Home Depot 2003 Annual Report Download

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Proud Past,
Bright Future
2003
ANNUAL REPORT

Table of contents

  • Page 1
    Proud Past, Bright Future 2003 A N N U A L R E P O RT

  • Page 2
    ... 2003 sales of $64.8 billion. Home Depot® stores are full-service, warehouse-style stores averaging approximately 107,000 square feet in size. The stores stock approximately 40,000 to 50,000 different kinds of building materials, home improvement supplies, décor and lawn and garden products that...

  • Page 3
    ...billion times in 2003 and the stock market rewarded our accomplishments with a 48 % increase in the value of our stock. Record Financial Results In fiscal 2003, earnings per diluted share grew to a company record of $1.88, an increase of 21%. We also achieved company records in average ticket, which...

  • Page 4
    ... scan guns, and upgraded technology infrastructure by installing more than 5,000 miles of cable and 90,000 new devices. These technological enhancements are reducing queue times at the checkout and allowing our associates to focus more on customer service. When The Home Depot moves into a community...

  • Page 5
    ... competitive advantage. Attracting, motivating and retaining the best associates are top priorities. Our Store Manager Council provides effective two-way communication between company executives and our store leadership teams. 2003 Members of The Home Depot Store Manager Council 20 8 28 30 23 24 25...

  • Page 6
    ... two-way cordless scan guns, and self checkout registers have given us a best-in-class front-end among retailers and are allowing us to redeploy our associates to the sales floor. This single largest technology investment in our history is part of a multi-year initiative designed to enhance...

  • Page 7
    ...2003 , our store modernization program touched every store at some level and we enhanced our associate learning curriculum to ensure a strong pipeline of great talent for our future. Store Modernization: SELF CHECKOUT Every store will receive new lighting, paint schemes, floor finishes and signage...

  • Page 8
    Delivering Associate Learning Hours in millions Innovative and Distinctive Products 21 19 '02 06 '03 MO DE R N IZAT ION Thousands of new and innovative products were introduced to customers last year

  • Page 9
    .... We reward our associates' hard work with benefits like Success Sharing, which awards bonuses to all full- and part-time associates whose stores have exceeded company targets. Additional incentive programs reward store managers and salaried associates for exceeding their goals. The Home Depot, Inc...

  • Page 10
    ... Expanding Oppor tunities and Markets G row i n g O u r S e r v i c e s Home Depot stores offer a variety of installation services through qualified independent contractors for products ranging from floors to roofs, windows to water heaters, and kitchen cabinets to vinyl siding. Our 1-800-79-DEPOT...

  • Page 11
    ...Ceramic tile » Countertops » Exterior doors » Fences » Garage door openers INDUSTRY OPPORTUNITY Estimated » Garage doors » Generators » Gutters » Hardwood flooring » Kitchen cabinets » Laminate flooring » Replacement siding » Replacement windows » Roofing » Sheds » Vinyl flooring...

  • Page 12
    ...environmentally responsible policies and practices. Building Sustainable Forestry The Home Depot leads with the most responsible wood purchasing policy in the industry. We continue the unprecedented task of understanding the origin of all our wood products and we approve regions for supply based on...

  • Page 13
    ... to provide guidance in expanding a culture of service in America. As a result of The Home Depot's civic leadership, President Bush appointed Chairman Bob Nardelli to serve on this 24-member council. Building for Our Youth Creating safe play areas in our communities continues to be a priority...

  • Page 14
    1 2 3 1 . RIDGID Professional Line of Power Tools 2 . Grills 3 . John Deere Power Equipment 4 . Live Goods 5 . Moulding 4 5 12

  • Page 15
    ... 24 Consolidated Statements of Cash Flows 25 Notes to Consolidated Financial Statements 26 Management's Responsibility for Financial Statements 37 Independent Auditors' Report 37 10 -Year Summary of Financial and Operating Results 38 Corporate and Stockholder Information 40 The Home Depot, Inc...

  • Page 16
    ...under The Home Depot Supply brand (Apex Supply Company, Maintenance Warehouse, Your "other" Warehouse and HD Builder Solutions Group) since their inclusion may cause distortion of the data presented due to operational differences from our retail stores. The total number of the excluded locations and...

  • Page 17
    ... in a number of areas including countertops, HVAC, kitchens and our flooring companies. We continued to drive our services programs, which focus primarily 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...

  • Page 18
    ... inventory management, which resulted in lower shrink levels, increased penetration of import products, which typically have a lower cost and benefits from Tool Rental Centers also positively impacted the gross profit rate. The adoption of Emerging Issues Task Force 02-16, "Accounting by a Customer...

  • Page 19
    ... inventory at night. In addition, comparable store sales were negatively impacted by the level of merchandise resets implemented throughout the year, which disrupted in-store service and had a negative impact on the customers' experience in our stores. Kitchen and bath, plumbing and paint categories...

  • Page 20
    ... value of capital lease obligations is reflected in our Consolidated Balance Sheets in Long-Term Debt. The off-balance sheet lease was created to purchase land and fund the construction of certain stores, office buildings and distribution centers. In accordance with generally accepted accounting...

  • Page 21
    ... of credit for insurance programs, purchases of import merchandise inventories and construction contracts. Our purchase obligations consist of commitments for both merchandise and services. Under an off-balance sheet lease for certain stores, office buildings and distribution centers totaling $282...

  • Page 22
    ... of Results of Operations and Financial Condition The Home Depot, Inc. and Subsidiaries (continued) IMPACT OF INFLATION, DEFLATION AND CHANGING PRICES We have experienced inflation and deflation related to our purchase of certain commodity products sold in our stores. We do not believe, however...

  • Page 23
    ...2004. We lease assets totaling $282 million under an off-balance sheet operating lease agreement that was created under a structured financing arrangement involving two special purpose entities. We financed a portion of our new stores, as well as, a distribution center and two office buildings under...

  • Page 24
    Consolidated Statements of Earnings The Home Depot, Inc. and ...share data NET SALES Cost of Merchandise Sold GROSS PROFIT Operating Expenses: Selling and Store Operating Pre-Opening General and Administrative Total Operating Expenses OPERATING INCOME Interest Income (Expense): Interest and Investment...

  • Page 25
    ...Equipment Notes Receivable Cost in Excess of the Fair Value of Net Assets Acquired, net of accumulated amortization of $54 at February 1, 2004 and $50 at February 2, 2003 Other Assets Total Assets LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable Accrued Salaries and Related...

  • Page 26
    ...)(1) Compensation Shares Amount amounts in millions, except per share data Common Stock Shares Amount Paid-In Capital Retained Earnings Total Stockholders' Equity Comprehensive Income(2) BALANCE, JANUARY 28, 2001 Net Earnings Shares Issued Under Employee Stock Purchase and Option Plans Tax...

  • Page 27
    ... 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 Financing Activities Effect of Exchange Rate Changes on Cash and Cash Equivalents...

  • Page 28
    ... flooring products and installation services. At the end of fiscal 2003, the Company was operating 1,707 stores in total, which included 1,515 Home Depot stores, 54 EXPO Design Center stores, 11 Home Depot Landscape Supply stores, five Home Depot Supply stores and two Home Depot Floor Stores...

  • Page 29
    Notes to Consolidated Financial Statements The Home Depot, Inc. and Subsidiaries Investments The Company's investments, consisting primarily of high-grade debt securities, are recorded at fair value based on current market rates and are classified as available-for-sale. Changes in the fair value of...

  • Page 30
    ... handling costs related to the shipment of product to customers from vendors as Cost of Merchandise Sold. However, cost of shipping and handling to customers by the Company is classified as Selling and Store Operating Expenses. The cost of shipping and handling, including internal costs and payments...

  • Page 31
    ...down the related assets to the estimated net recoverable value. Impairment losses were recorded as a component of Selling and Store Operating Expenses in the accompanying Consolidated Statements of Earnings. In August 2002, the Company adopted SFAS No. 146, "Accounting for Costs Associated with Exit...

  • Page 32
    Notes to Consolidated Financial Statements The Home Depot, Inc. and Subsidiaries Derivatives The Company measures its derivatives at fair value and recognizes these assets or liabilities on the Consolidated Balance Sheets. The Company's primary objective for holding derivative instruments is to ...

  • Page 33
    ..., excluding capital lease obligations, was approximately $50 million compared to the carrying value of $47 million. These fair values were estimated using a discounted cash flow analysis based on the Company's incremental borrowing rate for similar liabilities. The Company's combined federal, state...

  • Page 34
    ... plan is not a Section 423 plan. The ESPPs allow associates to purchase up to 152 million shares of common stock, of which 112 million shares (adjusted for subsequent stock splits) have been purchased from inception of the plans, at a price equal to the lower of 85% of the stock's fair market value...

  • Page 35
    ... 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 purchased the properties, paid for the construction costs and...

  • Page 36
    ... 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 2003...

  • Page 37
    ... to Consolidated Financial Statements The Home Depot, Inc. and Subsidiaries Stock plans include shares granted under the Company's ESPPs and stock incentive plans, as well as shares issued for deferred compensation stock plans. Options to purchase 67.9 million, 52.9 million and 10.9 million shares...

  • Page 38
    ... sales at locations open greater than 12 months and net sales of all of the subsidiaries of The Home Depot, Inc. Stores and subsidiaries become comparable on the Monday following their 365th day of operation. (2) Beginning in fiscal 2003, comparable store sales increases were reported to the nearest...

  • Page 39
    ... 1 to the Consolidated Financial Statements, effective February 3, 2003, the Company changed its method of accounting for cash consideration received from a vendor to conform to Emerging Issues Task Force No. 02-16 and adopted the fair value method of recording stock-based compensation expense in...

  • Page 40
    ... sales BALANCE SHEET DATA AND FINANCIAL RATIOS Total assets Working capital Merchandise inventories Net property and equipment Long-term debt Stockholders' equity Book value per share ($) Total debt-to-equity (%) Current ratio Inventory turnover Return on invested capital (%) STATEMENT OF CASH FLOWS...

  • Page 41
    ...103 8 802 404 302 41.29 67,300 $ $ $ $ $ $ $ $ $ (5) Adjusted to reflect the first 52 weeks of the 53-week fiscal years in 2001 and 1996. (6) Includes net sales at locations open greater than 12 months and net sales of all of the subsidiaries of The Home Depot, Inc. Stores and subsidiaries...

  • Page 42
    ..., NE Atlanta, GA 30308 STOCK EXCHANGE LISTING New York Stock Exchange Trading symbol - HD ANNUAL MEETING The Annual Meeting of Stockholders will be held at 10:00 a.m., Central Time, May 27, 2004, at the Westin Galleria, 13340 Dallas Parkway, Dallas, Texas 75240. QUARTERLY STOCK PRICE RANGE First...

  • Page 43
    ..., The Home Depot Supply Thomas V. Taylor, Jr. President, Eastern Division Annette M. Verschuren President, Canada and EXPO Design Centers Bonnie G. Hill 1,4 President B. Hill Enterprises, LLC Kenneth G. Langone 3,4,5,7 Chairman of the Board, Chief Executive Officer and President Invemed Associates...

  • Page 44
    The Home Depot, Inc. 2455 Paces Ferry Road, NW Atlanta, GA 30339-4024 USA 770.433.8211 2003 2700-AR-04