In 2008, our retail sales declined by 7. 8 percent, with comp sales down 8. 7 percent. Our adjusted earnings per share from continuing operations declined 22 percent. In ordinary times, these would be very disappointing results. But 2008 was not an ordinary year. Despite the difficult economic environment, we continued to improve our retail business, through investing in our associates and our stores, rebuilding our supply chain and improving customer service. We also made several strategic decisions to optimize our capital allocation, concentrating our efforts on our core business.
In the first quarter, we closed 15 underperforming stores and reduced our pipeline of new stores by 50. In the third quarter, we renegotiated our private label credit card agreement, capping our cost of private label credit. In the fourth quarter, we announced our decision to exit EXPO and related businesses. These actions will make the Company stronger. On the financial side, we ended the year with a solid operating profit and $41 billion in assets.
We generated cash from the business of approximately $5.
5 billion, which allowed us to invest in the business where necessary and reduce our debt obligations while maintaining a healthy dividend. On the operational side, we implemented an “Aprons on the Floor” initiative, which deployed over $200 million in annualized savings onto the floor of the stores for customer service. Our customer service levels, as measured by our Voice of Customer surveys and other external sources, continue to improve. We launched our “New Lower Price” campaign in the fall and have been very pleased with the customer response to this program.
More than ever, our customers expect great value and exciting products in our stores, and we are committed to providing for these expectations. We started the roll-out of our enhanced supply chain. At the end of January, we opened our fifth Rapid Deployment Center (RDC), and RDCs now serve approximately 500 of our U. S. stores. Our goal is to have approximately 20 RDCs in place by the end of 2010, serving all of our U. S. stores. We also rolled out new merchandising tools allowing our merchants to better plan and assort our products.
These tools helped us drive better inventory productivity and provided better markdown control, particularly for our seasonal categories. On the international front, our stores in Mexico continued their strong performance, ending the year with double digit positive comps. We also took a major step in transforming our information technology application footprint by converting our Canadian business to a new enterprise resource planning platform. The rest of the business will benefit from the lessons learned from the Canadian effort.
None of these activities would be possible without outstanding associates. Our associates carry our service culture to our customers every day. For 2008, we issued success sharing checks in excess of $88 million to our hourly associates. This is a Company record, and it is a source of pride that we can take care of associates in economically difficult times like these. Furthermore, associates under the officer level will receive performance based merit increases and our 401(k) matching program remains intact.
Taking care of our associates is an important part of taking care of our customers. We are expecting another challenging year in 2009. Across the business, we are making the adjustments necessary to respond to the economic environment. We are carefully controlling our discretionary spending, scrutinizing every dollar of capital, and — most importantly — intensifying our focus on our customers. Our strategy is simple and straightforward: We are passionate about customer service. We are — and must continue to be — the number one authority on products in the home improvement market.
And we will drive shareholder return through disciplined capital allocation. Above all, we are a values-based business. The Home Depot was founded in 1979 when the U. S. was in the middle of a recession. Our values — taking care of our customers and taking care of our associates — speak even more powerfully in difficult times. I hope as you spend time in our stores you will notice our continuing improvement. Francis S. Blake Chairman & Chief Executive Officer April 2, 2009 UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549 FORM 10-K ? ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 1, 2009 OR n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-8207 THE HOME DEPOT, INC. (Exact Name of Registrant as Specified in its Charter) DELAWARE (State or other jurisdiction of incorporation or organization) 95-3261426 (I. R. S. Employer Identification No. ) 2455 PACES FERRY ROAD, N. W.
, ATLANTA, GEORGIA 30339 (Address of principal executive offices) (Zip Code) Registrant’s Telephone Number, Including Area Code: (770) 433-8211 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF NAME OF EACH EXCHANGE ON WHICH REGISTERED EACH CLASS Common Stock, $0. 05 Par Value Per Share New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ? No n Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes n No ? Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ? No n
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. n Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one): Smaller reporting company n Large accelerated filer ? Accelerated filer n Non-accelerated filer n (Do not check if a smaller reporting company) Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes n No ? The aggregate market value of the common stock of the Registrant held by non-affiliates of the Registrant on August 3, 2008 was $39. 7 billion. The number of shares outstanding of the Registrant’s common stock as of March 23, 2009 was 1,696,279,008 shares. DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s proxy statement for the 2009 Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K to the extent described herein. THE HOME DEPOT, INC. FISCAL YEAR 2008 FORM 10-K TABLE OF CONTENTS PART I Item 1. Business 1 Item 1A. Risk Factors 5 Item 1B. Unresolved Staff Comments 8 Item 2. Properties 8 Item 3. Legal Proceedings 10 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
12 Item 6. Selected Financial Data 14 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 24 Item 8. Financial Statements and Supplementary Data 25 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 50 Item 9A. Controls and Procedures 50 Item 9B. Other Information 50 Item 10. Directors, Executive Officers and Corporate Governance 51 Item 11. Executive Compensation 52 Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 52 Item 13. Certain Relationships and Related Transactions, and Director Independence 52 Item 14. Principal Accounting Fees and Services 52 Exhibits, Financial Statement Schedules 53 Signatures 57 PART II PART III PART IV Item 15. CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements regarding our future performance 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, impact of cannibalization, store openings and closures, state of the economy, state of the residential construction, housing and home improvement markets, 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 charges, the planned recapitalization of the Company, timing of the completion of such recapitalization and the ability to issue debt securities on terms and at rates acceptable to us. 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. Such 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. Such risks and uncertainties include, but are not limited to, those described in Item 1A, “Risk Factors. ” Forward-looking statements speak only as of the date they are made, and we do not undertake to update such 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 (“SEC”). PART I Item 1. Business. Introduction The Home Depot, Inc. is the world’s largest home improvement retailer based on Net Sales for the fiscal year ended February 1, 2009 (“fiscal 2008”). The Home Depot stores sell a wide assortment of building materials, home improvement and lawn and garden products and provide a number of services. The Home Depot stores average approximately 105,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area.
As of the end of fiscal 2008, we had 2,233 The Home Depot stores located throughout the United States including the Commonwealth of Puerto Rico and the territories of the U. S. Virgin Islands and Guam (“U. S. ”), Canada, China and Mexico. In addition, at the end of fiscal 2008, the Company operated 34 EXPO Design Center stores, two THD Design Center stores and five Yardbirds stores. On January 26, 2009, we announced the planned closing of our EXPO, THD Design Center and Yardbirds stores as part of our focus on our core business. The Home Depot, Inc. is a Delaware corporation that was incorporated in 1978. Our Store Support Center (corporate office) is located at 2455 Paces Ferry Road, N. W. , Atlanta, Georgia 30339. Our telephone number is (770) 433-8211. We maintain an Internet website at www. homedepot. com.
We make available on our website, free of charge, our Annual Reports to shareholders, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and Forms 3, 4 and 5 as soon as reasonably practicable after filing such documents with, or furnishing such documents to, the SEC. We include our website addresses throughout this filing only as textual references. The information contained on our websites is not incorporated by reference into this report. 1 Our Business Operating Strategy. In fiscal 2008, despite the continuing difficult economic environment, we continued to focus on our core retail business, investing in our associates and stores and improving our customer service.
We shifted our focus from new square footage growth to maximizing the productivity of our existing store base. During the year, we implemented significant changes in our store operations to make them simpler, more consistent and more customer-focused. We shifted associate hours to be more customer facing and refocused our efforts on offering every day values in the stores. Additionally, we made several strategic decisions which are intended to optimize our capital allocation, concentrate our efforts on our core business and create long-term value for our shareholders, including our decision to close 15 stores, remove approximately 50 stores from our new store pipeline and exit our EXPO, THD Design Center, Yardbirds and HD Bath businesses. Customers.
The Home Depot stores serve three primary customer groups: • Do-It-Yourself (“D-I-Y”) Customers: These customers are typically home owners who purchase products and complete their own projects and installations. • Do-It-For-Me (“D-I-F-M”) Customers: These customers are typically home owners who purchase materials themselves and hire third parties to complete the project or installation, or both. We arrange for the installation of a variety of The Home Depot products through qualified independent contractors. • Professional Customers: These customers are professional remodelers, general contractors, repairmen, small business owners and tradesmen.
In many stores, we offer a variety of programs to these customers, including delivery and will-call services, dedicated staff, extensive merchandise selections and expanded credit programs, all of which we believe increase sales to these customers. Products. A typical Home Depot store stocks approximately 30,000 to 40,000 products during the year, including both national brand name and proprietary items. The following table shows the percentage of Net Sales of each major product group (and related services) for each of the last three fiscal years: Percentage of Net Sales for Fiscal Year Ended February 1, February 3, January 28, 2009 2008 2007 Product Group 30. 6% 28. 7 22. 1 18. 6 Total 31. 0% 28. 0 22. 3 18. 7 30. 8% 27. 0 23. 6 18. 6 100. 0% Plumbing, electrical and kitchen Hardware and seasonal
Building materials, lumber and millwork Paint and flooring 100. 0% 100. 0% In fiscal 2008, we reduced our inventory while maintaining a favorable in-stock rate. We also reduced a number of onetime discount promotions and refocused our efforts on offering every day values. We continued to introduce innovative and distinctive products to our customers, including Thomasville» deep seating patio furniture, Charbroil» infrared grills, RIDGID» pressure washers and Homelite» trimmers. To complement and enhance our product selection, we have formed strategic alliances and exclusive relationships with selected suppliers to market products under a variety of well-recognized brand names.
During fiscal 2008, we offered a number of proprietary and exclusive brands across a wide range of departments including, but not limited to, Behr Premium Plus» paint, Hampton Bay» lighting, Vigoro» lawn care products, Husky» hand tools, RIDGID» and Ryobi» power tools, Pegasus» faucets, and Glacier Bay» bath fixtures. We may consider additional strategic alliances and relationships with other suppliers and will continue to assess opportunities to expand the range of products available under brand names that are exclusive to The Home Depot. From our Store Support Center we maintain a global sourcing merchandise program to source high-quality products directly from manufacturers around the world. Our Product Development Merchants identify and purchase market leading innovative products directly for our stores.
Additionally, we have three sourcing offices located in the Chinese cities of Shanghai, Shenzhen and Dalian, and offices in Gurgaon, India; Milan, Italy; Monterrey, Mexico and Toronto, Canada. 2 Services. Our stores offer a variety of installation services. These services target D-I-F-M customers who select and purchase products and installation of those products from us. These installation programs include products such as carpeting, flooring, cabinets, countertops and water heaters. In addition, we provide professional installation of a number of products sold through our in-home sales programs, such as generators and furnace and central air systems. Store Growth United States.
At the end of fiscal 2008, we were operating 1,971 The Home Depot stores in the U. S. , including the Commonwealth of Puerto Rico and the territories of the U. S. Virgin Islands and Guam. During fiscal 2008, we opened 41 new The Home Depot stores, including five relocations, in the U. S. Canada. At the end of fiscal 2008, we were operating 176 The Home Depot stores in ten Canadian provinces. Of these stores, 12 were opened during fiscal 2008, including one relocation. Mexico. At the end of fiscal 2008, we were operating 74 The Home Depot stores in Mexico. Of these stores, nine were opened during fiscal 2008. China. At the end of fiscal 2008, we were operating 12 The Home Depot stores in six Chinese cities.
Certain financial information about our operations outside of the U. S. is reported in Note 1 to the Consolidated Financial Statements. Store Support Services Information Technologies. During fiscal 2008, we continued to make information technology investments to better support our customers and provide an improved overall shopping environment and experience. We invested in our supply chain and merchandising tools to improve inventory management capabilities and streamline our operations. We completed the deployment of a new enterprise resource planning (“ERP”) system to our Canadian division, which includes all stores and distribution centers.
We will assess the return on investment and performance of the system in the fiscal year ended January 31, 2010 (“fiscal 2009”) as we evaluate alternatives for our U. S. application footprint. With regard to our supply chain, we implemented a new warehouse management system to support the U. S. and Canadian stores, continued implementation of a new transportation management system, completed a technology refresh at our distribution centers, and implemented improvements to our Central Automated Replenishment system. We made improvements to the tools utilized in merchandising systems in the areas of assortment management, forecasting, and replenishment.
With our continued focus on the stores, we provided technology improvements designed to help store associates perform their tasks and improve customer service. We equipped 1,100 stores with new computers, registers and printers, and 920 stores received new paint dispensers. Credit Services. We offer six credit programs through third-party credit providers to professional, D-I-Y and D-I-F-M customers. In fiscal 2008, approximately 3. 2 million new The Home Depot credit accounts were opened, and the total number of The Home Depot active account holders was approximately 12. 5 million. Proprietary credit card sales accounted for approximately 28% of store sales in fiscal 2008.
In fiscal 2008, Home Depot re-negotiated and extended the term of the primary contracts governing the programs. The new contract with Citibank established a ceiling for the cost of credit for the program while retaining the ability for portfolio performance improvements to lower the cost of credit. Logistics. Our logistics programs are designed to ensure product availability for customers, effective use of our investment in inventory and low total supply chain costs. At the end of fiscal 2008, we operated 30 lumber distribution centers, 45 conventional distribution centers and five transit facilities, all located in the U. S. , Canada and Mexico. Additionally in 2008, we opened four new Rapid Deployment Centers (“RDC”) in the U. S.
, bringing our total number of RDCs to five. We now serve approximately 25% of our U. S. stores from RDCs. RDCs allow for aggregation of store product needs to a single purchase order, and then rapid allocation and deployment of inventory to individual stores upon 3 arrival at the center. This process allows improved transportation, simplified order processing at suppliers and reduced lead time from the time that product needs at stores are determined to actual replenishment. We plan to open additional RDCs during fiscal 2009 and 2010 and ultimately serve all of our U. S. stores from RDCs. In fiscal 2008, approximately 35% of the merchandise shipped to our U. S.
stores flowed through our distribution facilities. The remaining merchandise was shipped directly from suppliers to our stores. The expansion of the RDC network is expected to increase our distribution utilization. In addition to replenishing merchandise at our stores, we also provide delivery of in-stock and special order product directly to our customers. Associates. At the end of fiscal 2008, we employed approximately 322,000 associates, of whom approximately 22,500 were salaried, with the remainder compensated on an hourly or temporary basis. Approximately 65% of our associates are employed on a full-time basis. We believe that our employee relations are very good.
To attract and retain qualified personnel, we seek to maintain competitive salary and wage levels in each market we serve. Intellectual Property. Through our wholly-owned subsidiary, Homer TLC, Inc. , we have registered or applied for registration, in a number of countries, for a variety of internet domain names, service marks and trademarks for use in our businesses, including The Home Depot»; Hampton Bay» fans, lighting and accessories; Glacier Bay» toilets, sinks and faucets; Pegasus» faucets and bath accessories; and Workforce» tools, tool boxes and shelving. We have also obtained and now maintain patent portfolios relating to certain products and services provided by The Home Depot, and continually seek to patent or otherwise protect selected innovations we
incorporate into our products and business operations. We regard our intellectual property as having significant value to our business and as being an important factor in the marketing of our brand, e-commerce, stores and new areas of our business. Quality Assurance Program. We have both quality assurance and engineering resources who oversee the quality of our directly imported, globally-sourced and proprietary products. Through these programs, we have established criteria for supplier and product performance that are designed to ensure our products comply with federal, state and local quality and performance standards. These programs also allow us to measure and track timeliness of shipments.
These performance records are made available to the factories to allow them to strive for improvement. The program addresses quality assurance at the factory, product and packaging levels. Environmental, Health & Safety (“EH&S”). We are committed to maintaining a safe environment for our customers and associates and protecting the environment of the communities in which we do business. Our EH&S function in the field is directed by trained associates focused primarily on the execution of the EH&S programs. Additionally, we have a Store Support Center-based team of dedicated EH&S professionals who evaluate, develop, implement and enforce policies, processes and programs on a Company-wide basis. Environmental.
The Home Depot is committed to conducting business in an environmentally responsible manner and this commitment impacts all areas of our business, including store construction and maintenance, energy usage, product selection and customer education. In fiscal 2008, we spent approximately $27. 5 million for energy efficiency related projects. By replacing HVAC units in approximately 200 existing stores and switching to the use of T-5 lighting in approximately 700 existing stores, we estimate cumulative savings to be approximately $28 million since fiscal 2006. In addition, we have implemented strict operational standards that establish energy efficient practices in all of our facilities. These include HVAC unit temperature regulation and adherence
to strict lighting schedules, which are the largest sources of energy consumption in our stores, as well as utilizing the Novar Energy Management and Alarm System in each store to monitor energy efficiency. We estimate that by implementing and utilizing these energy saving programs we have avoided 1. 6 billion pounds of greenhouse gas emissions since fiscal 2006. We believe this is equivalent to removing approximately 132,000 cars from the highway. In June 2008, we launched a nation-wide in-store compact fluorescent light bulb recycling program. This service is offered to all customers free-of-charge and is available in all U. S. stores, including Alaska and Hawaii. We have also taken additional measures to further our sustainability efforts.
We partnered with the U. S. Green Building Council and have built seven Leadership in Energy and Environmental Design (“LEED”) green certified and equivalent stores. We offset the carbon emissions created by our facilities and a portion of those emissions created by businessrelated travel through an agreement with The Conservation Fund that resulted in the planting of thousands of trees that will help reduce the heat-island effect in urban areas, reduce erosion and help clean the air. Through our Eco OptionsSM 4 Program, we have created product categories that allow consumers to easily identify environmentally preferred product selections in our stores.
We implemented a Supplier Social and Environmental Responsibility Program to ensure that our suppliers adhere to the highest standards of social and environmental responsibility. Seasonality. Our business is seasonal to a certain extent. Generally, our highest volume of sales occurs in our second fiscal quarter, and the lowest volume occurs during our fourth fiscal quarter. Competition. Our business is highly competitive, based in part on price, store location, customer service and assortment of merchandise. In each of the markets we serve, there are a number of other home improvement stores, electrical, plumbing and building materials supply houses and lumber yards.
With respect to some products, we also compete with discount stores, local, regional and national hardware stores, mail order firms, warehouse clubs, independent building supply stores and, to a lesser extent, other retailers. Due to the variety of competition we face, we are unable to precisely measure the impact on our sales by our competitors. Item 1A. Risk Factors. The risks and uncertainties described below could materially and adversely affect our business, financial condition and results of operations and could cause actual results to differ materially from our expectations and projections. The Risk Factors described below include the considerable risks associated with the current economic environment and the possible adverse effects on our financial condition and results of operations.
You should read these Risk Factors in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our Consolidated Financial Statements and related notes in Item 8. There also may be other factors that we cannot anticipate or that are not described in this report, generally because we do not perceive them to be material. Such factors could cause results to differ materially from our expectations. The state of the housing, construction and home improvement markets, rising costs, a reduction in the availability of financing, weather and other conditions in North America could further adversely affect our costs of doing business, demand for our products and services and our financial performance.
In 2008, the housing, residential construction and home improvement markets have deteriorated dramatically and more severely than was previously anticipated. We expect the deterioration to continue through 2009 and our fiscal 2009 Net Sales and Diluted Earnings per Share from Continuing Operations to decline from fiscal 2008. Other factors — including increasing unemployment and foreclosures, interest rate fluctuations, fuel and other energy costs, labor and healthcare costs, the availability of financing, the state of the credit markets, including mortgages, home equity loans and consumer credit, consumer confidence, weather, natural disasters and other factors beyond our control — could further adversely affect demand for our products and services and our financial performance.
These and other similar factors could increase our costs and cause our customers to delay purchasing or determine not to purchase home improvement products and services. We rely on third party suppliers. If we fail to identify and develop relationships with a sufficient number of qualified suppliers, or if our current suppliers experience financial difficulties, our ability to timely and efficiently access products that meet our high standards for quality could be adversely affected. We buy our products from suppliers located throughout the world. Our ability to continue to identify and develop relationships with qualified suppliers who can satisfy our high standards for quality and our need to access products in a timely and efficient manner is a significant challenge.
Our ability to access products also can be adversely affected by political instability, the financial instability of suppliers, suppliers’ noncompliance with applicable laws, trade restrictions, tariffs, currency exchange rates, transport capacity and cost and other factors beyond our control. If we are unable to effectively manage and expand our alliances and relationships with selected suppliers of brand name products, we may be unable to effectively execute our strategy to differentiate ourselves from our competitors. As part of our focus on product differentiation, we have formed strategic alliances and exclusive relationships with selected suppliers to market products under a variety of well-recognized brand names. If we are unable to manage and expand these alliances and relationships or identify alternative sources for comparable products, we may not be able to effectively execute product differentiation. 5
Our ability to obtain additional financing on favorable terms, if needed, could be adversely affected by the volatility in the capital markets. We obtain and manage liquidity from the positive cash flow we generate from our operating activities and our access to capital markets, including our commercial paper programs supported by a long-term bank line-of-credit commitment. Although we currently maintain a strong investment grade rating and had no outstanding commercial paper obligations as of the end of fiscal 2008, there is no assurance that our ability to obtain additional financing through the capital markets, if needed, will not be adversely impacted if
the current recessionary trends persist or worsen. Continued volatility in the capital markets could result in diminished availability of credit, higher cost of borrowing and lack of confidence in the equity market, making it more difficult to obtain additional financing on terms that are favorable to us. The implementation of our supply chain and technology initiatives could disrupt our operations in the near term, and these initiatives might not provide the anticipated benefits or might fail. We have made, and we plan to continue to make, significant investments in our supply chain and technology. These initiatives are designed to streamline our operations to all