Home Depot 2009 Annual Report Download

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ANNUALREPORT2009

Table of contents

  • Page 1
    ANNUALREPORT2009

  • Page 2

  • Page 3
    ... "Customers FIRST." All associates in the company, from our stores to our store support center, were trained in Customers FIRST in 2009. We view FIRST as a sustaining long-term program and a commitment to continued improvement in the service levels in our stores. We also continued our supply chain...

  • Page 4
    ... - the number one authority on products in the home improvement market. And we will drive shareholder return through disciplined capital allocation. I hope as you spend time in our stores you will notice our continuing improvement. Francis S. Blake Chairman & Chief Executive Officer March 25, 2010

  • Page 5
    ... ATLANTA, GEORGIA 30339 (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (770) 433-8211 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED THE HOME DEPOT, INC. Common Stock...

  • Page 6
    ... Transactions, and Director Independence Principal Accounting Fees and Services 55 56 56 56 56 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results...

  • Page 7
    ... of Puerto Rico and the territories of the U.S. Virgin Islands and Guam ("U.S."), Canada, China and Mexico. 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, N.W., Atlanta, Georgia 30339...

  • Page 8
    ... business owners and tradesmen. In many stores, we offer a variety of programs to these customers, including delivery and will-call services, dedicated staff and expanded credit programs, all of which we believe increase sales to these customers. • Products. A typical Home Depot store stocks...

  • Page 9
    ...operating 10 The Home Depot stores in four Chinese cities. Net Sales for the Company outside of the U.S. were $7.0 billion for fiscal 2009 and were $7.4 billion for fiscal 2008 and 2007. Long-lived assets outside of the U.S. totaled $3.0 billion, $2.8 billion and $3.1 billion as of January 31, 2010...

  • Page 10
    private label credit accounts were opened, and the total number of The Home Depot active account holders was approximately 12 million. Private label credit card sales accounted for approximately 25% of store sales in fiscal 2009. In fiscal 2008, Home Depot renegotiated and extended the term of the ...

  • Page 11
    .... Our business is highly competitive, based primarily on customer service, price, store location and assortment 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 yards. With...

  • Page 12
    ... market share. We operate in markets that are highly competitive. We compete principally based on customer services, price, store location and assortment of merchandise. In each market we serve, there are a number of other home improvement stores, electrical, plumbing and building materials supply...

  • Page 13
    ... or regulations governing healthcare benefits or labor relations, such as the proposed Employee Free Choice Act, and health and other insurance costs. In addition, we compete with other retail businesses for many of our associates in hourly positions, and we invest significant resources in training...

  • Page 14
    ...and manage liquidity from the positive cash flow we generate from our operating activities and our access to capital markets, including our commercial paper programs supported by a back-up credit facility with a consortium of banks. Although we currently maintain a strong investment grade rating and...

  • Page 15
    ... sales, fines and lawsuits. Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results or financial condition. Generally accepted accounting principles and related accounting...

  • Page 16
    ... 2009: U.S. Locations Number of Stores U.S. Locations Number of Stores Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Guam Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota...

  • Page 17
    ... centers located in 33 states or provinces, consisting of approximately 32.1 million square feet, of which approximately 0.2 million is owned and approximately 31.9 million is leased. Our executive, corporate staff, divisional staff and financial offices occupy approximately 2.1 million square feet...

  • Page 18
    ...to have a material adverse effect on its consolidated financial condition or results of operations. In August 2005, the Company received an informal request from the staff of the SEC for information related to the Company's return-to-vendor policies and procedures. Subsequent to August 2005, the SEC...

  • Page 19
    ... on the Company's earnings, capital requirements, financial condition and other factors considered relevant by the Board of Directors. The table below sets forth the high and low sales prices of our common stock on the New York Stock Exchange and the quarterly cash dividends declared per share of...

  • Page 20
    ... ending January 29, 2010, the last trading day of fiscal 2009. The graph assumes $100 invested at the closing price of the Company's common stock on the New York Stock Exchange and each index on January 28, 2005 and assumes that all dividends were reinvested on the date paid. The points on the graph...

  • Page 21
    ... of Equity Securities Since fiscal 2002, the Company has repurchased shares of its common stock having a value of approximately $27.5 billion pursuant to its share repurchase program. The number and average price of shares purchased in each fiscal month of the fourth quarter of fiscal 2009 are set...

  • Page 22
    ... RDC roll-out strategy, supporting our goal of increasing our central distribution penetration. Our supply chain transformation also includes restructuring our stocking distribution centers. We opened 13 new stores in fiscal 2009, closed two stores in China and closed 41 stores related to our Exited...

  • Page 23
    ...this cash flow to repay $1.8 billion of Long-Term Debt, pay $1.5 billion of dividends, fund $966 million in capital expenditures and fund $213 million of share repurchases. At the end of fiscal 2009, our long-term debt-to-equity ratio was 44.7% compared to 54.4% at the end of fiscal 2008. Our return...

  • Page 24
    ...Income Taxes EARNINGS FROM CONTINUING OPERATIONS SELECTED SALES DATA Number of Customer Transactions (in millions)(2) Average Ticket(2) Weighted Average Weekly Sales per Operating Store (in thousands)(2) Weighted Average Sales per Square Foot(2) Comparable Store Sales Decrease (%)(3) 100.0% 33.9 24...

  • Page 25
    ...strength in our Building Materials, Flooring, Paint, Plumbing and Garden/Seasonal product categories as comparable store sales in these areas were above the Company average for fiscal 2009. Comparable store sales for our Lumber, Hardware, Electrical, Kitchen/Bath and Millwork product categories were...

  • Page 26
    ... Sales from Exited Businesses during the period from closing announcement to actual closing, and the charges to write-down our investment in HD Supply as described in Note 4 to the Consolidated Financial Statements. We believe these non-GAAP financial measures better enable management and investors...

  • Page 27
    ... fiscal 2009 and 2008 (amounts in millions, except per share data): Fiscal Year Ended January 31, 2010 As Reported Adjustments Non-GAAP Measures % of Net Sales Net Sales Cost of Sales Gross Profit Operating Expenses: Selling, General and Administrative Depreciation and Amortization Total Operating...

  • Page 28
    ...Company average for fiscal 2008. Comparable store sales for Lumber, Flooring, Paint, Electrical, Kitchen/Bath and Millwork were below the Company average for fiscal 2008. Softness in our big ticket categories negatively impacted average ticket, which decreased 3.3% to $55.61 for fiscal 2008. Our new...

  • Page 29
    ... other initiatives. In fiscal 2009, we added 13 new stores. Net Cash Used in Financing Activities for fiscal 2009 was $3.5 billion compared with $3.7 billion for fiscal 2008. This decrease was primarily due to repayments in fiscal 2008 of $1.7 billion of short-term commercial paper and $282 million...

  • Page 30
    ... Consolidated Balance Sheets. As of the end of fiscal 2009, our long-term debt-to-equity ratio was 44.7% compared to 54.4% at the end of fiscal 2008. As of January 31, 2010, we guaranteed a $1.0 billion senior secured amortizing term loan ("guaranteed loan") in connection with the sale of HD Supply...

  • Page 31
    ... Notes outstanding. The aggregate market value of the publicly traded Senior Notes as of January 31, 2010, was approximately $9.5 billion. Although we have international operating entities, our exposure to foreign currency rate fluctuations is not significant to our financial condition or results...

  • Page 32
    ... redemption of gift cards in Net Sales. Merchandise Inventories Our Merchandise Inventories are stated at the lower of cost (first-in, first-out) or market, with approximately 82% valued under the retail inventory method and the remainder under a cost method. Retailers like The Home Depot, with many...

  • Page 33
    ...of operations. We also recorded impairments on other closings and relocations in the ordinary course of business, which were not material to the Consolidated Financial Statements in fiscal 2009, 2008 and 2007. Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over...

  • Page 34
    ... on our consolidated financial statements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The information required by this item is incorporated by reference to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this report. 28

  • Page 35
    ..., consisting solely of independent directors, meets five times a year with the independent registered public accounting firm, the internal auditors and representatives of management to discuss auditing and financial reporting matters. In addition, a telephonic meeting is held prior to each quarterly...

  • Page 36
    ... of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheets of The Home Depot, Inc. and subsidiaries as of January 31, 2010 and February 1, 2009, and the related Consolidated Statements of Earnings, Stockholders' Equity and Comprehensive Income, and Cash Flows...

  • Page 37
    ... Accounting Firm 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 January 31, 2010 and February 1, 2009, and the related Consolidated Statements of Earnings, Stockholders' Equity...

  • Page 38
    .... AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Fiscal Year Ended(1) amounts in millions, except per share data January 31, 2010 February 1, 2009 February 3, 2008 NET SALES Cost of Sales GROSS PROFIT Operating Expenses: Selling, General and Administrative Depreciation and Amortization Total...

  • Page 39
    ... HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS amounts in millions, except share and per share data January 31, 2010 February 1, 2009 ASSETS Current Assets: Cash and Cash Equivalents Short-Term Investments Receivables, net Merchandise Inventories Other Current Assets Total Current...

  • Page 40
    ... of Restricted Stock Repurchase of Common Stock Retirement of Treasury Stock Cash Dividends ($0.90 per share) Other Comprehensive Income BALANCE, FEBRUARY 3, 2008 Net Earnings Shares Issued Under Employee Stock Plans Tax Effect of Sale of Option Shares by Employees Translation Adjustments Cash Flow...

  • Page 41
    THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended(1) amounts in millions January 31, 2010 February 1, 2009 February 3, 2008 CASH FLOWS FROM OPERATING ACTIVITIES: Net Earnings Reconciliation of Net Earnings to Net Cash Provided by Operating Activities: ...

  • Page 42
    ... fair value based on current market rates and are classified as available-for-sale. Accounts Receivable The Company has an agreement with a third-party service provider who directly extends credit to customers, manages the Company's private label credit card program and owns the related receivables...

  • Page 43
    ... as "the cost of credit" of the private label credit card program. In addition, certain subsidiaries of the Company extend credit directly to customers in the ordinary course of business. The receivables due from customers were $38 million and $37 million as of January 31, 2010 and February 1, 2009...

  • Page 44
    ...the accompanying Consolidated Balance Sheets. Certain development costs not meeting the criteria for capitalization are expensed as incurred. Revenues The Company recognizes revenue, net of estimated returns and sales tax, at the time the customer takes possession of merchandise or receives services...

  • Page 45
    ...locations or customers, the operating cost of the Company's sourcing and distribution network and the cost of deferred interest programs offered through the Company's private label credit card program. The cost of handling and shipping merchandise from the Company's stores, locations or distribution...

  • Page 46
    ... of business, which were not material to the Consolidated Financial Statements in fiscal 2009, 2008 and 2007. Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over the fair value of net assets acquired. The Company does not amortize goodwill, but does assess the...

  • Page 47
    ...The Home Depot stores. The Company closed the Exited Businesses in the first quarter of fiscal 2009 and expects to dispose of or sublet those locations over varying periods. These steps impacted approximately 5,000 associates in those locations, their support functions and their distribution centers...

  • Page 48
    ... weighted-average cost method. As of the end of fiscal 2008, the implementation of the new inventory system and related conversion to the weighted-average cost method for Canadian retail operations was complete. The new ERP system allows the Company to utilize the weighted-average cost method, which...

  • Page 49
    ... the Company's liquidity or capital resources. Short-Term Debt under the commercial paper programs was as follows (dollars in millions): January 31, 2010 February 1, 2009 Balance outstanding at fiscal year-end Maximum amount outstanding at any month-end Average daily short-term borrowings Weighted...

  • Page 50
    ..., accounted for as a cash flow hedge, to hedge interest rate fluctuations in anticipation of issuing long-term debt to refinance debt maturing in fiscal 2010. At January 31, 2010, the approximate fair value of this agreement was an asset of $3 million, which is the estimated amount the Company would...

  • Page 51
    ... January 31, 2010 February 1, 2009 February 3, 2008 Current: Federal State Foreign Deferred: Federal State Foreign Total $1,157 184 ...Company's combined federal, state and foreign effective tax rates for fiscal 2009, 2008 and 2007, net of offsets generated by federal, state and foreign tax benefits...

  • Page 52
    ... noncurrent deferred tax liabilities are netted by tax jurisdiction, and are included in the accompanying Consolidated Balance Sheets as follows (amounts in millions): January 31, 2010 February 1, 2009 Other Current Assets Other Assets Other Accrued Expenses Deferred Income Taxes Net Deferred Tax...

  • Page 53
    ... the deferred tax asset related to net operating losses to an amount that is more likely than not to be realized. Total valuation allowances at January 31, 2010 and February 1, 2009 were $15 million and $12 million, respectively. As a result of its sale of HD Supply, the Company incurred a tax loss...

  • Page 54
    ... amounts, but the Company does not anticipate the resolution of these matters will result in a material change to its consolidated financial position or results of operations. 7. EMPLOYEE STOCK PLANS The Home Depot, Inc. 2005 Omnibus Stock Incentive Plan ("2005 Plan") and The Home Depot, Inc. 1997...

  • Page 55
    ... Plans. The Company maintains two Employee Stock Purchase Plans ("ESPPs") (U.S. and non-U.S. plans). The plan for U.S. associates is a tax-qualified plan under Section 423 of the Internal Revenue Code. The non-U.S. plan is not a Section 423 plan. As of January 31, 2010, there were 13 million shares...

  • Page 56
    ...of three years. The total fair value of restricted stock and performance shares vesting during fiscal 2009, 2008 and 2007 was $41 million, $33 million and $103 million, respectively. 8. LEASES The Company leases certain retail locations, office space, warehouse and distribution space, equipment and...

  • Page 57
    ... Consolidated Balance Sheets in Current Installments of Long-Term Debt and Long-Term Debt, respectively. The assets under capital leases recorded in Property and Equipment, net of amortization, totaled $299 million and $309 million at January 31, 2010 and February 1, 2009, respectively. 9. EMPLOYEE...

  • Page 58
    Stock plans include shares granted under the Company's employee stock plans as described in Note 7 to the Consolidated Financial Statements. Options to purchase 48 million, 52 million and 43 million shares of common stock at January 31, 2010, February 1, 2009 and February 3, 2008, respectively, were...

  • Page 59
    ... market prices (level 1), was $9.5 billion at January 31, 2010 compared to a carrying value of $9.3 billion. 12. COMMITMENTS AND CONTINGENCIES At January 31, 2010, the Company was contingently liable for approximately $434 million under outstanding letters of credit and open accounts issued for...

  • Page 60
    ... and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required...

  • Page 61
    ... Report" in the Company's Proxy Statement for the 2010 Annual Meeting of Shareholders (the "Proxy Statement"). Executive officers of the Company are appointed by, and serve at the pleasure of, the Board of Directors. The current executive officers of the Company are as follows: FRANCIS S. BLAKE, age...

  • Page 62
    ..." in the Company's Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this item is incorporated by reference to the sections entitled "Beneficial Ownership of Common Stock" and "Executive Compensation...

  • Page 63
    ...Financial Statements and Management's Report on Internal Control Over Financial Reporting; and Reports of Independent Registered Public Accounting Firm. Consolidated Statements of Earnings for the fiscal years ended January 31, 2010, February 1, 2009 and February 3, 2008; Consolidated Balance Sheets...

  • Page 64
    ...-Employee Directors' Deferred Stock Compensation Plan. [Form 8-K filed on August 20, 2007, Exhibit 10.3] The Home Depot, Inc. Management Incentive Plan (Effective February 2, 2008). [Form 8-K filed on May 28, 2008, Exhibit 10.1] The Home Depot, Inc. Amended and Restated Employee Stock Purchase Plan...

  • Page 65
    ... Home Depot, Inc. 2005 Omnibus Stock Incentive Plan. [Form 8-K filed on March 3, 2008, Exhibit 10.2] Form of U.S. Restricted Stock Award Pursuant to The Home Depot, Inc. 2005 Omnibus Stock Incentive Plan. [Form 8-K filed on March 13, 2009, Exhibit 10.1] Form of Executive Officer Nonqualified Stock...

  • Page 66
    ... 2, 2008, Exhibit 18.1] List of Subsidiaries of the Company. Consent of Independent Registered Public Accounting Firm. Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended. Certification of Chief Financial Officer...

  • Page 67
    ...by the undersigned, thereunto duly authorized. THE HOME DEPOT, INC. (Registrant) By: /s/ FRANCIS S. BLAKE (Francis S. Blake, Chairman & CEO) Date: March 22, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf...

  • Page 68
    ...term debt-to-equity (%) Total debt-to-equity (%) Current ratio Inventory turnover(2) Return on invested capital (%)(2) STATEMENT OF CASH FLOWS DATA Depreciation and amortization Capital expenditures Payments for businesses acquired, net Cash dividends per share ($) STORE DATA Number of stores Square...

  • Page 69
    ...of operation. Comparable store sales is intended only as supplemental information and is not a substitute for Net Sales or Net Earnings presented in accordance with generally accepted accounting principles. (5) Comparable store sales in fiscal years prior to 2002 were reported to the nearest percent...

  • Page 70
    ..., access the Shareholder Services link on The Home Depot Investor Relations web site at http://ir.homedepot.com, or call (800) 577-0177 to contact Computershare. FINANCIAL AND OTHER COMPANY INFORMATION Our Annual Report on Form 10-K for the fiscal year ended January 31, 2010 is available on The Home...

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    The Home Depot, Inc. 2455 Paces Ferry Road, NW Atlanta, GA 30339-4042 United States 770.433.8211 www.homedepot.com