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THE HOME DEPOT
®
2002 ANNUAL REPORT

Table of contents

  • Page 1
    THE HOME DEPOT ® 2002 ANNUAL REPORT

  • Page 2
    ... supplies, décor and lawn and garden products that are sold to do-it-yourselfers, home improvement contractors, trades people, and building maintenance professionals. At the end of fiscal 2002, the Company was operating 1,532 stores in total, which included 1,370 Home Depot stores, 52 EXPO Design...

  • Page 3
    ...or clinics and workshops, our customers view us as more than a store. To them, we are a library, an expert, a teacher, a coach, a neighbor and a friend. This relationship with our customers is the foundation of our recently launched advertising campaign. It reinforces the message that The Home Depot...

  • Page 4
    ... to help us build our leadership pipeline and successfully manage our growth with great talent. Each Store Manager and District Manager recently attended a weeklong Learning Forum designed to enhance their leadership skills. Here, at our Annual Managers' Meetings, they were briefed on Company plans...

  • Page 5
    ... directly to the Audit Committee and are only permitted to perform pre-approved audit related and limited pre-approved non-audit related services, in conformity with recent SEC rules. Also, while many companies have recently commenced efforts to add a financial expert to their boards, The Home Depot...

  • Page 6
    ... growth through our 89 Home Depot stores in Canada. During 2002, we made significant investments in technology, operations, merchandising and our associates, all of which will contribute to our continued success in years ahead. In total, nearly $3 billion was reinvested in our business. Highlights...

  • Page 7
    ...'S LETTER • We enhanced our logistics by opening four Transit Facilities, bringing the total to 10, and by adding two more Import Distribution Centers. Associates • We enhanced pay and benefits for our associates by improving tuition reimbursement and by establishing our Success Sharing program...

  • Page 8

  • Page 9
    BUILDING RELATIONSHIPS The Home Depot is more than a store. We are a team of more than 280,000 associates who are passionate about our business, dedicated to customer service and committed to giving back to our communities. Our brand was built on the foundation of broad product assortment, great ...

  • Page 10
    ... ASSOCIATES ON PRODUCT KNOWLEDGE, SELLING SKILLS AND "HOW-TO" ADVICE. OUR COMPANY IS COMMITTED TO ATTRACTING, MOTIVATING AND RETAINING A HIGH-PERFORMING, DIVERSE WORKFORCE WHILE PROVIDING THEM WITH THE BEST TRAINING IN THE INDUSTRY. TO LEARN MORE ABOUT A CAREER AT THE HOME DEPOT, VISIT US ON-LINE...

  • Page 11
    ...®, we offer exclusive products at values that can't be matched by our competitors. We have brand strength in each of our selling categories. With national brand names such as Echo®, Toro®, Honda® and John Deere®, the lawn and garden power equipment department reflects merchandising expertise...

  • Page 12
    VISUAL MERCHANDISING New product displays, cleaner aisles, better signage, improved lighting - all of these measures are making The Home Depot an easier and more pleasant place for customers to shop. In addition, we made significant improvements in our visual merchandising program, providing ...

  • Page 13
    ..., to building a birdhouse with your children. In 2002, children attending our kid's workshops completed over 1.5 million projects. Our customers can also get helpful information through our style and buying guides, seasonal and specialty catalogs and instructional books. Home Depot 1-2-3 â„¢ books...

  • Page 14
    ...We can help you with your installation needs. The Home Depot At-Home Services® arranges installation services for kitchen cabinets, windows, doors, countertops, carpet, hardwood flooring, exterior siding, roofing, HVAC and much more. We're striving to be not only your home improvement warehouse but...

  • Page 15
    ... service and advice they need. Our TRCs have a broad range of tools - from concrete and cutting tools, to plumbing, painting and fastening tools, pressure washers and air compressors and lawn and garden equipment - that can be rented by the hour, day or week. PRO MARKET Home improvement...

  • Page 16
    ... PORTFOLIO OF SPECIALTY SERVICES. With 52 locations in key markets, EXPO Design Centers provide a complete one-stop home decorating and remodeling resource. EXPO has 10 designer showrooms under one roof and provides an incredible selection of designer products, special order lighting, soft and hard...

  • Page 17
    ... of The Home Depot with special-order faucets and plumbing fixtures. With a national sales force, catalog and on-line operations, Maintenance Warehouse is the industry leader in supplying building repair and replacement products at the lowest wholesale prices to owners and managers of multihousing...

  • Page 18
    ... and growing Company. The Home Depot employs over 280,000 associates who interact with millions of customers. With stores in communities in three countries, we sell a vast array of home improvement products, made from a wide variety of materials and natural resources, which are sourced and purchased...

  • Page 19
    ...OLYMPIC JOB OPPORTUNITY PROGRAM The Home Depot is the single largest employer of Olympic hopefuls. Our Olympic Job Opportunity Program (OJOP) allows our athletes to train and work part-time while receiving a full-time salary and benefits. During the 2002 Salt Lake City Games, our athlete associates...

  • Page 20
    ... to reduce outside air infiltration • reduced store footprint standard to 102,000 square feet • lower racking for better airflow • energy-efficient T-5 lighting • white TPO roofing to reduce heat load Through our e+ program, which includes signage, catalog pages, clinics and merchandise...

  • Page 21
    ... the beginning of the program, nearly five million children have participated in the program. KaBOOM! KaBOOM! fosters social and family networks while providing safe places for kids to play, develop and grow. Home Depot associates, business partners and vendors join together to build safe, fun and...

  • Page 22
    ... or approximately 69 million shares of our common stock. In addition, we increased our quarterly dividend by 20% in the fourth quarter. BALANCE SHEET STRENGTH The Home Depot's financial strength ranks among the best in retailing. At the end of fiscal 2002, we had total equity of $19.8 billion, with...

  • Page 23
    ... to Consolidated Financial Statements Management's Responsibility for Financial Statements Independent Auditors' Report 10-Year Summary of Financial and Operating Results Corporate and Stockholder Information Board of Directors and Executive Officers 30 31 32 41 41 42 44 45 22 28 29 THE HOME DEPOT...

  • Page 24
    ... 50,000 square feet and, therefore, excludes Apex Supply Company, Georgia Lighting, Maintenance Warehouse, Your "other" Warehouse, Designplace Direct (formerly National Blinds and Wallpaper) and HD Builder Solutions Group locations. (3) Adjusted to reï¬,ect the first 52 weeks of the 53-week fiscal...

  • Page 25
    ... on providing products and services to our do-it-for-me customers. These programs are offered through Home Depot and EXPO Design Center stores. We also arrange for the provision of ï¬,ooring installation services to homebuilders through HD Builder Solutions Group, Inc. Net service revenues for...

  • Page 26
    ... 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. Pre-opening expenses as a percent of sales...

  • Page 27
    ... 2002 compared to 204 new stores in fiscal 2001. We own 195 and 188 of the stores opened in fiscal 2002 and fiscal 2001, respectively, and lease the remainder. We plan to open 206 stores in fiscal 2003, including 6 Home Depot Landscape Supply stores, and expect total capital expenditures to be...

  • Page 28
    ... for StockBased Compensation - Transition and Disclosure," was issued, which provides three alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based compensation in accordance with SFAS No. 123. 26 THE HOME DEPOT, INC. 2002 ANNUAL REPORT

  • Page 29
    ..., but not limited to, the number of stock options granted and the fair value of the stock options on the date of grant. RECENT ACCOUNTING PRONOUNCEMENTS In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46, "Consolidation of Variable Interest Entities...

  • Page 30
    ... 4,217 1,636 $ 2,581 2,315 1.11 2,352 1.10 $ $ $ $ $ $ Fiscal years ended February 2, 2003 and January 28, 2001 include 52 weeks. Fiscal year ended February 3, 2002 includes 53 weeks. See accompanying notes to consolidated financial statements. 28 THE HOME DEPOT, INC. 2002 ANNUAL REPORT

  • Page 31
    ... Related Expenses Sales Taxes Payable Deferred Revenue Income Taxes Payable Other Accrued Expenses Total Current Liabilities Long-Term Debt, excluding current installments Other Long-Term Liabilities Deferred Income Taxes STOCKHOLDERS' EQUITY Common Stock, par value $0.05; authorized: 10,000 shares...

  • Page 32
    ... Amount Total Unearned Stockholders' Compensation Equity Comprehensive Income(1) BALANCE, JANUARY 30, 2000 Net Earnings Shares Issued Under Employee Stock Purchase and Option Plans Tax Effect of Sale of Option Shares by Employees Translation Adjustments Stock Compensation Expense Cash Dividends...

  • Page 33
    ... of Commercial Paper Obligations, net Proceeds from Long-Term Debt Repayments of Long-Term Debt Repurchase of Common Stock Proceeds from Sale of Common Stock, net Cash Dividends Paid to Stockholders Net Cash (Used in) Provided by Financing Activities Effect of Exchange Rate Changes on Cash and Cash...

  • Page 34
    ... Depot Floor Store, a test store that offers only ï¬,ooring products and installation services. At the end of fiscal 2002, the Company was operating 1,532 stores in total, which included 1,370 Home Depot stores, 52 EXPO Design Center stores, 5 Home Depot Supply stores, 3 Home Depot Landscape Supply...

  • Page 35
    ...Total revenues include service revenues generated through a variety of installation and home maintenance programs in Home Depot and EXPO stores as well as through the Company's subsidiary, HD Builder Solutions Group, Inc. In these programs, the customer selects and purchases materials for a project...

  • Page 36
    ... of changes in the fair value of a derivative in the Consolidated Statements of Earnings or Consolidated Statements of Stockholders' Equity and Comprehensive Income depends on the intended use of the derivative and its designation. The Company designates derivatives based upon criteria established...

  • Page 37
    ... lease obligations, approximated the carrying value of $51 million. These fair values were estimated using a discounted cash ï¬,ow analysis based on the Company's incremental borrowing rate for similar liabilities. 500 3 INCOME TAXES 232 Other Total long-term debt Less current installments...

  • Page 38
    ... deferral rights of the officer. The fair value of the deferred stock units on the grant dates was $27 million and $31 million for deferred units granted in fiscal 2001 and 2000, respectively. These amounts are being amortized over the vesting periods. 36 THE HOME DEPOT, INC. 2002 ANNUAL REPORT

  • Page 39
    ... employee stock purchase plans (U.S. and non-U.S. plans). The plan for U.S. associates is a taxqualified plan under Section 423 of the Internal Revenue Code. The non-U.S. plan is not a Section 423 plan. The Company had 43 million shares available for issuance under the Employee Stock Purchase Plans...

  • Page 40
    ... with the Company, its management or officers. The Company financed a portion of its new stores opened in fiscal years 1997 through 2002, as well as a distribution center and office buildings, under these lease agreements. Under both agreements, the lessor purchases the properties, pays for the...

  • Page 41
    ... for the maximum compensation limits under the Internal Revenue Code. The Company funds the restoration plan through contributions made to a grantor trust, which are then used to purchase shares of the Company's common stock in the open market. Compensation expense related to this plan for fiscal...

  • Page 42
    ...,277 14,475 13,213 $58,247 $12,200 14,576 13,289 13,488 $53,553 Fiscal year ended February 2, 2003 includes 52 weeks and fiscal year ended February 3, 2002 includes 53 weeks. Note: The quarterly data may not sum to fiscal year totals due to rounding. 40 THE HOME DEPOT, INC. 2002 ANNUAL REPORT

  • Page 43
    ...' REPORT The Board of Directors and Stockholders The Home Depot, Inc.: We have audited the accompanying consolidated balance sheets of The Home Depot, Inc. and subsidiaries as of February 2, 2003 and February 3, 2002 and the related consolidated statements of earnings, stockholders' equity and...

  • Page 44
    ... Stockholders' equity Book value per share ($) Long-term debt-to-equity (%) Current ratio Inventory turnover Return on invested capital (%) Statement of Cash Flows Data Depreciation and amortization Capital expenditures(3) Cash dividends per share ($) Store Data(4) Number of stores Square footage...

  • Page 45
    ...Georgia Lighting, Maintenance Warehouse, Your "other" Warehouse, Designplace Direct (formerly National Blinds and Wallpaper) and HD Builder Solutions Group locations. (5) Adjusted to reï¬,ect the first 52 weeks of the 53-week fiscal years in 2001 and 1996. THE HOME DEPOT, INC. 2002 ANNUAL REPORT...

  • Page 46
    ..., including the prospectus, access The Home Depot web site, or call 1-877-HD-SHARE. For all other communications regarding these services, contact the Transfer Agent and Registrar. FINANCIAL AND OTHER COMPANY INFORMATION To request a copy of the Company's Annual Report on Form 10-K for the fiscal...

  • Page 47
    ...Invemed Associates, Inc. Robert L. Nardelli 3* Chairman, President, and Chief Executive Officer The Home Depot, Inc. Roger S. Penske 4,5,6 Chairman of the Board Penske Corporation Board of Directors Committee Membership: 1 Audit 2 Compensation 3 Executive 4 Human Resources 5 Nominating and Corporate...

  • Page 48
    ... Olympic Te a m Proud Sponsor of the Canadian Paralympic Te a m Orgulloso Patrocinador del Equipo ´ Olimpico de Puerto Rico www.homedepot.com THE HOME DEPOT, INC. 2455 PACES FERRY ROAD, NW ATLANTA, GEORGIA 30339-4024 USA 770-433-8211 ©2003 Homer TLC, Inc. - All Rights Reserved 2700-AR-03