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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended February 2, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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.)
2727 PACES FERRY ROAD, ATLANTA, GEORGIA
(Address of principal executive offices)
30339-4089
(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
3-1/4% Convertible Subordinated Notes 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, 1997, was $24,231,029,313. The
aggregate market value was computed by reference to the closing price of the
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 holding by nonaffiliates was computed as 455,042,804
shares.
The number of shares outstanding of the Registrant's Common Stock as of April
1, 1997 was 485,657,520 shares.
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DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Proxy Statement for its Annual Meeting of Stockholders, to be
held May 28, 1997, which has been filed pursuant to Regulation 14A within 120
days of the close of Registrant's fiscal year, is incorporated by reference in
answer to Part III of this report but only to the extent indicated herein. In
addition, pages 15 through 31 and the inside cover page of The Home Depot,
Inc.'s 1996 Annual Report to Stockholders is incorporated by reference in
answer to Items 6, 7 and 8 of Part II and Item 14(a) of Part IV of this report.
PART I
Item 1. BUSINESS
The Home Depot, Inc. including its subsidiaries ("Home Depot" or
"Company") is the leading retailer in the home improvement industry and ranks
among the 10 largest retailers in the United States based on net sales volume.
At fiscal year end, the Company was operating 512 stores, including 483
full-service, warehouse-style Home Depot stores in the United States and 24 in
Canada, and 5 EXPO(R) Design Centers in the United States. The aggregate total
square footage of selling space was approximately 53,926,000 at year end. Home
Depot stores sell a wide assortment of building material, home improvement, and
lawn and garden products and average approximately 105,000 square feet of
enclosed space per store, with an additional 20,000 to 28,000 square feet in
the garden center area. The EXPO Design Centers range from 80,000 to 145,000
square feet in size and provide products and services primarily related to
design and renovation projects. The Company's Store Support Center (corporate
office) is located at 2727 Paces Ferry Road, Atlanta, Georgia 30339-4089,
telephone number (770) 433-8211.
Home Depot's operating strategy is to offer a broad assortment of high
quality merchandise at competitive prices utilizing highly knowledgeable,
service oriented personnel and aggressive advertising. The Company regularly
checks competitors' prices to ensure that Home Depot's low "Day-In, Day-Out"
warehouse prices are competitive within each market.
Since a large portion of the Company's customers are individual
homeowners, many of whom may have limited experience in do-it-yourself
("D-I-Y") projects, management considers its associates' knowledge of products
and home improvement techniques and applications to be very important to its
marketing approach and its ability to maintain customer satisfaction. Many
D-I-Y customers take advantage of "how-to" classes offered in Home Depot
stores.
Another segment of the Company's business activity is the buy-it-yourself
("B-I-Y") customers. The B-I-Y customer chooses products, makes the purchase,
and contracts with others to complete or install the project. For these
customers, Home Depot offers installation services for a variety of products.
Home Depot also devotes significant marketing, advertising and service efforts
toward attracting professional remodelers and commercial users.
Products
Management estimates that 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 table below shows the percentage of sales of each major
product group for each of the last three fiscal years. However, these
percentages may not necessarily be representative of the Company's future
product mix due,
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among other things, to the effects of promotional activities associated with
opening additional stores and changes in selling seasons due to unusual or
delayed weather patterns. Also, newly opened stores did not operate through a
complete seasonal product cycle for all periods presented.
Percentage of Sales for
Fiscal Year Ended
------------------------------------
Jan. 29, Jan. 28, Feb. 2,
1995 1996 1997
-------- -------- -------
Product Group
Building materials, lumber and floor and wall coverings 34.0% 33.9% 34.0%
Plumbing, heating, lighting and electrical supplies 27.9 27.7 27.4
Seasonal and specialty items 14.5 14.8 14.7
Hardware and tools 13.1 13.2 13.4
Paint and other 10.5 10.4 10.5
------ ------ ------
100.0% 100.0% 100.0%
The Company sources its merchandise from approximately 7,200 vendors
worldwide, of which no single vendor accounts for as much as five percent of
total purchases. The Company is not dependent on any single vendor. A
substantial majority of merchandise is purchased directly from manufacturers,
thereby eliminating costs of intermediaries. Management believes that
competitive sources of supply are readily available for substantially all
products the Company purchases for resale.
Marketing and Sales
Management believes a number of the Company's existing stores are
operating at or above their optimum capacity. In order to enhance long-term
market penetration, the Company has a strategy of opening new stores near the
edge of the market areas served by existing stores. While such a strategy may
initially have a negative impact on comparable store-for-store sales, the
Company believes 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.
Home Depot continued to introduce or refine a number of merchandising
programs during fiscal 1996. Key among them is the Company's ongoing
commitment to becoming the supplier of first choice to a variety of
professional customers, primarily remodelers, carpenters, plumbers,
electricians, building maintenance professionals and designers. The Company
has reacted to the needs of this group by expanding commercial credit programs,
on-site delivery services and updating lines of professional products.
During fiscal 1996, the Company announced that it had signed a definitive
agreement to acquire Maintenance Warehouse/America Corp. ("Maintenance
Warehouse"). Maintenance Warehouse, with 1996 sales of approximately $130
million, is the leading direct mail marketer of maintenance, repair and
operations products serving the estimated $10 billion building and facilities
management market. The Company believes that the acquisition of Maintenance
Warehouse will provide the Company with a unique opportunity to increase its
penetration of commercial accounts, including its professional customer base.
The acquisition was completed on March 14, 1997.
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The Company's installed sales program is available, with varying services
offered, in all of the Company's stores. There are approximately 3,000
installed sales vendors who, as independent, licensed contractors, are
authorized by the Company to provide services to customers. This program
targets the B-I-Y customer, who will purchase a product but either does not
have the desire or ability to install the product.
In fiscal 1996, the Company continued its marketing effort to support its
sponsorship of the 1996 Olympic Games, and the 1996 Atlanta Paralympic Games,
and the U.S. and Canadian Olympic teams' participation at those games. The
Company's partnership with many of its key suppliers in the United States and
Canada provided significant financial support for the sponsorship. The Company
intends to maintain its relationship with the United States Olympic Committee
and the Canadian Olympic Committee for at least the next eight years for the
Olympic Games to be held in 1998, 2000, 2002 and 2004.
In fiscal 1996, the Company opened its fifth EXPO Design Center store in
Miami, Florida. Unlike traditional Home Depot stores, EXPO does not sell
building materials such as lumber, but focuses instead on upscale interior
design products and installation services. The Miami EXPO format is different
from the format of other EXPO stores located in San Diego, California; Atlanta,
Georgia; Long Island, New York; and Dallas, Texas. This new format for EXPO is
60 percent smaller in size at approximately 82,000 square feet compared to an
average EXPO store of approximately 144,000 square feet of selling space,
including climate controlled garden center areas. Management believes the new
format is more project oriented than product oriented. The alternate format
focuses on kitchen, bath, lighting, window, soft flooring and hard flooring and
increased installation services. The only "cash and carry" items a customer
can purchase at this store are items principally relating to such kinds of
projects.
On February 28, 1994, the Company purchased a 75 percent interest in the
Aikenhead's Home Improvement Warehouse ("Aikenhead's") chain in Canada from the
Molson Companies Limited ("Molson"). The Company is the managing partner of
this Partnership with Molson which operates as The Home Depot Canada.
Subsequent to the acquisition, The Home Depot Canada commenced operations in
fiscal 1994 with seven stores previously operated by Aikenhead's. The Home
Depot Canada opened an additional five stores during fiscal 1994, seven stores
during fiscal 1995 and five stores during fiscal 1996. Approximately eight
additional new store openings are planned for fiscal 1997. At any time after
the sixth anniversary date of the purchase, the Company has the option to
purchase, or Molson has the option to cause the Company to purchase, the
remaining 25 percent of the Canadian operations. The option price is based on
the lesser of fair market value or a value determined by an agreed upon
formula, as of the option exercise date.
During fiscal 1996, the Company continued to open restaurants in certain
stores. Customers with limited amounts of time to complete their shopping,
especially professional contractors and customers with small children, may be
attracted to the restaurant in the store or spend more time in the store if
food is available. Restaurant operators vary by market.
During the year, the Company commenced rolling out its new Load 'N Go(TM)
program and by the end of fiscal 1996 it was available in Atlanta, San Diego,
Los Angeles and Nashville. This program offers rentals, at low hourly rates,
of standard and specially-fitted pickup trucks and cargo vans for customers who
cannot wait for normal delivery schedules or who are unable to transport their
purchases in their own vehicles. This provides an alternative to
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customers from regular delivery services offered by the Company. Since a Load
'N Go transaction would typically replace a delivery made with Home Depot's
vehicles, this program will contribute to reduced delivery costs to the
Company. The Load 'N Go service is neither owned nor operated by Home
Depot but through an independent third party. The Company has made tentative
plans to offer this program in most markets by the end of fiscal 1997.
Construction continued on the Company's new Import Distribution Center
("IDC") located in Savannah, Georgia. The 1.4 million square foot facility will
be staffed with approximately 600 associates. The IDC will enable the Company
to directly import products currently sourced from third party importers or not
currently available to customers. Other benefits include quicker turnaround
deliveries to stores, lower pricing, and improved quality control than would be
possible if the products were purchased through other third party importers.
The IDC is expected to begin shipments in May 1997.
The Company continued its use of phone centers to serve its customers by
adding two new features to the phone centers during fiscal 1996. One new
implemented feature provides a more efficient method for product look-up by
department, class and subclass. The benefits include locating the product as
requested by the phone-in customer in a more timely manner, with detailed
product information, and consistent, standardized abbreviations and look-up
criteria for sales associates attempting to locate a product. This enhances
customer service through decreasing phone calls to the selling floor and
minimizing the number of times customers must talk to more than one associate.
The second feature added to the phone centers was the installation and
implementation of new computer hardware and software which enable the Company's
visually impaired associates to work in the phone center department. The new
computer equipment, together with Vocal-Eyes(TM) Software, enable the associate
to access the menus in the phone sales system, which then audibly reads the
information on the computer screen.
In fiscal 1996, the Company rolled out the Right at Home(TM) program, a
new and exclusive decor product system which takes the guesswork out of
decorating. Developed by the Company, the program is divided into four popular
decorating styles. Each decorating style has a specific name, description and
symbol that is used in signage and packaging so customers can easily coordinate
products for living areas of the home, including kitchens, bathrooms and
bedrooms.
The Company, together with Lynette Jennings, a television personality who
is known as one of North America's best recognized authorities on home
renovation, design and construction, is a co-producer of Lynette Jennings
HouseSmart(TM) ("HouseSmart"). HouseSmart is a one-hour television program
hosted by Lynette Jennings and shown daily on The Discovery Channel.
HouseSmart is presented in a fast-paced, magazine style format featuring
experts who show viewers that many home improvement projects are not as
complicated and expensive as they look.
Beginning in fiscal 1997, the Company's Northeast, Mid-South and Southeast
Divisions will be testing Associated Press Adsend(TM) ("Adsend"). Adsend
allows the Company to send computer generated advertisements created in each
division to newspapers in a digital format. The end result is expected to be a
higher quality product delivered at less expense and without the insecurity of
loss or theft to any of the over 500 newspapers the Company currently utilizes
for print advertisement. Another advantage of using Adsend is that the
divisions can
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send an advertisement only 12 hours before the breakdate. This process will
allow the Company to produce and/or change last minute advertising, including
responding to newsbreaking emergency situations such as hurricanes, tornadoes
and flooding. If successful, the Company will roll out Adsend to the Midwest
and Western Divisions. In Canada the program is unavailable.
In fiscal 1997, the Company will sponsor the "1997 National Home and
Garden Show Series." Bringing together 16 of the nation's most successful
consumer shows under one national sponsorship will provide maximum support and
exposure and will be the first show sponsorship of its kind. Through this
sponsorship, the Company will play a key role in bringing attention to the most
innovative lawn and garden, interior design and home improvement products to
the general public.
In early fiscal 1997, the Company announced its intention to open stores
in the Latin America market. The first store is planned to open in Santiago,
Chile, in fiscal 1998. Chile was chosen because of its stable economy and
government and a growing middle class. To facilitate entry into the market,
the Company signed a letter of intent to form a joint venture with S.A.C.I.
Falabella, a leading department store retailer in Chile. The Company's
controlling share of the venture will be 66.67 percent. It is expected that
the alliance with Falabella will enhance the Company's presence in the Chilean
market, offer attractive real estate opportunities and provide assistance with,
among other things, systems, credit marketing and distribution logistics. The
Company plans to have offices in Santiago, Chile from which the day-to-day
management of the operation will be handled by a key management team comprised
of both Chilean nationals and seasoned Home Depot managers from the United
States who will live in Chile.
"The Home Depot," "EXPO," the "Homer" advertising symbol and various
private label brand names under which the Company sells certain of its products
are service marks, trademarks or trade names of the Company and are considered
to be important assets of the Company.
Information Systems
Each store is equipped with a computerized point of sale system,
electronic bar code scanning system, and a UNIX Server. Management believes
these systems provide efficient customer check-out (with an approximate 90
percent rate of scannable products), store-based inventory management, rapid
order replenishment, labor planning support, and item movement information.
Faster registers as well as a new check approval system and a new receipt
format have expedited transactions. To better serve the increasing number of
customers applying for credit, the charge card approval process time has been
reduced to less than 30 seconds. Store information is communicated to the
Store Support Centers' computers via a satellite and land-based frame relay
network. These computers provide corporate, financial, merchandising and other
back office function support. The Company operates its own television network
and produces training and informational programs that are transmitted to stores
via the satellite communications network and by videotape.
The Company is constantly assessing and upgrading its information systems
to support its growth, reduce and control costs, and enable better
decision-making. The Company continues to see greater efficiency as a result
of its electronic data interchange ("EDI") program. Currently, most of the
Company's highest volume vendors are participating in the EDI program. A
paperless system, EDI electronically processes orders from stores to vendors,
alerts the store when the
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merchandise is to arrive, and transmits vendor invoice data from the vendor to
the Home Depot Store Support Center. As previously discussed, the Company
initiated information systems in its phone enters to improve customer service.
In fiscal 1995, stores were equipped with Electronic Article Surveillance
("EAS") detectors that trigger an alarm if a person exits the store with
merchandise affixed with an EAS label that has not been desensitized at the
cash register. The Company continued its use of the EAS system in fiscal 1996
and the system appears to be a deterrent to theft, with many stores reporting
reductions in shoplifting offenses.
Employees
As of fiscal year end, The Home Depot employed approximately 100,000
associates, of whom approximately 6,300 were salaried with the remainder
compensated on an hourly basis. Approximately 78 percent of the Company's
associates are employed on a full-time basis. In order to attract and retain
qualified personnel, the Company seeks to maintain salary and wage levels above
those of its competitors in its market areas. The Company's policy is to hire
and train additional personnel in anticipation of future store expansion.
The Company has never experienced a strike or any work stoppage, and
management believes that its employee relations are satisfactory. There are no
collective bargaining agreements covering any of the Company's associates.
Competition
The business of the Company is highly competitive, based in part on price,
location of store, customer service and depth of merchandise. In each of the
markets served by the Company, there are several other chains of building
supply houses, lumber yards and home improvement stores. In addition, the
Company must compete, with respect to some of its products, with discount
stores, local, regional and national hardware stores, warehouse clubs,
independent building supply stores and, to a lesser extent, other retailers.
Due to the variety of competition faced by the Company, management is
unable to precisely measure the Company's market share in its existing market
areas. Management, however, believes that the Company is an effective and
significant competitor in its markets and has approximately a 14 percent market
share of the overall home improvement industry in the United States based on
certain industry estimates.
Executive Officers
The following provides information concerning the executive officers
holding positions in the Company and/or its subsidiaries.
BERNARD MARCUS, age 67, has been Chairman of the Board of Directors and
Chief Executive Officer ("CEO") of Home Depot since its inception in 1978; and
is, together with Mr. Arthur M. Blank and Mr. Kenneth G. Langone (a director of
the Company), a co-founder of the Company. Mr. Marcus serves on the Board of
Directors of Wachovia Bank of Georgia, N.A., National Service Industries, Inc.
and the New York Stock Exchange, Inc. Mr. Marcus also serves on the Board of
the National Foundation for the Centers for Disease Control and Prevention and
is Chairman of the Board of The Marcus Center, which provides support services
for persons with
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developmental disabilities and their families. In addition, he is a member
of the Advisory Board and Board of Directors of the Shepherd Center in Atlanta,
Georgia and Vice President and member of the Board of The City of Hope, a
charitable organization in Duarte, California.
ARTHUR M. BLANK, age 54, has been President, Chief Operating Officer
("COO") and a director of Home Depot since its inception in 1978; and is,
together with Mr. Bernard Marcus and Mr. Kenneth G. Langone, a co-founder of
the Company. Mr. Blank serves on the Board of Trustees of North Carolina
Outward Bound School, a non-profit corporation; serves on the Board of Trustees
of Emory University; the Board of Councilors of the Carter Center of Emory
University; and the Board of Directors of Cox Enterprises, Inc. and Post
Properties Inc.
RONALD M. BRILL, age 53, has been Executive Vice President and Chief
Administrative Officer ("CAO") of the Company since August 1995. Mr. Brill
joined Home Depot as its Controller in 1978, was elected Treasurer in 1980,
Vice President-Finance in 1981, Senior Vice President and Chief Financial
Officer ("CFO") in 1984, Executive Vice President and CFO in 1993, and was
elected as a director in 1987. Mr. Brill serves on the Board of Trustees of the
Atlanta Jewish Federation, the Atlanta Jewish Community Center and Woodruff
Arts Center; the Board of Directors of the Atlanta High Museum of Art and
Pilchuck Glass School, and the Governing Board of Woodward Academy.
BRUCE W. BERG, age 48, has been President-Southeast Division since 1991.
Mr. Berg joined the Company in 1984 as Vice President-Merchandising (East
Coast) and was promoted to Senior Vice President (East Coast) in 1988.
MARSHALL L. DAY, age 53, has been Senior Vice President-Chief Financial
Officer since August 1995. Mr. Day joined the Company in 1986 as Controller,
was promoted to Vice President-Controller in 1988, Vice President-Finance in
1989, and Senior Vice President-Finance in 1993.
BILL HAMLIN, age 44, has been Executive Vice President-Merchandising since
April 1994. Mr. Hamlin joined the Company in 1985 as a merchandiser and was
promoted to Vice President-Merchandising (West Coast) in 1988 and
President-Western Division in 1990.
VERNON JOSLYN, age 45, has been President-Northeast Division since
February 1996. Mr. Joslyn joined Home Depot in 1984 as an assistant store
manager, and was promoted to Store Manager the following year. Mr. Joslyn
subsequently served as District Manager in Phoenix and San Diego. In 1991, Mr.
Joslyn, as District Manager, opened the Boston market and served in that
capacity until 1993 when he was promoted to his previous position of Vice
President-Operations for the Northeast Division.
LYNN MARTINEAU, age 40, has been President-Western Division since
October 1996. Mr. Martineau joined The Home Depot in 1979 as a store
associate. During the past 17 years, Mr. Martineau has served in a variety of
merchandising and operations positions, including serving as the Company's Vice
President-Operations, West Coast Division from 1987 until 1989. Mr.
Martineau most recently served as Vice President-Merchandising for the
Company's Southeast Division, located in Tampa, Florida.
W. ANDREW McKENNA, age 51, has been President-Midwest Division since 1994.
Mr. McKenna joined Home Depot in 1990 as Senior Vice President-Corporate
Information Systems.
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LARRY M. MERCER, age 50, has been Executive Vice President since February
1996. Mr. Mercer joined the Company in 1979 as an assistant store manager and
after serving as Store Manager was promoted to Regional Manager of the
Central Florida Region in 1983. Mr. Mercer was then promoted to Vice
President-Store Operations (East Coast) in 1987, and in 1991 was promoted to
President-Northeast Division and served in that capacity until his promotion to
his current position.
BRYANT W. SCOTT, age 41, has been President of the EXPO Design Center
Division since March 1995. Mr. Scott began his career with Home Depot in 1980
as a store associate. Since then he has served in a variety of positions,
including Vice President-Merchandising for the Southeast Division, located in
Tampa, Florida.
KENNETH W. UBERTINO, age 52, has been President-Southwest Division,
located in Dallas, Texas, since September 1996. Mr. Ubertino joined The Home
Depot in 1990 as a merchant in the Company's Northeast Division. In 1993, Mr.
Ubertino was promoted to his previous position of Vice President-
Merchandising for the Midwest Division, located in Schaumburg, Illinois.
ANNETTE M. VERSCHUREN, age 40, has been President of The Home Depot Canada
since joining the Company in March 1996. Prior to joining the Company, Ms.
Verschuren had been President of Michaels of Canada Inc. since 1993. From 1989
until 1992, Ms. Verschuren held several positions with Imasco Limited. In
1992, Ms. Verschuren formed Verschuren Ventures Inc. and remained there until
becoming President of Michaels of Canada Inc. in 1993.
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Item 2. PROPERTIES
The following table indicates the number of the Company's store locations
by state in the United States and by province in Canada as of February 2, 1997.
Number of Stores
State in State
------------------ ----------------
Alabama 6
Arizona 15
Arkansas 2
California 87
Colorado 9
Connecticut 13
Delaware 1
Florida 61
Georgia 28
Idaho 1
Illinois 20
Indiana 2
Iowa 1
Kentucky 1
Louisiana 8
Maine 1
Maryland 11
Massachusetts 15
Michigan 15
Minnesota 4
Mississippi 3
Missouri 3
Nevada 4
New Hampshire 3
New Jersey 21
New Mexico 2
New York 26
North Carolina 15
Oklahoma 5
Oregon 7
Pennsylvania 16
Rhode Island 1
South Carolina 5
Tennessee 14
Texas 43
Utah 3
Virginia 6
Washington 10
----------------
Subtotal 488
Number of Stores
Canadian Provinces in Province
------------------------------------
Ontario 14
British Columbia 6
Alberta 4
----------------
Subtotal 24
TOTAL 512
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At fiscal year end, Home Depot had stores in 38 states, with approximately
50 percent of the U.S. stores being concentrated in California, Georgia, New
York, Texas and Florida. Although new store openings for fiscal 1996 occurred
primarily in existing markets, the Company continued its geographic expansion
by opening stores in a number of new markets - Montgomery, Alabama; Little
Rock, Arkansas; Newark, Delaware; Dalton, Columbus and Macon, Georgia;
Louisville, Kentucky; Flint, Michigan; Minneapolis/St. Paul, Minnesota; Jackson
and Gulfport, Mississippi; Columbia and St. Louis, Missouri; Cicero, New York;
Pittsburgh, Pennsylvania; Johnson City and Memphis, Tennessee; and Corpus
Christi, Texas.
The Midwest Division is expected to be one of the fastest growing
divisions for the next several years. Approximately 21 new stores are
scheduled for 1997 and, by the end of 1998, the Company expects approximately
112 stores to be open in that division.
In order to be more responsive to customers' needs, beginning in fiscal
1997, the Company realigned 59 Southeast Division stores, 4 Western Division
stores and 2 Midwest Division stores into the newly created Southwest Division.
This new operating division will open an additional 20 stores during fiscal
1997. The new division is based in Dallas, Texas and will initially consist of
stores with market areas located in Arkansas, Louisiana, Mississippi, Missouri,
New Mexico, Oklahoma and Texas.
In addition to the newly created Southwest Division, the Company has also
made changes within its Southeast Division. Effective February 1, 1997,
Florida became a separate region to be headquartered at the Southeast
Divisional office in Tampa, Florida. The Mid-South Region, based in Atlanta,
Georgia, consists of stores with market areas located in Alabama, the
Carolinas, Georgia, Kentucky and Tennessee. The Mid-South Region, together
with the new Florida Region comprise the Southeast Division.
From the end of fiscal 1991 to the end of fiscal 1996, the Company
increased its store count by an average of approximately 24 percent per year
(from 174 to 512 stores) and increased the total store square footage by an
average of approximately 27 percent per year (from 16,480,000 to 53,926,000
total square feet). Home Depot expects to continue to increase its store count
in both existing and selected new markets on a basis consistent with its
current policy of not exceeding a maximum growth rate of new stores of
approximately 22 percent per year. During fiscal 1996, the Company opened 89
new stores and relocated 7 existing stores, including the opening of 23
additional stores in the Northeast Division, 34 in the Southeast Division, 17
in the Midwest Division, 16 in the Western Division, 1 in the EXPO Division and
5 stores in Canada. During fiscal 1997, the Company anticipates opening
approximately 111 new stores: with at least 19 in the Southeast, 16 in the
Southwest, 30 in the Northeast, 17 in the West, 21 in the Midwest, 8 in Canada,
plus relocations of 7 existing stores. New stores average approximately
105,000 square feet with an additional 15,000 to 28,000 square feet of outside
selling and storage area.
Of the Company's 512 stores at February 2, 1997, approximately 75 percent
were owned (including those owned subject to a ground lease) consisting of
approximately 40,163,000 square feet and approximately 25 percent were leased
consisting of approximately 13,763,000 square feet. In recent years, the
relative percentage of new stores which are owned has increased. Although the
Company takes advantage of lease financing opportunities, the Company generally
prefers to own stores because of the greater operating control and flexibility,
generally lower occupancy costs and certain other economic advantages of owned
stores. See "Management's Discussion and Analysis of Results of Operations and
Financial Condition--Liquidity and Capital Resources."
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The Company's executive, corporate staff and accounting offices occupy
approximately 677,000 square feet of leased and owned space in several
locations in Atlanta, Georgia. The Company has acquired additional land in
Atlanta, Georgia and has commenced construction of replacement office
facilities. The new office facilities will be completed in stages generally to
coincide with the end of various lease terms and space requirements. In
addition, the Company occupies an aggregate of 340,000 square feet, of which
93,000 square feet is owned and 247,000 square feet is leased, for divisional
store support centers located in Atlanta, Georgia; Fullerton, California; South
Plainfield, New Jersey; Schaumburg, Illinois; Tampa, Florida; Dallas, Texas;
and Scarborough, Ontario, Canada.
The Company utilizes 3,518,000 square feet of warehousing and distribution
space of which 204,000 is owned and 3,314,000 is leased. The Company
constructed an approximate 1.4 million square foot facility in Savannah,
Georgia, for an import distribution facility. Imported products will be staged
in the distribution center pending shipment to the stores.
Management believes that at the end of existing lease terms, space
currently leased by the Company can be either relet or replaced by alternate
space for lease or purchase that is readily available.
Item 3. LEGAL PROCEEDINGS
The Company is a defendant in a consolidated class action lawsuit (Butler
et al. v. Home Depot, Inc. and Frank, et al. v. Home Depot, Inc., Case Nos.
94-4335SI and 95-2182SI, respectively, pending in U.S. Dist. Ct., N.D. CA)
claiming gender discrimination in the Company's Western Division. The action
seeks injunctive and declaratory relief and damages. Discovery is in its final
stages, and a trial is scheduled to begin in the latter part of fiscal 1997.
Two other gender discrimination lawsuits have been filed against the
Company, one in New Orleans, Louisiana (Griffin, et al., v. Home Depot, Inc.,
Civil Action No. 95-0181, pending in U.S. Dist. Ct., E.D. LA), and one in
Newark, New Jersey (Margorie Tortajada, individually and on behalf of all other
similarly situated v. Home Depot, Inc., Case No. 96-2927, pending in U.S. Dist.
Ct., for the Dist. of NJ), each of which is sought to be asserted on behalf of
a class of plaintiffs. Neither of these lawsuits had been certified as a class
action lawsuit as of February 2, 1997. Although the New Orleans case has been
stayed pending the outcome of a similar, but unrelated case on appeal, the U.S.
Equal Employment Opportunity Commission ("EEOC") has filed a motion to
intervene in the New Orleans case. The New Jersey case has been allowed to
proceed at this time without class status and only on an individual plaintiff
basis.
Management believes these cases are without merit and intends to
vigorously defend all of these cases, including the EEOC's attempted
intervention. While the ultimate results of this litigation cannot be
determined, management does not expect that the resolution of these proceedings
will have a material adverse effect on the Company's consolidated financial
position or results of operations.
The Company has other litigation arising from the normal course of
business. In management's opinion, this litigation will not materially effect
the Company's consolidated financial position or the results of operations.
12
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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 the fiscal year ended February 2, 1997.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since April 19, 1984, the Common Stock of the Company has been listed on
the New York Stock Exchange under the symbol "HD." The table below sets forth
the low and high prices of the 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.
PRICE RANGE CASH
-------------- DIVIDENDS
LOW HIGH DECLARED
------ ------ ---------
FISCAL YEAR 1995
First Quarter ended April 30, 1995 $40.25 $50.00 $.04
Second Quarter ended July 30, 1995 38.63 45.25 .05
Third Quarter ended October 29, 1995 36.63 44.88 .05
Fourth Quarter ended January 28, 1996 37.13 48.00 .05
FISCAL YEAR 1996
First Quarter ended April 28, 1996 $42.50 $50.38 $.05
Second Quarter ended July 28, 1996 45.50 57.00 .06
Third Quarter ended October 27, 1996 50.25 59.50 .06
Fourth Quarter ended February 2, 1997 47.75 57.25 .06
FISCAL YEAR 1997
First Quarter (through April 15, 1997) $49.50 $58.63 $.06
____________________________
The Company paid its first cash dividend on June 22, 1987, and has since
paid dividends in each quarter. Future dividend policies will depend on the
Company's earnings, capital requirements, financial condition and other factors
considered relevant by the Board of Directors.
Number of Record Holders
The number of record holders of Home Depot's Common Stock as of April 1,
1997 was 78,928 (excluding individual participants in nominee security position
listings).
Item 6. SELECTED FINANCIAL DATA
Reference is made to information for the fiscal years 1992-1996 under the
heading "Ten Year Selected Financial and Operating Highlights" contained in the
Company's Annual Report to
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Stockholders for the fiscal year ended February 2, 1997, which information is
incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Reference is made to information under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
contained in the Company's Annual Report to Stockholders for the fiscal year
ended February 2, 1997, which information is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to information under the headings "Consolidated
Statements of Earnings," "Consolidated Balance Sheets," "Consolidated
Statements of Stockholders' Equity," "Consolidated Statements of Cash Flows,"
"Notes to Consolidated Financial Statements" and "Independent Auditors' Report"
contained in the Company's Annual Report to Stockholders for the fiscal year
ended February 2, 1997, which information is incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference from
the information in Registrant's Proxy Statement (filed or to be filed pursuant
to Regulation 14A) for its Annual Meeting of Stockholders to be held May 28,
1997, except as to biographical information on Executive Officers which is
contained in Item I of this Annual Report on Form 10-K.
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from
the information in Registrant's Proxy Statement (filed or to be filed pursuant
to Regulation 14A) for its Annual Meeting of Stockholders to be held May 28,
1997.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference from
the information in Registrant's Proxy Statement (filed or to be filed pursuant
to Regulation 14A) for its Annual Meeting of Stockholders to be held May 28,
1997.
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Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from
the information in Registrant's Proxy Statement (filed or to be filed pursuant
to Regulation 14A) for its Annual Meeting of Stockholders to be held May 28,
1997.
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 18 through 31 of the Registrant's Annual Report to Stockholders for the
fiscal year ended February 2, 1997, as provided in Item 8 hereof:
- Consolidated Statements of Earnings for the fiscal years ended February
2, 1997, January 28, 1996 and January 29, 1995.
- Consolidated Balance Sheets as of February 2, 1997 and January 28, 1996.
- Consolidated Statements of Stockholders' Equity for the fiscal years
ended February 2, 1997, January 28, 1996 and January 29, 1995.
- Consolidated Statements of Cash Flows for the fiscal years ended
February 2, 1997, January 28, 1996 and January 29, 1995.
- 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 Reports on Form 8-K filed during the last quarter of the
fiscal year ended February 2, 1997.
(c) Exhibits
Exhibits marked with an asterisk (*) are hereby incorporated by reference
to exhibits or appendices previously filed by the Registrant as indicated in
brackets following the description of the exhibit.
*3.l Restated Certificate of Incorporation of The Home Depot, Inc., as
amended. [Form 10-K for the fiscal year ended January 29, 1995,
Exhibit 3.1]
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*3.2 By-laws, as amended. [Form 10-K for the fiscal year ended January 28,
1996, Exhibit 3.2]
*4.1 Indenture dated as of October 1, 1996, between The Home Depot, Inc., as
issuer and The First National Bank of Chicago, as trustee for
$1,104,000,000 aggregate principal amount of 3-1/4% Convertible
Subordinated Notes due 2001. [Form S-3 Registration Statement No.
333-12575, Exhibit 4.2]
*10.1 Investment Banking Consulting Contract dated April 17, 1985 between
Invemed Associates, Inc. and the Registrant. [Form 10-K for the fiscal
year ended February 2, 1992, Exhibit 10.1]
*10.2 +Corporate Office Management Bonus Plan of the Registrant dated March 1,
1991. [Form 10-K for the fiscal year ended February 2, 1992, Exhibit
10.2]
*10.3 +Employee Stock Purchase Plan, as amended. [Appendix A to Registrant's
Proxy Statement for the Annual Meeting of Stockholders held May 31,
1995]
*10.4 +Senior Officers' Bonus Pool Plan, as amended. [Form 10-K for the
fiscal year ended January 28, 1996, Exhibit 10.4]
*10.5 +The Home Depot, Inc. 1991 Omnibus Stock Option Plan. [Appendix A to
Registrant's Proxy Statement for the Annual Meeting of Stockholders held
May 22, 1991]
*10.6 +Executive Medical Reimbursement Plan, effective January 1, 1992. [Form
10-K for the fiscal year ended January 31, 1993, Exhibit 10.7]
*10.7 +The Home Depot ESOP Restoration Plan. [Form 10-K for the fiscal year
ended January 29, 1995, Exhibit 10.8]
*10.8 $800,000,000 Credit Agreement dated as of December 20, 1995 among The
Home Depot, Inc., the Banks Listed Therein and Wachovia Bank of Georgia,
N.A., as Agent (without exhibits). [Form 10-K for the fiscal year ended
January 28, 1996, Exhibit 4.1]
11 Computation of Earnings Per Common and Common Equivalent Share.
13 The Registrant's Annual Report to Stockholders for the fiscal
year ended February 2, 1997. 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.
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:
16
17
Power of Attorney from Frank Borman.
Power of Attorney from John L. Clendenin.
Power of Attorney from Johnnetta B. Cole.
Power of Attorney from Berry R. Cox.
Power of Attorney from Milledge A. Hart, III.
Power of Attorney from Donald R. Keough.
Power of Attorney from Kenneth G. Langone.
Power of Attorney from M. Faye Wilson.
27 Financial Data Schedule. [Filed electronically with SEC only]
- --------------
+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.
17
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, The Home Depot, Inc., has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Atlanta, and State of Georgia on this 21st day of
April, 1997.
THE HOME DEPOT, INC.
By: /s/ Bernard Marcus
------------------------------------
(Bernard Marcus, Chairman of the Board,
Chief Executive Officer and Secretary)
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 Chairman of the Board, Chief April 18, 1997
- ------------------- Executive Officer and Secretary
(Bernard Marcus) (Principal Executive Officer)
/s/ Arthur M. Blank President, Chief Operating Officer April 18, 1997
- ------------------- and Director
(Arthur M. Blank)
/s/ Ronald M. Brill Executive Vice President, April 18, 1997
- ------------------- Chief Administrative Officer,
(Ronald M. Brill) Assistant Secretary and Director
* Director April 18, 1997
- -------------------
(Frank Borman)
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Signature Title Date
- --------- ----- ----
* Director April 18, 1997
- -------------------
(John L. Clendenin)
* Director April 18, 1997
- -------------------
(Johnnetta B. Cole)
* Director April 18, 1997
- -------------------
(Berry R. Cox)
/s/ Marshall L. Day Senior Vice President- April 18, 1997
- --------------------- Chief Financial Officer
(Marshall L. Day) (Principal Financial and
Accounting Officer)
* Director April 18, 1997
- -----------------------
(Milledge A. Hart, III)
* Director April 18, 1997
- -----------------------
(Donald R. Keough)
* Director April 18, 1997
- -----------------------
(Kenneth G. Langone)
* Director April 18, 1997
- -----------------------
(M. Faye Wilson)
* 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/ Bernard Marcus
-------------------------------------
(Bernard Marcus, Attorney-in-fact)
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EXHIBIT INDEX
11 Computation of Earnings Per Common and Common Equivalent Share.
13 The Registrant's Annual Report to Stockholders for the fiscal year
ended February 2, 1997. 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.
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 Frank Borman.
Power of Attorney from John L. Clendenin.
Power of Attorney from Johnnetta B. Cole.
Power of Attorney from Berry R. Cox.
Power of Attorney from Milledge A. Hart, III.
Power of Attorney from Donald R. Keough.
Power of Attorney from Kenneth G. Langone.
Power of Attorney from M. Faye Wilson.
27 Financial Data Schedule. [Filed electronically with SEC only]