EX-99.1 2 hd_exhibit991x10282018.htm EX 99.1 Exhibit


Exhibit 99.1
hdlogoa02a01a01a01a01a11.jpg
The Home Depot Announces Third Quarter Results;
Updates Fiscal Year 2018 Guidance

ATLANTA, November 13, 2018 – The Home Depot®, the world's largest home improvement retailer, today reported sales of $26.3 billion for the third quarter of fiscal 2018, a 5.1 percent increase from the third quarter of fiscal 2017. Comparable sales for the third quarter of fiscal 2018 were positive 4.8 percent, and comp sales in the U.S. were positive 5.4 percent.

Net earnings for the third quarter of fiscal 2018 were $2.9 billion, or $2.51 per diluted share, compared with net earnings of $2.2 billion, or $1.84 per diluted share, in the same period of fiscal 2017. For the third quarter of fiscal 2018, diluted earnings per share increased 36.4 percent from the same period in the prior year.

“We are pleased with our third quarter results and the growth that we saw from both our professional and do-it-yourself customers. Our customers continue to respond to our expansive assortment and enhancements we are making to drive an interconnected shopping experience. We saw continued strength across the store, as well as healthy growth in our digital business,” said Craig Menear, chairman, CEO and president. “We believe this is a testament to the overall strength of demand in the home improvement market.”

Updated Fiscal 2018 Guidance

Based on its year-to-date performance, the Company updated its fiscal 2018 guidance. The Company will have 53 weeks of operating results in fiscal 2018 and now expects:
▪
Sales growth of approximately 7.2 percent;
▪
Comp sales growth of approximately 5.5 percent for the comparable 52-week period;
▪
Operating margin of approximately 14.5 percent;
▪
Tax rate of approximately 24 percent;
▪
Fiscal 2018 share repurchases of approximately $8 billion;
▪
Diluted earnings-per-share growth of approximately 33.8 percent from fiscal 2017 to $9.75.

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

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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.

At the end of the third 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.




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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


 
Nine Months Ended
 
 
in millions, except per share data
October 28,
2018

October 29,
2017

% Change
 
October 28,
2018
 
October 29,
2017
 
% Change
Net sales
$
26,302


$
25,026


5.1
 %
 
$
81,712

 
$
77,021

 
6.1
 %
Cost of sales
17,151


16,378


4.7

 
53,579

 
50,758

 
5.6

Gross profit
9,151


8,648


5.8

 
28,133

 
26,263

 
7.1

Operating expenses:




 
 
 
 
 
 
 
Selling, general and administrative
4,808


4,514


6.5

 
14,591

 
13,424

 
8.7

Depreciation and amortization
473


454


4.2

 
1,390

 
1,347

 
3.2

Total operating expenses
5,281


4,968


6.3

 
15,981

 
14,771

 
8.2

Operating income
3,870


3,680


5.2

 
12,152

 
11,492

 
5.7

Interest and other (income) expense:




 
 
 
 
 
 
 
Interest and investment income
(25
)

(22
)

13.6

 
(73
)
 
(51
)
 
43.1

Interest expense
249


269


(7.4
)
 
782

 
788

 
(0.8
)
Interest and other, net
224


247


(9.3
)
 
709

 
737

 
(3.8
)
Earnings before provision for income taxes
3,646


3,433


6.2

 
11,443

 
10,755

 
6.4

Provision for income taxes
779


1,268


(38.6
)
 
2,666

 
3,904

 
(31.7
)
Net earnings
$
2,867


$
2,165


32.4
 %
 
$
8,777

 
$
6,851

 
28.1
 %









 
 
 
 
 
 
Basic weighted average common shares
1,135


1,168


(2.8
)%
 
1,144

 
1,184

 
(3.4
)%
Basic earnings per share
$
2.53


$
1.85


36.8

 
$
7.67

 
$
5.79

 
32.5










 
 
 
 
 
 
Diluted weighted average common shares
1,141


1,174


(2.8
)%
 
1,150

 
1,190

 
(3.4
)%
Diluted earnings per share
$
2.51


$
1.84


36.4

 
$
7.63

 
$
5.76

 
32.5

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
Nine Months Ended
 
 
Selected Sales Data(1)
October 28,
2018
 
October 29,
2017
 
% Change
 
October 28,
2018
 
October 29,
2017
 
% Change
Customer transactions (in millions)
394.8

 
389.5

 
1.4
 %
 
1,226.0

 
1,212.0

 
1.2
 %
Average ticket
$
65.11

 
$
62.84

 
3.6

 
$
65.79

 
$
62.78

 
4.8

Sales per square foot
433.99

 
412.49

 
5.2

 
449.94

 
423.60

 
6.2

 —————
(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
October 28,
2018
 
October 29,
2017
 
January 28,
2018
Assets
 
 
 
 
 
Cash and cash equivalents
$
1,764

 
$
3,549

 
$
3,595

Receivables, net
2,171

 
2,166

 
1,952

Merchandise inventories
14,754

 
13,419

 
12,748

Other current assets
1,120

 
548

 
638

Total current assets
19,809

 
19,682

 
18,933

Net property and equipment
22,054

 
21,960

 
22,075

Goodwill
2,258

 
2,217

 
2,275

Other assets
1,079

 
1,164

 
1,246

Total assets
$
45,200

 
$
45,023

 
$
44,529

 
 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
 
Short-term debt
$
1,398

 
$
125

 
$
1,559

Accounts payable
9,054

 
8,570

 
7,244

Accrued salaries and related expenses
1,495

 
1,488

 
1,640

Current installments of long-term debt
1,054

 
1,198

 
1,202

Other current liabilities
5,195

 
4,621

 
4,549

Total current liabilities
18,196

 
16,002

 
16,194

Long-term debt, excluding current installments
23,332

 
24,266

 
24,267

Other liabilities
2,352

 
2,212

 
2,614

Total liabilities
43,880

 
42,480

 
43,075

Total stockholders’ equity
1,320

 
2,543

 
1,454

Total liabilities and stockholders’ equity
$
45,200

 
$
45,023

 
$
44,529





THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended
in millions
October 28,
2018

October 29,
2017
Cash Flows from Operating Activities:



Net earnings
$
8,777


$
6,851

Reconciliation of net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
1,603


1,533

Stock-based compensation expense
204


214

Changes in working capital and other, net of acquisition effects
(548
)

1,143

Net cash provided by operating activities
10,036


9,741

 
 
 
 
Cash Flows from Investing Activities:



Capital expenditures, net of non-cash capital expenditures
(1,711
)

(1,354
)
Payments for business acquired, net
—


(260
)
Proceeds from sales of property and equipment
21


38

Other investing activities
(3
)
 
—

Net cash used in investing activities
(1,693
)

(1,576
)
 
 
 
 
Cash Flows from Financing Activities:



Repayments of short-term debt, net
(161
)

(585
)
Proceeds from long-term debt, net of discounts
—

 
2,991

Repayments of long-term debt
(1,192
)

(534
)
Repurchases of common stock
(5,518
)

(6,067
)
Proceeds from sales of common stock
140


157

Cash dividends
(3,548
)

(3,174
)
Other financing activities
99


(41
)
Net cash used in financing activities
(10,180
)

(7,253
)
Change in cash and cash equivalents
(1,837
)

912

Effect of exchange rate changes on cash and cash equivalents
6


99

Cash and cash equivalents at beginning of period
3,595


2,538

Cash and cash equivalents at end of period
$
1,764


$
3,549





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 nine month periods ended October 28, 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 October 28, 2018
in millions
As
Reported
 
% of
Net Sales
 
ASU No. 2014-09
Impact
 
Excluding
ASU No. 2014-09 Impact
 
% of
Net Sales
Net sales
$
26,302

 
100.0
%
 
$
64

 
$
26,238

 
100.0
%
Cost of sales
17,151

 
65.2

 
(83
)
 
17,234

 
65.7

Gross profit
9,151

 
34.8

 
147

 
9,004

 
34.3

Selling, general and administrative
4,808

 
18.3

 
147

 
4,661

 
17.8

Total operating expenses
5,281

 
20.1

 
147

 
5,134

 
19.6

 
Nine Months Ended October 28, 2018
in millions
As
Reported
 
% of
Net Sales
 
ASU No. 2014-09
Impact
 
Excluding
ASU No. 2014-09 Impact
 
% of
Net Sales
Net sales
$
81,712

 
100.0
%
 
$
130

 
$
81,582

 
100.0
%
Cost of sales
53,579

 
65.6

 
(300
)
 
53,879

 
66.0

Gross profit
28,133

 
34.4

 
430

 
27,703

 
34.0

Selling, general and administrative
14,591

 
17.9

 
430

 
14,161

 
17.4

Total operating expenses
15,981

 
19.6

 
430

 
15,551

 
19.1





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 October 28, 2018.
 
October 28, 2018
in millions
As
Reported
 
ASU No. 2014-09
Impact
 
Excluding
ASU No. 2014-09 Impact
Assets
 
 
 
 
 
Receivables, net
$
2,171

 
$
(44
)
 
$
2,215

Other current assets
1,120

 
268

 
852

Total current assets
19,809

 
224

 
19,585

Total assets
45,200

 
224

 
44,976

 
 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
 
Other current liabilities
$
5,195

 
$
125

 
$
5,070

Total current liabilities
18,196

 
125

 
18,071

Other liabilities
2,352

 
24

 
2,328

Total liabilities
43,880

 
149

 
43,731

Total stockholders’ equity
1,320

 
75

 
1,245

Total liabilities and stockholders’ equity
45,200

 
224

 
44,976





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