Home Depot 2002 Annual Report Download - page 5

A Commitment to Strong Corporate Governance
Over the past year, there has been a significant focus on
corporate governance by Congress, the Securities and
Exchange Commission (SEC) and shareholders, among
others. I am very proud to say that The Home Depot has
always been a leader in corporate governance matters,
having been at the forefront in adopting the recommen-
dations of the SEC sponsored Blue Ribbon Committee
back in 1999.
During 2002, we implemented several new practices
to build on our strong corporate governance and to
improve the transparency of our financial reporting. These
include the expensing of stock options, the implementa-
tion of a corporate compliance council and improvement
of internal processes and procedures to ensure continued
clarity in our financial reporting.
The Board of Directors has tremendous depth of
experience and is actively engaged in our business.
Beyond attendance at regularly scheduled Board meet-
ings, the Board conducts routine store visits and is
engaged in the operational review of many stores
throughout the year. A substantial majority of the
Directors on our Board are independent, and each
Director serving as a member of the Board’s Audit
and Compensation Committees is independent.
The Company’s independent auditors, KPMG LLP,
report directly to the Audit Committee and are only per-
mitted 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 has had a financial expert
on its Board for many years. Given the breadth of experi-
ence, independence, expertise and business engagement,
it was no surprise to us that our Board was recently
recognized as one of the “Top 10 Best Boards” by a
national business publication.
Business Overview
From a financial perspective, we delivered positive results
during what was clearly one of the most challenging
retail environments in over 20 years. Here is how we
delivered on a number of key financial metrics:
•Revenue of $58.2 billion, 9% growth (11% when
adjusted for the extra week in 2001)
•Gross Margin of 31%, a 94 basis point improvement
over fiscal year 2001
•Net Earnings of $3.7 billion
•Earnings Per Share of $1.56, a 21% improvement
year over year (24% when adjusted for the extra
week in 2001)
•$2.3 billion in Cash and Short-Term Investments
•Repurchase of 69 million shares, valued at $2 billion
•Quarterly Dividend increase of 20%
•Return on Invested Capital of 18.8%, a 50 basis point
improvement over fiscal year 2001
With $19.8 billion in equity, a low debt-to-equity
ratio of 6.7%, and strong liquidity, the financial strength
of The Home Depot is unparalleled and is an enabler
for our transformation.
For us, the transformation starts with a “customer-
back” approach. Whether it is our do-it-yourselfer (DIY),
the do-it-for-me (DIFM), the professional or one of
many emerging and diverse customer segments, we
have rededicated ourselves to delivering a customer
experience that is second to none and that will enhance
loyalty to our brand.
Our commitment to meeting the changing needs of
the marketplace is evidenced by the growth of our services
business in 2002 and our commitment to strengthening
that business in the years ahead. In addition, we have
begun to tap the residential homebuilders’ market
through our acquisition of three of the top 10 turnkey
providers of installed flooring for new residential con-
struction in the United States.
The Customer Experience
Internally, we talk about the Orange Experience. To us, that
means offering a shopping experience that truly engages
the customer. It means offering great products, excep-
tional customer service, a pleasant shopping experience,
and merchandise at everyday low prices. It also means
having knowledgeable, friendly and helpful associates who
provide solutions and know-how. The greatest compet-
itive advantage we have is our talented associates.
Our new marketing campaign reinforces that
message: “The Home Depot is more than a store. It’s
a place full of possibilities that can take our customers
from wondering how to knowing how. It’s a brand our
customers have come to rely upon, backed by a com-
mitment they can trust. You can do it. We can help.”
As the pioneer and innovator in home improvement
retailing, our Company defined the standard others have
CHAIRMAN’S LETTER
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