TEN YEAR SELECTED FINANCIAL AND OPERATING HIGHLIGHTS
5 Year 10 Year
Annual Annual
Compound Compound
Growth Rate Growth Rate 1994 1993 1992 1991 1990(1)
Statement of Earnings Data
Net sales 35.2% 40.0% $12,476,697 $9,238,763 $7,148,436 $5,136,674 $3,815,356
Net sales increase - % - - 35.0 29.2 39.2 34.6 38.3
Earnings before taxes 40.0 43.6 979,751 736,871 575,973 396,120 259,828
Net earnings 40.1 45.6 604,501 457,401 362,863 249,150 163,428
Net earnings increase - % - - 32.2 26.1 45.6 52.5 46.0
Net earnings per share ($) 32.8 36.2 1.32 1.01 .82 .60 .45
Net earnings per share increase - % - - 30.5 23.2 36.7 33.3 40.6
Weighted average number of shares 6.0 6.4 475,947 453,037 444,989 415,997 362,505
Gross margin - % to sales - - 27.9 27.7 27.6 28.1 27.9
Store selling and operating-% to sales - - 17.8 17.6 17.4 18.1 18.2
Pre-opening - % to sales - - .4 .4 .4 .3 .4
General and administrative - % to sales - - 1.8 2.0 2.1 2.3 2.4
Net interest(expense)income-% to sales - - (.1) .3 .4 .3 (.1)
Earnings before taxes - % to sales - - 7.8 8.0 8.1 7.7 6.8
Net earnings - % to sales - - 4.8 5.0 5.1 4.8 4.3
Balance Sheet Data and Financial Ratios
Total assets 38.9% 36.9% $ 5,778,041 $4,700,889 $3,931,790 $2,510,292 $1,639,503
Working capital 27.4 24.8 918,724 993,963 807,028 623,937 300,867
Merchandise inventories 35.6 35.5 1,749,312 1,293,477 939,824 662,257 509,022
Net property and equipment 45.9 46.3 3,397,237 2,370,904 1,607,984 1,254,774 878,730
Long-term debt 26.6 23.6 983,369 874,048 843,672 270,575 530,774
Stockholders' equity 46.4 45.6 3,442,223 2,814,100 2,304,081 1,691,212 683,402
Book value per share ($) 37.1 36.6 7.59 6.26 5.20 4.01 1.93
Long-term debt to equity - % - - 28.6 31.1 36.6 16.0 77.7
Current ratio - - 1.76:1 2.02:1 2.07:1 2.17:1 1.73:1
Inventory turnover - - 5.7x 5.9x 6.3x 6.1x 6.0x
Return on average equity - % - - 19.3 17.9 18.1 18.5 27.6
Statement of Cash Flows Data
Depreciation and amortization 43.8% 49.2% $ 129,609 $89,839 $ 69,536 $ 52,283 $ 34,358
Capital expenditures 42.9 37.4 1,220,180 900,452 437,278 432,198 400,205
Cash dividends per share ($) - - .15 .11 .08 .05 .04
Customer and Store Data
Number of U.S. states 18.5% 16.7% 28 23 19 15 12
Number of Canadian provinces - - 3 - - - -
Number of stores 23.6 27.1 340 264 214 174 145
Square footage at year-end 27.5 30.9 35,133 26,383 20,897 16,480 13,278
Change in square footage - % - - 33.2 26.3 26.8 24.1 27.4
Average square footage per store - - 103 100 98 95 92
Number of customer transactions 29.0 35.7 302,181 236,101 189,493 146,221 112,464
Average sale per transaction ($) 4.8 3.1 41.29 39.13 37.72 35.13 33.92
Number of employees 30.9 32.6 67,300 50,600 38,900 28,000 21,500
Other Data
Average total company weekly sales 35.2% 40.0% $ 239,936 $ 177,669 $ 137,470 $ 98,782 $ 71,988
Weighted average weekly
sales per operating store 9.3 8.2 802 764 724 633 566
Comparable store sales increase-% (2) - - 8 7 15 11 10
Weighted average
sales per square foot ($) (2) 5.9 5.0 404 398 387 348 322
Advertising expense - % to sales - - .5 .5 .5 .7 .9
<FN>
<F1>
(1) Fiscal year 1990 consisted of 53 weeks, all other years reported consisted
of 52 weeks.
<F2>
(2) Adjusted to reflect the first 52 weeks of the 53-week fiscal year in 1990.
<FN>
Management's Discussion and Analysis of Results of Operations and
Financial Condition
The data below reflects selected sales data, the percentage
relationship between sales and major categories in the
Consolidated Statements of Earnings and the percentage change
in the dollar amounts of each of the items.
Percentage
Increase (Decrease)
of Dollar Amounts
---------------------------
Fiscal Year(1)
----------------------- 1994 1993
1994 1993 1992 vs. 1993 vs. 1992
----------------------------------------------------------------------------
Selected Consolidated Statements of Earnings Data
Net Sales 100.0% 100.0% 100.0% 35.0% 29.2%
----------------------------------------------------------------------------
Gross Profit 27.9 27.7 27.6 36.5 29.7
----------------------------------------------------------------------------
Operating Expenses:
Selling and
Store Operating 17.8 17.6 17.4 36.4 30.5
Pre-Opening .4 .4 .4 39.4 36.6
General and
Administrative 1.8 2.0 2.1 24.6 25.8
----------------------------------------------------------------------------
Total Operating
Expenses 20.0 20.0 19.9 35.3 30.1
----------------------------------------------------------------------------
Operating
Income 7.9 7.7 7.7 39.7 28.6
Interest Income (Expense):
Interest and
Investment
Income .2 .6 1.0 (53.2) (9.9)
Interest Expense (.3) (.3) (.6) 17.0 (25.1)
---------------------------------------------------------------------------
Interest, Net (.1) .3 .4 (124.7) 13.7
---------------------------------------------------------------------------
Earnings Before
Income Taxes 7.8 8.0 8.1 33.0 27.9
Income Taxes 3.0 3.0 3.0 34.3 31.1
---------------------------------------------------------------------------
Net Earnings 4.8% 5.0% 5.1% 32.2% 26.1%
===========================================================================
Selected Consolidated Sales Data
Number of Customer
Transactions 302,181,000 236,101,000 189,493,000 28.0% 24.6%
Average Amount of
Sale Per
Transaction $ 41.29 $ 39.13 $ 37.72 5.5 3.7
Weighted Average
Weekly Sales Per
Operating Store $802,000 $764,000 $724,000 5.0 5.5
Weighted Average
Sales Per Square Foot $ 404.04 $ 398.18 $ 386.92 1.5 2.9
============================================================================
<FN>
(1) Fiscal years 1994, 1993 and 1992 refer to the fiscal years ended January
29, 1995, January 30, 1994 and January 31, 1993, respectively.
</FN>
Results of Operations
For an understanding of the significant factors that influenced the
Company's performance during the past three fiscal years, the
following discussion should be read in conjunction with the
consolidated financial statements appearing elsewhere in this
annual report.
Fiscal Year Ended January 29, 1995 Compared to January 30, 1994
Sales for fiscal year 1994 increased 35.0% from $9,238,763,000 in
fiscal 1993 to $12,476,697,000. This increase was attributable to,
among other things, 69 new store openings, nine store relocations,
the acquisition of a 75% partnership interest in seven Canadian
stores then known as Aikenhead's Home Improvement Warehouse, an 8%
comparable store-for-store sales increase and full year sales from
the 50 new store openings during fiscal 1993. The percentage
increase in comparable store sales would have been 9% after
excluding all sales from the ten stores in Southern Florida that
were significantly affected by Hurricane Andrew during 1993.
Gross profit as a percent of sales was 27.9% for fiscal 1994
compared to 27.7% for fiscal 1993. This higher gross profit
percentage resulted primarily from changes in merchandise mix
including more decor products and upgraded seasonal merchandise at
higher margins, as well as decreased sales penetrations in lumber
which carries lower margins.
Operating expenses as a percent of sales were 20.0% for both
fiscal 1994 and fiscal 1993. Selling and store operating expenses
as a percent of sales increased to 17.8% in fiscal 1994 compared to
17.6% in fiscal 1993. This increase was attributable to, among
other things, additional costs associated with nine store
relocations during fiscal 1994 compared to six store relocations
during fiscal 1993. The increase in selling and store operating
expenses as a percent of sales was offset by lower general and
administrative expenses as a percent of sales due to cost control
measures and economies from higher sales volumes.
Interest and investment income as a percent of sales decreased
to 0.2% in fiscal 1994 compared to 0.6% during fiscal 1993. This decrease
was attributable to a reduction of investment principal due to
utilization of funds for capital expansion, as well as lower yields
due to shorter maturities on the investment portfolio. Interest
expense as a percent of sales was 0.3% for both fiscal 1994 and
fiscal 1993. Higher interest expense from additional capital leases
was partially offset by higher capitalized interest resulting from
constructing more owned stores than in the previous year.
The Company's combined Federal and state effective income tax
rate was 38.3% for fiscal 1994 compared to 38.2% for fiscal 1993,
before cumulative effect of change in accounting principle. This
increase was attributable to lower tax-advantaged investments. The
Company implemented SFAS 109 "Accounting for Income Taxes" during
fiscal 1993 which reduced the combined Federal and state effective
income tax rate to 37.9% in fiscal 1993.
Net earnings as a percent of sales was 4.8% for fiscal 1994
compared to 5.0% for fiscal 1993, reflecting lower interest income
and a higher effective income tax rate, partially offset by higher
gross profits, as described above. Earnings per share was $1.32 for
fiscal 1994 compared to $1.01 during fiscal 1993.
Fiscal Year Ended January 30, 1994 Compared to January 31, 1993
Sales for fiscal year 1993 increased 29.2% from $7,148,436,000 in
fiscal 1992 to $9,238,763,000. This increase was attributable to,
among other things, 50 new store openings, six store relocations,
a 7% comparable store-for-store sales increase and full year sales
from the 40 store openings during fiscal 1992. The percentage
increase in comparable store sales would have been 8% after
excluding all sales from the ten stores in Southern Florida that
were significantly affected by Hurricane Andrew.
Gross profit as a percent of sales was 27.7% for fiscal 1993 compared
to 27.6% for fiscal 1992. This higher gross profit percentage resulted
primarily from higher vendor volume rebates and changes in merchandise mix,
partially offset by lower margins in highly competitive markets.
Operating expenses as a percent of sales increased to 20.0% in
fiscal 1993 from 19.9% in fiscal 1992. This increase was attributable to,
among other things, higher payroll costs as a percent of sales due to the
implementation of new labor standards that put additional sales hours on the
selling floor, partially offset by lower self-funded insurance reserves and
lower general and administrative expenses as a percent of sales due to cost
control measures.
Interest income as a percent of sales decreased to 0.6% in
fiscal 1993 compared to 1.0% during fiscal 1992. This decrease was
attributable to a reduction of investment principal due to
utilization of funds for capital expansion, partially offset by a
higher yield on the investment portfolio. Interest expense as a
percent of sales decreased to 0.3% in fiscal 1993 from 0.6% in
fiscal 1992 due to the call for redemption and conversion to equity
of substantially all the Company's 6% Convertible Subordinated
Notes in June, 1992 and due to higher capitalized interest.
The Company's combined Federal and state effective income tax
rate, before cumulative effect of a change in accounting principle,
was 38.2% for fiscal 1993 compared to 37.0% for fiscal 1992. This
increase was attributable to the enactment of the Omnibus Budget
Reconciliation Act of 1993 and to lower tax-advantaged investments.
The Company implemented SFAS 109 "Accounting for Income Taxes" in
the first quarter of fiscal 1993. As a result of this change in
accounting principle, the combined Federal and state effective
income tax rate was 37.9% in 1993.
Net earnings as a percent of sales was 5.0% for fiscal 1993
compared to 5.1% for fiscal 1992, reflecting higher operating
expenses, lower net interest income and a higher effective income
tax rate, partially offset by higher gross profits, as described
above. Earnings per share was $1.01 for fiscal 1993 compared to
$.82 for fiscal 1992 on 2% more weighted average shares outstanding
in fiscal 1993.
Liquidity and Capital Resources
Cash flow generated from store operations provides the Company with
a significant source of liquidity. Additionally, a significant
portion of the Company's inventory is financed under vendor credit
terms.
The Company plans to open approximately 91 new stores and
relocate nine existing stores during fiscal 1995. Of these 100
locations, it is anticipated that approximately 90% will be owned
and the balance will be leased. The Company also plans to open
approximately 122 stores, including relocations, in fiscal 1996.
Although some of these locations may be newly leased, it is
expected that most will be obtained during fiscal 1995 through the
purchase of pre-existing leasehold interests, the acquisition of
land parcels and the construction or purchase of buildings. While
the cost of new stores to be constructed and owned by the Company
varies widely, principally due to land costs, new store costs are
currently estimated to average approximately $12,600,000 per
location. In addition, the Company may purchase leasehold interests
at varying amounts depending on the value of such properties. The
cost to remodel and fixture stores to be leased is expected to
average approximately $4,000,000 per store. Each new store will
require approximately $3,100,000 to finance inventories, net of
vendor financing.
During fiscal 1994, the Company initiated a commercial paper program
which will provide short-term funding needs up to a maximum of $300,000,000
of which $100,000,000 was outstanding as of January 29, 1995. In connection
with the program, the Company entered into a back-up credit facility with a
consortium of banks for up to $300,000,000. The facility expires
November 1, 1997. The facility contains various restrictive
covenants, none of which is expected to impact the Company's
liquidity or capital resources.
On February 28, 1995, the Company announced its decision to redeem
on March 31, 1995, all of its outstanding 41_2% Convertible Subordinated
Notes due February 15, 1997 at a redemption price of $1,016.75 (which includes
premium and accrued interest) per $1,000 principal amount of Notes. The
Notes are convertible into common stock of the Company at the rate
of one share for each $38.75 principal amount of Notes owned. In
light of current market prices of the Company's common stock, it is
expected that the redemption call will result in the conversion of
substantially all of the outstanding principal ($804,985,000) to
equity and, thereby, result in the issuance of approximately
20,774,000 additional shares of common stock.
As of January 29, 1995, the Company had $57,866,000 in cash and cash
equivalents and short-term investments as well as $98,022,000 in long-term
investments. Management believes that its current cash position,
the proceeds from short-term and long-term investments, internally
generated funds, its commercial paper program, and/or the ability
to obtain alternate sources of financing should enable the Company
to complete its capital expenditure programs, including store
expansion and renovation, through the next several fiscal years.
Impact of Inflation and Changing Prices
Although the Company cannot accurately determine the precise effect
of inflation on its operations, it does not believe inflation has
had a material effect on sales or results of operations.
Consolidated Statements of Earnings
The Home Depot, Inc. and Subsidiaries
Amounts in thousands, except per share data
Fiscal Year Ended
January 29, January 30, January 31,
1995 1994 1993
Net Sales $12,476,697 $9,238,763 $7,148,436
Cost of Merchandise Sold 8,991,204 6,685,384 5,179,368
Gross Profit 3,485,493 2,553,379 1,969,068
Operating Expenses:
Selling and Store Operating 2,216,540 1,624,920 1,245,608
Pre-Opening 51,307 36,816 26,959
General and Administrative 230,456 184,954 147,080
Total Operating Expenses 2,498,303 1,846,690 1,419,647
Operating Income 987,190 706,689 549,421
Interest Income (Expense):
Interest and Investment Income 28,510 60,896 67,562
Interest Expense (note 2) (35,949) (30,714) (41,010)
Interest, Net (7,439) 30,182 26,552
Earnings Before Income Taxes 979,751 736,871 575,973
Income Taxes (note 3) 375,250 279,470 213,110
Net Earnings $ 604,501 $ 457,401 $ 362,863
===========================================
Earnings Per Common and Common Equivalent Share $ 1.32 $ 1.01 $ .82
===========================================
Weighted Average Number of Common and
Common Equivalent Shares 475,947 453,037 444,989
==============================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
Consolidated Balance Sheets
Amounts in thousands, except per share data
January 29, January 30,
1995 1994
-------------------------------
Assets
Current Assets:
Cash and Cash Equivalents $ 1,154 $ 99,997
Short-Term Investments,
including current maturities of
long-term investments (note 7) 56,712 330,976
Receivables, Net 272,225 198,431
Merchandise Inventories 1,749,312 1,293,477
Other Current Assets 53,560 43,720
-------------------------------
Total Current Assets 2,132,963 1,966,601
-------------------------------
Property and Equipment, at cost:
Land 1,167,063 814,440
Buildings 1,311,806 891,755
Furniture, Fixtures and Equipment 634,173 451,789
Leasehold Improvements 273,015 224,933
Construction in Progress 289,157 194,482
Capital Leases (notes 2 and 5) 72,054 41,029
-------------------------------
3,747,268 2,618,428
Less Accumulated Depreciation and Amortization 350,031 247,524
-------------------------------
Net Property and Equipment 3,397,237 2,370,904
Long-Term Investments (note 7) 98,022 281,623
Notes Receivable 32,528 35,470
Cost in Excess of the Fair Value of Net Assets Acquired,
net of accumulated amortization of $8,636 at
January 29, 1995 and $5,788 at January 30, 1994 88,513 19,503
Other 28,778 26,788
===============================
$5,778,041 $4,700,889
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable $ 681,291 $ 521,246
Accrued Salaries and Related Expenses 192,151 167,489
Sales Taxes Payable 101,011 57,590
Other Accrued Expenses 208,377 183,933
Income Taxes Payable 8,717 40,303
Current Installments of Long-Term Debt (notes 2, 5 and 6) 22,692 2,077
--------------------------------
Total Current Liabilities 1,214,239 972,638
--------------------------------
Long-Term Debt, excluding current
installments (notes 2, 5 and 6) 983,369 874,048
Other Long-Term Liabilities 67,953 12,276
Deferred Income Taxes (note 3) 19,258 27,827
Minority Interest (note 9) 50,999 -
Stockholders' Equity (notes 2 and 4):
Common Stock, par value $.05. Authorized:
1,000,000,000 shares; issued and outstanding -
453,365,000 shares at January 29, 1995 and 449,364,000
shares at January 30, 1994 22,668 22,468
Paid-in Capital 1,526,463 1,436,029
Retained Earnings 1,937,284 1,400,575
Cumulative Translation Adjustments (10,887) (121)
Unrealized Loss on Investments, Net (1,495) -
-------------------------------
3,474,033 2,858,951
Less Notes Receivable From ESOP (note 6) 31,810 44,851
-------------------------------
Total Stockholders' Equity 3,442,223 2,814,100
-------------------------------
Commitments and Contingencies (notes 5, 8 and 9)
$5,778,041 $4,700,889
===============================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Unrealized Total
Common Stock Cumulative Loss on Notes Stock-
------------- Paid-in Retained Translation Investments, Receivable holders'
Shares Amount Capital Earnings Adjustments Net from ESOP Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, February 2, 1992 422,224 $21,111 $1,022,043 $ 666,471 $ - $ - $(18,413) $1,691,212
Shares Sold Under Employee Stock
Purchase and Option Plans,
Net of Retirements (note 4) 7,053 353 57,971 - - - - 58,324
Tax Effect of Sale of Option Shares
by Employees - - 32,451 - - - - 32,451
Additional Notes Receivable from ESOP,
Net of Repayments of $8,419 (note 6) - - - - - - (33,023) (33,023)
Conversion of 6% Convertible
Subordinated Notes, Net (note 2) 14,308 715 227,346 - - - - 228,061
Conversion of 4-1/2% Convertible
Subordinated Notes, Net (note 2) - - 10 - - - - 10
Net Earnings - - - 362,863 - - - 362,863
Cash Dividends ($.08 per share) - - - (35,817) - - - (35,817)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1993 443,585 $22,179 $1,339,821 $ 993,517 $ - $ - $(51,436) $2,304,081
===================================================================================================================================
Shares Sold Under Employee Stock
Purchase and Option Plans,
Net of Retirements (note 4) 5,779 289 76,500 - - - - 76,789
Tax Effect of Sale of Option Shares
by Employees - - 19,708 - - - - 19,708
Cumulative Translation Adjustments - - - - (121) - - (121)
Repayments of Notes Receivable
from ESOP (note 6) - - - - - - 6,585 6,585
Net Earnings - - - 457,401 - - - 457,401
Cash Dividends ($.11 per share) - - - (50,343) - - - (50,343)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, January 30, 1994 449,364 $22,468 $1,436,029 $1,400,575 $ (121) $ - $(44,851) $2,814,100
===================================================================================================================================
Shares Sold Under Employee Stock
Purchase and Option Plans,
Net of Retirements (note 4) 4,001 200 77,720 - - - - 77,920
Tax Effect of Sale of Option Shares
by Employees - - 12,709 - - - - 12,709
Cumulative Translation Adjustments - - - - (10,766) - - (10,766)
Repayments of Notes Receivable
from ESOP (note 6) - - - - - - 13,041 13,041
Conversion of 4-1/2% Convertible
Subordinated Notes, Net (note 2) - - 5 - - - - 5
Unrealized Loss on Investments,
Net (note 7) - - - - - (1,495) - (1,495)
Net Earnings - - - 604,501 - - - 604,501
Cash Dividends ($.15 per share) - - - (67,792) - - - (67,792)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, January 29, 1995 453,365 $22,668 $1,526,463 $1,937,284 $(10,887) $(1,495) $(31,810) $3,442,223
===================================================================================================================================
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
The Home Depot, Inc. and Subsidiaries
Amounts in thousands
Fiscal Year Ended
- ---------------------------------------------------------------------------------------------------------------------------
January 29, January 30, January 31,
1995 1994 1993
Cash Provided From Operations:
Net Earnings $ 604,501 $ 457,401 $ 362,863
Reconciliation of Net Earnings to Net Cash
Provided by Operations:
Depreciation and Amortization 129,609 89,839 69,536
Deferred Income Tax (Benefit) Expense (2,468) 12,578 5,465
Increase in Receivables, Net (69,023) (36,658) (68,593)
Increase in Merchandise Inventories (405,197) (353,653) (277,567)
Increase in Accounts Payable and Accrued Expenses 280,056 200,977 219,046
(Decrease) Increase in Income Taxes Payable (11,126) 36,143 34,031
Other 8,161 (10,120) (6,639)
- --------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operations 534,513 396,507 338,142
- --------------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Capital Expenditures, Net of $31,183, $36,294 and $4,765 of
non-cash capital
expenditures in fiscal 1994, 1993 and 1992, respectively (1,100,654) (864,158) (432,513)
Acquisition of Canadian Partnership Interest (161,548) - -
Proceeds from Sale of Property and Equipment 49,718 35,070 5,046
Sale (Purchase) of Short-Term Investments, Net 96,007 14,903 (62,008)
Purchase of Long-Term Investments (94,442) (840,361) (2,029,214)
Proceeds from Maturities of Long-Term Investments 50,251 269,988 212,786
Proceeds from Sale of Long-Term Investments 403,738 929,598 1,132,627
Advances Secured by Real Estate, Net 2,650 5,681 (54,022)
- ---------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (754,280) (449,279) (1,227,298)
- ---------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Proceeds from Commercial Paper and Long-Term Borrowings 100,000 - 805,000
Cash Loaned to ESOP - - (41,442)
Repayments of Notes Receivable from ESOP 13,041 6,585 8,419
Principal Repayments of Long-Term Debt (2,175) (2,006) (2,133)
Proceeds from Sale of Common Stock, Net 77,926 76,789 58,324
Cash Dividends Paid to Stockholders (67,792) (50,343) (35,817)
Effect of Exchange Rate Changes on Cash (76) - -
- --------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 120,924 31,025 792,351
- --------------------------------------------------------------------------------------------------------------------------
Decrease in Cash and Cash Equivalents (98,843) (21,747) (96,805)
Cash and Cash Equivalents at Beginning of Year 99,997 121,744 218,549
- --------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 1,154 $ 99,997 $ 121,744
==========================================================================================================================
Supplemental Disclosure of Cash Payments Made For:
Interest (net of interest capitalized) $ 30,537 $ 28,778 $ 26,182
Income Taxes $ 393,915 $ 228,968 $ 169,617
===========================================================================================================================
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
Note ONE Summary of Significant Accounting Policies
Fiscal Year
The Company's fiscal year is a 52- or 53-week period ending on the
Sunday nearest to January 31. Fiscal years 1994, 1993 and 1992,
which ended January 29, 1995, January 30, 1994 and January 31,
1993, respectively, consisted of 52 weeks.
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. Minority interest represents the
minority partner's share of the equity in The Home Depot Canada.
All significant intercompany transactions have been eliminated in
consolidation.
Cash Equivalents
The Company considers all highly liquid investments purchased with
a maturity of three months or less to be cash equivalents. The
Company's cash and cash equivalents are primarily cash equivalents
carried at fair market value and consist of preferred stocks,
commercial paper, money market funds and U.S. government agency
securities.
Investments
Effective January 31, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115 (SFAS 115), "Accounting for
Certain Investments in Debt and Equity Securities," which was
effective for fiscal years beginning after December 15, 1993. The
Company classifies its investments into one of three categories:
trading, held to maturity, or available for sale. Trading
securities, which are bought and held primarily for the purpose of
selling them in the near term, are recorded at fair value with
gains and losses included in earnings. Held to maturity securities,
which are securities that the Company has the ability and the
intent to hold until maturity, are recorded at amortized cost and
adjusted for amortization or accretion of premiums or discounts.
The Company's short-term and long-term investments, consisting
primarily of debt securities, have been designated as being held
available for sale, and accordingly, are reported at fair value.
Unrealized gains and losses on securities classified as available
for sale are reported as a separate component of stockholders'
equity, net of income taxes until realized. The cost of investments
sold is determined using the specific identification method.
Estimated fair values of investments are based on quoted market
prices on the last business day of the fiscal year. A decline in
the market value of any available for sale or held to maturity
security below cost that is deemed other than temporary is charged
to earnings resulting in the establishment of a new cost basis for
the security. In fiscal years 1993 and 1992, the Company valued
its short-term investments, consisting primarily of debt
securities, at amortized cost which approximated market. Certain
long-term investments designated as available for sale were
recorded at lower of amortized cost or market. The Company's
remaining investments classified as held to maturity were valued at
amortized cost.
Merchandise Inventories
Inventories are stated at the lower of cost (first-in, first-out)
or market, as determined by the retail inventory method.
Income Taxes
The Company provides for Federal and state income taxes currently
payable as well as for those deferred because of timing differences
between reporting income and expenses for financial statement
purposes and income and expenses for tax purposes. Targeted jobs
tax credits are recorded as a reduction of income taxes in the year
realized.
Effective February 1, 1993, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 109
(SFAS 109), "Accounting for Income Taxes" and reported the
cumulative effect of that change in the method of accounting for
income taxes in the consolidated statement of earnings for the
first fiscal quarter of 1993, which ended May 2, 1993. SFAS 109
requires an asset and liability approach in accounting for income
taxes and, therefore, required a change from the deferred method
the Company previously used. Under the asset and liability method,
deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS 109, the effect on
deferred tax assets and liabilities of a change in tax rates is
recognized as income or expense in the period that includes the
enactment date.
Pursuant to the deferred method under Accounting Principles
Board Opinion 11, which was applied in fiscal 1992 and prior
years, deferred income taxes that were reported in different
years for financial reporting purposes and income tax
purposes were recognized for income and expense items using the tax
rate applicable for the year of the calculation. Under the deferred
method, deferred taxes were not adjusted for subsequent changes in
the tax rate.
Depreciation and Amortization
The Company's buildings, furniture, fixtures and equipment are
depreciated using the straight-line method over the estimated
useful lives of the assets. Improvements to leased premises are
amortized on the straight-line method over the life of the lease or
the useful life of the improvement, whichever is shorter. The
Company's property and equipment is depreciated using the following
estimated useful lives:
Life
Buildings 10-45 years
Furniture, fixtures and equipment 5-20 years
Leasehold improvements 8-30 years
The cost of purchased software and associated consulting fees
is amortized on a straight-line basis over periods ranging from
three to five years.
Store Pre-Opening Costs
Non-capital expenditures associated with opening new stores are
charged to expense as incurred.
Store Closing Costs
When a store is relocated or closed, estimated unrecoverable costs
are charged to expense. Such costs include the estimated loss on
sale of land and building, the book value of abandoned fixtures,
equipment, leasehold improvements and a provision for the present
value of future lease obligations, less estimated sub-rental
income.
Earnings Per Common and Common Equivalent Share
Earnings per common and common equivalent share are based on the
weighted average number of shares and equivalent shares
outstanding. Common equivalent shares used in the calculation of
earnings per share represent options to purchase shares granted
under the Company's employee stock option and stock purchase plans
and the Company's 4-1/2% Convertible Subordinated Notes due 1997,
issued in 1992. For the 1994 fiscal year, the 4-1/2% Notes are
dilutive and are assumed to be converted as of the beginning of the
accounting period for purposes of calculating earnings per share.
Earnings per share is calculated by dividing net earnings, adjusted
for tax-effected net interest and issue costs on the 4-1/2% Notes,
by weighted average common and common equivalent shares. The
weighted average number of common and common equivalent shares
include shares issuable under the Company's stock plans and the
20,774,000 shares issuable upon conversion of the 4-1/2% Notes. In
fiscal year 1993, the 4-1/2% Notes were dilutive but had no impact
on earnings per share.
The Company's 6% Convertible Subordinated Notes, issued in 1990,
were common stock equivalents prior to their conversion in 1992.
Because shares issuable upon conversion of the 6% Notes were
not dilutive in fiscal 1992, they were excluded from the earnings
per share calculations.
Cost in Excess of the Fair Value of Net Assets Acquired
Goodwill, which represents the excess of purchase price over fair
value of net assets acquired, is amortized on a straight-line basis
over a 40-year period. The Company assesses the recoverability of
this intangible asset by determining whether the amortization of
the goodwill balance over its remaining useful life can be
recovered through undiscounted future operating cash flows of the
acquired operation. The amount of goodwill impairment, if any, is
measured based on projected discounted future operating cash flows
using a discount rate reflecting the Company's average cost of
funds.
Employee Stock Ownership Plan
For all shares purchased by the Employee Stock Ownership Plan
(ESOP) prior to December 31, 1992, the Company's contributions to
the ESOP are determined based on the ESOP's cost of the shares
released to the employees. For shares purchased after December 31,
1992, the Company's contributions to the ESOP will be determined
based on the fair value of the shares released to the employees as
of the release date.
Foreign Currency Translation
The local currency has been used as the functional currency in
Canada. The assets and liabilities denominated in foreign currency
are translated into U.S. dollars at the current rate of exchange
existing at year-end and revenues and expenses are translated at
the average monthly exchange rates. The translation gains and
losses are included as a separate component of stockholders'
equity. Transaction gains and losses included in income are
immaterial.
Recent Accounting Pronouncements
In December 1993, the Accounting Institute of Certified Public
Accountants issued Statement of Position 93-7, "Reporting on
Advertising Costs" (SOP 93-7). Under SOP 93-7, certain advertising
expenditures must be expensed either as incurred or the first time
the advertising takes place. Certain production costs incurred by
the Company are currently amortized over periods not exceeding one
year. While the Company plans to adopt SOP 93-7 in fiscal 1995, it
is not expected to have a significant impact on the Company's
results of operations.
In June 1993, Statement of Financial Accounting Standards
No. 116, "Accounting for Contributions Received and
Contributions Made" (SFAS 116) was issued. SFAS 116
requires companies that make contributions of cash and other
assets, including unconditional promises to give, to not-for-profit
organizations, to recognize expense in the accounting period made.
Under SFAS 116, conditional promises to give should be recognized
when the conditions on which they depend are substantially met.
Results of operations for the Company will not be significantly
impacted when SFAS 116 is adopted by the Company in fiscal 1995.
Reclassifications
Certain balances in prior fiscal years have been reclassified to
conform with the presentation adopted in the current fiscal year.
Note TWO Long-Term Debt
The Company's long-term debt consists of the following (in
thousands):
January 29, January 30,
1995 1994
4-1/2% Convertible Subordinated Notes,
due February 15, 1997, convertible
into shares of common stock of the Company
at a conversion price of $38.75 per share.
The Notes are redeemable by the Company
at a premium, plus accrued interest, beginning
March 3, 1995. $ 804,985 $804,990
Commercial Paper, with a
weighted average interest rate of 5.9%. 100,000 -
Capital Lease obligations payable in
varying installments through January 31,
2015 (see note 5). 63,225 32,585
7.95% Unsecured Note, payable on September 1,
1995, incurred in connection with the
establishment of a leveraged Employee
Stock Ownership Plan and Trust (see Note 6);
interest is payable semi-annually. 20,000 20,000
Variable Rate Industrial Revenue Bonds, secured
by letters of credit or land, interest
rates averaging 2.7% during fiscal 1994,
payable in varying installments through 1999,
$3,000 payable on December 1, 2010
and $5,200 payable on September 1, 2011. 9,966 10,500
Installment Notes Payable, interest imputed
at rates between 9.5% and 11.5%,
payable in varying installments through 2014. 7,419 7,592
Other 466 458
Total long-term debt 1,006,061 876,125
Less current installments 22,692 2,077
Long-term debt, excluding
current installments $ 983,369 $ 874,048
On February 3, 1992, the Company issued, through a public
offering, $805,000,000 of its 4-1/2% Convertible Subordinated Notes
at par, maturing February 15, 1997. The Notes are convertible into
shares of common stock at any time prior to maturity, unless
previously redeemed, at a conversion price of $38.75 per share,
subject to adjustment under certain conditions. The Notes are not
subject to sinking fund provisions.
On February 28, 1995, the Company announced that its outstanding
4-1/2% Convertible Subordinated Notes which had a face value of $804,985,000
would be redeemed on March 31, 1995, at a redemption price of $1,016.75
(which includes premium and accrued interest) per $1,000 principal
amount of Notes. Noteholders have the right through March 21, 1995
to convert their Notes into approximately 25.81 shares of common
stock of The Home Depot, Inc. for each $1,000 principal amount of
Notes at the conversion price of $38.75 per share. Conversion of
all the Notes would result in the issuance of approximately
20,774,000 shares of the Company's common stock.
In January, 1995, the Company established a $300,000,000 Commercial Paper
program supported by a back-up credit facility with a maximum aggregate
principal amount outstanding of $300,000,000. The program expires
November 1, 1997. The Commercial Paper borrowings are classified as
long-term debt as it is the Company's intention to refinance them
on a long-term basis. As of January 29, 1995, the Company was in
compliance with all restrictive covenants.
The 7.95% Unsecured Note related to the ESOP requires, among other things,
that debt shall not exceed 66-2/3% of consolidated assets, net of goodwill
and current liabilities. The Company was in compliance with all
restrictive covenants as of January 29, 1995. The restrictive
covenants related to letter of credit agreements securing the
industrial revenue bonds are no more restrictive than those
referenced or described above.
Interest expense in the accompanying consolidated statements of earnings
is net of interest capitalized of $17,559,000 in fiscal 1994, $13,912,000
in fiscal 1993 and $7,549,000 in fiscal 1992.
Maturities of long-term debt (excluding the 4-1/2% Convertible Subordinated
Notes) are $22,692,000 for fiscal 1995, $3,197,000 for fiscal 1996,
$102,706,000 for fiscal 1997, $2,594,000 for fiscal 1998, and
$2,805,000 for fiscal 1999.
Based on discounted cash flows of future payment streams, assuming rates
equivalent to the Company's current incremental borrowing rate on similar
liabilities, the fair value of the 7.95% unsecured ESOP Note, the Variable
Rate Industrial Revenue Bonds, the Installment Notes, the Capital
Leases, the Commercial Paper, and other notes payable as of January
29, 1995 is $231,649,000. The fair value of the 4-1/2% Convertible
Subordinated Notes as of January 29, 1995, based on the quoted
market price on the last business day of the year, is $986,107,000.
Note THREE Income Taxes
As discussed in Note 1, the Company adopted SFAS 109 as of February
1, 1993. The cumulative effect of this change in accounting for
income taxes, which resulted in a tax benefit of $2,130,000, was
determined as of February 1, 1993 and has been reflected in the
consolidated statement of earnings for the fiscal year ended
January 30, 1994. Prior years' financial statements have not been
restated to apply the provisions of SFAS 109.
The provision for income taxes from operations consists of the following
(in thousands):
Fiscal Year Ended
January 29, January 30, January 31,
1995 1994 1993
Current:
Federal $330,232 $236,888 $181,727
State 47,486 32,134 25,918
- ---------------------------------------------------------------------
377,718 269,022 207,645
- ---------------------------------------------------------------------
Deferred:
Federal (1,875) 10,212 4,413
State (593) 2,366 1,052
- ---------------------------------------------------------------------
(2,468) 12,578 5,465
- ---------------------------------------------------------------------
Total $375,250 $281,600 $213,110
The Company's combined state and Federal effective tax rate
from operations for fiscal years 1994, 1993 and 1992, net of
offsets generated by targeted jobs tax credits, were approximately
38.3%, 38.2% and 37.0%, respectively. The 1994 and 1993 fiscal year
effective tax rates include the effect of the corporate Federal tax
rate increase from 34% to 35% enacted into law during the Company's
1993 fiscal year. A reconciliation of income tax expense from
operations at the Federal statutory rate to actual tax expense from
operations for the applicable fiscal years follows (in thousands):
Fiscal Year Ended
January 29, January 30, January 31,
1995 1994 1993
Income taxes at Federal
statutory rate $342,913 $257,905 $195,831
State income taxes,
net of Federal
income tax benefit 30,480 22,425 17,800
Other, net 1,857 1,270 (521)
- ----------------------------------------------------------------------------
Total $375,250 $281,600 $213,110
- ----------------------------------------------------------------------------
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities as of January 29, 1995 and January 30, 1994 are as
follows (in thousands):
January 29, January 30,
1995 1994
Deferred Tax Assets:
Accrued self-insurance
liabilities $ 40,906 $ 26,813
Other accrued liabilities 28,061 16,300
Net deferred tax assets 68,967 43,113
Deferred Tax Liabilities:
Accelerated depreciation (77,061) (62,835)
Other (11,164) (8,105)
Total gross
deferred liabilities (88,225) (70,940)
Net deferred tax liability $(19,258) $(27,827)
No valuation allowance was recorded against the deferred tax assets
at January 29, 1995, January 30, 1994, or February 1, 1993. The
Company's management believes the existing net deductible temporary
differences comprising the total gross deferred tax assets will
reverse during periods in which the Company generates net taxable
income.
For fiscal years ending before January 31, 1993, deferred
income taxes resulted from differences in the timing of reporting
income and expenses for financial statement and income tax
purposes. The sources of these differences and the tax effect of
each for fiscal 1992 are as follows (in thousands):
Accelerated depreciation $12,245
Accrued self-insurance liabilities (9,132)
Other accrued liabilities (574)
Other, net 2,926
Total $ 5,465
Note FOUR Employee Stock Plans
The Company has stock option plans that provide for the granting of
incentive and non-qualified options to purchase the Company's
common stock to selected key employees, officers and directors.
Under the Employee Incentive Stock Option Plan of 1981,
options for 43,360,692 shares, net of cancellations (of which
41,246,391 had been exercised), have been granted at $.16 to $18.83
per share as of January 29, 1995. Such options may be exercised at
the rate of 25% per year commencing with the first anniversary date
of the grant and expire after five years. The Plan expired on June
1, 1991 and the shares available for grant were carried over to the
1991 Omnibus Stock Option Plan.
Under the Non-Qualified Stock Option Plan of 1984, options for 679,124
shares, net of cancellations (of which 529,232 had been exercised), have been
granted at $1.53 to $9.86 per share as of January 29, 1995. Such
options may be exercised at varying rates commencing on the third
anniversary date of the grant and expire on the tenth anniversary
date of the grant. The Plan expired on June 1, 1991 and the shares
available for grant were carried over to the 1991 Omnibus Stock
Option Plan.
The provisions of the 1991 Omnibus Stock Option
Plan, which became effective June 1, 1991, authorize a maximum
number of shares available for grant equal to the cumulative number
of shares available the previous year plus one percent of the
number of shares of common stock issued and outstanding at the
beginning of each fiscal year the plan is in effect. Under the 1991
Omnibus Stock Option Plan, options for 6,852,504 shares, net of
cancellations (of which 426,102 had been exercised), have been
granted at $24.50 to $48.94 per share. As of January 29, 1995, the
maximum shares available under this plan for future grants were
30,408,417.
The following summarizes shares outstanding under
the plans at January 29, 1995, January 30, 1994 and January 31,
1993 and changes during the fiscal years then ended (in thousands
of shares):
Fiscal Year Ended
January 29, January 30, January 31,
1995 1994 1993
Number of option shares
At beginning of year
Outstanding 9,647 12,455 14,750
Exercisable 2,757 4,528 4,576
During the year
Issued 1,981 1,831 3,549
Cancelled 306 332 415
Became exercisable 2,843 2,536 5,381
Exercised 2,631 4,307 5,429
At end of year
Outstanding 8,691 9,647 12,455
Exercisable 2,969 2,757 4,528
Average price per share
Outstanding at
the end of year $30.57 $23.50 $14.89
Exercised
during the year $10.66 $ 7.42 $ 4.99
In addition, the Company had 2,375,460 shares available for
future grants under the Employee Stock Purchase Plan at January 29,
1995. This plan enables the Company to grant substantially all
eligible employees options to purchase up to 17,137,500 shares of
common stock, of which 14,762,040 shares have been exercised from
inception of the plan, at a price equal to 85% of the stock's fair
market value at the date of grant. Shares purchased may not exceed
the lesser of 20% of the employee's annual compensation, as
defined, or $25,000 of common stock at its fair market value
(determined at the time such option is granted) for any one
calendar year. Employees pay for the shares ratably over a period
of one year (the purchase period) through payroll deductions, and
cannot exercise their option to purchase any of the shares until
the conclusion of the purchase period. In the event an employee
elects not to exercise such options, the full amount withheld is
refundable. During fiscal 1994, options for 1,420,463 shares were
exercised at an average price of $34.72 per share. At January 29,
1995, 821,812 options were outstanding, net of cancellations, at an
average price of $36.68 per share.
Note FIVE Leases
The Company leases certain retail locations, office space,
warehouse and distribution space, equipment and vehicles. While the
majority of the leases are operating leases, certain retail
locations are leased under capital leases. As leases expire, it can
be expected that in the normal course of business, leases will be
renewed or replaced. Total rent expense, net of minor sublease
income for the fiscal years ended January 29, 1995, January 30,
1994 and January 31, 1993 amounted to $164,381,000, $137,252,000
and $110,577,000, respectively. Real estate taxes,
insurance,
maintenance and operating expenses applicable to the leased
property are obligations of the Company under the building leases.
Certain of the store leases provide for contingent rentals based on
percentages of sales in excess of specified minimums. Contingent
rentals for fiscal years ended January 29, 1995, January 30, 1994
and January 31, 1993 were approximately $9,744,000, $8,370,000 and
$6,855,000, respectively.
The approximate future minimum lease payments under capital and operating
leases at January 29, 1995, are as follows (in thousands):
Fiscal year Capital leases Operating leases
1995 $ 10,411 $ 184,801
1996 10,465 186,131
1997 10,486 176,534
1998 10,628 165,559
1999 10,780 161,801
Thereafter 157,452 1,902,130
210,222 $2,776,956
==========
Less: Imputed interest (146,997)
Net present value of
capital lease obligations 63,225
Less: Current installments (803)
Long-term, excluding
current installments $ 62,422
==========
On the Consolidated Balance Sheet the long-term and short-term
obligations for capital leases are included in Long-term Debt and
Current Installments of Long-term Debt, respectively. The assets
recorded at January 29, 1995 and January 30, 1994, net of
amortization, in Net Property and Equipment amounted to $68,647,000
and $40,608,000, respectively.
Note SIX Employee Benefit Plans
During fiscal 1988, the Company established a leveraged Employee
Stock Ownership Plan and Trust (ESOP) covering substantially all
full-time employees. At January 29, 1995, the ESOP held a total of
7,558,551 shares of the Company's common stock in trust for plan
participants. The ESOP purchased the shares in the open market with
the proceeds of loans obtained from the Company during fiscal 1992,
1990 and 1989 totaling $81,442,000. Of that amount, the Company
borrowed $20,000,000 during 1988 in a private placement (see note
2), which in turn was loaned to the ESOP for the purpose of
purchasing the shares. The additional $61,442,000 loaned to the
ESOP was funded by cash from operations of the Company. Outstanding
loans totalling $31,810,000 to the ESOP are due and payable to the
Company in varying amounts from 1995 through 2001.
The Company's Board of Directors authorized loans to the ESOP up to
$90,000,000. The Company may advance funds to the ESOP so that the
ESOP may purchase up to an additional $8,558,000 of the Company's
stock in the open market at prices the ESOP deems desirable.
The Company's common stock purchased by the ESOP is held in a
"suspense account" as collateral for amounts loaned by the Company.
The Company makes annual contributions to the ESOP at the
discretion of its Board of Directors which the plan trustee is
required to use to make loan interest and principal payments to the
Company. When the Company commits to make contributions to the
ESOP, a portion of the common stock is released from the "suspense
account" and allocated to participating employees. As of January
29, 1995, 5,296,862 shares had been allocated to participating
employees, 433,295 shares were committed to be released, and
1,828,394 shares were held in suspense by the trustee. Any
dividends on unallocated shares are used to service the ESOP's
debt, to pay expenses of the ESOP, to purchase additional shares of
the Company or to purchase other investments. The unpaid portion of
the ESOP's obligation to the Company is recorded as a reduction of
stockholders' equity. The Company's contributions to the ESOP were
$12,500,000, $6,000,000 and $8,200,000 for the fiscal years 1994,
1993 and 1992, respectively.
The Company adopted a non-qualified ESOP Restoration Plan in fiscal 1994.
The primary purpose of the Plan is to provide certain employees deferred
compensation that they would have received under the ESOP if not for the
maximum compensation limits under the Internal Revenue Code of 1986, as
amended. The Company plans to establish a "rabbi trust" to fund the
benefits under the ESOP Restoration Plan. Compensation expense for
1994 related to this plan was not significant. Funds to be provided
to the trust will primarily be used to purchase shares of the
Company's common stock on the open market.
Note SEVEN Investments
The Company's investments are all classified as available for sale
and consisted of the following at January 29, 1995 and January 30,
1994 (in thousands):
January 29, 1995 January 30, 1994
------------------------------------------------ -------------------------------------------------
Gross Gross Gross Gross
Amortized unrealized unrealized Fair Amortized unrealized unrealized Fair
cost gains losses value cost gains losses value
------------------------------------------------- -------------------------------------------------
Tax exempt notes and bonds $ 95,079 $ - $1,431 $ 93,648 $104,996 $ 482 $ 12 $105,466
U.S. Treasury securities - - - - 61,286 449 18 61,717
U.S. government agency
securities 13,000 - 296 12,704 74,940 157 200 74,897
Commercial paper - - - - 16,496 3 61 16,438
Certificates of deposit - - - - 30,000 - 189 29,811
Corporate obligations 13,900 - 139 13,761 209,903 2,479 211 212,171
Preferred stock 14,998 - 301 14,697 46,831 271 4 47,098
Corporate Asset-
backed securities 6,415 - 127 6,288 61,288 389 320 61,357
Other 13,636 - - 13,636 6,859 35 - 6,894
- -----------------------------------------------------------------------------------------------------------------------------------
157,028 - 2,294 154,734 612,599 4,265 1,015 615,849
- -----------------------------------------------------------------------------------------------------------------------------------
Short-term, including
current maturities of
long-term investments 57,345 - 633 56,712 330,976 2,322 774 332,524
Long-term investments 99,683 - 1,661 98,022 281,623 1,943 241 283,325
- -----------------------------------------------------------------------------------------------------------------------------------
Total $157,028 - $2,294 $154,734 $612,599 $4,265 $1,015 $615,849
Proceeds from sale of investments available for sale during
the year ended January 29, 1995 were $526,696,000. Gross gains of
$1,638,000 and gross losses of $1,251,000 were realized on those
sales.
Maturities of investment securities classified as available for sale
were as follows at January 29, 1995 (in thousands):
Amortized Cost Fair Value
Due within one year $ 52,842 $ 52,323
Due after one year through five years 99,683 98,022
Mortgage-backed securities not due
at a single date 4,503 4,389
- ----------------------------------------------------------------------------
$157,028 $154,734
===================================
Note EIGHT Commitments and Contingencies
At January 29, 1995, the Company was contingently liable for
approximately $131,896,000 under outstanding letters of credit
issued in connection with purchase commitments.
The Company has litigation arising from the normal course of business. In
management's opinion this litigation will not materially affect the
Company's consolidated results of operations.
Note NINE Acquisition of Interest in Canadian Company
Effective February 28, 1994, the Company entered into a partnership
and, as a result, acquired 75 percent of Aikenhead's Home
Improvement Warehouse which was operating seven warehouse-style
home improvement stores in Toronto, London and Kitchener, Ontario,
Canada. Subsequent to the acquisition, the partnership has opened
five stores which include one store each in Edmonton and Calgary,
Alberta and Toronto, Ontario, and two stores in Vancouver, British
Columbia. At any time after the sixth anniversary of the purchase,
the Company has the option to purchase, or the other partner has
the right to cause the Company to purchase, the remaining 25
percent of the Canadian company. The option price is based on the
lesser of fair market value or a value to be determined by an
agreed-upon formula as of the option exercise date.
The purchase price paid for the 75 percent interest in the Canadian company
was approximately $161,548,000 and was accounted for by the purchase
method of accounting. Accordingly, results of the partnership's
operations have been included with those of the Company from the
date of acquisition. The excess purchase price over the estimated
fair value of the net assets as of the acquisition date of
$66,800,000 has been recorded as goodwill and will be amortized
over 40 years. Proforma results of operations did not have a
significant impact on historical results of the Company and,
therefore, are not presented.
Note TEN Quarterly Financial Data (Unaudited)
The following is a summary of the unaudited quarterly results of
operations for the fiscal years ended January 29, 1995 and January
30, 1994 (in thousands, except per share data):
Net earnings
Percent per common
increase in and common
comparable Gross Net equivalent
Net sales store sales profit earnings share
-------------------------------------------------------------------------------
Fiscal year ended January 29, 1995:
First Quarter $ 2,872,129 7% $ 808,757 $139,734 $ .31
Second Quarter 3,287,036 6% 895,817 178,014 .39
Third Quarter 3,240,050 9% 880,568 140,774 .31
Fourth Quarter 3,077,482 8% 900,351 145,979 .32
-------------------------------------------------------------------------------------
$ 12,476,697 8% $ 3,485,493 $604,501 $1.32
=====================================================================================
Fiscal year ended January 30, 1994:
First Quarter $ 2,180,218 7% $ 601,700 $106,799 $ .24
Second Quarter 2,453,756 9% 661,834 134,504 .30
Third Quarter 2,317,372 6% 626,186 103,418 .23
Fourth Quarter 2,287,417 6% 663,659 112,680 .25
-------------------------------------------------------------------------------------
$ 9,238,763 7% $ 2,553,379 $457,401 $1.01
=====================================================================================
Independent Auditors' Report
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, 1995 and
January 30, 1994, and the related consolidated statements of
earnings, stockholders' equity, and cash flows for each of the
years in the three-year period ended January 29, 1995. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Home
Depot, Inc. and subsidiaries as of January 29, 1995 and January 30, 1994, and
the results of their operations and their cash flows for each of
the years in the three-year period ended January 29, 1995 in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Atlanta, Georgia
March 10, 1995