HOME DEPOT, INC. - FORM 8-K - EX-99.1 - February 20, 2018

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Exhibit 99.1
hdlogoa02a01a01a01a01a07.jpg
The Home Depot Announces Fourth Quarter and Fiscal 2017 Results;
Increases Quarterly Dividend by 15.7 Percent;
Provides Fiscal 2018 Guidance;
Reaffirms Fiscal 2020 Sales and Operating Margin Targets;
Updates Fiscal 2020 Return on Invested Capital Target

ATLANTA, February 20, 2018 -- The Home Depot®, the world's largest home improvement retailer, today reported sales of $23.9 billion for the fourth quarter of fiscal 2017, a 7.5 percent increase from the fourth quarter of fiscal 2016. Comparable store sales for the fourth quarter of fiscal 2017 were positive 7.5 percent, and comp sales for U.S. stores were positive 7.2 percent.

Net earnings for the fourth quarter of fiscal 2017 were $1.8 billion, or $1.52 per diluted share, compared with net earnings of $1.7 billion, or $1.44 per diluted share, in the same period of fiscal 2016. For the fourth quarter of fiscal 2017, diluted earnings per share increased 5.6 percent from the same period in the prior year.

On January 25, 2018, the Company announced that it expected the impact of the Tax Cuts and Jobs Act of 2017 to result in an additional net tax expense of approximately $150 million. The provisional amount recorded in the fourth quarter was $127 million. This charge, coupled with the one-time bonus payment to hourly associates that was also announced on January 25, 2018, negatively impacted fourth quarter and fiscal 2017 diluted earnings per share by approximately $0.17.

Fiscal 2017

Sales for fiscal 2017 were $100.9 billion, an increase of 6.7 percent from fiscal 2016. Total company comparable store sales for fiscal 2017 increased 6.8 percent, and comp sales for U.S. stores were positive 6.9 percent for the year.

Earnings per diluted share in fiscal 2017 were $7.29, compared to $6.45 per diluted share in fiscal 2016, an increase of 13.0 percent.

“Our ongoing commitment to enhance the interconnected retail experience for our customers, provide localized and innovative product, and deliver best in class productivity resulted in record sales and net earnings for 2017,” said Craig Menear, chairman, CEO and president. “I would like to thank our associates for their solid execution and exceptional work in service to our customers.”

Dividend Declaration

The Company today announced that its board of directors declared a 15.7 percent increase in its quarterly dividend to $1.03 per share. “As a testament to our commitment to create value for our shareholders and our positive outlook for the business, the board has increased the dividend for the ninth consecutive year,” said Menear. The dividend is payable on March 22, 2018, to shareholders of
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record on the close of business on March 8, 2018. This is the 124th consecutive quarter the Company has paid a cash dividend.

Fiscal 2018 Guidance

The Company will have 53 weeks of operating results in fiscal 2018 and provides the following guidance for fiscal 2018:

•
Sales growth of approximately 6.5 percent including the 53rd week
•
Comparable store sales growth of approximately 5.0 percent for the 52-week period
•
53rd week projected to add approximately $1.6 billion to total sales
•
Three new stores
•
Gross margin of approximately 34.0 percent
•
Operating margin of approximately 14.5 percent
•
Tax rate of approximately 26.0 percent
•
Share repurchases of approximately $4.0 billion
•
53-week diluted earnings-per-share growth, after anticipated share repurchases, of approximately 28.0 percent to $9.31
◦
53rd week expected to contribute approximately $0.19 of diluted earnings per share
•
Capital spending of approximately $2.5 billion
•
Depreciation and amortization expense of approximately $2.1 billion
•
Cash flow from the business of approximately $14.1 billion

The Company plans to adopt ASU No. 2014-09, which pertains to revenue recognition, in the first quarter of fiscal 2018. The Company will update its fiscal 2018 guidance to reflect the impact of this accounting change during its first quarter earnings call in May. The Company does not expect the accounting change to have a material impact on its fiscal 2018 sales or operating margin guidance.

Long-Term Financial Targets

Today the Company reaffirms and updates its fiscal 2020 financial targets as follows:

Reaffirms:
•
Total sales ranging from approximately $115 billion to approximately $120 billion
•
Compounded annual sales growth rate ranging from approximately 4.5 percent to approximately 6.0 percent
•
Operating margin ranging from approximately 14.4 percent to approximately 15.0 percent
•
Annual average capital spending of approximately 2.5 percent of sales
Updates:
•
Return on invested capital target of more than 40 percent. Note that the return on invested capital target has been updated to reflect the impact of the Tax Cuts and Jobs Act of 2017


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

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At the end of the fourth quarter, the Company operated a total of 2,284 retail stores in all 50 states, the District of Columbia, Puerto Rico, the 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.
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Certain statements contained herein constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the demand for our products and services; net sales growth; comparable store sales; effects of competition; 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; implementation of store, interconnected retail, supply chain and technology initiatives; management of relationships with our suppliers and vendors; the impact and expected outcome of investigations, inquiries, claims and litigation, including those related to the 2014 data breach; issues related to the payment methods we accept; 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 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 29, 2017 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
Diane Dayhoff
 
Stephen Holmes
Vice President of Investor Relations
 
Senior Director of Corporate Communications
770-384-2666
 
770-384-5075
diane_dayhoff@homedepot.com
 
stephen_holmes@homedepot.com
 
 
 



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


 
Fiscal Year Ended
 
 
in millions, except per share data and as noted
January 28,
2018

January 29,
2017

% Change
 
January 28,
2018
 
January 29,
2017
 
% Change
Net sales
$
23,883


$
22,207


7.5
 %
 
$
100,904

 
$
94,595

 
6.7
 %
Cost of sales
15,790


14,654


7.8

 
66,548

 
62,282

 
6.8

Gross profit
8,093


7,553


7.1

 
34,356

 
32,313

 
6.3

Operating expenses:




 
 
 
 
 
 
 
Selling, general and administrative
4,440


4,183


6.1

 
17,864

 
17,132

 
4.3

Depreciation and amortization
464


443


4.7

 
1,811

 
1,754

 
3.2

Total operating expenses
4,904


4,626


6.0

 
19,675

 
18,886

 
4.2

Operating income
3,189


2,927


9.0

 
14,681

 
13,427

 
9.3

Interest and other (income) expense:




 
 
 
 
 
 
 
Interest and investment income
(23
)

(11
)

N/M
 
(74
)
 
(36
)
 
N/M
Interest expense
269


246


9.3

 
1,057

 
972

 
8.7

Interest and other, net
246


235


4.7

 
983

 
936

 
5.0

Earnings before provision for income taxes
2,943


2,692


9.3

 
13,698

 
12,491

 
9.7

Provision for income taxes
1,164


948


22.8

 
5,068

 
4,534

 
11.8

Net earnings
$
1,779


$
1,744


2.0
 %
 
$
8,630

 
$
7,957

 
8.5
 %









 
 
 
 
 
 
Basic weighted average common shares
1,160


1,206


(3.8
)%
 
1,178

 
1,229

 
(4.1
)%
Basic earnings per share
$
1.53


$
1.45


5.5

 
$
7.33

 
$
6.47

 
13.3










 
 
 
 
 
 
Diluted weighted average common shares
1,167


1,211


(3.6
)%
 
1,184

 
1,234

 
(4.1
)%
Diluted earnings per share
$
1.52


$
1.44


5.6

 
$
7.29

 
$
6.45

 
13.0

 
 
 
 
 
 
 
 
Selected Sales Data (1)
 
 
 
 
 
 
 
 
 
 
 
Customer transactions
366.5

 
359.2

 
2.0
 %
 
1,578.6

 
1,544.0

 
2.2
 %
Average ticket (actual)
$
64.00

 
$
60.65

 
5.5

 
$
63.06

 
$
60.35

 
4.5

Sales per square foot (actual)
394.87

 
366.25

 
7.8

 
417.02

 
390.78

 
6.7

 —————
(1)
Selected Sales Data does not include results for Interline Brands, Inc., which was acquired in fiscal 2015.
N/M - Not Meaningful

 






THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
in millions
January 28,
2018
 
January 29,
2017
Assets
 
 
 
Cash and cash equivalents
$
3,595

 
$
2,538

Receivables, net
1,952

 
2,029

Merchandise inventories
12,748

 
12,549

Other current assets
638

 
608

Total current assets
18,933

 
17,724

Net property and equipment
22,075

 
21,914

Goodwill
2,275

 
2,093

Other assets
1,246

 
1,235

Total assets
$
44,529

 
$
42,966

 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
Short-term debt
$
1,559

 
$
710

Accounts payable
7,244

 
7,000

Accrued salaries and related expenses
1,640

 
1,484

Current installments of long-term debt
1,202

 
542

Other current liabilities
4,549

 
4,397

Total current liabilities
16,194

 
14,133

Long-term debt, excluding current installments
24,267

 
22,349

Other liabilities
2,614

 
2,151

Total liabilities
43,075

 
38,633

Total stockholders’ equity
1,454

 
4,333

Total liabilities and stockholders’ equity
$
44,529

 
$
42,966





THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Fiscal Year Ended
in millions
January 28,
2018

January 29,
2017
Cash Flows From Operating Activities:



Net earnings
$
8,630


$
7,957

Reconciliation of net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
2,062


1,973

Stock-based compensation expense
273


267

Changes in working capital and other, net of acquisition effects
1,066


(414
)
Net cash provided by operating activities
12,031


9,783

 
 
 
 
Cash Flows From Investing Activities:



Capital expenditures, net of non-cash capital expenditures
(1,897
)

(1,621
)
Payments for business acquired, net
(374
)

—

Proceeds from sales of property and equipment
47


38

Other investing activities
(4
)
 
—

Net cash used in investing activities
(2,228
)

(1,583
)
 
 
 
 
Cash Flows From Financing Activities:



Proceeds from short-term debt, net
850


360

Proceeds from long-term debt, net of discounts
2,991

 
4,959

Repayments of long-term debt
(543
)

(3,045
)
Repurchases of common stock
(8,000
)

(6,880
)
Proceeds from sales of common stock
255


218

Cash dividends
(4,212
)

(3,404
)
Other financing activities
(211
)

(78
)
Net cash used in financing activities
(8,870
)

(7,870
)
Change in cash and cash equivalents
933


330

Effect of exchange rate changes on cash and cash equivalents
124


(8
)
Cash and cash equivalents at beginning of year
2,538


2,216

Cash and cash equivalents at end of year
$
3,595


$
2,538



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