x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 95-3261426 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
2455 Paces Ferry Road, Atlanta, Georgia | 30339 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer x | Accelerated filer ¨ | Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company ¨ |
Page | ||
amounts in millions, except share and per share data | October 30, 2016 | January 31, 2016 | |||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and Cash Equivalents | $ | 3,589 | $ | 2,216 | |||
Receivables, net | 1,995 | 1,890 | |||||
Merchandise Inventories | 13,241 | 11,809 | |||||
Other Current Assets | 523 | 569 | |||||
Total Current Assets | 19,348 | 16,484 | |||||
Property and Equipment, at cost | 40,015 | 39,266 | |||||
Less Accumulated Depreciation and Amortization | 18,175 | 17,075 | |||||
Net Property and Equipment | 21,840 | 22,191 | |||||
Goodwill | 2,095 | 2,102 | |||||
Other Assets | 1,219 | 1,196 | |||||
Total Assets | $ | 44,502 | $ | 41,973 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current Liabilities: | |||||||
Short-Term Debt | $ | — | $ | 350 | |||
Accounts Payable | 8,054 | 6,565 | |||||
Accrued Salaries and Related Expenses | 1,398 | 1,515 | |||||
Sales Taxes Payable | 594 | 476 | |||||
Deferred Revenue | 1,632 | 1,566 | |||||
Income Taxes Payable | 123 | 34 | |||||
Current Installments of Long-Term Debt | 543 | 77 | |||||
Other Accrued Expenses | 2,087 | 1,941 | |||||
Total Current Liabilities | 14,431 | 12,524 | |||||
Long-Term Debt, excluding current installments | 22,338 | 20,789 | |||||
Other Long-Term Liabilities | 1,856 | 1,965 | |||||
Deferred Income Taxes | 255 | 379 | |||||
Total Liabilities | 38,880 | 35,657 | |||||
STOCKHOLDERS’ EQUITY | |||||||
Common Stock, par value $0.05; authorized: 10 billion shares; issued: 1.775 billion shares at October 30, 2016 and 1.772 billion shares at January 31, 2016; outstanding: 1.220 billion shares at October 30, 2016 and 1.252 billion shares at January 31, 2016 | 88 | 88 | |||||
Paid-In Capital | 9,628 | 9,347 | |||||
Retained Earnings | 34,612 | 30,973 | |||||
Accumulated Other Comprehensive Loss | (883 | ) | (898 | ) | |||
Treasury Stock, at cost, 555 million shares at October 30, 2016 and 520 million shares at January 31, 2016 | (37,823 | ) | (33,194 | ) | |||
Total Stockholders’ Equity | 5,622 | 6,316 | |||||
Total Liabilities and Stockholders’ Equity | $ | 44,502 | $ | 41,973 |
Three Months Ended | Nine Months Ended | ||||||||||||||
amounts in millions, except per share data | October 30, 2016 | November 1, 2015 | October 30, 2016 | November 1, 2015 | |||||||||||
NET SALES | $ | 23,154 | $ | 21,819 | $ | 72,388 | $ | 67,539 | |||||||
Cost of Sales | 15,112 | 14,254 | 47,628 | 44,430 | |||||||||||
GROSS PROFIT | 8,042 | 7,565 | 24,760 | 23,109 | |||||||||||
Operating Expenses: | |||||||||||||||
Selling, General and Administrative | 4,280 | 4,161 | 12,949 | 12,623 | |||||||||||
Depreciation and Amortization | 442 | 423 | 1,311 | 1,261 | |||||||||||
Total Operating Expenses | 4,722 | 4,584 | 14,260 | 13,884 | |||||||||||
OPERATING INCOME | 3,320 | 2,981 | 10,500 | 9,225 | |||||||||||
Interest and Other (Income) Expense: | |||||||||||||||
Interest and Investment Income | (10 | ) | (7 | ) | (25 | ) | (160 | ) | |||||||
Interest Expense | 246 | 247 | 726 | 677 | |||||||||||
Interest and Other, net | 236 | 240 | 701 | 517 | |||||||||||
EARNINGS BEFORE PROVISION FOR INCOME TAXES | 3,084 | 2,741 | 9,799 | 8,708 | |||||||||||
Provision for Income Taxes | 1,115 | 1,016 | 3,586 | 3,170 | |||||||||||
NET EARNINGS | $ | 1,969 | $ | 1,725 | $ | 6,213 | $ | 5,538 | |||||||
Weighted Average Common Shares | 1,224 | 1,268 | 1,236 | 1,284 | |||||||||||
BASIC EARNINGS PER SHARE | $ | 1.61 | $ | 1.36 | $ | 5.03 | $ | 4.31 | |||||||
Diluted Weighted Average Common Shares | 1,229 | 1,274 | 1,242 | 1,290 | |||||||||||
DILUTED EARNINGS PER SHARE | $ | 1.60 | $ | 1.35 | $ | 5.00 | $ | 4.29 | |||||||
Dividends Declared per Share | $ | 0.69 | $ | 0.59 | $ | 2.07 | $ | 1.77 |
Three Months Ended | Nine Months Ended | ||||||||||||||
amounts in millions | October 30, 2016 | November 1, 2015 | October 30, 2016 | November 1, 2015 | |||||||||||
Net Earnings | $ | 1,969 | $ | 1,725 | $ | 6,213 | $ | 5,538 | |||||||
Other Comprehensive (Loss) Income: | |||||||||||||||
Foreign Currency Translation Adjustments | (125 | ) | (70 | ) | (8 | ) | (200 | ) | |||||||
Cash Flow Hedges, net of tax | 21 | (10 | ) | 23 | (10 | ) | |||||||||
Other | (1 | ) | — | — | — | ||||||||||
Total Other Comprehensive (Loss) Income | (105 | ) | (80 | ) | 15 | (210 | ) | ||||||||
COMPREHENSIVE INCOME | $ | 1,864 | $ | 1,645 | $ | 6,228 | $ | 5,328 |
Nine Months Ended | |||||||
amounts in millions | October 30, 2016 | November 1, 2015 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net Earnings | $ | 6,213 | $ | 5,538 | |||
Reconciliation of Net Earnings to Net Cash Provided by Operating Activities: | |||||||
Depreciation and Amortization | 1,474 | 1,384 | |||||
Stock-Based Compensation Expense | 199 | 177 | |||||
Gain on Sales of Investments | — | (144 | ) | ||||
Changes in Assets and Liabilities, net of the effects of acquisitions: | |||||||
Receivables, net | (108 | ) | (220 | ) | |||
Merchandise Inventories | (1,453 | ) | (1,176 | ) | |||
Other Current Assets | 36 | 57 | |||||
Accounts Payable and Accrued Expenses | 1,449 | 1,582 | |||||
Deferred Revenue | 64 | 50 | |||||
Income Taxes Payable | 184 | 295 | |||||
Deferred Income Taxes | (131 | ) | (148 | ) | |||
Other | (8 | ) | (29 | ) | |||
Net Cash Provided by Operating Activities | 7,919 | 7,366 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Capital Expenditures | (1,145 | ) | (1,083 | ) | |||
Proceeds from Sales of Investments | — | 144 | |||||
Payments for Businesses Acquired, net | — | (1,662 | ) | ||||
Proceeds from Sales of Property and Equipment | 30 | 24 | |||||
Net Cash Used in Investing Activities | (1,115 | ) | (2,577 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Repayments of Short-Term Borrowings, net | (350 | ) | (290 | ) | |||
Proceeds from Long-Term Borrowings, net of discounts | 4,959 | 3,991 | |||||
Repayments of Long-Term Debt | (3,034 | ) | (29 | ) | |||
Repurchases of Common Stock | (4,535 | ) | (5,043 | ) | |||
Proceeds from Sales of Common Stock | 136 | 149 | |||||
Cash Dividends Paid to Stockholders | (2,567 | ) | (2,287 | ) | |||
Other Financing Activities | (33 | ) | 86 | ||||
Net Cash Used in Financing Activities | (5,424 | ) | (3,423 | ) | |||
Change in Cash and Cash Equivalents | 1,380 | 1,366 | |||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | (7 | ) | (49 | ) | |||
Cash and Cash Equivalents at Beginning of Period | 2,216 | 1,723 | |||||
Cash and Cash Equivalents at End of Period | $ | 3,589 | $ | 3,040 |
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
2. | RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS |
3. | LONG-TERM DEBT |
4. | COMMITMENTS AND CONTINGENCIES |
Accrued Liabilities | Insurance Receivable | ||||||
Balance at January 31, 2016 | $ | (34 | ) | $ | 70 | ||
(Expenses incurred) insurance receivable recorded in the first quarter of fiscal 2016 | (2 | ) | — | ||||
Payments made (received) in the first quarter of fiscal 2016 | 9 | (15 | ) | ||||
Balance at May 1, 2016 | $ | (27 | ) | $ | 55 | ||
(Expenses incurred) insurance receivable recorded in the second quarter of fiscal 2016 | (2 | ) | — | ||||
Payments made (received) in the second quarter of fiscal 2016 | — | (10 | ) | ||||
Balance at July 31, 2016 | $ | (29 | ) | $ | 45 | ||
(Expenses incurred) insurance receivable recorded in the third quarter of fiscal 2016 | (23 | ) | — | ||||
Payments made (received) in the third quarter of fiscal 2016 | 2 | (25 | ) | ||||
Balance at October 30, 2016 | $ | (50 | ) | $ | 20 |
5. | FAIR VALUE MEASUREMENTS |
• | Level 1 – | Observable inputs that reflect quoted prices in active markets |
• | Level 2 – | Inputs other than quoted prices in active markets that are either directly or indirectly observable |
• | Level 3 – | Unobservable inputs for which little or no market data exists, therefore requiring the Company to develop its own assumptions |
Fair Value at October 30, 2016 Using | Fair Value at January 31, 2016 Using | ||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
Derivative agreements - assets | $ | — | $ | 258 | $ | — | $ | — | $ | 213 | $ | — | |||||||||||
Derivative agreements - liabilities | — | — | — | — | (82 | ) | — | ||||||||||||||||
Total | $ | — | $ | 258 | $ | — | $ | — | $ | 131 | $ | — |
6. | BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES |
Three Months Ended | Nine Months Ended | ||||||||||
October 30, 2016 | November 1, 2015 | October 30, 2016 | November 1, 2015 | ||||||||
Weighted average common shares | 1,224 | 1,268 | 1,236 | 1,284 | |||||||
Effect of potentially dilutive securities: | |||||||||||
Stock plans | 5 | 6 | 6 | 6 | |||||||
Diluted weighted average common shares | 1,229 | 1,274 | 1,242 | 1,290 |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
% of Net Sales | % Increase (Decrease) in Dollar Amounts | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
October 30, 2016 | November 1, 2015 | October 30, 2016 | November 1, 2015 | Three Months | Nine Months | ||||||||||||||||
NET SALES | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 6.1 | % | 7.2 | % | |||||||||
GROSS PROFIT | 34.7 | 34.7 | 34.2 | 34.2 | 6.3 | 7.1 | |||||||||||||||
Operating Expenses: | |||||||||||||||||||||
Selling, General and Administrative | 18.5 | 19.1 | 17.9 | 18.7 | 2.9 | 2.6 | |||||||||||||||
Depreciation and Amortization | 1.9 | 1.9 | 1.8 | 1.9 | 4.5 | 4.0 | |||||||||||||||
Total Operating Expenses | 20.4 | 21.0 | 19.7 | 20.6 | 3.0 | 2.7 | |||||||||||||||
OPERATING INCOME | 14.3 | 13.7 | 14.5 | 13.7 | 11.4 | 13.8 | |||||||||||||||
Interest and Other (Income) Expense: | |||||||||||||||||||||
Interest and Investment Income | — | — | — | (0.2 | ) | 42.9 | (84.4 | ) | |||||||||||||
Interest Expense | 1.1 | 1.1 | 1.0 | 1.0 | (0.4 | ) | 7.2 | ||||||||||||||
Interest and Other, net | 1.0 | 1.1 | 1.0 | 0.8 | (1.7 | ) | 35.6 | ||||||||||||||
EARNINGS BEFORE PROVISION FOR INCOME TAXES | 13.3 | 12.6 | 13.5 | 12.9 | 12.5 | 12.5 | |||||||||||||||
Provision for Income Taxes | 4.8 | 4.7 | 5.0 | 4.7 | 9.7 | 13.1 | |||||||||||||||
NET EARNINGS | 8.5 | % | 7.9 | % | 8.6 | % | 8.2 | % | 14.1 | % | 12.2 | % | |||||||||
SELECTED SALES DATA(1) | |||||||||||||||||||||
Number of Customer Transactions (in millions) | 380.0 | 371.1 | 1,184.8 | 1,151.7 | 2.4 | % | 2.9 | % | |||||||||||||
Average Ticket | $ | 59.78 | $ | 58.03 | $ | 60.26 | $ | 58.72 | 3.0 | % | 2.6 | % | |||||||||
Sales per Square Foot | $ | 382.18 | $ | 366.37 | $ | 399.12 | $ | 380.12 | 4.3 | % | 5.0 | % | |||||||||
Comparable Store Sales Increase (%)(2) | 5.5% | 5.1% | 5.5 | % | 5.1 | % | N/A | N/A | |||||||||||||
Online Sales (% of Net Sales)(3) | 5.6% | 5.1% | 5.6 | % | 5.0 | % | 17.5 | % | 19.2 | % |
(1) | Selected Sales Data does not include results for the Interline acquisition that was completed in the third quarter of fiscal 2015. |
(2) | Includes Net Sales at locations open greater than 12 months, including relocated and remodeled stores and online sales, and excluding closed stores. Retail stores become comparable on the Monday following their 365th day of operation. Comparable store sales is intended only as supplemental information and is not a substitute for Net Sales or Net Earnings presented in accordance with U.S. generally accepted accounting principles. |
(3) | Consists of Net Sales generated online through our Home Depot, Home Decorators Collection and Blinds.com websites for products picked up in stores or delivered to customer locations through our BOPIS, BOSS and BODFS programs. |
For the Twelve Months Ended | ||||||||
October 30, 2016 | November 1, 2015 | |||||||
Net Earnings | $ | 7,684 | $ | 6,917 | ||||
Add: | ||||||||
Interest and Other, net | 937 | 615 | ||||||
Provision for Income Taxes | 4,428 | 3,884 | ||||||
Operating Income | 13,049 | 11,416 | ||||||
Subtract: | ||||||||
Income Tax Adjustment (1) | 4,771 | 4,156 | ||||||
Net Operating Profit After Tax | $ | 8,278 | $ | 7,260 | ||||
Average Debt and Equity (2) | $ | 28,441 | $ | 27,565 | ||||
Return on Invested Capital (NOPAT / Average Debt and Equity) | 29.1 | % | 26.3 | % |
(1) | Income Tax Adjustment is defined as Operating Income multiplied by the Company's effective tax rate. |
(2) | Average Debt and Equity is defined as the average of beginning and ending long-term debt, including current maturities, and equity for the most recent twelve-month period. |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
1. | During the third quarter of fiscal 2016, the Company issued 871 deferred stock units under The Home Depot, Inc. Non-Employee Directors' Deferred Stock Compensation Plan pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act") and Rule 506 of the SEC's Regulation D thereunder. The deferred stock units were credited to the accounts of those non-employee directors who elected to receive all or a portion of board retainers in the form of deferred stock units instead of cash during the third quarter of fiscal 2016. The deferred stock units convert to shares of common stock on a one-for-one basis following a termination of service as described in this plan. |
2. | During the third quarter of fiscal 2016, the Company credited 1,136 deferred stock units to participant accounts under The Home Depot FutureBuilder Restoration Plan pursuant to an exemption from the registration requirements of the Securities Act for involuntary, non-contributory plans. The deferred stock units convert to shares of common stock on a one-for-one basis following the termination of service as described in this plan. |
Period | Total Number of Shares Purchased(1) | Average Price Paid Per Share(1) | Total Number of Shares Purchased as Part of Publicly Announced Program(2) | Dollar Value of Shares that May Yet Be Purchased Under the Program(2) | ||||||||||
August 1, 2016 – August 28, 2016 | 3,691,696 | $ | 136.08 | 3,678,603 | $ | 7,999,398,137 | ||||||||
August 29, 2016 – September 25, 2016 | 5,400,659 | $ | 130.23 | 5,387,197 | $ | 7,297,857,715 | ||||||||
September 26, 2016 – October 30, 2016 | 7,356,654 | $ | 126.62 | 7,322,099 | $ | 6,370,702,724 | ||||||||
16,449,009 | $ | 129.93 | 16,387,899 |
(1) | These amounts include repurchases pursuant to the Company's 1997 and Amended and Restated 2005 Omnibus Stock Incentive Plans (the "Plans"). Under the Plans, participants may surrender shares as payment of applicable tax withholding on the vesting of restricted stock and deferred share awards. Participants in the Plans may also exercise stock options by surrendering shares of common stock that the participants already own as payment of the exercise price. Shares so surrendered by participants in the Plans are repurchased pursuant to the terms of the Plans and applicable award agreement and not pursuant to publicly announced share repurchase programs. |
(2) | In the first quarter of fiscal 2015, the Board of Directors authorized an $18.0 billion share repurchase program that replaced the previous authorization. The program does not have a prescribed expiration date. |
Item 6. | Exhibits |
*3.1 | Amended and Restated Certificate of Incorporation of The Home Depot, Inc. [Form 10-Q filed on September 1, 2011, Exhibit 3.1] | |
*3.2 | By-Laws of The Home Depot, Inc. (Amended and Restated Effective March 3, 2016). [Form 8-K filed on March 8, 2016, Exhibit 3.2] | |
12.1 | Statement of Computation of Ratio of Earnings to Fixed Charges. | |
15.1 | Acknowledgment of Independent Registered Public Accounting Firm, dated November 21, 2016. | |
31.1 | Certification of the Chief Executive Officer and President pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended. | |
31.2 | Certification of the Chief Financial Officer and Executive Vice President – Corporate Services pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended. | |
32.1 | Certification of Chief Executive Officer and President furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Chief Financial Officer and Executive Vice President – Corporate Services furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended October 30, 2016, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Earnings; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements. |
THE HOME DEPOT, INC. | ||
(Registrant) | ||
By: | /s/ CRAIG A. MENEAR | |
Craig A. Menear | ||
Chairman, Chief Executive Officer and | ||
President | ||
/s/ CAROL B. TOMÉ | ||
Carol B. Tomé | ||
Chief Financial Officer and | ||
Executive Vice President – Corporate Services |
November 21, 2016 |
(Date) |
Exhibit | Description | |
Exhibits marked with an asterisk (*) are incorporated by reference to exhibits or appendices previously filed with the SEC, as indicated by the references in brackets. All other exhibits are filed or furnished herewith. | ||
*3.1 | Amended and Restated Certificate of Incorporation of The Home Depot, Inc. [Form 10-Q filed on September 1, 2011, Exhibit 3.1] | |
*3.2 | By-Laws of The Home Depot, Inc. (Amended and Restated Effective March 3, 2016). [Form 8-K filed on March 8, 2016, Exhibit 3.2] | |
12.1 | Statement of Computation of Ratio of Earnings to Fixed Charges. | |
15.1 | Acknowledgment of Independent Registered Public Accounting Firm, dated November 21, 2016. | |
31.1 | Certification of the Chief Executive Officer and President pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended. | |
31.2 | Certification of the Chief Financial Officer and Executive Vice President – Corporate Services pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended. | |
32.1 | Certification of Chief Executive Officer and President furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Chief Financial Officer and Executive Vice President – Corporate Services furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended October 30, 2016, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Earnings; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements. |
Fiscal Year(1) | |||||||||||||||||||||||
Nine Months Ended | |||||||||||||||||||||||
October 30, 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Earnings Before Provision for Income Taxes | $ | 9,799 | $ | 11,021 | $ | 9,976 | $ | 8,467 | $ | 7,221 | $ | 6,068 | |||||||||||
Less: Capitalized Interest | (1 | ) | (2 | ) | (2 | ) | (2 | ) | (3 | ) | (3 | ) | |||||||||||
Add: | |||||||||||||||||||||||
Portion of Rental Expense under operating leases deemed to be the equivalent of interest | 236 | 312 | 312 | 308 | 298 | 280 | |||||||||||||||||
Interest Expense | 727 | 921 | 832 | 713 | 635 | 609 | |||||||||||||||||
Adjusted Earnings | $ | 10,761 | $ | 12,252 | $ | 11,118 | $ | 9,486 | $ | 8,151 | $ | 6,954 | |||||||||||
Fixed Charges: | |||||||||||||||||||||||
Interest Expense | $ | 727 | $ | 921 | $ | 832 | $ | 713 | $ | 635 | $ | 609 | |||||||||||
Portion of Rental Expense under operating leases deemed to be the equivalent of interest | 236 | 312 | 312 | 308 | 298 | 280 | |||||||||||||||||
Total Fixed Charges | $ | 963 | $ | 1,233 | $ | 1,144 | $ | 1,021 | $ | 933 | $ | 889 | |||||||||||
Ratio of Earnings to Fixed Charges(2) | 11.2 | x | 9.9 | x | 9.7 | x | 9.3 | x | 8.7 | x | 7.8 | x |
(1) | Fiscal years 2015, 2014, 2013, 2012, and 2011 refer to the fiscal years ended January 31, 2016, February 1, 2015, February 2, 2014, February 3, 2013 and January 29, 2012, respectively. Fiscal year 2012 includes 53 weeks; all other fiscal years reported include 52 weeks. |
(2) | For purposes of computing the ratios of earnings to fixed charges, “earnings” consist of earnings before provision for income taxes plus fixed charges, excluding capitalized interest. “Fixed charges” consist of interest incurred on indebtedness including capitalized interest, amortization of debt expenses and the portion of rental expense under operating leases deemed to be the equivalent of interest. The ratios of earnings to fixed charges are calculated as follows: |
Description | Registration Statement Number |
Form S-3 | |
Depot Direct stock purchase program | 333-200607 |
Debt securities | 333-206550 |
Form S-8 | |
The Home Depot, Inc. 1997 Omnibus Stock Incentive Plan | 333-61733 |
The Home Depot Canada Registered Retirement Savings Plan | 333-38946 |
The Home Depot, Inc. Restated and Amended Employee Stock Purchase Plan | 333-151849 |
The Home Depot, Inc. Amended and Restated Employee Stock Purchase Plan | 333-182374 |
The Home Depot, Inc. Non-Qualified Stock Option and Deferred Stock Units Plan and Agreement | 333-56722 |
The Home Depot, Inc. 2005 Omnibus Stock Incentive Plan | 333-125331 |
The Home Depot, Inc. 2005 Omnibus Stock Incentive Plan | 333-153171 |
The Home Depot FutureBuilder and The Home Depot FutureBuilder for Puerto Rico | 333-125332 |
1. | I have reviewed this quarterly report on Form 10-Q of The Home Depot, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Craig A. Menear |
Craig A. Menear |
Chairman, Chief Executive Officer and President |
1. | I have reviewed this quarterly report on Form 10-Q of The Home Depot, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Carol B. Tomé |
Carol B. Tomé |
Chief Financial Officer and |
Executive Vice President – Corporate Services |
(1) | The Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Craig A. Menear |
Craig A. Menear |
Chairman, Chief Executive Officer and President |
November 21, 2016 |
(1) | The Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Carol B. Tomé |
Carol B. Tomé |
Chief Financial Officer and |
Executive Vice President – Corporate Services |
November 21, 2016 |
Document And Entity Information - shares |
9 Months Ended | |
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Oct. 30, 2016 |
Nov. 15, 2016 |
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Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Oct. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | HOME DEPOT INC | |
Entity Central Index Key | 0000354950 | |
Current Fiscal Year End Date | --01-29 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 1,218,160,970 |
Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Millions |
Oct. 30, 2016 |
Jan. 31, 2016 |
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Statement of Financial Position [Abstract] | ||
Common Stock, par value | $ 0.05 | $ 0.05 |
Common Stock, shares authorized | 10,000 | 10,000 |
Common Stock, shares issued | 1,775 | 1,772 |
Common Stock, shares outstanding | 1,220 | 1,252 |
Treasury Stock, shares | 555 | 520 |
Consolidated Statements of Earnings - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
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Oct. 30, 2016 |
Nov. 01, 2015 |
Oct. 30, 2016 |
Nov. 01, 2015 |
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Income Statement [Abstract] | ||||
NET SALES | $ 23,154 | $ 21,819 | $ 72,388 | $ 67,539 |
Cost of Sales | 15,112 | 14,254 | 47,628 | 44,430 |
GROSS PROFIT | 8,042 | 7,565 | 24,760 | 23,109 |
Operating Expenses: | ||||
Selling, General and Administrative | 4,280 | 4,161 | 12,949 | 12,623 |
Depreciation and Amortization | 442 | 423 | 1,311 | 1,261 |
Total Operating Expenses | 4,722 | 4,584 | 14,260 | 13,884 |
OPERATING INCOME | 3,320 | 2,981 | 10,500 | 9,225 |
Interest and Other (Income) Expense: | ||||
Interest and Investment Income | (10) | (7) | (25) | (160) |
Interest Expense | 246 | 247 | 726 | 677 |
Interest and Other, net | 236 | 240 | 701 | 517 |
EARNINGS BEFORE PROVISION FOR INCOME TAXES | 3,084 | 2,741 | 9,799 | 8,708 |
Provision for Income Taxes | 1,115 | 1,016 | 3,586 | 3,170 |
NET EARNINGS | $ 1,969 | $ 1,725 | $ 6,213 | $ 5,538 |
Weighted Average Common Shares | 1,224 | 1,268 | 1,236 | 1,284 |
BASIC EARNINGS PER SHARE | $ 1.61 | $ 1.36 | $ 5.03 | $ 4.31 |
Diluted Weighted Average Common Shares | 1,229 | 1,274 | 1,242 | 1,290 |
DILUTED EARNINGS PER SHARE | $ 1.60 | $ 1.35 | $ 5.00 | $ 4.29 |
Dividends Declared per Share | $ 0.69 | $ 0.59 | $ 2.07 | $ 1.77 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
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Oct. 30, 2016 |
Nov. 01, 2015 |
Oct. 30, 2016 |
Nov. 01, 2015 |
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Statement of Comprehensive Income [Abstract] | ||||
Net Earnings | $ 1,969 | $ 1,725 | $ 6,213 | $ 5,538 |
Other Comprehensive (Loss) Income: | ||||
Foreign Currency Translation Adjustments | (125) | (70) | (8) | (200) |
Cash Flow Hedges, net of tax | 21 | (10) | 23 | (10) |
Other | (1) | 0 | 0 | 0 |
Total Other Comprehensive (Loss) Income | (105) | (80) | 15 | (210) |
COMPREHENSIVE INCOME | $ 1,864 | $ 1,645 | $ 6,228 | $ 5,328 |
Summary of Significant Accounting Policies |
9 Months Ended |
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Oct. 30, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended January 31, 2016, as filed with the Securities and Exchange Commission. Business The Home Depot, Inc., together with its subsidiaries (the "Company"), is a home improvement retailer that sells a wide assortment of building materials, home improvement products and lawn and garden products and provides a number of services to do-it-yourself customers, do-it-for-me customers and professional customers. The Home Depot stores, which are full-service, warehouse-style stores averaging approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area, stock approximately 30,000 to 40,000 different kinds of products. The Company also offers a significantly broader product assortment through its Home Depot, Home Decorators Collection and Blinds.com websites. Valuation Reserves As of October 30, 2016 and January 31, 2016, the valuation allowances for Merchandise Inventories and uncollectible Receivables were not material. Recent Accounting Pronouncements In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory", which requires an entity to recognize the income tax consequences of an intercompany transfer of assets other than inventory when the transfer occurs. An entity will continue to recognize the income tax consequences of an intercompany transfer of inventory when the inventory is sold to a third party. This guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods, using a modified retrospective approach, and early adoption is permitted. The Company is evaluating the effect that ASU No. 2016-16 will have on its Consolidated Financial Statements and related disclosures. In March 2016, the FASB issued ASU No. 2016-09, "Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting", which makes several modifications to the accounting for employee share-based payment transactions, including the requirement to recognize the income tax effects of awards that vest or settle as income tax expense. This guidance also clarifies the presentation of certain components of share-based awards in the statement of cash flows. This guidance is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods, and early adoption is permitted. The Company does not believe that ASU No. 2016-09 will have a material impact on its Consolidated Financial Statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)", which requires an entity that is a lessee to recognize the assets and liabilities arising from leases on the balance sheet. This guidance also requires disclosures about the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, using a modified retrospective approach, and early adoption is permitted. The Company is evaluating the effect that ASU No. 2016-02 will have on its Consolidated Financial Statements and related disclosures. In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)", which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. ASU No. 2014-09 supersedes most existing revenue recognition guidance in U.S. GAAP, and it permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date", which delayed the effective date of ASU No. 2014-09 by one year. As a result, ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, including interim periods within those annual periods. In fiscal 2016, the FASB issued guidance clarifying the interpretation of certain principles of ASU No. 2014-09. The Company is evaluating the effect that this revenue recognition guidance will have on its Consolidated Financial Statements and related disclosures. Reclassifications Certain amounts in prior fiscal periods have been reclassified to conform with the presentation adopted in the current fiscal periods. See Note 2 to the Consolidated Financial Statements included in this report. |
Recently Adopted Accounting Pronouncements |
9 Months Ended |
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Oct. 30, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recently Adopted Accounting Pronouncements | RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS On February 1, 2016, the Company adopted ASU No. 2015-03, "Interest–Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs". Under ASU No. 2015-03, debt issuance costs related to a recognized debt liability are presented as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The adoption of ASU No. 2015-03 has been applied retrospectively, and accordingly, the Company's Consolidated Balance Sheet as of January 31, 2016 has been reclassified to reflect this adoption. The impact of this reclassification was a decrease of $99 million to Other Assets, and a corresponding decrease to Long-Term Debt, excluding current installments, as of January 31, 2016. Also on February 1, 2016, the Company early adopted ASU No. 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes". Under ASU No. 2015-17, deferred tax assets and liabilities are presented as noncurrent in a classified balance sheet. The adoption of ASU No. 2015-17 has been applied retrospectively and accordingly, the Company's Consolidated Balance Sheet as of January 31, 2016 has been reclassified to reflect this adoption. The impact of this reclassification was a decrease of $509 million to Other Current Assets, an increase of $32 million to Other Assets, a decrease of $2 million to Other Accrued Expenses and a $475 million decrease to Deferred Income Taxes as of January 31, 2016. All future deferred tax assets and liabilities will be presented as noncurrent. |
Long-Term Debt |
9 Months Ended |
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Oct. 30, 2016 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | LONG-TERM DEBT In September 2016, the Company issued $1.0 billion of 2.125% senior notes due September 15, 2026 (the "September 2026 notes") at a discount of $11 million and $1.0 billion of 3.50% senior notes due September 15, 2056 (the "2056 notes") at a discount of $19 million (together, the "September 2016 issuance"). Interest on the September 2026 and the 2056 notes is due semi-annually on March 15 and September 15 of each year, beginning March 15, 2017. The $30 million discount associated with the September 2016 issuance is being amortized over the term of the notes using the effective interest rate method. Issuance costs of $16 million associated with the September 2016 issuance were recorded as a direct deduction to the senior notes and are being amortized over the term of the notes. The net proceeds of the September 2016 issuance were used for general corporate purposes, including repurchases of shares of the Company's common stock. In February 2016, the Company issued $1.35 billion of 2.00% senior notes due April 1, 2021 (the "2021 notes") at a discount of $5 million, $1.3 billion of 3.00% senior notes due April 1, 2026 (the "April 2026 notes") at a discount of $8 million, and $350 million of 4.25% senior notes due April 1, 2046 (the "2046 notes") at a premium of $2 million (together, the "February 2016 issuance"). The 2046 notes form a single series with the Company's $1.25 billion of 4.25% senior notes due April 1, 2046 that were issued in May 2015, and have the same terms. The aggregate principal amount outstanding of the Company's senior notes due April 1, 2046 is $1.6 billion. Interest on the 2021 and the April 2026 notes is due semi-annually on April 1 and October 1 of each year, beginning October 1, 2016. Interest on the 2046 notes is due semi-annually on April 1 and October 1 of each year, beginning April 1, 2016, with interest accruing from October 1, 2015. The $13 million discount associated with the 2021 and the April 2026 notes and the $2 million premium associated with the 2046 notes are being amortized over the term of the notes using the effective interest rate method. Issuance costs of $17 million associated with the February 2016 issuance were recorded as a direct deduction to the senior notes and are being amortized over the term of the notes. The net proceeds of the February 2016 issuance were used to repay the Company's 5.40% senior notes that matured on March 1, 2016. All of the Company's senior notes, other than the $500 million of floating rate senior notes due September 15, 2017, may be redeemed by the Company at any time, in whole or in part, at the redemption price plus accrued interest up to the redemption date. The redemption price is equal to the greater of (1) 100% of the principal amount of the notes to be redeemed, or (2) the sum of the present values of the remaining scheduled payments of principal and interest to the Par Call Date, as defined in the respective notes. Additionally, if a Change in Control Triggering Event occurs, as defined in the notes, holders of all notes have the right to require the Company to redeem those notes at 101% of the aggregate principal amount of the notes plus accrued interest up to the redemption date. The Company is generally not limited under the indentures governing the notes in its ability to incur additional indebtedness or required to maintain financial ratios or specified levels of net worth or liquidity. Further, while the indentures governing the notes contain various restrictive covenants, none are expected to impact the Company's liquidity or capital resources. In fiscal 2015, the Company entered into forward starting interest rate swap agreements with a combined notional amount of $1.0 billion, accounted for as cash flow hedges, to hedge interest rate fluctuations in anticipation of the February 2016 issuance. In connection with the February 2016 issuance, the Company paid $89 million to settle these forward starting interest rate swap agreements. This amount, net of income taxes, is included in Accumulated Other Comprehensive Loss and is being amortized to Interest Expense over the term of the April 2026 notes. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Data Breach As previously reported, in the third quarter of fiscal 2014, the Company confirmed that its payment data systems were breached, which potentially impacted customers who used payment cards at self-checkout systems in the Company's U.S. and Canadian stores (the "Data Breach"). Litigation, Claims and Government Investigations In fiscal 2015, the four major payment card networks made claims against the Company for costs that they assert they or their issuing banks incurred in connection with the Data Breach. The Company entered into settlement agreements with all four networks in fiscal 2015. In addition, a total of 57 putative class actions were filed in the U.S. on behalf of customers and financial institutions and in Canada on behalf of customers allegedly harmed by the Data Breach. The U.S. class actions were consolidated for pre-trial proceedings in the United States District Court for the Northern District of Georgia (the "District Court"). In the fourth quarter of fiscal 2015 and first quarter of fiscal 2016, the Company agreed to settlement terms to resolve and dismiss the claims asserted in the U.S. and Canadian customer class actions, respectively. In August 2016, the respective courts approved the settlements. The Company previously recorded accruals for estimated probable losses in connection with the payment card networks' claims and the U.S. and Canadian customer class actions. In the third quarter of fiscal 2016, the Company recorded an accrual for estimated probable losses that it expects to incur in connection with the U.S. financial institution class actions, which remain ongoing. The Company's estimates are based on currently available information associated with each of these matters and may change as new information becomes available or circumstances change. In addition, the accrual for the U.S. financial institution class actions is based on the expectation of reaching a negotiated settlement with the claimants and not on any determination that it is probable that the Company would be found liable for the losses it has accrued were this matter to be litigated. Other claims have been and may be asserted against the Company on behalf of customers, payment card issuing banks, shareholders or others seeking damages or other related relief allegedly arising from the Data Breach. In fiscal 2015, two purported shareholder derivative actions were filed in the District Court against certain present and former members of the Company's Board of Directors and executive officers. The Company was also named as a nominal defendant in both suits. In the first quarter of fiscal 2016, the two actions were consolidated into a single derivative complaint, which asserts claims for breaches of fiduciary duty, waste of corporate assets and violations of the Securities Exchange Act of 1934. The complaint seeks unspecified damages, equitable relief to reform the Company's corporate governance structure, restitution, disgorgement of profits, benefits and other compensation obtained by the defendants, and reasonable costs and expenses. In addition, several state and federal agencies, including State Attorneys General, are investigating events related to the Data Breach, including how it occurred, its consequences and the Company's responses. The Company is cooperating in the governmental investigations, and the Company may be subject to fines or other obligations. While losses from these pending matters are reasonably possible, the Company is not able to estimate the costs, or range of costs, related to these matters (other than the U.S. financial institutions class actions discussed above) because the proceedings remain in the early stages, alleged damages have not been specified, and there are significant factual and legal issues to be resolved. The Company has not concluded that a loss from these matters is probable; therefore, the Company has not recorded an accrual for litigation, claims and governmental investigations related to these matters as of the end of the third quarter of fiscal 2016. The Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable. The Company believes that the ultimate amount paid on these actions, claims and investigations could have an adverse effect on the Company's consolidated financial condition, results of operations or cash flows in future periods. Expenses Incurred and Amounts Accrued In the third quarter and first nine months of fiscal 2016, the Company recorded $23 million and $27 million, respectively, of pretax expenses related to the Data Breach. The Company did not record any related expected insurance proceeds in the third quarter and first nine months of fiscal 2016. Since the Data Breach occurred, the Company has recorded $288 million of pretax gross expenses related to the Data Breach, partially offset by $100 million of expected insurance proceeds, for pretax net expenses of $188 million. These expenses include costs to investigate the Data Breach; provide identity protection services, including credit monitoring, to impacted customers; increase call center staffing; and pay legal and other professional services, all of which were expensed as incurred. Expenses also include the accruals for estimated probable losses that the Company has incurred or expects to incur in connection with the claims made by the payment card networks or their issuing banks, the U.S. and Canadian customer class actions, and the U.S. financial institution class actions. These expenses are included in Selling, General and Administrative expenses in the accompanying Consolidated Statements of Earnings. At October 30, 2016, accrued liabilities and insurance receivable related to the Data Breach consisted of the following (amounts in millions):
Future Costs The Company expects to incur additional legal and other professional service expenses associated with the Data Breach in future periods and will recognize these expenses as services are received. Costs related to the Data Breach that may be incurred in future periods may include liabilities from current and future civil litigation, governmental investigations and enforcement proceedings; future expenses for legal, investigative, and consulting fees; and incremental expenses and capital investments for remediation activities. The Company believes that the ultimate amount paid for these services and claims could have an adverse effect on the Company's consolidated financial condition, results of operations, or cash flows in future periods. Insurance Coverage The Company maintained $100 million of network security and privacy liability insurance coverage in fiscal 2014, above a $7.5 million deductible, to limit the Company's exposure to losses such as those related to the Data Breach. As of October 30, 2016, the Company had received initial payments totaling $80 million of insurance reimbursements under the fiscal 2014 policy, and expects to receive additional payments. In fiscal 2016 and 2015, the Company maintained $100 million of network security and privacy liability insurance coverage, above a $10 million deductible, to limit the Company's exposure to similar losses. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | FAIR VALUE MEASUREMENTS The fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, rather than the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are:
Assets and Liabilities Measured at Fair Value on a Recurring Basis The assets and liabilities of the Company that are measured at fair value on a recurring basis as of October 30, 2016 and January 31, 2016 were as follows (amounts in millions):
The Company uses derivative financial instruments from time to time in the management of its interest rate exposure on long-term debt and its exposure on foreign currency fluctuations. The fair value of the Company's derivative financial instruments was measured using level 2 inputs. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Long-lived assets were analyzed for impairment on a nonrecurring basis using fair value measurements with unobservable inputs (level 3). Impairment charges related to long-lived assets in the first nine months of fiscal 2016 and 2015 were not material. During the third quarter of fiscal 2016, the Company completed its annual assessment of the recoverability of Goodwill for its U.S., Canada and Mexico reporting units. The fair values of these reporting units were estimated using the present value of expected future discounted cash flows through unobservable inputs (level 3) and the fair value exceeded the carrying value for each respective reporting unit. Accordingly, no Goodwill impairments were recorded for these reporting units. The aggregate fair value of the Company's senior notes, based on quoted market prices, was $24.6 billion and $21.8 billion at October 30, 2016 and January 31, 2016, respectively, compared to a carrying value of $22.0 billion and $20.1 billion at October 30, 2016 and January 31, 2016, respectively. |
Basic And Diluted Weighted Average Common Shares |
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Basic And Diluted Weighted Average Common Shares | BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES The reconciliation of basic to diluted weighted average common shares for the three and nine months ended October 30, 2016 and November 1, 2015 was as follows (amounts in millions):
Stock plans consist of shares granted under the Company's employee stock plans. Options to purchase 1 million and 1 million shares of common stock for the three months ended October 30, 2016 and November 1, 2015, respectively, and options to purchase 1 million and 1 million shares of common stock for the nine months ended October 30, 2016 and November 1, 2015, respectively, were excluded from the computation of Diluted Earnings per Share because their effect would have been anti-dilutive. |
Summary of Significant Accounting Policies (Policy) |
9 Months Ended |
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Oct. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended January 31, 2016, as filed with the Securities and Exchange Commission. |
Reclassifications | Reclassifications Certain amounts in prior fiscal periods have been reclassified to conform with the presentation adopted in the current fiscal periods. See Note 2 to the Consolidated Financial Statements included in this report. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory", which requires an entity to recognize the income tax consequences of an intercompany transfer of assets other than inventory when the transfer occurs. An entity will continue to recognize the income tax consequences of an intercompany transfer of inventory when the inventory is sold to a third party. This guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods, using a modified retrospective approach, and early adoption is permitted. The Company is evaluating the effect that ASU No. 2016-16 will have on its Consolidated Financial Statements and related disclosures. In March 2016, the FASB issued ASU No. 2016-09, "Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting", which makes several modifications to the accounting for employee share-based payment transactions, including the requirement to recognize the income tax effects of awards that vest or settle as income tax expense. This guidance also clarifies the presentation of certain components of share-based awards in the statement of cash flows. This guidance is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods, and early adoption is permitted. The Company does not believe that ASU No. 2016-09 will have a material impact on its Consolidated Financial Statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)", which requires an entity that is a lessee to recognize the assets and liabilities arising from leases on the balance sheet. This guidance also requires disclosures about the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, using a modified retrospective approach, and early adoption is permitted. The Company is evaluating the effect that ASU No. 2016-02 will have on its Consolidated Financial Statements and related disclosures. In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)", which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. ASU No. 2014-09 supersedes most existing revenue recognition guidance in U.S. GAAP, and it permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date", which delayed the effective date of ASU No. 2014-09 by one year. As a result, ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, including interim periods within those annual periods. In fiscal 2016, the FASB issued guidance clarifying the interpretation of certain principles of ASU No. 2014-09. The Company is evaluating the effect that this revenue recognition guidance will have on its Consolidated Financial Statements and related disclosures. On February 1, 2016, the Company adopted ASU No. 2015-03, "Interest–Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs". Under ASU No. 2015-03, debt issuance costs related to a recognized debt liability are presented as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Also on February 1, 2016, the Company early adopted ASU No. 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes". Under ASU No. 2015-17, deferred tax assets and liabilities are presented as noncurrent in a classified balance sheet. |
Commitments and Contingencies (Tables) |
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Oct. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Loss Contingencies by Contingency | At October 30, 2016, accrued liabilities and insurance receivable related to the Data Breach consisted of the following (amounts in millions):
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Fair Value Measurements (Tables) |
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Oct. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and Liabilities Measured at Fair Value on a Recurring Basis | The assets and liabilities of the Company that are measured at fair value on a recurring basis as of October 30, 2016 and January 31, 2016 were as follows (amounts in millions):
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Basic And Diluted Weighted Average Common Shares (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Weighted Average Number of Shares | The reconciliation of basic to diluted weighted average common shares for the three and nine months ended October 30, 2016 and November 1, 2015 was as follows (amounts in millions):
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Summary of Significant Accounting Policies (Narrative) (Details) product in Thousands, ft² in Thousands |
Oct. 30, 2016
ft²
product
|
---|---|
Minimum [Member] | |
Accounting Policies [Line Items] | |
Approximate number of different types of inventory held at stores | product | 30 |
Maximum [Member] | |
Accounting Policies [Line Items] | |
Approximate number of different types of inventory held at stores | product | 40 |
Average Store Size [Member] | |
Accounting Policies [Line Items] | |
Approximate average square footage of warehouse-style stores | ft² | 104 |
Average Garden Center Size [Member] | |
Accounting Policies [Line Items] | |
Approximate average square footage of warehouse-style stores | ft² | 24 |
Fair Value Measurements (Narrative) (Details) - USD ($) $ in Billions |
Oct. 30, 2016 |
Jan. 31, 2016 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Carrying value of senior notes | $ 22.0 | $ 20.1 |
Senior Notes [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of senior notes | $ 24.6 | $ 21.8 |
Fair Value Measurements (Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Millions |
Oct. 30, 2016 |
Jan. 31, 2016 |
---|---|---|
Fair Value, Inputs, Level 1 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative agreements - assets | $ 0 | $ 0 |
Derivative agreements - liabilities | 0 | 0 |
Total | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative agreements - assets | 258 | 213 |
Derivative agreements - liabilities | 0 | (82) |
Total | 258 | 131 |
Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative agreements - assets | 0 | 0 |
Derivative agreements - liabilities | 0 | 0 |
Total | $ 0 | $ 0 |
Basic And Diluted Weighted Average Common Shares (Narrative) (Details) - shares shares in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 30, 2016 |
Nov. 01, 2015 |
Oct. 30, 2016 |
Nov. 01, 2015 |
|
Employee Stock Option [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Options to purchase common stock excluded from computation of Diluted Earnings per Share | 1 | 1 | 1 | 1 |
Basic and Diluted Weighted Average Common Shares (Reconciliation Of Basic To Diluted Weighted Average Common Shares) (Details) - shares shares in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 30, 2016 |
Nov. 01, 2015 |
Oct. 30, 2016 |
Nov. 01, 2015 |
|
Reconciliation of Basic to Diluted Weighted Average Common Shares: | ||||
Weighted average common shares | 1,224 | 1,268 | 1,236 | 1,284 |
Effect of potentially dilutive securities: Stock plans | 5 | 6 | 6 | 6 |
Diluted weighted average common shares | 1,229 | 1,274 | 1,242 | 1,290 |
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