Home Depot 2010 Annual Report Download

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ANNUALREPORT2010

Table of contents

  • Page 1
    ANNUALREPORT2010

  • Page 2

  • Page 3
    ... shift in our supply chain will provide ongoing benefits in cost-out, asset efficiency and customer service. Over the course of 2010, we made significant improvements in our merchandising systems, with foundational work on our data warehouse and improved tools for forecasting and replenishment...

  • Page 4
    ...one of our core values is taking care of our associates. I hope as you spend time in our stores or on our web site or on our mobile applications, you will see continued improvement in our service and our commitment to our customers. Francis S. Blake Chairman & Chief Executive Officer March 24, 2011

  • Page 5
    ...N.W., 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 Common Stock, $0.05 Par Value...

  • Page 6
    ...14. PART IV Item 15. Exhibits and Financial Statement Schedules Signatures 57 61 Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions...

  • Page 7
    ..., management of our purchasing or customer credit policies, the effect of accounting charges, the planned recapitalization of the Company and the timing of its completion, the ability to issue debt securities on terms and at rates acceptable to us, store openings and closures and financial outlook...

  • 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
    ...cabinets, countertops and water heaters. In addition, we provide professional installation of a number of products sold through our in-home sales programs, such as generators and furnace and central air systems. Stores. United States. At the end of fiscal 2010, we were operating 1,976 The Home Depot...

  • Page 10
    ...Depot private label credit accounts were opened, and the total number of The Home Depot active account holders was approximately 10 million. Private label credit card sales accounted for approximately 22% of store sales in fiscal 2010. In fiscal 2010, we also launched a home improvement loan program...

  • Page 11
    ... operation of our stores as well as from our transportation and supply chain activities. As the world's largest home improvement retailer, we are in a unique position to enable our customers to achieve energy savings through our products and services. Through our Eco Options® Program introduced in...

  • Page 12
    ...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 respect...

  • Page 13
    ...prevailing wage rates, the impact of legislation or regulations governing labor relations or healthcare benefits, 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
    ...those associated with managing third-party service providers and employing new web-based tools and services, could disrupt or reduce the efficiency of our operations in the near term. In addition, our improved supply chain and new or upgraded technology might not provide the anticipated benefits, it...

  • Page 15
    ... risks applicable to general contractors, which include management of licensing, permitting and quality of our third-party installers. We have established processes and procedures that provide protections beyond those required by law to manage these requirements and ensure customer satisfaction with...

  • Page 16
    ...34 6 Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virgin Islands Virginia Washington West Virginia Wisconsin Wyoming Total U.S. 8 21 20 67...

  • Page 17
    ... 185 warehouses and distribution centers located in 34 states or provinces, consisting of approximately 35.6 million square feet, of which approximately 0.2 million is owned and approximately 35.4 million is leased. Our executive, corporate staff, divisional staff and financial offices occupy...

  • Page 18
    ..., but uncertified, class actions were filed against the Company, The Home Depot FutureBuilder Administrative Committee and certain of the Company's current and former directors and employees alleging breach of fiduciary duty in violation of the Employee Retirement Income Security Act of 1974...

  • Page 19
    PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Since April 19, 1984, our common stock has been listed on the New York Stock Exchange, trading under the symbol "HD." The Company paid its first cash dividend on June 22, ...

  • Page 20
    ...-year period commencing January 27, 2006, the last trading day of fiscal 2005, and ending January 28, 2011, the last trading day of fiscal 2010. 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 27, 2006 and...

  • Page 21
    ... of Equity Securities Since fiscal 2002, the Company has repurchased shares of its common stock having a value of approximately $30.1 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 2010 are set...

  • Page 22
    ... the benefit of this training in improved customer service ratings for fiscal 2010 compared to fiscal 2009. Also in fiscal 2010, we completed the deployment of our FIRST Phone, a new hand held device that provides multiple functions such as inventory management, product location and mobile checkout...

  • Page 23
    ...capital allocation focused on building best-in-class competitive advantages in information technology and supply chain, as well as building shareholder value through higher returns on invested capital and total value returned to shareholders in the form of dividends and share repurchases. At the end...

  • Page 24
    ... 2010, 2009 and 2008 include 52 weeks. (2) Includes Net Sales at locations open greater than 12 months, including relocated and remodeled stores. Retail stores become comparable on the Monday following their 365th day of operation. Comparable store sales is intended only as supplemental information...

  • Page 25
    ... for fiscal 2009. Gross Profit as a percent of Net Sales was 34.3% for fiscal 2010 compared to 33.9% for fiscal 2009, an increase of 40 basis points. Our U.S. stores experienced gross profit margin expansion in fiscal 2010 as we realized benefits from better product assortment management through our...

  • Page 26
    ... for fiscal 2010, 2009 and 2008, we supplement our reporting with non-GAAP financial measures to reflect adjustments for the $51 million pretax charge related to the HD Supply Guarantee Extension as described more fully in Note 4 to the Consolidated Financial Statements, the Rationalization...

  • Page 27
    ... financial measures to the corresponding GAAP measures for fiscal 2010, 2009 and 2008 (amounts in millions, except per share data): Fiscal Year Ended January 30, 2011 As Reported Adjustment Non-GAAP Measures % of Net Sales Net Sales Cost of Sales Gross Profit Operating Expenses: Selling, General...

  • Page 28
    ... fewer open stores in fiscal 2009 versus fiscal 2008. Total comparable store sales decreased 6.6% for fiscal 2009 compared to a decrease of 8.7% for fiscal 2008. There were a number of factors that contributed to our comparable store sales decline. The U.S. residential construction, housing and home...

  • Page 29
    ...fiscal 2008. Our SG&A results for fiscal 2009 reflect the impact of a negative comparable store sales environment, offset by a lower cost of credit associated with the private label credit card program and solid expense control. For fiscal 2009, the penetration of the private label credit card sales...

  • Page 30
    ..., including our stores, distribution centers and store support centers. The net present value of capital lease obligations is reflected in our Consolidated Balance Sheets in Long-Term Debt and Current Installments of Long-Term Debt. In accordance with generally accepted accounting principles, the...

  • Page 31
    ...of future cash payments. Quantitative and Qualitative Disclosures about Market Risk Our exposure to market risk results primarily from fluctuations in interest rates. Interest rate swap agreements are used, at times, to manage our fixed/floating rate debt portfolio. At January 30, 2011, after giving...

  • Page 32
    ... in the accompanying Consolidated Balance Sheets until the sale or service is complete. We also record Deferred Revenue for the sale of gift cards and recognize this revenue upon the redemption of gift cards in Net Sales. Merchandise Inventories Our Merchandise Inventories are stated at the lower...

  • Page 33
    ...fair market value are generally based on market appraisals of owned locations and estimates on the amount of potential sublease income and the time required to sublease for leased locations. As part of our Rationalization Charges, we recorded no asset impairments in fiscal 2010 and 2009 and recorded...

  • Page 34
    ... and other lease obligation costs on other closings and relocations in the ordinary course of business, which were not material to the Consolidated Financial Statements in fiscal 2010, 2009 and 2008. Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over the...

  • Page 35
    ... of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The effectiveness of our internal control over financial reporting as of January 30, 2011 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in...

  • 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 30, 2011 and January 31, 2010, and the related Consolidated Statements of Earnings, Stockholders' Equity and Comprehensive Income, and Cash Flows...

  • Page 37
    ... Public 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 30, 2011 and January 31, 2010, and the related Consolidated Statements of Earnings, Stockholders...

  • Page 38
    THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Fiscal Year Ended(1) amounts in millions, except per share data January 30, January 31, February 1, 2011 2010 2009 NET SALES Cost of Sales GROSS PROFIT $67,997 44,693 23,304 15,849 1,616 17,465 5,839 (15) 530 51 566 5,273 1,...

  • Page 39
    ... Other Assets Total Assets LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable Accrued Salaries and Related Expenses Sales Taxes Payable Deferred Revenue Income Taxes Payable Current Installments of Long-Term Debt Other Accrued Expenses Total Current Liabilities Long-Term Debt...

  • Page 40
    ... Other Comprehensive Income (Loss) Treasury Stock Shares Amount Stockholders' Equity Total 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 Hedges, net of tax...

  • Page 41
    THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended(1) amounts in millions January 30, 2011 January 31, 2010 February 1, 2009 CASH FLOWS FROM OPERATING ACTIVITIES: Net Earnings Reconciliation of Net Earnings to Net Cash Provided by Operating Activities: ...

  • Page 42
    ... States, including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam ("U.S."), 179 The Home Depot stores in Canada, 85 The Home Depot stores in Mexico and 8 The Home Depot stores in China. The Consolidated Financial Statements include the accounts of the Company...

  • Page 43
    ... customers were $42 million and $38 million as of January 30, 2011 and January 31, 2010, respectively. The Company's valuation reserve related to accounts receivable was not material to the Consolidated Financial Statements of the Company as of the end of fiscal 2010 or 2009. Merchandise Inventories...

  • Page 44
    ... the accompanying Consolidated Balance Sheets. Services revenue was $2.7 billion, $2.6 billion and $3.1 billion for fiscal 2010, 2009 and 2008, respectively. Self-Insurance The Company is self-insured for certain losses related to general liability, workers' compensation, medical, product liability...

  • Page 45
    ... Consolidated Statements of Earnings. When a leased location closes, the Company also recognizes in SG&A the net present value of future lease obligations less estimated sublease income. As part of its Rationalization Charges, the Company recorded no asset impairments in fiscal 2010 and 2009...

  • Page 46
    ... and other lease obligation costs on other closings and relocations in the ordinary course of business, which were not material to the Consolidated Financial Statements in fiscal 2010, 2009 and 2008. Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over the...

  • Page 47
    ...Asset Impairments Lease Obligation Costs, net Severance Other Total Fiscal 2008 Charges Cash Uses Non-cash Activity Accrued Balance at February 1, 2009 Fiscal 2009 Charges Cash Uses Non-cash Activity Accrued Balance at January 31, 2010 Cash Uses Non-cash Activity Accrued Balance at January 30, 2011...

  • Page 48
    ... income, including estimates of the time required to sublease the locations. The payments related to the leased locations therefore are not generally incremental uses of cash. 3. CHANGE IN ACCOUNTING PRINCIPLE During fiscal 2008, the Company implemented a new enterprise resource planning ("ERP...

  • Page 49
    ... they are not expected to impact the Company's liquidity or capital resources. Short-Term Debt under the commercial paper programs was as follows (amounts in millions): January 30, 2011 January 31, 2010 Balance outstanding at fiscal year-end Maximum amount outstanding at any month-end Average daily...

  • Page 50
    ..., 2011, the approximate fair market value of this agreement was a liability of $2 million, which is the estimated amount the Company would have paid to settle the agreement and is included in Other Long-Term Liabilities in the accompanying Consolidated Balance Sheets. In September 2010, the Company...

  • Page 51
    ...actual tax expense for the applicable fiscal years was as follows (amounts in millions): Fiscal Year Ended January 30, 2011 January 31, 2010 February 1, 2009 Income taxes at federal statutory rate State income taxes, net of federal income tax benefit Other, net Total $1,846 131 (42) $1,935 $1,394...

  • Page 52
    ...): January 30, 2011 January 31, 2010 Current: Deferred Tax Assets: Property and equipment Accrued self-insurance liabilities Other accrued liabilities Deferred compensation Current Deferred Tax Assets Deferred Tax Liabilities: Accelerated inventory deduction Other Current Deferred Tax Liabilities...

  • Page 53
    ... operations for fiscal 2010, 2009 and 2008 were as follows (amounts in millions): January 30, 2011 January 31, 2010 February 1, 2009 Unrecognized tax benefits balance at beginning of fiscal year Additions based on tax positions related to the current year Additions for tax positions of prior years...

  • Page 54
    ..., 2011 and January 31, 2010 are $84 million and $138 million, respectively. Interest and penalties are included in Interest Expense and SG&A, respectively, in the accompanying Consolidated Statements of Earnings. 7. EMPLOYEE STOCK PLANS The Home Depot, Inc. 2005 Omnibus Stock Incentive Plan ("2005...

  • Page 55
    ...expense related to deferred shares of $14 million, $14 million and $9 million in fiscal 2010, 2009 and 2008, respectively. As of January 30, 2011, there were 2 million non-qualified stock options outstanding under non-qualified stock option plans that are not part of the Plans. The Company maintains...

  • Page 56
    ... of two years. The total fair value of restricted stock and performance shares vesting during fiscal 2010, 2009 and 2008 was $168 million, $41 million and $33 million, respectively. 8. LEASES The Company leases certain retail locations, office space, warehouse and distribution space, equipment...

  • 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 $336 million and $299 million at January 30, 2011 and January 31, 2010, respectively. 9. EMPLOYEE...

  • Page 58
    Stock plans consist of shares granted under the Company's employee stock plans as described in Note 7 to the Consolidated Financial Statements. Options to purchase 39 million, 48 million and 52 million shares of common stock at January 30, 2011, January 31, 2010 and February 1, 2009, respectively, ...

  • Page 59
    ... of credit and open accounts issued for certain business transactions, including insurance programs, trade contracts and construction contracts. The Company's letters of credit are primarily performance-based and are not based on changes in variable components, a liability or an equity security of...

  • Page 60
    ... term is defined in Rule 13a-15(f) under the Exchange Act) and a report of KPMG LLP, an independent registered public accounting firm, on the effectiveness of the Company's internal control over financial reporting are incorporated by reference to Item 8, "Financial Statements and Supplementary Data...

  • Page 61
    ... of Directors Information," "General" and "Audit Committee Report" in the Company's Proxy Statement for the 2011 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...

  • Page 62
    ... 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 - Equity Compensation Plan Information" in the Company's Proxy Statement...

  • Page 63
    ... Statements have the file numbers noted wherever such statements are identified in the following list of exhibits. The Company will furnish a copy of any exhibit to shareholders without charge upon written request to Investor Relations, The Home Depot, Inc., 2455 Paces Ferry Road, Atlanta, Georgia...

  • 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
    ... Omnibus Stock Incentive Plan. [Form 8-K filed on March 13, 2009, Exhibit 10.6] Form of Equity Award Terms and Conditions Agreement Pursuant to The Home Depot, Inc. 2005 Omnibus Stock Incentive Plan. [Form 8-K filed on March 2, 2011, Exhibit 10.1] Separation Agreement Between the Company and Robert...

  • Page 66
    ... quarter ended November 2, 2008, Exhibit 18.1] List of Subsidiaries of the Company. [Form 10-K for the fiscal year ended January 31, 2010, Exhibit 21] Consent of Independent Registered Public Accounting Firm. Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) promulgated under...

  • Page 67
    ..., thereunto duly authorized. THE HOME DEPOT, INC. (Registrant) By: /s/ FRANCIS S. BLAKE (Francis S. Blake, Chairman and Chief Executive Officer) Date: March 22, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons...

  • Page 68
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  • Page 69
    ... - % of sales BALANCE SHEET DATA AND FINANCIAL RATIOS(3) Total assets Working capital Merchandise inventories Net property and equipment Long-term debt Stockholders' equity Book value per share ($) Long-term debt-to-equity (%) Total debt-to-equity (%) Current ratio Inventory turnover(2) Return on...

  • 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 30, 2011 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