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The Home Depot Announces Second Quarter Results; Updates Fiscal Year 2010 Guidance

ATLANTA, Aug 17, 2010 /PRNewswire via COMTEX/ -- The Home Depot(R), the world's largest home improvement retailer, today reported second quarter of fiscal 2010 net earnings of $1.2 billion, or $0.72 per diluted share, compared with net earnings of $1.1 billion, or $0.66 per diluted share, in the same period of fiscal 2009.

Sales for the second quarter totaled $19.4 billion, a 1.8 percent increase from the second quarter of fiscal 2009. Comparable store sales for the second quarter of fiscal 2010 were positive 1.7 percent, and comp sales for U.S. stores were positive 1.0 percent.

"Our second quarter sales reflect the third consecutive quarter of positive same store sales. We delivered solid results as we continue to build momentum with our merchandising transformation, supply chain enhancements and customer service initiatives," said Frank Blake, chairman & CEO. "I want to thank our associates for their hard work and dedication, and I am proud to announce 97 percent of our stores qualified for success sharing, our bonus plan for hourly associates, for the first half of fiscal 2010."

Updated Fiscal 2010 Guidance

Based on its year-to-date performance and expectations for the remainder of the fiscal year, the Company updated its fiscal 2010 guidance and now expects sales to be up approximately 2.6 percent for the year. The Company expects diluted earnings per share from continuing operations as reported to increase by approximately 22.6 percent to $1.90 for the year. This earnings per share guidance includes the benefit of the Company's year-to-date share repurchases, but excludes the impact of future share repurchases.

The Home Depot will conduct a conference call today at 9 a.m. ET to discuss information included in this news release and related matters. The conference call will be available in its entirety through a webcast and replay at earnings.homedepot.com.

At the end of the second quarter, the Company operated a total of 2,244 retail stores, which included 1,976 The Home Depot stores in the United States (including the Commonwealth of Puerto Rico, the territory of the U.S. Virgin Islands and the territory of Guam), 179 stores in Canada, 80 stores in Mexico and 9 stores in China. The Company employs more than 300,000 associates. The Home Depot's stock is traded on the New York Stock Exchange (NYSE: HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index.

To provide clarity, internally and externally, about the Company's operating performance for recently completed fiscal periods, the Company supplemented its reporting with non-GAAP financial measures to reflect the impact of the store rationalization charges, business rationalization charges, related restructuring charges and the charge related to the extension of the Company's guarantee of a third party senior secured loan.

The Company believes that these non-GAAP financial measures better enable management and investors to understand and analyze the Company's performance by providing them with meaningful information relevant to events of unusual nature or frequency. However, this supplemental information should not be considered in isolation or as a substitute for the related GAAP measures. A reconciliation of the non-GAAP financial measures to the corresponding GAAP measures can be found attached to this press release and at earnings.homedepot.com.

Certain statements contained herein constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the demand for our products and services, net sales growth, comparable store sales, state of the economy, state of the residential construction, housing and home improvement markets, state of the credit markets, including mortgages, home equity loans and consumer credit, commodity price inflation and deflation, implementation of store initiatives, continuation of reinvestment plans, net earnings performance, earnings per share, stock-based compensation expense, capital allocation and expenditures, liquidity, the effect of adopting certain accounting standards, return on invested capital, management of our purchasing or customer credit policies, the effect of accounting charges, the planned recapitalization of the Company, timing of the completion of the recapitalization, the ability to issue debt securities on terms and at rates acceptable to us, store openings and closures and financial outlook. Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You are cautioned not to place undue reliance on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties - many of which are beyond our control or are currently unknown to us - as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include but are not limited to those described in Item 1A, "Risk Factors," and elsewhere in our Annual Report on Form 10-K for our fiscal year ended January 31, 2010, and in Part II, Item 1A, "Risk Factors" and elsewhere in our Quarterly Report on Form 10-Q for the fiscal quarter ended May 2, 1010.

Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the Securities and Exchange Commission.

                    THE HOME DEPOT, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF EARNINGS
     FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 1, 2010 AND AUGUST
                                   2, 2009
                                 (Unaudited)
      (Amounts in Millions Except Per Share Data and as Otherwise Noted)



                                        Three Months
                                           Ended              % Increase
                                  8-1-10       8-2-09       (Decrease)
                                  ------       ------       ----------
    NET SALES                     $19,410      $19,071         1.8%
    Cost of Sales                  12,828       12,683         1.1
                                   ------       ------
      GROSS PROFIT                  6,582        6,388         3.0

    Operating Expenses:
       Selling, General and
        Administrative              4,127        4,121         0.1
       Depreciation and
        Amortization                  406          434        (6.5)
                                      ---          ---
         Total Operating Expenses   4,533        4,555        (0.5)
                                    -----        -----

      OPERATING INCOME              2,049        1,833        11.8

    Interest and Other (Income)
     Expense:
      Interest and Investment
       Income                          (3)          (6)      (50.0)
      Interest Expense                151          167        (9.6)

      Other                             -            -           -
                                      ---          ---
         Interest and Other, net      148          161        (8.1)
                                      ---          ---

    EARNINGS BEFORE PROVISION
     FOR INCOME TAXES               1,901        1,672        13.7

    Provision for Income Taxes        709          556        27.5
                                      ---          ---


      NET EARNINGS                 $1,192       $1,116         6.8%
                                   ======       ======



    Weighted Average Common
     Shares                         1,653        1,683       (1.8)%

    BASIC EARNINGS PER SHARE        $0.72        $0.66         9.1

    Diluted Weighted Average
     Common Shares                  1,663        1,691       (1.7)%

    DILUTED EARNINGS PER SHARE      $0.72        $0.66         9.1




                                      Three Months
    SELECTED HIGHLIGHTS                  Ended          % Increase
    -----------------------
                                  8-1-10       8-2-09     (Decrease)
                                  ------       ------     ----------
    Number of Customer
     Transactions                     369          362         1.9%
    Average Ticket (actual)        $52.30       $52.25         0.1
    Weighted Average Weekly
     Sales
        per Operating Store (in
         thousands)                  $662         $650         1.8
    Square Footage at End of
     Period                           235          235           -
    Capital Expenditures             $240         $181        32.6
    Depreciation and
     Amortization (1)                $428         $458       (6.6)%




                                                          %
                                Six Months Ended      Increase
                             8-1-10       8-2-09   (Decrease)
                             ------       ------   ----------
    NET SALES                $36,273      $35,246     2.9%
    Cost of Sales             23,897       23,408     2.1
                              ------       ------
      GROSS PROFIT            12,376       11,838     4.5

    Operating Expenses:
       Selling, General and
        Administrative         8,205        8,163     0.5
       Depreciation and
        Amortization             817          862    (5.2)
                                 ---          ---
         Total Operating
          Expenses             9,022        9,025       -
                               -----        -----

      OPERATING INCOME         3,354        2,813    19.2

    Interest and Other
     (Income) Expense:
      Interest and
       Investment Income          (7)         (11)  (36.4)
      Interest Expense           293          347   (15.6)
      Other                       51            -     N/M
                                 ---          ---
         Interest and Other,
          net                    337          336     0.3
                                 ---          ---

    EARNINGS BEFORE
     PROVISION FOR INCOME
     TAXES                     3,017        2,477    21.8

    Provision for Income
     Taxes                     1,100          847    29.9
                               -----          ---

      NET EARNINGS            $1,917       $1,630    17.6%
                              ======       ======


    Weighted Average
     Common Shares             1,666        1,684   (1.1)%

    BASIC EARNINGS PER
     SHARE                     $1.15        $0.97    18.6

    Diluted Weighted
     Average Common Shares     1,676        1,690   (0.8)%

    DILUTED EARNINGS PER
     SHARE                     $1.14        $0.96    18.8




                                                      %
    SELECTED HIGHLIGHTS       Six Months Ended      Increase
    -------------------
                             8-1-10       8-2-09   (Decrease)
                             ------       ------   ----------
    Number of Customer
     Transactions                692          672     3.0%
    Average Ticket
     (actual)                 $52.41       $52.45    (0.1)
    Weighted Average
     Weekly Sales
        per Operating Store
         (in thousands)         $621         $600     3.5
    Square Footage at End
     of Period                   235          235       -
    Capital Expenditures        $407         $353    15.3
    Depreciation and
     Amortization (1)           $866         $911   (4.9)%




    (1) Includes depreciation of distribution centers and tool rental
    equipment included in Cost of Sales and amortization of deferred
    financing costs included in Interest Expense.
    N/M - Not Meaningful

                    THE HOME DEPOT, INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF EARNINGS ITEMS EXCLUDING CERTAIN
                            ADJUSTMENTS (NON-GAAP)
    FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 1, 2010 AND AUGUST
                                   2, 2009
                                 (Unaudited)
                 (Amounts in Millions Except Per Share Data)

                                      Three Months Ended 8-1-10
                                      -------------------------
                                                                   As
                              Actuals          Adjustment       Adjusted
                                                                  (Non-
                              -------          ----------         GAAP)
                                                                 ------

     Net Sales                  $19,410                   $-     $19,410

     Gross Profit                 6,582                    -       6,582

     Total Operating Expenses     4,533                    -       4,533

     Operating Income             2,049                    -       2,049

     Interest and Other, net        148                    -         148

     Net Earnings                $1,192                   $-      $1,192

     Diluted Earnings Per
      Share                       $0.72                   $-       $0.72


                                     Three Months Ended 8-2-09
                                     -------------------------
                                                                   As
                              Actuals         Adjustments(2)    Adjusted
                                                                  (Non-
                              -------         -------------       GAAP)
                                                                 ------

     Net Sales                  $19,071                   $-     $19,071

     Gross Profit                 6,388                   (1)      6,389

     Total Operating Expenses     4,555                   19       4,536

     Operating Income             1,833                  (20)      1,853

     Interest and Other, net        161                    -         161

     Net Earnings                $1,116                 $(11)     $1,127

     Diluted Earnings Per
      Share                       $0.66               $(0.01)      $0.67

                                       Six Months Ended 8-1-10
                                       -----------------------
                                                                  As
                              Actuals         Adjustment(1)    Adjusted
                                                                 (Non-
                              -------          ------------      GAAP)
                                                                ------

     Net Sales                  $36,273                   $-    $36,273

     Gross Profit                12,376                    -     12,376

     Total Operating Expenses     9,022                    -      9,022

     Operating Income             3,354                    -      3,354

     Interest and Other, net        337                   51        286

     Net Earnings                $1,917                 $(33)    $1,950

     Diluted Earnings Per
      Share                       $1.14               $(0.02)     $1.16


                                      Six Months Ended 8-2-09
                                      -----------------------
                                                                  As
                              Actuals         Adjustments(2)   Adjusted
                                                                 (Non-
                              -------         -------------      GAAP)
                                                                ------

     Net Sales                  $35,246                 $221    $35,025

     Gross Profit                11,838                   28     11,810

     Total Operating Expenses     9,025                  165      8,860

     Operating Income             2,813                 (137)     2,950

     Interest and Other, net        336                    -        336

     Net Earnings                $1,630                 $(84)    $1,714

     Diluted Earnings Per
      Share                       $0.96               $(0.05)     $1.01


    (1) Adjustment is comprised of a charge related to the extension of
    the Company's guarantee of a third-party senior secured loan.

    (2) Adjustments are comprised of store rationalization charges
    related to the closing of 15 stores and the removal of 50 stores
    from our future growth pipeline, business rationalization charges
    related to the exit of EXPO, THD Design Center, Yardbirds and HD
    Bath businesses, as well as net sales, gross profit and operating
    expenses of those exited businesses during the period from closing
    announcement to actual closing, and charges related to restructuring
    of support functions.

                      THE HOME DEPOT, INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEETS
             AS OF AUGUST 1, 2010, AUGUST 2, 2009 AND JANUARY 31, 2010
                                    (Unaudited)
                               (Amounts in Millions)

                                              8-1-10   8-2-09   1-31-10
                                              ------   ------   -------

     ASSETS
       Cash and Cash Equivalents                $2,395   $3,107   $1,421
       Receivables, net                          1,218    1,225      964
       Merchandise Inventories                  10,759   10,797   10,188
       Other Current Assets                      1,385    1,434    1,327
          Total Current Assets                  15,757   16,563   13,900
                                                ------   ------   ------

       Property and Equipment, net              25,190   25,851   25,550
       Goodwill                                  1,187    1,168    1,171
       Other Assets                                401      416      256
          TOTAL ASSETS                         $42,535  $43,998  $40,877
                                               =======  =======  =======

     LIABILITIES AND STOCKHOLDERS' EQUITY
       Accounts Payable                         $5,919   $6,018   $4,863
       Accrued Salaries and Related Expenses     1,226    1,159    1,263
       Current Installments of Long-Term
        Debt                                     2,022    1,769    1,020
       Other Current Liabilities                 3,572    3,617    3,217
          Total Current Liabilities             12,739   12,563   10,363
                                                ------   ------   ------

       Long-Term Debt                            7,727    9,661    8,662
       Other Long-Term Liabilities               2,624    2,605    2,459
          Total Liabilities                     23,090   24,829   21,484
                                                ------   ------   ------

       Total Stockholders' Equity               19,445   19,169   19,393
          TOTAL LIABILITIES AND STOCKHOLDERS'
           EQUITY                              $42,535  $43,998  $40,877
                                               =======  =======  =======


                   THE HOME DEPOT, INC. AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
         FOR THE SIX MONTHS ENDED AUGUST 1, 2010 AND AUGUST 2, 2009
                                 (Unaudited)
                            (Amounts in Millions)


                                                         Six Months Ended
                                                      8-1-10        8-2-09
                                                      ------        ------
    CASH FLOWS FROM OPERATING ACTIVITIES:
    Net Earnings                                       $1,917        $1,630
    Reconciliation of Net Earnings to Net Cash
     Provided by Operating Activities:
         Depreciation and Amortization                    866           911
         Stock-Based Compensation Expense                 112           109
         Changes in Working Capital and Other             468           678
         Net Cash Provided by Operating Activities      3,363         3,328
                                                        -----         -----

    CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital Expenditures                                 (407)         (353)
    Other                                                  44           139
         Net Cash Used in Investing Activities           (363)         (214)
                                                         ----          ----

    CASH FLOWS FROM FINANCING ACTIVITIES:
    Repurchases of Common Stock                        (1,209)            -
    Cash Dividends Paid to Stockholders                  (793)         (762)
    Other                                                 (28)          233
        Net Cash Used in Financing Activities          (2,030)         (529)
                                                       ------          ----

    Increase in Cash and Cash Equivalents                 970         2,585

    Effect of Exchange Rate Changes on Cash and
     Cash Equivalents                                       4             3
    Cash and Cash Equivalents at the Beginning of
     the Period                                         1,421           519
                                                        -----           ---

    Cash and Cash Equivalents at the End of the
     Period                                            $2,395        $3,107
                                                       ======        ======


SOURCE The Home Depot