consolidated Statements of Earnings," "Consolidated Balance
Sheets," "Consolidated Statements of Stockholders' Equity and Comprehensive
Income," "Consolidated Statements of Cash Flows," "Notes to Consolidated
Financial Statements" and "Independent Auditors' Report" contained in our Annual
Report to Stockholders for the fiscal year ended February 3, 2002, which are
incorporated by reference herein.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
26
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
We refer you to the information in our Proxy Statement for the 2002 Annual
Meeting of Stockholders under the headings "Election of Directors and Director
Biographies," "Board of Directors Information" and "General - Compliance with
Section 16(a) Beneficial Ownership Reporting Requirements," which is
incorporated by reference herein. Biographical information on our executive
officers is contained in Item I of this Annual Report on Form 10-K.
Item 11. EXECUTIVE COMPENSATION
We refer you to the information in our Proxy Statement for the 2002 Annual
Meeting of Stockholders under the headings "Executive Compensation," "Board of
Directors Information" and "General - Compensation Committee Interlocks and
Insider Participation," which is incorporated by reference herein.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We refer you to the information in our Proxy Statement for the 2002 Annual
Meeting of Stockholders under the heading "Stock Ownership," which is
incorporated by reference herein.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We refer you to the information in our Proxy Statement for the 2002 Annual
Meeting of Stockholders under the heading "General - Insider Transactions,"
which is incorporated by reference herein.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements are incorporated by reference from pages 24
through 35 of our Annual Report to Stockholders for the fiscal year ended
February 3, 2002, as provided in Item 8 hereof:
- Consolidated Statements of Earnings for the fiscal years ended
February 3, 2002; January 28, 2001; and January 30, 2000.
- Consolidated Balance Sheets as of February 3, 2002 and January
28, 2001.
- Consolidated Statements of Stockholders' Equity and
Comprehensive Income for the fiscal years ended February 3, 2002; January 28,
2001; and January 30, 2000.
27
- Consolidated Statements of Cash Flows for the fiscal years
ended February 3, 2002; January 28, 2001; and January 30, 2000.
- Notes to Consolidated Financial Statements.
- Independent Auditors' Report.
2. Financial Statement Schedules
All schedules are omitted as the required information is inapplicable or the
information is presented in the consolidated financial statements or related
notes.
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed during the fourth quarter of
fiscal 2001.
(c) Exhibits
Exhibits marked with an asterisk (*) are incorporated by reference to exhibits
or appendices previously filed with the SEC, as indicated by the references in
brackets.
The Registrant agrees to furnish a copy of all agreements relating to long-term
debt upon request of the Commission.
*3.l Restated Certificate of Incorporation of The Home Depot, Inc., as amended. [FORM
10-Q FOR THE FISCAL QUARTER ENDED JULY 30, 2000, EXHIBIT 3.1]
*3.2 By-laws, as amended and restated. [FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY
30, 2000, EXHIBIT 3.2]
*4.1 Indenture, dated as of September 27, 1999 among The Home Depot, Inc., Credit
Suisse First Boston Corporation and Invemed Associates. [FORM S-4 (FILE NO.
333-89935) FILED OCTOBER 29, 1999, EXHIBIT 4.1]
*4.2 Indenture, dated as of April 12, 2001, between The Home Depot, Inc. and The Bank
of New York. [FORM S-4 (FILE NO. 333-61548) FILED MAY 24, 2001, EXHIBIT 4.1]
*4.3 Form of 5-3/8% Note due April 1, 2006 (INCLUDED IN EXHIBIT 4.2).
*10.1 Credit Agreement dated September 17, 1999 (the "Credit Agreement") by and among
The Home Depot, Inc., Bank of America, N.A., as Administrative Agent, Wachovia
Bank, N.A., as Syndication Agent, First Union National Bank and The Bank of New
York, as Co-Documentation Agents, and banks party thereto. [FORM 10-Q FOR THE
FISCAL QUARTER ENDED OCTOBER 31, 1999, EXHIBIT 10.1]
28
*10.2 Assignment and Acceptance of the Credit Agreement dated February 23, 2000 by and
among The Home Depot, Inc., the banks party thereto, Bank of America, N.A., as
Administrative Agent, Wachovia Bank, N.A., as Syndication Agent, and First Union
National Bank and Bank of New York, as Co-Documentation Agents. [FORM 10-K FOR
THE FISCAL YEAR ENDED JANUARY 30, 2000, EXHIBIT 10.2]
*10.3 Assignment and Acceptance of the Credit Agreement dated March 31, 2000 by and
among The Home Depot, Inc., the banks party thereto, Bank of America, N.A., as
Administrative Agent, Wachovia Bank, N.A., as Syndication Agent, and First Union
National Bank and The Bank of New York, as Co-Documentation Agents. [FORM 10-K
FOR THE FISCAL YEAR ENDED JANUARY 30, 2000, EXHIBIT 10.3]
*10.4 +Corporate Office Management Bonus Plan of the Registrant dated March 1, 1991.
[FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 1, 1998, EXHIBIT 10.2]
*10.5 +Employee Stock Purchase Plan, as amended. [FORM 10-K FOR THE FISCAL YEAR ENDED
JANUARY 28, 2001, EXHIBIT 10.5]
*10.6 +Senior Officers' Bonus Pool Plan, as amended. [APPENDIX A TO REGISTRANT'S PROXY
STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS HELD MAY 26, 1999]
*10.7 +Executive Officers' Bonus Plan. [APPENDIX B TO REGISTRANT'S PROXY STATEMENT FOR
THE ANNUAL MEETING OF STOCKHOLDERS HELD MAY 27, 1998]
*10.8 +The Home Depot, Inc. 1997 Omnibus Stock Incentive Plan. [FORM 10-K FOR THE
FISCAL YEAR ENDED FEBRUARY 1, 1998, EXHIBIT 10.5]
*10.9 +Executive Medical Reimbursement Plan, effective January 1, 1992. [FORM 10-K FOR
THE FISCAL YEAR ENDED JANUARY 31, 1999, EXHIBIT 10.7]
*10.10 +The Home Depot ESOP Restoration Plan.
*10.11 Participation Agreement dated as of October 22, 1998 among The Home Depot, Inc.
as Guarantor; Home Depot U.S.A., Inc. as Lessee; HD Real Estate Funding Corp. II
as Facility Lender; Credit Suisse Leasing 92A L.P. as Lessor; The Bank of New
York as Indenture Trustee; and Credit Suisse First Boston Corporation and
Invemed Associates, Inc. as Initial Purchasers. [FORM 10-K FOR THE YEAR ENDED
JANUARY 31, 1999, EXHIBIT 10-10.]
*10.12 Participation Agreement dated as of June 25, 1996 among The Home Depot, Inc. as
Guarantor; Home Depot U.S.A., Inc. as Lessee and Construction Agent; HD Real
Estate Funding Corp. as Facility Lender; the lenders named on the Schedule
thereto as Lenders; Credit Suisse First Boston Corporation as Agent Bank and
Lender; and Credit Suisse Leasing 92A L.P. as Lessor. [FORM 10-K FOR THE YEAR
ENDED JANUARY 31, 1999, EXHIBIT 10.11]
*10.13 First Amendment and Supplement to the Participation Agreement dated as of May 8,
1997 among The Home Depot, Inc. as Guarantor; Home Depot U.S.A., Inc. as Lessee
and Construction Agent; HD Real Estate Funding Corp. as Facility Lender; the
lenders named on the Schedule thereto as Lenders; Credit Suisse First Boston
Corporation as Agent Bank and Lender; and Credit Suisse Leasing 92A L.P. as
Lessor. [FORM 10-K FOR THE YEAR ENDED JANUARY 31, 1999, EXHIBIT 10-12.]
29
*10.14 Master Modification Agreement dated as of April 20, 1998 among The Home Depot,
Inc. as Guarantor; Home Depot U.S.A., Inc., as Lessee and Construction Agent; HD
Real Estate Funding Corp., as Facility Lender; Credit Suisse Leasing 92A L.P. as
Lessor; the lenders named on the Schedule thereto as Lenders; and Credit Suisse
First Boston Corporation as Agent Bank. [FORM 10-K FOR THE YEAR ENDED JANUARY
31, 1999, EXHIBIT 10.13]
10.15 +Supplemental Executive Choice Program, effective January 1, 1999.
*10.16 +Employment Agreement between Robert L. Nardelli and The Home Depot, Inc., dated
as of December 4, 2000. [FORM 10-Q FOR THE QUARTER ENDED OCTOBER 28, 2001,
EXHIBIT 10.1]
*10.17 +Promissory Note between Robert L. Nardelli and The Home Depot, Inc. dated as of
December 4, 2000. [FORM 10-K FOR THE YEAR ENDED JANUARY 28, 2001, EXHIBIT 10.18]
*10.18 Deferred Stock Units Plan and Agreement between Robert L. Nardelli and The Home
Depot, Inc., effective as of September 17, 2001. [FORM 10-Q FOR THE QUARTER
ENDED OCTOBER 28, 2001, EXHIBIT 10.2]
*10.19 Commercial Paper Dealer Agreement between Credit Suisse First Boston
Corporation, as Dealer, and The Home Depot, Inc., dated as of January 24, 2001.
[FORM 10-K FOR THE YEAR ENDED JANUARY 28, 2001, EXHIBIT 10.19]
*10.20 +Non-Qualified Stock Option and Deferred Stock Unit Plan and Agreement dated as
of December 4, 2001. [FORM 10-K FOR THE YEAR ENDED JANUARY 28, 2001, EXHIBIT
10.20]
*10.21 +Agreement between Bernard Marcus and The Home Depot, Inc. dated as of February
22, 2001. [FORM 10-K FOR THE YEAR ENDED JANUARY 28, 2001, EXHIBIT 10.21]
*10.22 +Employment Agreement between Dennis M. Donovan and The Home Depot, Inc., dated
March 16, 2001. [FORM S-4 (FILE NO. 333-61548) FILED MAY 24, 2001, EXHIBIT 10.1]
*10.23 +Employment Agreement between Frank L. Fernandez and The Home Depot, Inc., dated
April 2, 2001. [FORM S-4 (FILE NO. 333-61548) FILED MAY 24, 2001, EXHIBIT 10.2]
*10.24 +Deferred Stock Units Plan and Agreement between Frank L. Fernandez and The Home
Depot, Inc. dated April 2, 2001. [FORM S-4 (FILE NO. 333-61548) FILED MAY 24,
2001, EXHIBIT 10.3]
30
10.25 +Deferred Stock Units Plan and Agreement between Dennis M. Donovan and The Home
Depot, Inc., dated as of May 30, 2001.
10.26 +Promissory Note between Dennis M. Donovan and The Home Depot, Inc. dated June
7, 2001.
10.27 +Promissory Note between Frank L. Fernandez and The Home Depot, Inc. dated June
18, 2001.
*11 Computation of Earnings Per Common and Common Equivalent Share. [ANNUAL REPORT
TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2002, FILED HEREWITH AS
EXHIBIT 13, NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, NOTE 7]
13 The Registrant's Annual Report to Stockholders for the fiscal year ended
February 3, 2002. Only those portions of said report which are specifically
designated in this Form 10-K as being incorporated by reference are being
electronically filed pursuant to the Securities Exchange Act of 1934.
*21 List of Subsidiaries of the Registrant. [FORM 10-K FOR THE YEAR ENDED JANUARY
28, 2001, EXHIBIT 21]
23 Consent of Independent Auditors.
24 Special Powers of Attorney authorizing execution of this Form 10-K Annual Report
have been granted and are filed herewith as follows:
Power of Attorney from Gregory D. Brenneman.
Power of Attorney from Richard H. Brown.
Power of Attorney from John L. Clendenin.
Power of Attorney from Berry R. Cox.
Power of Attorney from William S. Davila.
Power of Attorney from Claudio X. Gonzalez.
Power of Attorney from Richard A. Grasso.
Power of Attorney from Milledge A. Hart, III.
Power of Attorney from Bonnie G. Hill.
Power of Attorney from Kenneth G. Langone.
Power of Attorney from Roger S. Penske.
- -----------
+Management contract or compensatory plan or arrangement required to be filed as
an exhibit to this form pursuant to Item 14(c) of this report.
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ Robert L. Nardelli
-----------------------------------------------
(Robert L. Nardelli, Chairman, President & CEO)
Date: April 19, 2002
---------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant, The Home Depot, Inc., and in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/ Bernard Marcus Director April 19, 2002
- -------------------------------
(Bernard Marcus)
/s/ Robert L. Nardelli Chairman, President & CEO April 19, 2002
- ------------------------------- (Principal Executive Officer)
(Robert L. Nardelli)
/s/ Carol B. Tome Executive Vice President and April 19, 2002
- ------------------------------- Chief Financial Officer
(Carol B. Tome) (Principal Financial Officer
and Principal Accounting Officer)
32
Signature Title Date
--------- ----- ----
* Director
- -------------------------------
(Gregory D. Brenneman)
* Director
- -------------------------------
(Richard H. Brown)
* Director
- -------------------------------
(John L. Clendenin)
* Director
- -------------------------------
(Berry R. Cox)
* Director
- -------------------------------
(William S. Davila)
* Director
- -------------------------------
(Claudio X. Gonzalez)
* Director
- -------------------------------
(Richard A. Grasso)
* Director
- -------------------------------
(Milledge A. Hart, III)
* Director
- -------------------------------
(Bonnie G. Hill)
* Director
- -------------------------------
(Kenneth G. Langone)
* Director
- -------------------------------
(Roger S. Penske)
33
* The undersigned, by signing his name hereto, does hereby sign this report on
behalf of each of the above-indicated directors of the Registrant pursuant to
powers of attorney, executed on behalf of each such director.
By: /s/ Robert L. Nardelli
-------------------------------------
(Robert L. Nardelli, Attorney-in-fact)
34
EXHIBIT INDEX
10.15 +Supplemental Executive Choice Program, effective January 1,
1999.
10.25 +Deferred Stock Units Plan and Agreement between Dennis M.
Donovan and The Home Depot, Inc., dated as of May 30, 2001.
10.26 +Promissory Note between Dennis M. Donovan and The Home Depot,
Inc. dated June 7, 2001.
10.27 +Promissory Note between Frank L. Fernandez and The Home Depot,
Inc. dated June 18, 2001.
13 The Registrant's Annual Report to Stockholders for the fiscal
year ended February 3, 2002. Only those portions of said report
which are specifically designated in this Form 10-K as being
incorporated by reference are being electronically filed pursuant
to the Securities Exchange Act of 1934.
23 Consent of Independent Auditors.
24 Special Powers of Attorney authorizing execution of this Form
10-K Annual Report have been granted and are filed herewith as
follows:
Power of Attorney from Gregory D. Brenneman.
Power of Attorney from Richard H. Brown.
Power of Attorney from John L. Clendenin.
Power of Attorney from Berry R. Cox.
Power of Attorney from William S. Davila.
Power of Attorney from Claudio X. Gonzalez.
Power of Attorney from Richard A. Grasso.
Power of Attorney from Milledge A. Hart, III.
Power of Attorney from Bonnie G. Hill.
Power of Attorney from Kenneth G. Langone.
Power of Attorney from Roger S. Penske.
- ---------------
+Management contract or compensatory plan or arrangement required to be filed as
an exhibit to this form pursuant to Item 14(c) of this report.