Home Depot 2011 Annual Report Download

Download and view the complete annual report

Please find the complete 2011 Home Depot annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 68

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68

Table of contents

  • Page 1

  • Page 2

  • Page 3
    ... consecutive year of positive sales growth, with comp sales up 3.4 percent and total sales XSSHUFHQW'LOXWHGHDUQLQJVSHUVKDUHZHUHXSSHUFHQWUHÁHFWLQJVDOHVJURZWKRQJRLQJEHQHÀWVIURPRXU merchandising and supply chain transformations, improved technology and effective expense...

  • Page 4
    ...EXVLQHVVPRGHO that addresses customer needs in that market. ,QZHZLOOFRQWLQXHRXUHIIRUWVWRVLPSOLI\WKHEXVLQHVVLPSURYHFXVWRPHUVHUYLFHDQGSURYLGHWKHEHVWYDOXH in home improvement retail. I hope as you spend time in our store or on our website or mobile applications you will see...

  • Page 5
    ...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 Per Share New...

  • Page 6
    ...Risk Factors Item 1B. Unresolved Staff Comments Item 2. Item 3. Item 4. PART II Item 5. Item 6. Item 7. 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...

  • Page 7
    ..., housing and home improvement markets, state of the credit markets, including mortgages, home equity loans and consumer credit, inventory and in-stock positions, commodity price inflation and deflation, implementation of store and supply chain initiatives, continuation of reinvestment plans, net...

  • Page 8
    ...values in our stores. Productivity and Efficiency. Our productivity and efficiency initiative is advanced through 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...

  • Page 9
    ... in our stores through third-party credit providers. In fiscal 2011, approximately 2.4 million new The Home Depot private label credit accounts were opened, and at fiscal year end the total number of The Home Depot active account holders was approximately 10 million. Private label credit card sales...

  • Page 10
    ... us to meet a growing customer demand for environmentally responsible and cost-saving products and projects. In 2011, we also partnered with the U.S. Green Building Council to establish a list of products sold at our stores that meet "LEED for Homes" product specifications. This program helps our...

  • Page 11
    ... improve our inventory management. We added approximately 1.5 million net square feet of distribution center space in fiscal 2011, primarily for new repair and liquidation centers as part of our centralized returns system. These centers consolidate product from our stores to return to our vendors...

  • Page 12
    ... labor and healthcare costs, the availability of financing, the state of the credit markets, including mortgages, home equity loans and consumer credit, weather, natural disasters and other conditions beyond our control - could further adversely affect demand for our products and services, our costs...

  • Page 13
    ...mail order firms, warehouse clubs, independent building supply stores and other retailers, as well as with installers of home improvement products. In addition, we face growing competition from online and multichannel retailers. Intense competitive pressures from one or more of our competitors could...

  • 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
    ...regulatory requirements and 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...

  • Page 16
    ... show locations of the 1,974 The Home Depot stores located in the U.S. and its territories and the 278 The Home Depot stores outside the U.S. at the end of fiscal 2011: U.S. Locations Number of Stores U.S. Locations Number of Stores Alabama Alaska Arizona Arkansas California Colorado Connecticut...

  • Page 17
    ...and New Jersey. At the end of fiscal 2011, we utilized 143 warehouses and distribution centers located in 35 states or provinces, consisting of approximately 37.3 million square feet, of which approximately 1.2 million is owned and approximately 36.1 million is leased. Our executive, corporate staff...

  • Page 18
    ... on its consolidated financial condition or results of operations. As previously reported, in September 2010, the Company was contacted by district attorneys in three counties in California within the South Coast Air Quality Management District (the "SCAQMD") and the City of Los Angeles regarding...

  • 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 26, 2007, the last trading day of fiscal 2006, and ending January 27, 2012, the last trading day of fiscal 2011. 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 26, 2007 and...

  • Page 21
    ... common stock having a value of approximately $33.6 billion. The number and average price of shares purchased in each fiscal month of the fourth quarter of fiscal 2011 are set forth in the table below: Total Number of Shares Purchased as Part of Publicly Announced Program(2) Dollar Value of Shares...

  • Page 22
    ... on invested capital and total value returned to shareholders in the form of dividends and share repurchases. In fiscal 2011, we saw continued benefits from our supply chain investments, which improved our in-stock rate and asset efficiency. Our inventory turnover ratio was 4.3 times at the end of...

  • Page 23
    ... 31, 2010, respectively. Fiscal years 2011, 2010 and 2009 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...

  • Page 24
    ...our 14 departments for fiscal 2011. Comparable store sales for our Building Materials, Paint, Hardware, Tools, Plumbing, Electrical and Kitchen product categories were above the Company average for fiscal 2011. Comparable store sales for our Flooring, Bath, Lighting, Outdoor Garden and Indoor Garden...

  • Page 25
    ...-down our investment in HD Supply as described more fully in Note 3 to the Consolidated Financial Statements. We believe these non-GAAP financial measures better enable management and investors to understand and analyze our performance by providing them with meaningful information relevant to events...

  • Page 26
    ... gross profit margin expansion in fiscal 2010 as we realized benefits from better product assortment management through our portfolio approach and leveraging of our newly developed merchandising tools. Lower levels of clearance inventory in our stores for fiscal 2010 compared to fiscal 2009 also...

  • Page 27
    ... capital items. Net Cash Used in Investing Activities for fiscal 2011 was $1.1 billion compared to $1.0 billion for fiscal 2010. This change was primarily due to increased Capital Expenditures and Payments for Business Acquired related to the purchase of an online home services platform, partially...

  • Page 28
    ... Current Installments of Long-Term Debt. In accordance with generally accepted accounting principles, the operating leases are not reflected in our Consolidated Balance Sheets. As of January 29, 2012, we guaranteed a $1.0 billion senior secured amortizing term loan in connection with the sale of HD...

  • Page 29
    ...of Senior Notes outstanding. The aggregate market value of these publicly traded Senior Notes as of January 29, 2012 was approximately $12.1 billion. Although we have international operating entities, our exposure to foreign currency rate fluctuations is not significant to our financial condition or...

  • Page 30
    ... allowance for Merchandise Inventories valued under a cost method was not material to our Consolidated Financial Statements as of the end of fiscal 2011 or 2010. Independent physical inventory counts or cycle counts are taken on a regular basis in each store and distribution center to ensure that...

  • Page 31
    ... 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 2011, 2010 or 2009. Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over the...

  • Page 32
    ... 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. 26

  • Page 33
    Item 8. Financial Statements and Supplementary Data. Management's Responsibility for Financial Statements The financial statements presented in this Annual Report have been prepared with integrity and objectivity and are the responsibility of the management of The Home Depot, Inc. These financial ...

  • Page 34
    ... of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheets of The Home Depot, Inc. and subsidiaries as of January 29, 2012 and January 30, 2011, and the related Consolidated Statements of Earnings, Stockholders' Equity and Comprehensive Income, and Cash Flows...

  • Page 35
    ... 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 29, 2012 and January 30, 2011, and the related Consolidated Statements of Earnings, Stockholders' Equity and...

  • Page 36
    THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Fiscal Year Ended amounts in millions, except per share data January 29, 2012 January 30, 2011 (1) January 31, 2010 NET SALES Cost of Sales GROSS PROFIT Operating Expenses: Selling, General and Administrative Depreciation ...

  • Page 37
    ...-Term Debt, excluding current installments Other Long-Term Liabilities Deferred Income Taxes Total Liabilities STOCKHOLDERS' EQUITY Common Stock, par value $0.05; authorized: 10 billion shares; issued: 1.733 billion shares at January 29, 2012 and 1.722 billion shares at January 30, 2011; outstanding...

  • Page 38
    ... Income (Loss) Treasury Stock Shares Amount Stockholders' Equity Total Comprehensive Income amounts in millions, except per share data Balance, February 1, 2009 Net Earnings Shares Issued Under Employee Stock Plans Tax Effect of Stock-Based Compensation Translation Adjustments Cash Flow Hedges, net...

  • Page 39
    THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended amounts in millions January 29, 2012 January 30, 2011 (1) January 31, 2010 CASH FLOWS FROM OPERATING ACTIVITIES: Net Earnings Reconciliation of Net Earnings to Net Cash Provided by Operating Activities: ...

  • Page 40
    .... The Company's cash equivalents are carried at fair market value and consist primarily of money market funds. 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...

  • Page 41
    ... for Merchandise Inventories valued under a cost method was not material to the Consolidated Financial Statements of the Company as of the end of fiscal 2011 or 2010. Independent physical inventory counts or cycle counts are taken on a regular basis in each store and distribution center to ensure...

  • Page 42
    ... the customer is remote. During fiscal 2011, 2010 and 2009, the Company recognized $42 million, $46 million and $40 million, respectively, of gift card breakage income. This income is included in the accompanying Consolidated Statements of Earnings as a reduction in SG&A. Services Revenue Net Sales...

  • Page 43
    ...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 centers to the customer...

  • Page 44
    ...") in order to focus on its core The Home Depot stores. The Company closed the Exited Businesses in the first quarter of fiscal 2009 and expects to dispose of or sublet any remaining locations over varying periods. These steps impacted approximately 5,000 associates in those locations, their support...

  • Page 45
    ... sublet 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. HD SUPPLY DISPOSITION On August 30, 2007, the Company closed the sale of HD Supply, Inc. In accordance with FASB...

  • Page 46
    ... fair value of this agreement was an asset of $39 million, which is the estimated amount the Company would have received to settle the agreement and is included in Other Assets in the accompanying Consolidated Balance Sheets. Also at January 29, 2012, the Company had outstanding interest rate swaps...

  • Page 47
    ... of the Company's common stock through an Accelerated Share Repurchase ("ASR") agreement, and the balance of the net proceeds was used to repay the Company's 5.20% Senior Notes that matured March 1, 2011 in the aggregate principal amount of $1.0 billion. The $6 million discount associated with the...

  • Page 48
    ...final number of shares delivered upon settlement of the agreement was determined with reference to the average price of the Company's common stock over the term of the ASR agreement. The $1.0 billion of shares repurchased are included in Treasury Stock in the accompanying Consolidated Balance Sheets...

  • Page 49
    ... the actual tax expense for the applicable fiscal years was as follows (amounts in millions): Fiscal Year Ended January 29, 2012 January 30, 2011 January 31, 2010 Income taxes at federal statutory rate State income taxes, net of federal income tax benefit Other, net Total $ 2,125 175 (115) 2,185...

  • Page 50
    ... 2009 are currently under audit by the Internal Revenue Service. The Company's Canadian operations are currently under audit by the Canada Revenue Agency for fiscal years 2005 to 2007. There are also ongoing U.S. state and local and other foreign audits covering tax years 2003 to 2010. At this time...

  • Page 51
    ... the associate has had five years of continuous service. The Company recognized $20 million, $20 million and $19 million of stock-based compensation expense in fiscal 2011, 2010 and 2009, respectively, related to stock options. Restrictions on the restricted stock issued under the Plans generally...

  • Page 52
    ... shares at 85% of the stock's fair market value on the last day (June 30, 2012) of the current purchase period. The Company recognized $14 million, $13 million and $10 million of stock-based compensation expense in fiscal 2011, 2010 and 2009, respectively, related to the ESPPs. In total, the Company...

  • Page 53
    ... of two years. The total fair value of restricted stock and performance shares vesting during fiscal 2011, 2010 and 2009 was $290 million, $168 million and $41 million, respectively. 8. LEASES The Company leases certain retail locations, office space, warehouse and distribution space, equipment and...

  • Page 54
    ... 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 23 million, 39 million and 48 million shares of common stock at January 29, 2012, January 30, 2011 and January 31, 2010, respectively...

  • Page 55
    ... of HD Supply loan Total for fiscal 2010 $ $ (158) (67) $ $ (9) (51) (60) Gains (Losses) Fair Value Measured During Fiscal 2009 Level 3 HD Supply investment Lease obligation costs, net Total for fiscal 2009 $ $ - (191) $ $ (163) (84) (247) Lease obligation costs included in the Company...

  • Page 56
    .... In management's opinion, this litigation is not expected to have a material adverse effect on the Company's consolidated financial condition or results of operations. 13. QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of the quarterly consolidated results of operations for the...

  • Page 57
    ... the Company's Exchange Act reports is recorded, processed, summarized 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...

  • Page 58
    ... as a director of United Parcel Service, Inc., a package delivery company, and as chairman of the board of directors of the Federal Reserve Bank of Atlanta. TERESA WYNN ROSEBOROUGH, age 53, has been Executive Vice President, General Counsel and Corporate Secretary since November 2011. From April...

  • Page 59
    ... 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. Item...

  • Page 60
    ... 4.1] Form of 5.95% Senior Note due April 1, 2041. [Form 8-K filed March 31, 2011, Exhibit 4.2] The Home Depot, Inc. 1997 Omnibus Stock Incentive Plan. [Form 10-Q for the fiscal quarter ended August 4, 2002, Exhibit 10.1] Form of Executive Employment Death Benefit Agreement. [Form 10-K for the...

  • Page 61
    ... 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 62
    .... The following financial information from the Annual Report on Form 10-K for the fiscal year ended January 29, 2012, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Consolidated Statements of Earnings; (ii) the Consolidated Balance Sheets; (iii...

  • Page 63
    ..., thereunto duly authorized. THE HOME DEPOT, INC. (Registrant) By: /s/ FRANCIS S. BLAKE (Francis S. Blake, Chairman and Chief Executive Officer) Date: March 21, 2012 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons...

  • Page 64
    ...term debt Stockholders' equity Book value per share ($) Long-term debt-to-equity (%) Total debt-to-equity (%) Current ratio Inventory turnover Return on invested capital (%) STATEMENT OF CASH FLOWS DATA Depreciation and amortization Capital expenditures Cash dividends per share ($) STORE DATA Number...

  • Page 65
    ...HYHUDJHV Director since 2008 3, 4 %RQQLH*+LOO(G' 3UHVLGHQW%+LOO(QWHUSULVHV LLC Director since 1999 Lead Director 2, 3 5RQDOG/6DUJHQW Chairman and Chief Executive 2IÀFHU6WDSOHV,QF Director since 2011 3, 4 .DUHQ/.DWHQ Senior Advisor, Essex Woodlands Health Ventures Director...

  • Page 66
    ... 2000 303 Peachtree Street, NE Atlanta, GA 30308 STOCK EXCHANGE LISTING New York Stock Exchange Trading symbol - HD ANNUAL MEETING The Annual Meeting of Shareholders will be held at 9 a.m., Eastern Time, May 17, 2012, at Cobb Galleria Centre in Atlanta, Georgia. NUMBER OF SHAREHOLDERS As of March...

  • Page 67

  • Page 68
    View the online version at www.homedepotar.com the home depot, inc. 2455 paces ferry road, nw atlanta, GA 30339-4042 770.433.8211