Home Depot 2014 Annual Report Download

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DELIVERING A SEAMLESS CUSTOMER EXPERIENCE
2014 ANNUAL REPORT
INTERCONNECTING

Table of contents

  • Page 1
    2014 ANNUAL REPORT INTERCONNECTING DELIVERING A SEAMLESS CUSTOMER EXPERIENCE

  • Page 2
    ... to check inventory levels, access the internet for howto videos, research products, and even complete sales in the aisle of a store. We will continue to build out our interconnecting retail capabilities to connect with customers across multiple channels, including Buy Online, Pick-up In Store; Buy...

  • Page 3
    .... In 2014, we opened two new direct fulfillment centers to support our online channel; a third will be completed in 2015. We are currently in pilot with Buy Online, Deliver From Store, which will allow product to be delivered to the job site or home within a time-specific delivery window. We...

  • Page 4
    ... ACT OF 1934 For the fiscal year ended February 1, 2015 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-8207 THE HOME DEPOT, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of...

  • Page 5
    ... Item 9B. PART III Item 10. Item 11. Item 12. Item 13. Item 14. PART IV Item 15. Exhibits and Financial Statement Schedules Signatures Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder...

  • Page 6
    ... ("SEC"). PART I Item 1. Business. Introduction The Home Depot, Inc. is the world's largest home improvement retailer based on Net Sales for the fiscal year ended February 1, 2015 ("fiscal 2014"). The Home Depot stores sell a wide assortment of building materials, home improvement products and...

  • Page 7
    ...facilitate their buying experience. We offer a variety of special programs to these customers, including delivery and will-call services, dedicated staff, expanded credit programs, designated parking spaces close to store entrances and bulk pricing programs for both online and in-store purchases. In...

  • Page 8
    ...stores through third-party credit providers. In fiscal 2014, our customers opened approximately 2.9 million new The Home Depot private label credit accounts, and at fiscal year end the total number of The Home Depot active account holders was approximately 11 million. Private label credit card sales...

  • Page 9
    ... to our online properties; sales from our online channels increased over 36% compared to fiscal 2013; and almost 40% of our online orders were picked up in a store, compared to approximately 30% in fiscal 2013. Energy Saving Products and Programs. The Home Depot has a long-standing commitment to...

  • Page 10
    ... on creating a competitive advantage through ensuring product availability for our customers, effectively using our investment in inventory, and managing total supply chain costs. Our fiscal 2014 initiatives have been to further optimize and efficiently operate our network, build new logistics...

  • Page 11
    ...our stores to the customer's home or job site. In addition, we added capacity for the more traditional online direct-tocustomer delivery methods in fiscal 2014. We opened two new direct fulfillment centers in Georgia and California, which brings our total to four direct fulfillment center operations...

  • Page 12
    ... cannot guarantee that these programs or others we may implement will be implemented successfully or will meet customers' needs and expectations. Customers are also using social media to provide feedback and information about our Company and products and services in a manner that can be quickly and...

  • Page 13
    ... certain payment card information and customer email addresses through unauthorized access to our systems. As a result of the Data Breach, we are facing at least 57 civil lawsuits filed in the U.S. and Canada, and other claims may be asserted on behalf of customers, payment card brands, payment card...

  • Page 14
    .... We accept payments using a variety of methods, including cash, checks, credit and debit cards, PayPal, our private label credit cards and installment loan program, and gift cards, and we may offer new payment options over time. Acceptance of these payment options subjects us to rules, regulations...

  • Page 15
    ..., tablets, smart 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...

  • Page 16
    ...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 17
    speculation, government regulations and periodic delays in delivery. Rapid and significant changes in commodity prices may affect the demand for our products, our sales and our profit margins. Changes in accounting standards and subjective assumptions, estimates and judgments by management related ...

  • Page 18
    ... territories and the 292 The Home Depot stores outside the U.S. at the end of fiscal 2014: 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 19
    ... space in Atlanta, Georgia. At the end of fiscal 2014 including the offices in Atlanta, we occupied an aggregate of approximately 3.3 million square feet, of which approximately 2.1 million is owned and approximately 1.2 million is leased, for store support centers and customer support centers. 14

  • Page 20
    ...Not applicable. 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...

  • Page 21
    ... 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 29, 2010 January 28, 2011 January 27, 2012 February 1, 2013 January 31, 2014 January 30, 2015 The Home Depot S&P 500 Index...

  • Page 22
    ... (the "Securities Act") and Rule 506 of the SEC's Regulation D thereunder. The deferred stock units were credited to the accounts of those non-employee directors who elected to receive board retainers in the form of deferred stock units instead of cash during the fourth quarter of fiscal 2014. The...

  • Page 23
    ... supporting law enforcement efforts to identify the responsible parties. In September 2014, we completed a major payment security project that provides enhanced encryption of payment card data at the point of sale in all of our U.S. stores, offering significant new protection for customers. The new...

  • Page 24
    ... Using our new merchandising assortment planning and pricing tools in fiscal 2014, we reviewed approximately one-third of the products offered in a typical store, allowing us to better match our assortments to local customer preferences, regulations and demographics. We also used these tools to help...

  • Page 25
    ... three planned direct fulfillment centers in fiscal 2014 and plan to open the third direct fulfillment center in the second half of fiscal 2015. These highly automated facilities will support our online growth by providing a balance of cost efficiency and speed in shipping online orders to meet our...

  • Page 26
    ... sales results for fiscal 2012. (4) Consists of Net Sales generated online through our Home Depot, Home Decorators Collection and Blinds.com websites for products delivered to customer locations or picked up in stores through our BOPIS and BOSS programs. N/M - Not Meaningful N/A - Not Applicable...

  • Page 27
    ... sales driven by increased customer transactions and average ticket growth. Total comparable store sales increased 5.3% for fiscal 2014 on top of an increase of 6.8% for fiscal 2013. The positive comparable store sales for fiscal 2014 reflect a number of factors, including the execution of our key...

  • Page 28
    ... supply chain and improved shrink performance, partially offset by a change in the mix of products sold. Operating Expenses SG&A increased 0.5% to $16.6 billion for fiscal 2013 from $16.5 billion for fiscal 2012. SG&A for fiscal 2012 included a $135 million charge related to the China store closings...

  • Page 29
    ... from higher comparable store sales and expense leverage. The gain on the sale of a portion of our equity ownership in HD Supply is classified as an investing activity in our Consolidated Statements of Cash Flows. Net Cash Used in Investing Activities for fiscal 2014 was $1.3 billion compared...

  • 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 LongTerm Debt and Current Installments of Long-Term Debt. In accordance with generally accepted accounting principles, the...

  • Page 31
    ... binding service contracts. Purchase orders that are not binding agreements are excluded from the table above. (5) Excludes $495 million of noncurrent unrecognized tax benefits due to uncertainty regarding the timing of future cash payments. Quantitative and Qualitative Disclosures About Market Risk...

  • Page 32
    ... 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 of cost...

  • Page 33
    ... as well as for the China store closings in fiscal 2012, which were not material to the Consolidated Financial Statements in fiscal 2014, 2013 or 2012. Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over the fair value of net assets acquired. We do not amortize...

  • Page 34
    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 35
    ... of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheets of The Home Depot, Inc. and subsidiaries as of February 1, 2015 and February 2, 2014, and the related Consolidated Statements of Earnings, Comprehensive Income, Stockholders' Equity, and Cash Flows for...

  • Page 36
    ... 2, 2014, and the related Consolidated Statements of Earnings, Comprehensive Income, Stockholders' Equity, and Cash Flows for each of the fiscal years in the three-year period ended February 1, 2015. These Consolidated Financial Statements are the responsibility of the Company's management. Our...

  • Page 37
    THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS amounts in millions, except share and per share data February 1, 2015 February 2, 2014 ASSETS Current Assets: Cash and Cash Equivalents Receivables, net Merchandise Inventories Other Current Assets Total Current Assets Property and ...

  • Page 38
    THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Fiscal Year Ended amounts in millions, except per share data February 1, 2015 February 2, 2014 (1) February 3, 2013 NET SALES Cost of Sales GROSS PROFIT Operating Expenses: Selling, General and Administrative Depreciation ...

  • Page 39
    THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Year Ended amounts in millions February 1, 2015 February 2, 2014 (1) February 3, 2013 Net Earnings Other Comprehensive (Loss) Income: Foreign Currency Translation Adjustments Cash Flow Hedges, net of tax ...

  • Page 40
    THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Accumulated Other Comprehensive Income (Loss) Common Stock Treasury Stock Shares Amount Stockholders' Equity amounts in millions, except per share data Balance, January 29, 2012 Net Earnings Shares Issued Under ...

  • Page 41
    ... to Net Cash Provided by Operating Activities: Depreciation and Amortization Stock-Based Compensation Expense Gain on Sales of Investments Goodwill Impairment Changes in Assets and Liabilities, net of the effects of acquisitions: Receivables, net Merchandise Inventories Other Current Assets Accounts...

  • Page 42
    ... 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 Company evaluated the third-party entities holding the...

  • Page 43
    ... Taxes Income taxes are accounted for under the asset and liability method. The Company provides for federal, state and foreign income taxes currently payable, as well as for those deferred due to timing differences between reporting income and expenses for financial statement purposes versus tax...

  • Page 44
    ... 2014, 2013 and 2012, respectively, and are recorded as an offset to advertising expense in SG&A. Cost of Sales Cost of Sales includes the actual cost of merchandise sold and services performed, the cost of transportation of merchandise from vendors to the Company's stores, locations or customers...

  • Page 45
    ... for the closing of seven stores in China in fiscal 2012, which were not material to the Consolidated Financial Statements in fiscal 2014, 2013 or 2012. Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over the fair value of net assets acquired. The Company does...

  • Page 46
    ..., 2013 and 2012, respectively. Long-lived assets outside the U.S. totaled $2.5 billion and $2.9 billion as of February 1, 2015 and February 2, 2014, 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 47
    ... Income in the accompanying Consolidated Statements of Earnings for fiscal 2014. The remaining 4.1 million shares owned by the Company, which represent approximately 2% of the shares of HD Supply common stock outstanding, continue to be accounted for using the cost method as the restrictions...

  • Page 48
    ...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 $557 million and $374 million at February 1, 2015 and February 2, 2014, respectively. 4. DEBT The Company has commercial...

  • Page 49
    ...'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 million discount associated with the September 2013 issuance is being amortized over the term of the notes using the effective interest rate method. Issuance costs 44

  • Page 50
    ... issuance were used for general corporate purposes, including repurchases of shares of the Company's common stock. The $6 million discount associated with the April 2013 issuance is being amortized over the term of the notes using the effective interest rate method. Issuance costs associated with...

  • Page 51
    ... Company's common stock over the term of the ASR agreement. 6. INCOME TAXES The components of Earnings before Provision for Income Taxes for fiscal 2014, 2013 and 2012 were as follows (amounts in millions): Fiscal Year Ended February 1, 2015 February 2, 2014 February 3, 2013 United States Foreign...

  • Page 52
    ... actual tax expense for the applicable fiscal years was as follows (amounts in millions): Fiscal Year Ended February 1, 2015 February 2, 2014 February 3, 2013 Income taxes at federal statutory rate State income taxes, net of federal income tax benefit Other, net Total $ 3,492 235 (96) $ 2,964...

  • Page 53
    ... years 2008 through 2012 are currently under examination by the IRS. There are also ongoing U.S. state and local and other foreign audits covering fiscal years 2005 through 2013. The Company does not expect the results from any income tax audit to have a material impact on the Company's consolidated...

  • Page 54
    ...years of continuous service. The Company recorded stock-based compensation expense related to deferred shares of $14 million, $14 million and $13 million in fiscal 2014, 2013 and 2012, respectively. The Company maintains two Employee Stock Purchase Plans ("ESPPs") (U.S. and non-U.S. plans). The plan...

  • Page 55
    ...summarizes stock options outstanding at February 1, 2015, February 2, 2014 and February 3, 2013, and changes during the fiscal years ended on these dates (shares in thousands): Number of Shares Weighted Average Exercise Price Outstanding at January 29, 2012 Granted Exercised Canceled Outstanding at...

  • Page 56
    ... are then used to purchase shares of the Company's common stock in the open market. The Company's contributions to the Benefit Plans and the restoration plan were $182 million, $184 million and $182 million for fiscal 2014, 2013 and 2012, respectively. At February 1, 2015, the Benefit Plans and the...

  • Page 57
    ... on the Company's consolidated financial condition, results of operations or cash flows. Data Breach In the third quarter of fiscal 2014, the Company confirmed that its payment data systems were breached, which potentially impacted customers who used payment cards at self-checkout systems in the...

  • Page 58
    ...-checkout systems to access payment card information of customers who shopped at the Company's U.S. and Canadian stores between April 2014 and September 2014. The investigation of the Data Breach is ongoing, and the Company is supporting law enforcement efforts to identify the responsible parties...

  • Page 59
    ...expenses as services are received. Costs related to the Data Breach that may be incurred in future periods may also include liabilities to payment card networks for reimbursements of credit card fraud and card reissuance costs; liabilities related to the Company's private label credit card fraud and...

  • Page 60
    ...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, as appropriate...

  • Page 61
    ... 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 2015 Annual Meeting of Shareholders (the "Proxy Statement"). Executive officers of the Company are appointed by, and serve at...

  • Page 62
    ... 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 63
    ... financial statements are set forth in Item 8 hereof: - Management's Responsibility for Financial Statements and Management's Report on Internal Control Over Financial Reporting; and - Reports of Independent Registered Public Accounting Firm. - Consolidated Balance Sheets as of February 1, 2015...

  • Page 64
    ...4, 2002, Exhibit 10.1] Form of Executive Employment Death Benefit Agreement. [Form 10-K for the fiscal year ended February 3, 2013, Exhibit 10.2] The Home Depot Deferred Compensation Plan for Officers (As Amended and Restated Effective January 1, 2008). [Form 8-K filed on August 20, 2007, Exhibit 10...

  • Page 65
    .... The following financial information from the Annual Report on Form 10-K for the fiscal year ended February 1, 2015, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Earnings; (iii...

  • Page 66
    ... authorized. THE HOME DEPOT, INC. (Registrant) By: /s/ CRAIG A. MENEAR (Craig A. Menear, Chairman, Chief Executive Officer and President) Date: March 25, 2015 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of...

  • Page 67
    ...of sales BALANCE SHEET DATA AND FINANCIAL RATIOS Total assets Working capital Merchandise inventories Net property and equipment Long-term debt Stockholders' equity Long-term debt-to-equity (%) Total debt-to-equity (%) Current ratio Inventory turnover Return on invested capital (%) STATEMENT OF CASH...

  • Page 68
    ... Statements of Stockholders' Equity; (v) the Consolidated Statements of Cash Flows; and (vi) the Notes to the Consolidated Financial Statements. Management contract or compensatory plan or arrangement. Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of the SEC's Regulation...

  • Page 69
    ... Officer, PepsiCo Americas Beverages Director since 2008 3, 4 Helena B. Foulkes Executive Vice President, CVS Health Corporation and President, CVS/pharmacy Director since 2013 2, 3 Wayne M. Hewett President, Platform Specialty Products Corporation Director since 2014 2, 3 Karen L. Katen Senior...

  • Page 70
    ... 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 1, 2015 is...

  • Page 71
    The Home Depot, Inc. 2455 Paces Ferry Road, NW Atlanta, GA 30339-4024 United States 770.433.8211 www.homedepotar.com