EX-99.1 2 hd_exhibit991x07292018.htm EX-99.1 Exhibit


Exhibit 99.1
hdlogoa02a01a01a01a01a10.jpg
The Home Depot Announces Second Quarter Results;
Updates Fiscal Year 2018 Guidance

ATLANTA, August 14, 2018 -- The Home Depot®, the world's largest home improvement retailer, today reported sales of $30.5 billion for the second quarter of fiscal 2018, an 8.4 percent increase from the second quarter of fiscal 2017. Comparable sales for the second quarter of fiscal 2018 were positive 8.0 percent, and comp sales in the U.S. were positive 8.1 percent.

Net earnings for the second quarter of fiscal 2018 were $3.5 billion, or $3.05 per diluted share, compared with net earnings of $2.7 billion, or $2.25 per diluted share, in the same period of fiscal 2017. For the second quarter of fiscal 2018, diluted earnings per share increased 35.6 percent from the same period in the prior year.

“We were very pleased with our record second quarter sales and earnings. Not only did our seasonal business rebound from the first quarter, but our overall results exceeded our expectations,” said Craig Menear, chairman, CEO and president. “These results exemplify the outstanding execution of our combined team of store associates, merchants, suppliers and supply chain.”

Updated Fiscal 2018 Guidance

Based on its year-to-date performance, the Company updated its fiscal 2018 sales growth guidance and now expects sales will be up approximately 7.0 percent including the 53rd week, with comp sales growth of approximately 5.3 percent for the comparable 52-week period. The Company also raised its diluted earnings-per-share growth guidance for the year and now expects diluted earnings-per-share growth of approximately 29.2 percent from fiscal 2017 to $9.42. The Company’s diluted earnings-per-share growth guidance includes $6 billion of share repurchases for fiscal 2018.

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 http://ir.homedepot.com/events-and-presentations.

Recent Accounting Pronouncement - Revenue Recognition

During the first quarter of fiscal 2018, the Company adopted ASU No. 2014-09, which pertains to revenue recognition. The adoption of this standard will not materially impact the Company’s consolidated financial statements or related disclosures.

The Company has adopted this standard on a modified retrospective basis. In accordance therewith, financial information prior to fiscal 2018 will not be recast. The consolidated statements of earnings and balance sheet for periods and dates subsequent to fiscal 2017 reflect the effect of this accounting policy adoption.

Additional information about the impact of the adoption of ASU No. 2014-09 is available at http://ir.homedepot.com/financial-reports/quarterly-earnings/2018.
 
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At the end of the second quarter, the Company operated a total of 2,286 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. The Company employs more than 400,000 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.


###

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 sales; effects of competition; implementation of store, interconnected retail, supply chain and technology initiatives; issues related to the payment methods we accept; 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; demand for credit offerings; inventory and in-stock positions; management of relationships with our suppliers and vendors; continuation of share repurchase programs; net earnings performance; earnings per share; dividend targets; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; stock-based compensation expense; commodity price inflation and deflation; the ability to issue debt on terms and at rates acceptable to us; the impact and expected outcome of investigations, inquiries, claims and litigation; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of the Tax Cuts and Jobs Act of 2017; store openings and closures; guidance for fiscal 2018 and beyond; financial outlook; and the integration of acquired companies into our organization and the ability to recognize the anticipated synergies and benefits of those acquisitions.  Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events.  You should not rely 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 28, 2018 and in our subsequent Quarterly Reports on Form 10-Q.

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.

For more information, contact:
 
 
Financial Community
 
News Media
Isabel Janci
 
Stephen Holmes
Vice President of Investor Relations
 
Senior Director of Corporate Communications
770-384-2666
 
770-384-5075
isabel_janci@homedepot.com
 
stephen_holmes@homedepot.com
 
 
 



THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended


 
Six Months Ended
 
 
in millions, except per share data
July 29,
2018

July 30,
2017

% Change
 
July 29,
2018
 
July 30,
2017
 
% Change
Net sales
$
30,463


$
28,108


8.4
 %
 
$
55,410

 
$
51,995

 
6.6
 %
Cost of sales
20,098


18,647


7.8

 
36,428

 
34,380

 
6.0

Gross profit
10,365


9,461


9.6

 
18,982

 
17,615

 
7.8

Operating expenses:




 
 
 
 
 
 
 
Selling, general and administrative
5,004


4,549


10.0

 
9,783

 
8,910

 
9.8

Depreciation and amortization
460


449


2.4

 
917

 
893

 
2.7

Total operating expenses
5,464


4,998


9.3

 
10,700

 
9,803

 
9.2

Operating income
4,901


4,463


9.8

 
8,282

 
7,812

 
6.0

Interest and other (income) expense:




 
 
 
 
 
 
 
Interest and investment income
(26
)

(16
)

62.5

 
(48
)
 
(29
)
 
65.5

Interest expense
272


265


2.6

 
533

 
519

 
2.7

Interest and other, net
246


249


(1.2
)
 
485

 
490

 
(1.0
)
Earnings before provision for income taxes
4,655


4,214


10.5

 
7,797

 
7,322

 
6.5

Provision for income taxes
1,149


1,542


(25.5
)
 
1,887

 
2,636

 
(28.4
)
Net earnings
$
3,506


$
2,672


31.2
 %
 
$
5,910

 
$
4,686

 
26.1
 %









 
 
 
 
 
 
Basic weighted average common shares
1,144


1,183


(3.3
)%
 
1,148

 
1,191

 
(3.6
)%
Basic earnings per share
$
3.06


$
2.26


35.4

 
$
5.15

 
$
3.93

 
31.0










 
 
 
 
 
 
Diluted weighted average common shares
1,149


1,189


(3.4
)%
 
1,154

 
1,197

 
(3.6
)%
Diluted earnings per share
$
3.05


$
2.25


35.6

 
$
5.12

 
$
3.91

 
30.9

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
Six Months Ended
 
 
Selected Sales Data (1)
July 29,
2018
 
July 30,
2017
 
% Change
 
July 29,
2018
 
July 30,
2017
 
% Change
Customer transactions (in millions)
455.4

 
441.8

 
3.1
 %
 
831.2

 
822.6

 
1.1
 %
Average ticket
$
66.20

 
$
63.05

 
5.0

 
$
66.12

 
$
62.74

 
5.4

Sales per square foot
504.20

 
464.38

 
8.6

 
458.07

 
429.17

 
6.7

 —————
(1)
Selected Sales Data does not include results for Interline Brands, Inc., which was acquired in fiscal 2015.

 






THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
in millions
July 29,
2018
 
July 30,
2017
 
January 28,
2018
Assets
 
 
 
 
 
Cash and cash equivalents
$
3,490

 
$
4,830

 
$
3,595

Receivables, net
2,164

 
2,187

 
1,952

Merchandise inventories
14,044

 
12,868

 
12,748

Other current assets
1,104

 
626

 
638

Total current assets
20,802

 
20,511

 
18,933

Net property and equipment
21,909

 
22,035

 
22,075

Goodwill
2,251

 
2,235

 
2,275

Other assets
1,270

 
1,178

 
1,246

Total assets
$
46,232

 
$
45,959

 
$
44,529

 
 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
 
Short-term debt
$
—

 
$
—

 
$
1,559

Accounts payable
9,407

 
8,541

 
7,244

Accrued salaries and related expenses
1,535

 
1,503

 
1,640

Current installments of long-term debt
2,203

 
545

 
1,202

Other current liabilities
5,281

 
5,234

 
4,549

Total current liabilities
18,426

 
15,823

 
16,194

Long-term debt, excluding current installments
23,295

 
24,422

 
24,267

Other liabilities
2,502

 
2,160

 
2,614

Total liabilities
44,223

 
42,405

 
43,075

Total stockholders’ equity
2,009

 
3,554

 
1,454

Total liabilities and stockholders’ equity
$
46,232

 
$
45,959

 
$
44,529





THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended
in millions
July 29,
2018

July 30,
2017
Cash Flows from Operating Activities:



Net earnings
$
5,910


$
4,686

Reconciliation of net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
1,062


1,015

Stock-based compensation expense
234


148

Changes in working capital and other, net of acquisition effects
791


2,013

Net cash provided by operating activities
7,997


7,862

 
 
 
 
Cash Flows from Investing Activities:



Capital expenditures, net of non-cash capital expenditures
(1,091
)

(846
)
Payments for business acquired, net
—


(268
)
Proceeds from sales of property and equipment
16


23

Net cash used in investing activities
(1,075
)

(1,091
)
 
 
 
 
Cash Flows from Financing Activities:



Repayments of short-term debt, net
(1,559
)

(710
)
Proceeds from long-term debt, net of discounts
—

 
1,994

Repayments of long-term debt
(28
)

(21
)
Repurchases of common stock
(3,121
)

(3,921
)
Proceeds from sales of common stock
35


137

Cash dividends
(2,373
)

(2,130
)
Other financing activities
142


2

Net cash used in financing activities
(6,904
)

(4,649
)
Change in cash and cash equivalents
18


2,122

Effect of exchange rate changes on cash and cash equivalents
(123
)

170

Cash and cash equivalents at beginning of period
3,595


2,538

Cash and cash equivalents at end of period
$
3,490


$
4,830





THE HOME DEPOT, INC.
ASU NO. 2014-09 IMPACT OF ADOPTION
(Unaudited)
The Company adopted ASU No. 2014-09, which pertains to revenue recognition, in the first quarter of fiscal 2018. The following table shows the impact of adopting ASU No. 2014-09 on the consolidated statement of earnings for the three and six month periods ended July 29, 2018. The implementation of this accounting standard resulted in an increase in net sales, gross profit, selling, general and administrative, and total operating expenses and a decrease in cost of sales. There was no impact on operating income, net earnings, or earnings per share.
 
Three Months Ended July 29, 2018
in millions
As Reported
% of
Net Sales
 
ASU No. 2014-09
Impact
 
Excluding
ASU No. 2014-09 Impact
% of
Net Sales
Net sales
$
30,463

100.0
%
 
$
33

 
$
30,430

100.0
%
Cost of sales
20,098

66.0

 
(119
)
 
20,217

66.4

Gross profit
10,365

34.0

 
152

 
10,213

33.6

Selling, general and administrative
5,004

16.4

 
152

 
4,852

15.9

Total operating expenses
5,464

17.9

 
152

 
5,312

17.5

 
Six Months Ended July 29, 2018
in millions
As Reported
% of
Net Sales
 
ASU No. 2014-09
Impact
 
Excluding
ASU No. 2014-09 Impact
% of
Net Sales
Net sales
$
55,410

100.0
%
 
$
66

 
$
55,344

100.0
%
Cost of sales
36,428

65.7

 
(217
)
 
36,645

66.2

Gross profit
18,982

34.3

 
283

 
18,699

33.8

Selling, general and administrative
9,783

17.7

 
283

 
9,500

17.2

Total operating expenses
10,700

19.3

 
283

 
10,417

18.8





THE HOME DEPOT, INC.
ASU NO. 2014-09 IMPACT OF ADOPTION
(Unaudited)
The Company adopted ASU No. 2014-09, which pertains to revenue recognition, in the first quarter of fiscal 2018. The following table shows the impact of adopting ASU No. 2014-09 on the consolidated balance sheet as of July 29, 2018.
 
July 29, 2018
in millions
As Reported
 
ASU No. 2014-09
Effect
 
Excluding
ASU No. 2014-09 Effect
Assets
 
 
 
 
 
Receivables, net
$
2,164

 
$
(46
)
 
$
2,210

Other current assets
1,104

 
272

 
832

Total current assets
20,802

 
226

 
20,576

Total assets
46,232

 
226

 
46,006

 
 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
 
Other current liabilities
$
5,281

 
$
127

 
$
5,154

Total current liabilities
18,426

 
127

 
18,299

Other liabilities
2,502

 
24

 
2,478

Total liabilities
44,223

 
151

 
44,072

Total stockholders’ equity
2,009

 
75

 
1,934

Total liabilities and stockholders’ equity
46,232

 
226

 
46,006





THE HOME DEPOT, INC.
PRO FORMA EFFECT OF ASU NO. 2014-09
(Unaudited)
The Company adopted ASU No. 2014-09, which pertains to revenue recognition, in the first quarter of fiscal 2018 using the modified retrospective method. In accordance therewith, financial information prior to fiscal 2018 will not be recast as the modified retrospective method does not permit recasting pre-adoption financial information. The following tables present selected as-reported financial results and the pro forma effect of ASU No. 2014-09 as if the recognition and presentation guidance in the accounting standard had been applied in fiscal 2017. There was no impact on operating income, net earnings, or earnings per share. The fiscal 2017 pro forma financial information included in the tables below is presented for informational purposes only.
 
Three Months Ended April 30, 2017
in millions
As Reported
% of
Net Sales
 
ASU No. 2014-09
Effect
 
Including
ASU No. 2014-09 Effect
% of
Net Sales
Net sales
$
23,887

100.0
%
 
$
48

 
$
23,935

100.0
%
Cost of sales
15,733

65.9

 
(90
)
 
15,643

65.4

Gross profit
8,154

34.1

 
138

 
8,292

34.6

Selling, general and administrative
4,361

18.3

 
138

 
4,499

18.8

Total operating expenses
4,805

20.1

 
138

 
4,943

20.7

 
Three Months Ended July 30, 2017
in millions
As Reported
% of
Net Sales
 
ASU No. 2014-09
Effect
 
Including
ASU No. 2014-09 Effect
% of
Net Sales
Net sales
$
28,108

100.0
%
 
$
33

 
$
28,141

100.0
%
Cost of sales
18,647

66.3

 
(114
)
 
18,533

65.9

Gross profit
9,461

33.7

 
147

 
9,608

34.1

Selling, general and administrative
4,549

16.2

 
147

 
4,696

16.7

Total operating expenses
4,998

17.8

 
147

 
5,145

18.3

 
Three Months Ended October 29, 2017
in millions
As Reported
% of
Net Sales
 
ASU No. 2014-09
Effect
 
Including
ASU No. 2014-09 Effect
% of
Net Sales
Net sales
$
25,026

100.0
%
 
$
44

 
$
25,070

100.0
%
Cost of sales
16,378

65.4

 
(85
)
 
16,293

65.0

Gross profit
8,648

34.6

 
129

 
8,777

35.0

Selling, general and administrative
4,514

18.0

 
129

 
4,643

18.5

Total operating expenses
4,968

19.9

 
129

 
5,097

20.3

 
Three Months Ended January 28, 2018
in millions
As Reported
% of
Net Sales
 
ASU No. 2014-09
Effect
 
Including
ASU No. 2014-09 Effect
% of
Net Sales
Net sales
$
23,883

100.0
%
 
$
41

 
$
23,924

100.0
%
Cost of sales
15,790

66.1

 
(85
)
 
15,705

65.6

Gross profit
8,093

33.9

 
126

 
8,219

34.4

Selling, general and administrative
4,440

18.6

 
126

 
4,566

19.1

Total operating expenses
4,904

20.5

 
126

 
5,030

21.0

 
Fiscal Year Ended January 28, 2018
in millions
As Reported
% of
Net Sales
 
ASU No. 2014-09
Effect
 
Including
ASU No. 2014-09 Effect
% of
Net Sales
Net sales
$
100,904

100.0
%
 
$
166

 
$
101,070

100.0
%
Cost of sales
66,548

66.0

 
(374
)
 
66,174

65.5

Gross profit
34,356

34.0

 
540

 
34,896

34.5

Selling, general and administrative
17,864

17.7

 
540

 
18,404

18.2

Total operating expenses
19,675

19.5

 
540

 
20,215

20.0