The Home Depot's CEO Hosts Annual Shareholder Meeting Conference (Transcript)

Seeking Alpha

The Home Depot, Inc. (HD)

Annual Shareholder Meeting Conference Call

May 23, 2013, 09:00 am ET

Executives

Frank Blake - Chairman & CEO

Analysts

Presentation

Unidentified Speaker

Ladies and gentlemen please welcome Chairman and CEO Frank Blake.

Frank Blake

Good morning and good morning and thank you all for coming to the 2013 Annual Shareholders Meeting. Before we start the meeting, I would like to make a few introductions. First, it’s my pleasure to introduce our Board of Directors. I think you may have had a chance to meet some of them earlier this morning. They are Duane Ackerman, Ari Bousbib, Greg Brenneman, Frank Brown, Al Carey, Armando Codina, Karen Katen, Mark Vadon, and our lead director Bonnie Hill. The members of our senior leadership team are also here and I would like them just to stand, thank you all. Finally, I would like to recognize [Dave Mindorff] and Larry Bradley of KPMG, the company's independent auditor.

We will begin today's meeting with the formal business portion. This consists of the election of directors named in the proxy statement, ratification of auditors and consideration of the company and shareholder proposals. After that I will provide a brief business overview and then open the floor for questions.

I now officially call the 2013 annual meeting of the shareholders of The Home Depot to order. Teresa Wynn Roseborough our General Counsel and Corporate Secretary is serving as Secretary of the meeting and Broadridge Investor Communications Solutions is our inspector of elections.

As of March 25, 2013, which is the record date for the meeting, there were approximately 1.4 billion shares of the company’s common stock entitled to vote. A majority of these shares is needed for a quorum and majority are represented here today and we have a quorum.

If you haven't voted yet and would like to vote today, please raise your hand now, so we can give you a ballot. We will collect your ballots after all the proposals have been presented. If you voted already, you don’t have to vote again, and I now declare the polls open for voting. So raise your hand if you need a ballot?

Alright. The first item of business is the election of directors which is Item 1 on your ballot. The Board has nominated the individual’s named in the proxy statement to serve for one year term through the 2014 annual meeting. Your Board recommends that you vote for each of these directors.

We will now move on to the next proposal. The next item is the ratification of the appointment of KPMG as the independent auditors of the company for fiscal 2013, Item 2 on your ballot. Your board recommends that you vote for this proposal.

We will now move on to the next proposal. The next item is the advisory vote on executive compensation also known as say-on-pay, which is Item 3 on your ballot, specifically you are being asked to approve the compensation of the company’s named executive officers as disclosed in the proxy statement for this meeting. Your Board recommends that you vote for this proposal.

We will now move on to the next proposal. The next item, Item 4 on your ballot is approval of the material firms of officer performance goals under the company’s management incentive plan. Your Board recommends that you vote for this proposal.

We will move on to the next proposal. The next item is approval of the company’s amended and restated 2005 Omnibus Stock Incentive Plan Item 5 on your ballot. Your Board recommends that you vote for this proposal.

We will now move on to the shareholder proposals. The next item consideration of the shareholder proposal regarding employment diversity reports is Item 6, on your ballot. I will ask Ms. [Lynne Connelly] a representative of Benedictine Sisters and the other proponents to please step to the microphone and present the proposal.

Unidentified Speaker

Good morning Mr. Chair, members of the board and shareholders who are gathered today. I am Lynne Connelly here today representing the Benedictine Sisters from Boerne, Texas. I also represent several members of the Interface Center on corporate responsibility who are shareholders and co-filers to this proposal. These groups are long term shareholders of The Home Depot.

Proposal number six on the ballot, fix the board review of our company's policies regarding disclosure of Equal Employment Opportunity data known as EEO1 Data and public reporting of diversity issues to shareholders. The full text of the proposal can be found on page 28 of the proxy statement.

Equal Employment Opportunity is an investment concern when allegations of discrimination in the workplace for the shareholders with costly litigation and add risk to a company's brand there is an impact to shareholder value. We can tend descriptions don't go far enough to mitigate potential risk. We mentioned in the resolution that Home Depot has paid out more than $100 million to settle discrimination lawsuits over the past 16 years. We appreciate that Home Depot has published the diversity and inclusion report in March 2013; it did not give a chart identifying employees by gender and raise in each of the EEOC defined categories.

This resolution which has been filed over the past several years focuses on the importance of measurement and disclosure of diversity issues to its shareholders, to manage diversity companies have to be able to measure it, that is why we have asked the EEO1 data which offers investors a measurement tool and EEO report is submitted annually by Home Depot to the Equal Employment Opportunity Commission providing data to shareholders would not pose an added financial burden.

The company actually did provide the information for one year and then stopped. In the absence of meaningful disclosure investors cannot fully assess potential risk on Depot faces nor for that matter identifies successful diversity efforts. Moreover while other brand name companies have advanced transparency measures in place, we feel that Home Depot has lagged; IBM, Intel, Merck and Coca-Cola to name a few have been disclosing EEO data for at least the past five years. We feel this is a bottomline issue affecting competitiveness and market share. We ask Home Depot to report diversity disclosure to all shareholders. We met with the Corporate Secretary and others to offer a way forward for 2014. We hope they will take us up on the ideas we gave.

Thank you for your time and we ask you to vote in favor of stockholder proposal number six.

Frank Blake

Thank you Ms. Connelly. Your Board recommends that you vote against this proposal and we will now move forward to the next proposal. The next item, item seven on your ballot is consideration of the shareholder proposal regarding a storm water management policy. I will ask Lynne Connelly a representative of [David Brook] to please step to the microphone and present the proposal.

Unidentified Speaker

Hi again. Good morning my name is still Lynne Connelly. I am speaking on behalf of Mr. David Brook regarding his shareholders proposal listed as item number seven on today's agenda. Mr. Brook was unable to attend today's meeting but he wishes his best to the board and management and his fellow shareholders. This is the second year that Mr. Brook has made this proposal.

Last year as you may recall, Mr. Brook asked all of you the simple question, why am I here? This year he is repeating the same question as to why is it taking the Home Depot so long to realize that without a defined policy as he is proposing for keeping all lawn and garden products from exposure to precipitation that The Home Depot will continue to lose profitability, spend unnecessary money on hazardous waste disposals and cause continued environmental degradation to 2,248 streams and rivers across the United States. The Brook shareholder proposal titled No Rain, No Run Off simply asks the Home Depot to not store soluble garden products where they are exposed to rain and snow. Garden products contain nutrients, pesticides, herbicides, fungicides and other chemicals. When these products are stored outside and bags rip and tear which they do and get rain done, these products leak out in concentrated form into our streams and rivers as contaminated storm water.

The United States Environmental Protection Agency and state environmental agencies identify contaminated storm water as a significant environmental concern, especially in the handling of garden products containing pesticides, herbicides and fungicides. The Brook shareholder proposal offers a simple preventive measure that will greatly enhance corporate profitability and minimize environmental degradation since once a bag of fertilizer is broken and it gets rained on, it must be disposed as hazardous waste. The Home Depot has already paid fines in other states for failure to comply with more stringent storm water controls in Connecticut and for improper health of just waste disposal in the State of California.

So this proposal will help to prevent future regulatory penalties, which means larger profits for the Home Depot and its shareholders. Management at the Home Depot has refused to disclose how much money the Home Depot was spending each year for the disposal of hazardous waste, but Mr. Brook believes that the majority of hazardous waste generated is coming directly from these damaged and saturated bags of lawn and garden products. These costs will be eliminated if the Brook Proposal was adopted.

Implementation of the Brook Proposal will reduce the high cost of hazardous waste handling and disposal, minimize harm to the environment by reducing contaminated runoffs, increase corporate profitability, contaminated bags means no sale and then a high cost to dispose it plus possible fines and improve Home Depot’s environmental performance. In other words, the Brook shareholder proposal will be a win-win-win for the Home Depot, the environment and the investors. How could anyone not support it?

And so generally two years ago, [Mr. Brookman], the same proposal at Lowe’s companies and after some detailed discussions Lowe’s companies has chosen to voluntarily implement these improved storm water management policy that all of its 1,745 stores nationwide. This implementation started in January of this year in California and New York and is now having a full roll out across the country. Mr. Brooks believes that Lowe's companies determined that its implementation of the Brook Proposal will benefit its corporate performance and profitability. So he believes that the same conclusion will be true for the Home Depot.

By the way, Mr. Brook was recently told by the Home Depot management that some form of action was made to address these issues so it sounds like management agrees with the Brook Proposal. Apparently, the stores may have been told not to place fertilizers where they can get rained on. Here is the problem. Without a defined policy and some checks and balances implementation will not be guarantee, but recent random tour of Home Depot store locations in New Jersey by Mr. Brook showed that these products continue to be stored outside exposed rain.

So apparently someone at the store level did not get the memo. That said, reality continues to reinforce the sound reasoning and the Brook Proposal that is that management must thoroughly institutionalize these no rain, no runoff policy in order for to actually begin to work. For example, the Home Depot does not simply recommend that its employees watch their health and safety nor would help established careful measures that are written and defined in supervisory resources to ensure that all (inaudible) policies that will protect their health and safety. In the same way in order for the Brook Proposal to work, management must also commit resources so that all employees know what the policy is and how it should be properly implemented.

Mr. Brook is hopeful that between today and next year that management will work to create a defined policy, which will realistically implement the simple requirements of the work proposal, so that The Home Depot can reduce its [health hazard switch] generation, increase its profitability and minimize its pollution footprint to Americas streams and rivers. It is for the proceeding reasons that Mr. Brook asked all shareholders to vote yes on proposal number seven. If you would like any additional information, please go to Mr. Brook’s website at NoRainNoRunoff.org. Thank you for your time and willingness to consider making this important improvement to the corporate and environmental performance of The Home Depot.

Frank Blake

Thank you, Ms. Connelly. Your board recommends that you vote against this proposal. We will now move on to the preliminary voting results. If you’ve requested a ballot, please mark your vote and sign it where indicated. And when you finished, please raise your hand and one of our volunteers will collect your ballot.

Are all ballots collected? No not quite yet, all right. The ballots have been collected and the polls are now closed. I would now like to review the preliminary results of today's voting. All of the director nominees named in the proxy statement had been elected by the majority of the votes cast. Approximately 99% of the votes cast have voted in favor of the (inaudible) of the appointment of KPMG.

Approximately 93% of the votes cast have voted in favor of the compensation of the company's named executive officers. Approximately 75% of the votes cast have voted in favor of the company's proposal to approve the material terms of officer performance goals under the management incentive plan. Approximately 95% of the votes cast have voted in favor of the company's proposal to approve the stock incentive plan. Approximately 26% of the votes cast have voted in favor of the shareholder proposal regarding employment diversity reports. And approximately 4% of the votes cast have voted in favor of the shareholder proposal regarding a storm water management policy.

Based on the preliminary vote count, all of the nominees of the Board of Directors have been elected. The appointment of KPMG as the company's independent auditors for fiscal 2013 has been ratified. The majority of votes cast approved our executive compensation and the company's proposal regarding the management incentive plan and stock incentive plan have been approved. None of the shareholders proposals has been approved.

Please note the ballots collected at this meeting will be verified and tabulated by our Inspector of Elections and final results of the vote will be available in a Form 8-K which we will file next week.

This concludes our formal business and I declare the meeting adjourned and we will now move to an overview of our business and at the end of our business overview open it up to any questions that you may have.

So I will start with this reminder that these are forward-looking statements and if you can read this small pipe you will understand the caution with which you should judge these forward-looking statements.

Now we've shown a version of this chart at our annual meeting for the last several years. It shows private fixed residential investment, PFRI which includes new home buildings, remodel activity and other housing related spend as a percentage of GDP. The positive news this year is that even though PFRI as a percent of GDP continues to be near its 60-year low, it is showing signs of a recovery. Prior to 2010, our results correlated fairly well with this metric. We decoupled from PFRI starting in 2010 and recently GDP, U.S. GDP has been a better indicator of our growth and as you may remember US GDP grew at 2.2% in 2012. The recovery of the housing market is obviously important to us and we think can add to our growth going forward.

Moving to our financial results, in fiscal 2012 a 53-week year, sales finished up 6.2% and we had our third consecutive year of positive comps. Total company comp sales were up 4.6% and comps for our US stores were positive 4.9%. We saw growth in ticket and transaction and our net earnings increased 16.8% and EPS earnings per share increased 21.5% to $3.

And your company continues to generate strong cash flow. We generated $7.5 billion in cash in fiscal 2012. We spent $1.3 billion on capital improvements. We returned $1.7 billion to shareholders through dividends and repurchased $4 billion in shares leaving $2.5 billion in cash.

Along with delivering better than expected financial results in fiscal 2012, we announced a 34% increase in our quarterly dividend. We are targeting a dividend payout ratio of 50% and as you can see our yield is well above the S&P Retail Average. The market rewarded your company's performance. In fiscal 2012, Home Depot shares appreciated approximately 50% and outperformed the Dow Jones Industrial Average by approximately 39% and the S&P 500 by approximately 35%.

The focus of our business over the past several years and our strategic framework is what we called the three-legged stool. I am borrowing from Jim Collin’s book, Good to Great, which start with what we're passionate about, customer service. Then what we want to be best in the world at, product authority for home improvement and finally what drives our economic engine, disciplined capital allocation and productivity and efficiency. The element that ties this together is represented on this chart as inter-connected retail. We believe that over the next decade, the winners in retail will be those who deliver a best-in-class inter-connected retail experience, giving our customers a seamless experience online and in our stores.

For customer service, we’ve created a clear, concise and simple operational plan which we have maintained for the past four years. We talk about the big three, customer service, in-stock and store environment. We've retrained all of our store associates on customer service and the initiative we launched in 2009 called Customer’s First. We've simplified our in-stock processes and continue to focus on the basics of store cleanliness and presentation. We're very proud that both external and internal surveys of our customer service continue to improve.

Driving product authority through continued development of tools, capabilities and analytics remains a strategic priority. First, we approach product categories with an understanding that they each fill a different need and role in the portfolio of products we offer. Second, we have been on a long term path to develop a world class supply chain to drive productivity and efficiency. And third, our customers are looking for innovative products that make projects simpler to do and create value.

As the customer experience transforms, we must offer customers the ability to shop anywhere, anytime and anyway they want. Our initiatives have shown good growth and in fiscal 2012, we saw over 650 million visits to our online products. We launched buy online ship-to-store in 2012 and believe this functionality along with buy online return in store and buy online pick-up in store are the fundamental building blocks of our interconnected retail strategy. And we opened two new 80,000 square foot call centers to support our growing online business.

Moving to our shareholder return principles, we are committed to returning capital to our shareholders in the form of dividends and share repurchases. Our share repurchase principle is to use excess cash to repurchase shares. And from a return on capital perspective, our goal is to maintain a high return on capital benchmarking all uses of excess liquidity against value created for shareholders through repurchases.

On the international front, in Canada, Home Depot is the number one home improvement retail. We positively comped for the year and continue to show improved performance. In Mexico, Home Depot is the number one home improvement retailer; Ricardo Saldivar and his team had produced positive comps for 38 quarters in a row. We also opened our 100th store in Mexico in fiscal 2012 a significant milestone in the growth of our business there.

Now let’s turn to our 2013 outlook; we continue to see strength in the core of our store and for the year we project sales growth of approximately 2.8%; please remember that we are comparing a 52-week year in 2013 against a 53-week year in 2012. We expect our comp sales to be up approximately 4% in 2013 and for the year, we are planning to open nine stores with seven of those store openings in Mexico. We expect diluted earnings per share to increase approximately 17% to $3.52 including $6.5 billion in share repurchases.

Our overall strategy has not changed; we will continue to invest in customer service, product authority and interconnected retail within overall focused on a disciplined capital allocation strategy creating value for our shareholders.

And in closing, I just want to briefly discuss the culture of our company, the power of The Home Depot starts with the power of our value space business. We believe that if we take care of our associates and take care of our customers, the rest will take care of itself. Since this coming weekend is the Memorial Day weekend, I thought I would like to highlight in closing some of our activities in 2012 that were directed to the benefit of our country’s veterans.

We repaired and rehabbed over 4000 homes for veterans. We provided cash grants of approximately $25 million to hundreds of non-profits specifically serving veterans. In 2011, we pledged $30 million to help our country’s veterans over three years. We actually hit that target in 2012 and pledged another $50 million on behalf of our veterans. It is our way of saying thank you and giving back to our community.

So with that, thank you very much and if you have any questions you can proceed to the microphone and please identify yourself with your question. Thank you.

Question-and-Answer Session

Unidentified Speaker

Good morning. I am [David Reisnow] representing the National Center for Public Policy Research which is conservative free market think tank and a company’s shareholder. Home Depot is a member of the retail industry leaders’ association one of the countries largest Washington D.C. based trade associations [RILA] has launched a massive market and labor distorting campaign dubbed sustainability. Under the so called sustainability campaign it is currently pressuring its members to make capital expenditures that often have limited prospects for reasonable return. RILA also advocates that its members lobby for changes in local building codes and infrastructure that will increase the cost of buildings and result in significant restrictions on property use. Finally, RILA is advocating top down sustainability standards that go beyond its own members affecting the entire supply chain despite the likelihood that these standards will increase suppliers costs and in turn the cost of the goods that they sell. As a shareholder our concern is that this push for so-called sustainability will harm Home Depot’s shareholders, suppliers and customers as they will bear the associated costs.

My organization, the National Center for Public Policy Research conducted a national poll on these issues in January results indicated that 52% of consumers given the choice aren't willing to spend a single penny more for their products for sustainability label and 56% believe it is unfair to ask the public to pay more so retailers can operate under these standards. We are also concerned that the sustainability effort will add an additional layer of regulation on the retail industry, you know as well as anybody else that it’s already a heavily regulated industry by federal, state and local government. The economy has been stagnant for nearly five years and in the last quarter it actually shrank again.

Measures that expand growth and sales are good for Home Depot and the nation, those that don't, are not. Where does management stand on the question of its trade association imposing sustainability standards on its members including Home Depot? Does management support the idea of RILA imposing such standards or is it opposing mandatory sustainability standards and standing up for the right of each retailer to make its own decisions regarding the best way to lawfully and ethically satisfy the needs of its customers and shareholders.

Frank Blake

Thank you very much. Thank you for the comment and the concern. What I would say to all of our shareholders, if you look at the last chart I showed in concluding my business overview, we start with the principle that it is very important for us to be a value space business. One of our values is making sure that we operate as an appropriate citizen in the communities where we're located. What we've found is a business is that very often sustainability is one of those issues where both the shareholders gain through our improved performance as well as our communities and our society gains as we provide a better way of doing business and we're committed to that. We will continue to be committed to that. I don't think it in terms of division that you are suggesting between shareholder interest and sustainability, that is one we're very conscious of avoiding, we're very conscious of meeting those together, but thank you for your concerns.

Unidentified Speaker

If I can ask a very quick follow-up. The specific question was with regard to operating within an association such as this, obviously the company has an interest in trading lightly on the environment. Nobody wants to do any harm to the environment. I am just saying that when you are dealing with an association, and they are taking the lead on this, you are necessarily giving over power to them and my view and probably a lot of shareholders would be as well is that we would better trust your judgment than the CEO of Walmart or Best Buy.

Frank Blake

I am sure their judgments are good as well, but what I would say is we're obviously always very careful with what we do with our associations in Washington including The Retail Industry Leaders Association, RILA and make sure that when we are participating in their efforts, we're participating appropriately for our shareholders.

Unidentified Speaker

Thank you very much.

Frank Blake

Thank you.

Unidentified Speaker

Good morning shareholders and good morning Frank. First, thank you for the veterans that you are supporting which I am one also.

Frank Blake

Well, we know each other, because you have been here in fire meetings, you might want to identify yourself.

Unidentified Speaker

Yes, I was going to do that right now. I am [Gary Patent], I am a 21-year employee with The Home Depot at Rainbow, South Carolina. I appreciate the last question that was asked and I wanted to ask you something specific also. I am having a hard time figuring it out completely. How is the implementation of the affordable Care Act which should be fully implemented in January I believe of next year affecting us employees here with the Home Depot in our deductions, our medical coverage, and all of that, can you foresee or share with me in layman’s term how that might be affecting us?

Frank Blake

Thank you, Gary, and I will. So this is a very broad answer, but what I would say is first off it is a very complex law and we have been spending a lot of time as management team and also with our board going through some of the implications of it. There has been a lot written about how some companies might decide not to provide health insurance for their associates and instead choose to pay a penalty, your company will not do that. We think it is critical as part of our values that we continue to provide our associates healthcare as we can under the act and we will do that.

Unidentified Speaker

Could I ask one follow-up please?

Frank Blake

Yes.

Unidentified Speaker

Coincidently this morning on FOX, they were talking about that and said there was discussion about a lot of a companies just giving the bare minimum to avoid the penalty of not giving anything like you just mentioned. Could we be assured of quality service like one thing, I have always been [over the brag] about Home Depot that we have good coverage, I have been told we have some of the best eye insurance, some of the best medical insurance in the industry, I am proud of that, I am glad to say that a participate in that was Home Depot, but can we still consider the same high level of coverage?

Frank Blake

So yes, I would say and I don't know enough to be able to respond specifically to eye coverage or particular elements of the coverage, but as I commented before and as you know, our view is if we take care of our associates and take care of our customers, everything takes care of itself, everything else. We will continue to take care of our associates. There will be changes. The law will create some changes. They will create some changes in the way coverage works, but we will be guided by wanting to provide to our associates strong coverage.

Unidentified Speaker

Thank you very much.

Frank Blake

Thanks.

Unidentified Speaker

My name is (inaudible), nine years ago came to Home Depot. First of all, we are up to the Home Depot, my statement here today is to speak to diversity and employment practices. Unfortunately nine months ago, I was terminated by Home Depot unfairly as it was. My concern here today is about people with disabilities, I am a dialysis patient, I was not always be treated fairly and (inaudible) I came out of. As a shareholder it was important to me to ask the question, what practices are you going to put in place to help people out in the stores that are not being fairly treated, I have dialysis appointments and my store manager wouldn’t schedule me coverage to go to those treatments. Since my termination, I have been taken out to transplant list, but I am still going and my issue here is your practice says that you take care of your associates but that is not always the case. And my concern is that even though there are processes in place they do not get acknowledged and present it well in the stores. So I would like to know if there's going to be some processes going forward to help people like myself.

Frank Blake

Well, first off, I obviously don't know the specifics of your situation and what I would suggest is we have our HR team here this morning and they will follow up with you to make sure that you feel like we are being fairly treated. Thank you.

Unidentified Speaker

Hi, I'm [Willington Lee]. I want to know from you and also your management team what have you learned from your entry into and your exit or reduced exposure in China?

Frank Blake

Thank you very much and what he is referencing is over the past year in 2012 we had a large store format presence in China and we closed down those large stores. I would say the dominant lesson learned is always the customer decides, and we and I put that on myself we weren't as focused initially on the development of our business model in China on the Chinese consumer. We weren't as focused and knowledgeable as we should have been. Thank you.

Unidentified Speaker

Good morning. About nine or 10 years ago, we were introduced to the idea that Home Depot would start selling major appliances in its stores; I am just wondering in the next five years are we going to see any new items in Home Depot what are you guys thinking about right now?

Frank Blake

I don't know if you want to identify yourself.

Unidentified Speaker

I'm sorry if I didn't. My name is [Ken Cap] I'm from Seminal Florida.

Frank Blake

Thank you very much and thanks for being here. It is a constant source of work with our merchants and store operations team to be identifying new products and new product categories to develop in our store and now online; I won't go through the whole list with you, but I could tell you that a great deal of the growth your company has had over the past several years has been expanding into new categories. A good example is if you, a few years ago if you walked into a Home Depot store you might be hard pressed to know that we sold cleaning products. Now when you go into Home Depot store hopefully you will see that immediately that we have a major presence in cleaning products and a growing presence in cleaning products and that's just one example, but thank you very much for the question sir.

Unidentified Speaker

Yes; I am [Lee Bears] I've been in this county since 1957 and I have watched Home Depot grow up and it’s been pretty exciting to watch it. I have a question about Mr. Brooks request; I don't understand why you all keep pushing back against him. It only makes good business sense and why do you always if a shareholder makes a proposal you recommend to vote against it. They can't all be bad?

Frank Blake

Thank you very much. They aren’t all bad and what you would be interested to know is so you've seen over the years, the number of proposals go down and that’s because very frequently the shareholders come to us in advance and say this is what we're thinking of and we say that’s a good idea and we do it and there is no need to have a proposal, so it tends to be that the shareholder proposal select to those where there is some disagreement with management. So we listen to our shareholders and our shareholders are great source of new ideas. Specifically, with Mr. Brooks’ suggestion, the issue for us operationally is what Mr. Brooks would do is to take a particular element of our environmental management plan for the store and provide a particular focus on that element and we think it is better looking at that specific activity that he is concerned about, we will put it in the context of a larger environmental management program. So it's really the mode for addressing the problem that is one of the differences with Mr. Brook. Thank you. Are there any other questions or comments?

Unidentified Speaker

My name is [Chaney Garnet] and I am one of your shareholders and I used to work with Home Depot about 20 years ago; anyway, not concerned about the employment. I am just concerned about the service and the product, one time we have bought this water heater, okay, and it costs us about $140, but then we were not told about someone will install and come and then after that, we come out a bill of about over $600 and I said my god, what is the cost of my water heater and it cost me $600. And they said that because of the labor, the labor should not, it's not that hard to install our new water heater. So that’s another thing, I wish one of your representative asked that this how much is going to cost for the labor and this how much to cost for the item. So we will be prepared how much we can pay.

And also one time we bought also the garden stuff like chain saw or something and on the mail we were given a 10% discount, but it was not specify what item that we can get at 10%, so I expect that because you did not specify what item. So I assume that when we bought this item we will be given a 10%. And not only that when we ordered the item it's not available at the time they said it will be a special order so we did that. But then we got the bill right away in a matter of two weeks and then I refused to pay it. And then after two weeks later, I got another bill with charged interest on that and I said, you know what, I am going to the main office and complain about it. And I told them we haven’t got the item yet, why am I billed for the item that we have not received. So all I want you guys to improve your what you call billing system?

Frank Blake

So thank you very much for your comment and we will have someone from our team here address you after the meeting and take care of your concerns. So thank you. Yes, sir.

Unidentified Speaker

Good morning, a question what is the stock selling at now, what was the lasted quote, do you know?

Frank Blake

I don't know, as we were exiting yesterday, I think the stock was slightly over $79.

Unidentified Speaker

Okay, I would like to comment and compliment you five years ago below it was $17 and change its now $76 and change, at what point do you anticipate to keep stalling that you think you might split the stock?

Frank Blake

Well, thank you very much; I don't know if you want to identify yourself.

Unidentified Speaker

Well, I work for the CIA, (inaudible)

Frank Blake

All right, the CIA always ask those tough question. Thank you very much for the question, we do not have an intend to split our stock but thank you very much for the question. Are there any other questions? Yes, sir.

Unidentified Speaker

I am [Jack Evers] a long time company stockholder since 1980s; I was in The Home Depot yesterday, the (inaudible) flagship store and I was so impressed by the service there; walking inside the door, I was greeted immediately by just manager, I am sorry I forgot his name, but my two hours in the store, I had several boys coming and asking, and boys trying to help me out, if I had any question it was most impressive and this is just the opposite to the way it was some years ago. And so services the next door improved tremendously. Question I have is several years ago when you became CEO, (inaudible) off within a very short time, within months, except for a certain minority interest, we think you been holding at and at that time I thought that was I was wondering if that was a harsh and too quick decision. In hindsight what's your comments on was that a good move or not?

Frank Blake

First off thank you very much for your comments about the service in the stores that's hugely important to us; obviously, it is really what drives everything in our company and both at the time and looking back on HD Supply, my comment would be, it is very difficult for any organization to be excellent at one thing. It is extraordinarily, extraordinarily difficult for an organization to be good in two lines of businesses and from my perspective it was better for The Home Depot and the board’s perspective better for The Home Depot to be focused on being excellent in our retail operation; that was the case in 2007 I think that is still the case in 2013.

Unidentified Speaker

(Inaudible) and I am a shareholder with Home Depot and my question this morning is, is the company doing anything to find more American made products and let the customer decide if they want to buy American made which might be more costly than the imported items?

Frank Blake

Yes, thank you very much and we frequently do that, you will see that in our stores we will frequently call out that products are made in America and give our customers the choice. Thank you.

Unidentified Speaker

May I ask one more question unrelated to my other previous remarks. We get many more complements than we do negative, many more positive things since you became a board than we do the negative ones. So thank you, you are obviously doing a very good job and we employees thank you for that too.

Frank Blake

You are doing the job, I'm just [out of the mind].

Unidentified Speaker

Thank you. Well, you are setting the tone like leadership you know what you expected to be set for us down here at the bottom. But anyway we still have a hard time with getting enough employees on the floor at different times and we have a lot more compliments during the power hour when we have the greeters and people are focused more on the customer one-on-one face-to-face attention, but at other times it'd just be nice to see like old days where we had more employees on the floor. Can you explain what we might be doing if anything to keep improving that?

Frank Blake

Thanks Gary. And it’s a great comment and for those of you who aren't familiar with how our business works, the interesting thing about our business model is we are very much generated by sales. So the more sales and transactions in the store, the more hours the store generates. So one of the positive things about the recovery for us is the business return as we can return more hours to the floor of the store and then through the efforts of Marvin Ellison and his team. We hopefully simplify our operational processes so more of those hours can also be focused on the customer, but thanks Gary, we need more sales generates more hours and that’s the positive aspect of our business.

Unidentified Speaker

Good morning, Mr. Chairman. My name is [Tim Lewis]. I live in the Orlando area, original investor in the Home Depot and I want to thank you for that.

Frank Blake

Thank you.

Unidentified Speaker

I thought it might be interesting to you that one of the major television stations in metropolitan Orlando, I believe it was WFTV, did a quote undercover survey of five different retail outlets in our area and they were the Home Depot, Walmart, Target, Publix and Lowe’s and there are unannounced five different stores for each one of them and they recorded the amount of time that it took for an associate to approach the individual in the store to ask if they needed help and no matter what metrics they use but (inaudible) best time and the last time and took the mean time, Home Depot won every category. Congratulations.

Frank Blake

Thank you. Thank you for raising that. I actually saw that video. We're very proud. We're very proud of our performance of our stores.

Unidentified Speaker

Good morning. My name is [Dr. Albert Palo]. I am a dentist in the area, but I always admire the company. My father has been an employee with Home Depot and I got stock early and someone share that with me, call it that I needed to start investing. This is a very great opportunity just to be here. My statement is more of a comment. I am just excited to be a part of such as phenomenal movement and as an entrepreneur, I don't know I would love to hook up with the member of the management team that might be able to give me some golden nuggets just as a private practice in it, but I am just excited to be here and I want to tribute you guys and give you attributes for doing such a phenomenal job with the great company. And I am so glad that someone tells me early in life to start investing and you guys with that company.

Frank Blake

Well, thank you very much for that comment, we do have our management team here and I am sure they would be thrilled to talk with you, very excited that we have one of our youngest shareholders if he is still here, somebody who has described me, he is at the mic. That’s such a perfect you are following that so perfectly. Thank you very much.

Unidentified Speaker

All right. Thank you, sir.

Unidentified Speaker

My name is [Everett] and I was just wondering if the Home Depot is going to get new models of the things that they sell?

Frank Blake

So Everett first off thank you for investing your money in the Home Depot and I hope you will be up at the microphone many couple of decades from now explaining what a great decision that was and I will assure you that we spend a great deal of time, all the time thinking about innovative new products and new models to be putting in the store. Thank you very much.

Unidentified Speaker

Good morning, my name is [Gary Samaha]. My wife and I have been Home Depot’s stockholders for a number of years, not quite as many years as we should have been, but we are glad to be stockholders. I have two questions. One is what is the status of efforts by labor unions to organize employees of the Home Depot around the country and elsewhere? And also what efforts is management making to preclude the need for employees to join the unions?

Frank Blake

Thank you very much for the comment, Gary. We spent a great deal of time as you can probably tell from some of the other questions here focused on taking care of our associates. We are very proud, I will give you one small interesting fact, we are very proud of the fact we have the program called Success Sharing which is a bonus program for our hourly associates. In 2012, 100% of our stores in the United States participated in Success Sharing and we paid out almost $200 million in bonus to our hourly associates through Success Sharing. That compares to an amount that would have been $25 million in 2006. So we are very focused in making sure that our associates know how much they are appreciated, how important they are to the success of this company and they would never be a need to contacting union because in fact the union is not going to do anything for them.

Unidentified Speaker

But in terms of the status of efforts by labor organization to unionize Home Depot employees, so what’s (inaudible)?

Frank Blake

So I would say on a constant basis there is small activity in different areas, but there isn't, I mean we are -- I think we are recognized by our associates, recognized by those outside the company as a company that does a great job taking care of its associates, so it isn't a major issue with us.

Unidentified Speaker

Thank you.

Unidentified Speaker

Good morning, Mr. Blake. My name is [Kevin Davis]. I was wondering if there were any efforts being conducted by the Home Depot currently to address the strategy that happened in Moore, Oklahoma recently if there were certain efforts to (inaudible), I am sure there are, just wondering if there were anything?

Frank Blake

Yes, sir, and thank you for raising that. We are doing a number of things as a company and our associates. We have a store in Moore, Oklahoma. The store is open 24 hours a day. They run -- they are very if you saw new segments, I would say we are the dominant place helping first responders in Moore, Oklahoma. Our store associates as always respond in moments of crisis and they are doing an amazing job there. For the company our foundation has donated $1 million to help in the disaster relief. This is something that unfortunately we are very used to doing is responding to disasters. We take that very seriously as part of culture of our business to be there when people are most in need.

Unidentified Speaker

Good morning. My name is [Robert Chandler] and I have been a stockholder for Home Depot since 1984. I saw the young man come back here and I thought I was related little story. I have seven grand children. My oldest grandchild at Christmas time and birthday he would be setting in the flow at one or two years old and had so many toys he didn't know what they were. In a week or two most of them were broken or missing. So I started giving each of my grandchildren a $100 in Home Depot stock on birthdays and Christmas and later I raised that but not a lot. I raised it to $200. The oldest grandchild, when he got ready to buy his first house, he paid his down payment with his Home Depot stock.

Frank Blake

That's great. What a great story.

Unidentified Speaker

The next granddaughter when she graduated from college she bought her a new car and the others continue to call me. Granddad, how much do I have?

Frank Blake

I think (inaudible) as you talk.

Unidentified Speaker

So I have another question, I have a question that might be too much information for most of you, but my hearing isn't better one and I couldn’t hear what you said. I have been tracking Home Depot stock for many years and I was just sure that you guys are going to split since you were buying back all the stock and the dividend raised and the stock value was trading over $81 yesterday and that's where they used to split frequently. Did you say you were not going to split?

Frank Blake

Your hearing was accurate. No, we are not going to split and I would just comment that you know obviously mathematically no value is added in the split. And as we've seen companies like Apple and others have shown that that's not necessary for creation of shareholders value.

Unidentified Speaker

It wouldn't increase the value unless the stock went up.

Frank Blake

The stock hopefully will go up either way.

Unidentified Speaker

And I have another question. There's about three different stores and honestly I don't remember which one it was that I was in and they had taken down the big signs and aisle and as you enter the store that said hardware and so on and they put them all in the aisle itself and smaller counter like the Home Depot sign out there. I can't figure out what that was because you could walk in and look all the way down each way and tell what aisle you want to go to, you can't do that now. And I mentioned to some of the employees, I said we wish they were put back up, it saves our customers from having to chase us down and find out what, where item is located.

Frank Blake

Well, thank you for the feedback. Actually, we experiment a great deal on our signage and different looks of our stores to try to constantly improve and I suspect that that was one of those experiments and that's all I can say.

Unidentified Speaker

Well, like I said, you could stand in the front aisle and see every one of those but when they put it on in the end of the aisle, you have to walk closer to the aisle to see it because it was being blocked.

Frank Blake

It's great to get your feedback. Thank you very much.

Unidentified Speaker

I am [Frank Bradford]. I am a shareholder as well but probably not the experience of lot of people here. My story would be that in 1992 my mother gave me $1,000. I had a 13-year-old daughter. I put the $1,000 in to Home Depot, 20 shares. Today, it's a 117 worth about probably $8,000, $9,000. So I compliment you also. I refer myself as a poor man’s Warren Buffett. Warren Buffett very light but Home Depot has served me well being a buying holder and I remember when it was 17.

Frank Blake

Well, thank you for staying with us, Mr. Bradford. I appreciate it.

Unidentified Speaker

I will be around but might eventually get somewhat I have, not giving it up yet.

Frank Blake

Thank you very much. Thank you for your comments.

Unidentified Speaker

Thank you.

Frank Blake

Any other questions? All right, well thank you all very much. Thank you for taking your time



More From Seeking Alpha
    View Comments