Home Depot 2013 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... market. Our international businesses in both Canada and Mexico had positive comparable store sales for every quarter of the year. This year continued the Mexican team's record of consistent performance, with 41 quarters in a row of positive comparable store sales. For our business's strategic...

  • Page 3
    ... grow our business; we look to increase our dividend every year, targeting a payout ratio of 50 percent of net earnings; and we will return excess cash to our shareholders through share buy backs. In fiscal 2013, we repurchased a total of $8.5 billion or 111 million shares of our outstanding stock...

  • Page 4
    ...reporting company Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes The number of shares outstanding of the Registrant's common stock as of March 10, 2014 was 1,381,350,137 shares. No The aggregate market value of the common stock...

  • Page 5
    ... 13 13 Item 1A. Risk Factors Item 1B. 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 Results...

  • Page 6
    ... based on Net Sales for the fiscal year ended February 2, 2014 ("fiscal 2013"). The Home Depot stores sell a wide assortment of building materials, home improvement products and lawn and garden products and provide a number of services. The Home Depot stores average approximately 104,000 square feet...

  • Page 7
    ... bestin-class competitive advantages in our information technology and supply chain to better ensure product availability to our customers while managing our costs. During fiscal 2013, we continued to focus on optimizing our supply chain network and improving our inventory, transportation and...

  • Page 8
    ... and bulk pricing programs for both online and in-store purchases. In fiscal 2013, we launched a mobile app for our professional customers, which enables them to see multiple stores' inventory at one time, provides them with direct access to our pro desks, and gives them other functionality to help...

  • Page 9
    ... Store Support Center in Atlanta, Georgia, we maintained three sourcing offices located in the Chinese cities of Shanghai, Shenzhen and Dalian, as well as sourcing offices in Gurgaon, India; Rome, Italy; Monterrey, Mexico and Toronto, Canada. The percentage of Net Sales of each of our major product...

  • Page 10
    ..., and managing total supply chain costs. Our fiscal 2013 initiatives have been to further optimize and efficiently operate our network, build new logistics capabilities and improve our inventory management systems and processes by investing in information technology. Our distribution strategy is to...

  • Page 11
    ... areas of our business, including energy usage, supply chain, store construction and maintenance, and, as noted above under "Energy Saving Products and Programs," product selection and delivery of product knowledge to our customers. In fiscal 2013, our energy management team continued to implement...

  • Page 12
    ... increasing use of technology and mobile devices by our customers in the purchasing process. Customers are able to use technology to rapidly compare products and prices and use social media to provide feedback and information about our Company and products in a manner that can be quickly and broadly...

  • Page 13
    ... phones and other mobile devices. We use our website both as a sales channel for our products and also as a method of providing product, project and other relevant information to our customers to drive both in-store and online sales. We have multiple online communities and knowledge centers that...

  • Page 14
    ...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 might...

  • Page 15
    ... demand for our products, our sales and our profit margins. Prices of certain commodity products, including lumber and other raw materials, are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market...

  • Page 16
    ... territories and the 286 The Home Depot stores outside the U.S. at the end of fiscal 2013: 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...

  • Page 17
    ...two new The Home Depot stores in the U.S. and closed one store. We also opened six new stores in Mexico. Of our 2,263 stores operating at the end of fiscal 2013, approximately 90% were owned (including those owned subject to a ground lease), consisting of approximately 210.3 million square feet, and...

  • Page 18
    ... is leased, for store support centers and customer support centers. Item 3. Legal Proceedings. We are reporting the following proceedings to comply with SEC regulations, which require us to disclose certain information about proceedings arising under federal, state or local environmental provisions...

  • Page 19
    ... 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 common stock for the periods indicated. Price Range High Low Cash Dividends Declared Fiscal Year 2013 First...

  • Page 20
    ... that all dividends were reinvested on the date paid. The points on the graph represent fiscal year-end amounts based on the last trading day in each fiscal year. January 30, 2009 January 29, 2010 January 28, 2011 January 27, 2012 February 1, 2013 January 31, 2014 The Home Depot S&P 500 Index...

  • Page 21
    ... share repurchase table in future quarters. Sales of Unregistered Securities During the fourth quarter of fiscal 2013, the Company issued 485 deferred stock units under The Home Depot, Inc. NonEmployee Directors' Deferred Stock Compensation Plan pursuant to the exemption from registration provided...

  • Page 22
    ...to offer customers a compelling shopping, sales and service experience for online window coverings purchases and help us to develop best-in-class capabilities for selling customizable and configurable products online. In fiscal 2013, we opened eight new stores, including six new stores in Mexico and...

  • Page 23
    ... billion of incremental long-term debt issued in fiscal 2013 and cash on hand, was used to fund $8.5 billion of share repurchases, pay $2.2 billion of dividends and fund $1.4 billion in capital expenditures. Our return on invested capital (computed on net operating profit after tax for the trailing...

  • Page 24
    ... accounting principles. Net Sales for the 53rd week of fiscal 2012 are not included in comparable store sales results for fiscal 2012. (4) Consists of Net Sales generated online through the Home Depot and Home Decorators Collection websites for products delivered to customer locations or picked...

  • Page 25
    ... fiscal 2012 included a $10 million charge related to the China store closings. Gross Profit as a percent of Net Sales was 34.8% for fiscal 2013 compared to 34.6% for fiscal 2012, an increase of 18 basis points. The increase in gross profit margin in fiscal 2013 was driven primarily by businesses we...

  • Page 26
    ...the China store closings. Gross Profit as a percent of Net Sales was 34.6% for fiscal 2012 compared to 34.5% for fiscal 2011, an increase of 10 basis points. The increase in gross profit margin in fiscal 2012 was driven primarily by a change in mix of products sold and benefits from our supply chain...

  • Page 27
    ... to shareholders and $543 million less in proceeds from the sale of common stock, offset for the most part by $4.0 billion, net of repayments, of proceeds from long-term borrowings in fiscal 2013. In February 2013, our Board of Directors authorized a new $17.0 billion share repurchase program, under...

  • Page 28
    ... paper programs and related credit facility. We use capital and operating leases to finance a portion of our real estate, 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...

  • Page 29
    ...judgment or use of significant assumptions or complex estimates. Revenues We recognize revenue, net of estimated returns and sales tax, at the time the customer takes possession of merchandise or receives services. We estimate the liability for sales returns based on our historical return levels. We...

  • Page 30
    ... 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 of cost (first-in, first-out) or market...

  • Page 31
    ... course of business, as well as for the China store closings in fiscal 2012, which were not material to the Consolidated Financial Statements in fiscal 2013, 2012 or 2011. Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over the fair value of net assets acquired...

  • Page 32
    ...the Public Company Accounting Oversight Board (United States). The Audit Committee of the Board of Directors, 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...

  • Page 33
    ... standards of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheets of The Home Depot, Inc. and subsidiaries as of February 2, 2014 and February 3, 2013, and the related Consolidated Statements of Earnings, Comprehensive Income, Stockholders' Equity, and Cash...

  • Page 34
    Report of Independent Registered 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 February 2, 2014 and February 3, 2013, and the related Consolidated ...

  • Page 35
    THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS amounts in millions, except share and per share data February 2, 2014 February 3, 2013 ASSETS Current Assets: Cash and Cash Equivalents Receivables, net Merchandise Inventories Other Current Assets Total Current Assets Property and ...

  • Page 36
    THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Fiscal Year Ended amounts in millions, except per share data February 2, 2014 February 3, 2013 (1) January 29, 2012 NET SALES Cost of Sales GROSS PROFIT Operating Expenses: Selling, General and Administrative Depreciation ...

  • Page 37
    THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Year Ended amounts in millions February 2, 2014 February 3, 2013 (1) January 29, 2012 Net Earnings Other Comprehensive (Loss) Income: Foreign Currency Translation Adjustments Cash Flow Hedges, net of tax ...

  • Page 38
    ... Stock Treasury Stock Shares Amount Stockholders' Equity amounts in millions, except per share data Balance, January 30, 2011 Net Earnings Shares Issued Under Employee Stock Plans Tax Effect of Stock-Based Compensation Foreign Currency Translation Adjustments Cash Flow Hedges, net of tax Stock...

  • Page 39
    ...-Term Liabilities Other Net Cash Provided by Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures, net of $46, $98 and $25 of non-cash capital expenditures in fiscal 2013, 2012 and 2011, respectively Proceeds from Sale of Business, net Payments for Businesses Acquired, net...

  • Page 40
    ... 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 owns the related receivables. The...

  • Page 41
    ... Revenues The Company recognizes revenue, net of estimated returns and sales tax, at the time the customer takes possession of merchandise or receives services. The liability for sales returns is estimated based on historical return levels. When the Company receives payment from customers before the...

  • Page 42
    ... Consolidated Balance Sheets. Services revenue was $3.5 billion, $3.2 billion and $2.9 billion for fiscal 2013, 2012 and 2011, respectively. Self-Insurance The Company is self-insured for certain losses related to general liability (including product liability), workers' compensation, employee...

  • Page 43
    ... for the closing of seven stores in China in fiscal 2012, which were not material to the Consolidated Financial Statements in fiscal 2013, 2012 or 2011. Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over the fair value of net assets acquired. The Company does...

  • Page 44
    ..., 2012 and 2011, respectively. Long-lived assets outside the U.S. totaled $2.9 billion and $3.1 billion as of February 2, 2014 and February 3, 2013, respectively. The following table presents the Net Sales of each major product category (and related services) for each of the last three fiscal years...

  • Page 45
    ... Long-Term Liabilities in the accompanying Consolidated Balance Sheets. Total rent expense, net of minor sublease income, for fiscal 2013, 2012 and 2011 was $905 million, $849 million and $823 million, respectively. Certain store leases also provide for contingent rent payments based on percentages...

  • Page 46
    ... of each year, beginning February 15, 2014. The net proceeds of the September 2013 issuance were used for general corporate purposes, including repayment of the Company's $1.25 billion 5.25% senior notes that matured December 16, 2013 and repurchases of shares of the Company's common stock. The $22...

  • Page 47
    ... on these senior notes is due semi-annually on April 1 and October 1 of each year, beginning October 1, 2013. The net proceeds of the April 2013 issuance were used for general corporate purposes, including repurchases of shares of the Company's common stock. The $6 million discount associated with...

  • Page 48
    ... with reference to the average price of the Company's common stock over the term of the applicable ASR agreement. The $3.05 billion of shares repurchased are included in Treasury Stock in the accompanying Consolidated Balance Sheets. In fiscal 2011, the Company entered into an ASR agreement...

  • Page 49
    ... actual tax expense for the applicable fiscal years was as follows (amounts in millions): Fiscal Year Ended February 2, 2014 February 3, 2013 January 29, 2012 Income taxes at federal statutory rate State income taxes, net of federal income tax benefit Other, net Total $ 2,964 227 (109) $ 2,527...

  • Page 50
    ...tax benefits for fiscal 2013, 2012 and 2011 were as follows (amounts in millions): February 2, 2014 February 3, 2013 January 29, 2012 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 51
    ... age 60, provided the associate has had five years of continuous service. The Company recorded stock-based compensation expense related to deferred shares of $14 million, $13 million and $12 million in fiscal 2013, 2012 and 2011, respectively. The Company maintains two Employee Stock Purchase Plans...

  • Page 52
    ...summarizes stock options outstanding at February 2, 2014, February 3, 2013 and January 29, 2012, and changes during the fiscal years ended on these dates (shares in thousands): Number of Shares Weighted Average Exercise Price Outstanding at January 30, 2011 Granted Exercised Canceled Outstanding at...

  • Page 53
    ... 2013, 2012 and 2011, respectively. At February 2, 2014, the Benefit Plans and the restoration plan held a total of 11 million shares of the Company's common stock in trust for plan participants. 8. CHINA STORE CLOSINGS In fiscal 2012, the Company closed its remaining seven big box stores in China...

  • Page 54
    ... Value at February 3, 2013 Using Level 1 Level 2 Level 3 Derivative agreements - assets Derivative agreements - liabilities Total $ $ - - - $ $ 30 (10) 20 $ $ - - - $ $ - - - $ $ 64 (15) 49 $ $ - - - The Company uses derivative financial instruments from time to time in the management...

  • Page 55
    ... under outstanding letters 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...

  • Page 56
    ... 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 57
    ... reference to the sections entitled "Election of Directors," "Board of Directors Information," "General" and "Audit Committee Report" in the Company's Proxy Statement for the 2014 Annual Meeting of Shareholders (the "Proxy Statement"). Executive officers of the Company are appointed by, and serve at...

  • Page 58
    ... sections entitled "Executive Compensation," "Director Compensation" and "Leadership Development and Compensation Committee Report" in the Company's Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by...

  • Page 59
    ...and Management's Report on Internal Control Over Financial Reporting; and - Reports of Independent Registered Public Accounting Firm. - Consolidated Balance Sheets as of February 2, 2014 and February 3, 2013; - Consolidated Statements of Earnings for the fiscal years ended February 2, 2014, February...

  • Page 60
    ... 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] Form of Executive Officer Equity Award Terms and Conditions Agreement Pursuant to The Home Depot, Inc...

  • Page 61
    .... The following financial information from the Annual Report on Form 10-K for the fiscal year ended February 2, 2014, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Earnings; (iii...

  • Page 62
    ... of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE HOME DEPOT, INC. (Registrant) By: /s/ FRANCIS S. BLAKE (Francis S. Blake, Chairman and Chief Executive Officer) Date: March 26, 2014 Pursuant to the requirements of the...

  • Page 63
    Five-Year Summary of Financial and Operating Results The Home Depot, Inc. and Subsidiaries amounts in millions, except where noted 2013 2012(1) 2011 2010 2009(2) STATEMENT OF EARNINGS DATA Net sales Net sales increase (decrease) (%) Earnings before provision for income taxes Net earnings Net ...

  • Page 64
    ... Chairman and Chief Executive Officer, The Home Depot, Inc. Director since 2006 Gregory D. Brenneman Chairman, CCMP Capital Advisors, LLC Director since 2000 2, 3 J. Frank Brown Managing Director and Chief Operating Officer, General Atlantic LLC Director since 2011 Financial Expert 1, 2 Armando...

  • Page 65
    ... the prospectus, access the Shareholder Services section 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 February 2, 2014 is...

  • Page 66