10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 3, 2019

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 1-8207

THE HOME DEPOT, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-3261426
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2455 Paces Ferry Road
Atlanta,	Georgia	30339
(Address of principal executive offices)		(Zip Code)

(770) 433-8211

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report): N/A

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.05 Par Value Per Share	HD	New York Stock Exchange LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒         Accelerated filer ☐      Non-accelerated filer ☐     Smaller reporting company ☐     Emerging growth company ☐    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

1,090,831,020 shares of common stock, $0.05 par value, as of November 19, 2019

TABLE OF CONTENTS

Commonly Used or Defined Terms		ii
Forward-Looking Statements		iii
PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements.	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Earnings	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Stockholders' Equity	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
	Note 1. Summary of Significant Accounting Policies	6
	Note 2. Net Sales	7
	Note 3. Property and Leases	8
	Note 4. Debt and Derivative Instruments	11
	Note 5. Stockholders' Equity	11
	Note 6. Fair Value Measurements	12
	Note 7. Weighted Average Common Shares	13
	Note 8. Commitments and Contingencies	13
	Report of Independent Registered Public Accounting Firm	14
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	21
Item 4.	Controls and Procedures.	21
PART II – OTHER INFORMATION		21
Item 1A.	Risk Factors.	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	22
Item 6.	Exhibits.	23
SIGNATURES		24

i

COMMONLY USED OR DEFINED TERMS

Term	Definition
ASR	Accelerated share repurchase
ASU	Accounting Standards Update
Comparable sales	As defined in the Results of Operations and Non-GAAP Financial Measures section of MD&A
Exchange Act	Securities Exchange Act of 1934, as amended
FASB	Financial Accounting Standards Board
fiscal 2018	Fiscal year ended February 3, 2019 (includes 53 weeks)
fiscal 2019	Fiscal year ending February 2, 2020 (includes 52 weeks)
GAAP	U.S. generally accepted accounting principles
Interline	The legacy Interline Brands business, now operating as a part of The Home Depot Pro
MD&A	Management's Discussion and Analysis of Financial Condition and Results of Operations
NOPAT	Net operating profit after tax
Restoration Plan	Home Depot FutureBuilder Restoration Plan
ROIC	Return on invested capital
SEC	Securities and Exchange Commission
Securities Act	Securities Act of 1933, as amended
SG&A	Selling, general and administrative
Tax Act	2017 tax reform, commonly referred to as the Tax Cuts and Jobs Act of 2017
2018 Form 10-K	Annual Report on Form 10-K for fiscal 2018 as filed with the SEC on March 28, 2019

ii

FORWARD-LOOKING STATEMENTS

Certain statements contained herein, as well as in other filings we make with the SEC and other written and oral information we release, regarding our future performance constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the demand for our products and services; net sales growth; comparable sales; effects of competition; implementation of store, interconnected retail, supply chain and technology initiatives; inventory and in-stock positions; state of the economy; state of the housing and home improvement markets; state of the credit markets, including mortgages, home equity loans, and consumer credit; impact of tariffs; issues related to the payment methods we accept; demand for credit offerings; management of relationships with our associates, 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 Act and other regulatory changes; store openings and closures; 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, dependent on the actions of third parties, or 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 Part II, Item 1A, "Risk Factors" and elsewhere in this report and as also may be described from time to time in future reports we file with the SEC. You should read such information in conjunction with our consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. There also may be other factors that we cannot anticipate or that are not described in this report, generally because we do not currently perceive them to be material. Such factors could cause results to differ materially from our expectations.

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 SEC.

iii

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

THE HOME DEPOT, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

in millions, except per share data	November 3, 2019			February 3, 2019
Assets
Current assets:
Cash and cash equivalents	$	2,193		$	1,778
Receivables, net	2,231			1,936
Merchandise inventories	15,711			13,925
Other current assets	1,039			890
Total current assets	21,174			18,529
Net property and equipment	22,472			22,375
Operating lease right-of-use assets	5,638			—
Goodwill	2,253			2,252
Other assets	772			847
Total assets	$	52,309		$	44,003
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt	$	695		$	1,339
Accounts payable	9,240			7,755
Accrued salaries and related expenses	1,467			1,506
Sales taxes payable	686			656
Deferred revenue	2,121			1,782
Current installments of long-term debt	1,818			1,056
Current operating lease liabilities	828			—
Other accrued expenses	2,710			2,622
Total current liabilities	19,565			16,716
Long-term debt, excluding current installments	26,597			26,807
Long-term operating lease liabilities	5,113			—
Other long-term liabilities	2,116			2,358
Total liabilities	53,391			45,881
Common stock, par value $0.05; authorized: 10,000 shares; issued: 1,785 shares at November 3, 2019 and 1,782 shares at February 3, 2019; outstanding: 1,090 shares at November 3, 2019 and 1,105 shares at February 3, 2019	89			89
Paid-in capital	10,747			10,578
Retained earnings	50,729			46,423
Accumulated other comprehensive loss	(801		)	(772		)
Treasury stock, at cost, 695 shares at November 3, 2019 and 677 shares at February 3, 2019	(61,846		)	(58,196		)
Total stockholders’ (deficit) equity	(1,082		)	(1,878		)
Total liabilities and stockholders’ equity	$	52,309		$	44,003

See accompanying notes to consolidated financial statements.

1

THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

	Three Months Ended						Nine Months Ended
in millions, except per share data	November 3, 2019			October 28, 2018			November 3, 2019			October 28, 2018
Net sales	$	27,223		$	26,302		$	84,443		$	81,712
Cost of sales	17,836			17,151			55,607			53,579
Gross profit	9,387			9,151			28,836			28,133
Operating expenses:
Selling, general and administrative	4,942			4,808			14,926			14,591
Depreciation and amortization	498			473			1,470			1,390
Total operating expenses	5,440			5,281			16,396			15,981
Operating income	3,947			3,870			12,440			12,152
Interest and other (income) expense:
Interest and investment income	(22		)	(25		)	(56		)	(73		)
Interest expense	302			249			892			782
Interest and other, net	280			224			836			709
Earnings before provision for income taxes	3,667			3,646			11,604			11,443
Provision for income taxes	898			779			2,843			2,666
Net earnings	$	2,769		$	2,867		$	8,761		$	8,777
Basic weighted average common shares	1,089			1,135			1,096			1,144
Basic earnings per share	$	2.54		$	2.53		$	7.99		$	7.67
Diluted weighted average common shares	1,094			1,141			1,100			1,150
Diluted earnings per share	$	2.53		$	2.51		$	7.96		$	7.63

See accompanying notes to consolidated financial statements.

2

THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited) 

	Three Months Ended						Nine Months Ended
in millions	November 3, 2019			October 28, 2018			November 3, 2019			October 28, 2018
Net earnings	$	2,769		$	2,867		$	8,761		$	8,777
Other comprehensive income (loss):
Foreign currency translation adjustments	(23		)	59			(7		)	(204		)
Cash flow hedges, net of tax	(2		)	(2		)	4			46
Other	—			—			5			7
Total other comprehensive income (loss)	(25		)	57			2			(151		)
Comprehensive income	$	2,744		$	2,924		$	8,763		$	8,626

See accompanying notes to consolidated financial statements.

3

THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited) 

	Three Months Ended						Nine Months Ended
in millions	November 3, 2019			October 28, 2018			November 3, 2019			October 28, 2018
Common Stock:
Balance at beginning of period	$	89		$	89		$	89		$	89
Shares issued under employee stock plans	—			—			—			—
Balance at end of period	89			89			89			89
Paid-in Capital:
Balance at beginning of period	10,777			10,079			10,578			10,192
Shares issued under employee stock plans	20			10			79			21
Stock-based compensation expense	50			52			190			196
Repurchases of common stock	(100		)	268			(100		)	—
Balance at end of period	10,747			10,409			10,747			10,409
Retained Earnings:
Balance at beginning of period	49,446			43,543			46,423			39,935
Cumulative effect of accounting changes	—			—			26			75
Net earnings	2,769			2,867			8,761			8,777
Cash dividends	(1,486		)	(1,175		)	(4,477		)	(3,548		)
Other	—			—			(4		)	(4		)
Balance at end of period	50,729			45,235			50,729			45,235
Accumulated Other Comprehensive Income (Loss):
Balance at beginning of period	(776		)	(774		)	(772		)	(566		)
Cumulative effect of accounting change	—			—			(31		)	—
Foreign currency translation adjustments	(23		)	59			(7		)	(204		)
Cash flow hedges, net of tax	(2		)	(2		)	4			46
Other	—			—			5			7
Balance at end of period	(801		)	(717		)	(801		)	(717		)
Treasury Stock:
Balance at beginning of period	(60,696		)	(50,928		)	(58,196		)	(48,196		)
Repurchases of common stock	(1,150		)	(2,768		)	(3,650		)	(5,500		)
Balance at end of period	(61,846		)	(53,696		)	(61,846		)	(53,696		)
Total stockholders' (deficit) equity	$	(1,082	)	$	1,320		$	(1,082	)	$	1,320

See accompanying notes to consolidated financial statements.

4

THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
in millions	November 3, 2019			October 28, 2018
Cash Flows from Operating Activities:
Net earnings	$	8,761		$	8,777
Reconciliation of net earnings to net cash provided by operating activities:
Depreciation and amortization	1,701			1,603
Stock-based compensation expense	197			204
Changes in receivables, net	(298		)	(196		)
Changes in merchandise inventories	(1,788		)	(2,041		)
Changes in other current assets	(152		)	(480		)
Changes in accounts payable and accrued expenses	1,616			2,134
Changes in deferred revenue	340			156
Changes in income taxes payable	116			61
Changes in deferred income taxes	107			(64		)
Other operating activities	64			(118		)
Net cash provided by operating activities	10,664			10,036
Cash Flows from Investing Activities:
Capital expenditures, net of non-cash capital expenditures	(1,891		)	(1,711		)
Proceeds from sales of property and equipment	21			21
Other investing activities	(10		)	(3		)
Net cash used in investing activities	(1,880		)	(1,693		)
Cash Flows from Financing Activities:
Repayments of short-term debt, net	(644		)	(161		)
Proceeds from long-term debt, net of discounts and premiums	1,404			—
Repayments of long-term debt	(1,046		)	(1,192		)
Repurchases of common stock	(3,909		)	(5,518		)
Proceeds from sales of common stock	185			140
Cash dividends	(4,477		)	(3,548		)
Other financing activities	9			99
Net cash used in financing activities	(8,478		)	(10,180		)
Change in cash and cash equivalents	306			(1,837		)
Effect of exchange rate changes on cash and cash equivalents	109			6
Cash and cash equivalents at beginning of period	1,778			3,595
Cash and cash equivalents at end of period	$	2,193		$	1,764
Supplemental Disclosures:
Cash paid for interest, net of interest capitalized	$	910		$	855
Cash paid for income taxes	2,660			3,017

See accompanying notes to consolidated financial statements.

5

THE HOME DEPOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements of The Home Depot, Inc. and its subsidiaries (the "Company," "Home Depot," "we," "our" or "us") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by 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. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2018 Form 10-K.

There were no significant changes to our significant accounting policies as disclosed in the 2018 Form 10-K, except as set forth below.

Leases

On February 4, 2019, we adopted the new leases standard using the modified retrospective transition method, which requires that we recognize leases differently pre- and post-adoption. See "Recently Adopted Accounting Pronouncements—ASU No. 2016-02" below for more information.

We categorize leases at their inception as either operating or finance leases. Lease agreements cover certain retail locations, office space, warehouse and distribution space, equipment, and vehicles. Most of these leases are operating leases; however, certain retail locations and equipment are leased under finance leases. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and long-term operating lease liabilities in our consolidated balance sheets. Finance leases are included in net property and equipment, current installments of long-term debt, and long-term debt, excluding current installments in our consolidated balance sheets.

Leased assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use a secured incremental borrowing rate as the discount rate for present value of lease payments when the rate implicit in the contract is not readily determinable. We determine a secured rate on a quarterly basis and update the weighted average discount rate accordingly. For operating leases with variable payments dependent upon an index or rate that commenced subsequent to adoption of ASU No. 2016-02, we apply the active index or rate as of the lease commencement date. Variable lease payments not based on an index or rate are not included in the operating lease liability as they cannot be reasonably estimated and are recognized in the period in which the obligation for those payments is incurred. Leases that have a term of twelve months or less upon commencement date are considered short-term in nature. Accordingly, short-term leases are not included on the consolidated balance sheets and are expensed on a straight-line basis over the lease term, which commences on the date we have the right to control the property.

Recently Adopted Accounting Pronouncements

ASU No. 2018-02. In February 2018, the FASB issued ASU No. 2018-02, "Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which allows for an optional reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects as a result of the Tax Act. On February 4, 2019, we adopted ASU No. 2018-02, resulting in an increase of $31 million to retained earnings and a decrease of $31 million to accumulated other comprehensive income.

ASU No. 2017-12. In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which amends the hedge accounting recognition and presentation requirements. ASU No. 2017-12 eliminates the concept of recognizing periodic hedge ineffectiveness for cash flow and net investment hedges and allows an entity to apply the shortcut method to partial-term fair value hedges of interest rate risk. On February 4, 2019, we adopted ASU No. 2017-12 with no impact to our consolidated financial statements. We expect the impact of the adoption to be immaterial to our financial position, results of operations, and cash flows on an ongoing basis.

6

ASU No. 2016-02. In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)," which establishes a right-of-use model and requires an entity that is a lessee to recognize the right-of-use assets and liabilities arising from leases on the balance sheets. ASU No. 2016-02 also requires disclosures about the amount, timing, and uncertainty of cash flows arising from leases. Leases will be classified as finance or operating, with classification affecting both the pattern and classification of expense recognition in the statements of earnings. This guidance was subsequently amended by ASU No. 2018-01, "Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842;" ASU No. 2018-10, "Codification Improvements to Topic 842;" and ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements." ASU No. 2016-02 and subsequent updates require a modified retrospective transition, with the cumulative effect of transition, including initial recognition of lease assets and liabilities for existing operating leases, as of (i) the effective date or (ii) the beginning of the earliest comparative period presented. These updates also provide a number of practical expedients for implementation which we are applying, as discussed below.

On February 4, 2019 (the “effective date”), we adopted ASU No. 2016-02 and subsequent updates, collectively referred to as Topic 842, using the modified retrospective transition method. In addition, we adopted the package of practical expedients in transition, which permits us to not reassess our prior conclusions pertaining to lease identification, lease classification, and initial direct costs on leases that commenced prior to our adoption of the new standard. We also elected the ongoing practical expedient to not recognize operating lease right-of-use assets and operating lease liabilities related to short-term leases. We did not elect the use-of-hindsight or land easements practical expedients. For leases beginning subsequent to the effective date, we elected to not separate lease and non-lease components for certain classes of assets including real estate and certain equipment. To determine the measurement of the lease liability for operating leases with variable payments based on an index or rate that commenced prior to the adoption of Topic 842, we elected to apply the active index or rate at the effective date.

As a result of adopting Topic 842, we recognized net operating lease right-of-use assets of $5.7 billion and operating lease liabilities of $6.0 billion on the effective date. Existing prepaid rent, accrued rent, and closed store reserves were recorded as an offset to our gross operating lease right-of-use assets. The cumulative effect of the adoption resulted in an immaterial adjustment to the opening balance of retained earnings as of February 4, 2019. The standard did not have a material impact on our results of operations or cash flows.

Recently Issued Accounting Pronouncements

Recent accounting pronouncements pending adoption not discussed above or in the 2018 Form 10-K are either not applicable or will not have or are not expected to have a material impact on our consolidated financial condition, results of operations, or cash flows.

2. NET SALES

No sales to an individual customer accounted for more than 10% of net sales during the three and nine months ended November 3, 2019 and October 28, 2018. Net sales, classified by geography, follow.

	Three Months Ended				Nine Months Ended
in millions	November 3, 2019		October 28, 2018		November 3, 2019		October 28, 2018
Net sales – in the U.S.	$	24,995	$	24,083	$	77,634	$	74,978
Net sales – outside the U.S.	2,228		2,219		6,809		6,734
Net sales	$	27,223	$	26,302	$	84,443	$	81,712

Net sales by products and services follow.

	Three Months Ended				Nine Months Ended
in millions	November 3, 2019		October 28, 2018		November 3, 2019		October 28, 2018
Net sales – products	$	25,887	$	24,922	$	80,599	$	77,733
Net sales – services	1,336		1,380		3,844		3,979
Net sales	$	27,223	$	26,302	$	84,443	$	81,712

7

Major product lines, as well as the associated merchandising departments (and related services), follow.

Major Product Line	Merchandising Departments
Building Materials	Building Materials, Electrical/Lighting, Lumber, Millwork, and Plumbing
Décor	Appliances, Décor/Storage, Flooring, Kitchen and Bath, and Paint
Hardlines	Hardware, Indoor Garden, Outdoor Garden, and Tools

During the first quarter of fiscal 2019, we combined the Electrical and Lighting merchandising departments into one department, Electrical/Lighting, and we renamed the Décor merchandising department to Décor/Storage. These changes had no impact on our net sales presentations.

Net sales by major product lines (and related services) follow.

	Three Months Ended				Nine Months Ended
in millions	November 3, 2019		October 28, 2018		November 3, 2019		October 28, 2018
Building Materials	$	10,299	$	10,243	$	30,198	$	30,224
Décor	9,383		8,919		28,178		26,985
Hardlines	7,541		7,140		26,067		24,503
Net sales	$	27,223	$	26,302	$	84,443	$	81,712

—————

Note: Net sales for certain merchandising departments were reclassified in the first quarter of fiscal 2019. As a result, prior-period amounts have been reclassified to conform with the current-period presentation.

3. PROPERTY AND LEASES

Net Property and Equipment

Net property and equipment includes accumulated depreciation and amortization of $21.7 billion as of November 3, 2019 and $20.6 billion as of February 3, 2019.

Leases

We lease certain retail locations, office space, warehouse and distribution space, equipment, and vehicles. While most of these leases are operating leases, certain retail locations and equipment are leased under finance leases. We consider various factors such as market conditions and the terms of any renewal options that may exist to determine whether we will renew or replace the lease. A substantial majority of our leases have remaining lease terms of one to 20 years, typically with the option to extend the leases for up to five years. Some of our leases may include the option to terminate in less than five years. In the event we are reasonably certain to exercise the option to extend a lease, we will include the extended terms in the related lease assets and liabilities. Real estate taxes, insurance, maintenance, and operating expenses applicable to the leased property are generally our obligations under the lease agreements.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Further, certain lease agreements include rental payments based on an index or rate and others include rental payments based on a percentage of sales.

8

The consolidated balance sheet location of assets and liabilities related to operating and finance leases follow.

in millions	Consolidated Balance Sheet Caption	November 3, 2019
Assets:
Operating lease assets	Operating lease right-of-use assets	$	5,638
Finance lease assets	Net property and equipment	876
Total lease assets		$	6,514
Liabilities:
Current:
Operating lease liabilities	Current operating lease liabilities	$	828
Finance lease liabilities	Current installments of long-term debt	69
Long-term:
Operating lease liabilities	Long-term operating lease liabilities	5,113
Finance lease liabilities	Long-term debt, excluding current installments	1,035
Total lease liabilities		$	7,045

The components of lease cost follow.

in millions	Consolidated Statement of Earnings Caption	Three Months Ended November 3, 2019			Nine Months Ended November 3, 2019
Operating lease cost	Selling, general and administrative	$	211		$	626
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	21			64
Interest on lease liabilities	Interest expense	23			69
Short-term lease cost	Selling, general and administrative	30			73
Variable lease cost	Selling, general and administrative	53			175
Sublease income	Selling, general and administrative	(3		)	(10		)
Net lease cost		$	335		$	997

ASU 2016-02 requires that public companies use a secured incremental borrowing rate as the discount rate for the present value of lease payments when the rate implicit in the contract is not readily determinable. We determine a secured rate on a quarterly basis and update the weighted average discount rate accordingly. Lease terms and discount rates follow.

	November 3, 2019
Weighted Average Remaining Lease Term (Years):
Operating leases	10
Finance leases	13
Weighted Average Discount Rate:
Operating leases	3.1	%
Finance leases	10.9	%

9

The approximate future minimum lease payments under operating and finance leases at November 3, 2019 follow.

in millions	Operating Leases		Finance Leases
Fiscal 2019	$	239	$	40
Fiscal 2020	953		156
Fiscal 2021	845		154
Fiscal 2022	745		153
Fiscal 2023	650		147
Thereafter	3,274		1,074
Total lease payments	6,706		1,724
Less imputed interest	765		620
Present value of lease liabilities	$	5,941	$	1,104

—————

Note: Amounts presented do not include payments relating to immaterial leases excluded from the consolidated balance sheets as part of transition elections adopted upon implementation of Topic 842. Additionally, we have excluded approximately $1.6 billion of leases (undiscounted basis) that have not yet commenced. These leases will commence between 2019 and 2020 with lease terms of one to 20 years.

The approximate future minimum lease payments under capital and operating leases at February 3, 2019 and accounted for under previous lease guidance follow.

in millions	Operating Leases		Capital Leases
Fiscal 2019	$	976	$	150
Fiscal 2020	912		167
Fiscal 2021	792		143
Fiscal 2022	682		142
Fiscal 2023	584		137
Thereafter	3,090		970
	$	7,036	1,709
Less imputed interest			660
Net present value of capital lease obligations			1,049
Less current installments			57
Long-term capital lease obligations, excluding current installments			$	992

Other lease information follows.

in millions	Nine Months Ended November 3, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – operating leases	$	750
Operating cash flows – finance leases	69
Financing cash flows – finance leases	46
Leased assets obtained in exchange for new operating lease liabilities	589
Leased assets obtained in exchange for new finance lease liabilities	101

10

4. DEBT AND DERIVATIVE INSTRUMENTS

June 2019 Issuance. In June 2019, we issued two tranches of senior notes.

• The first tranche consisted of $1.0 billion of 2.95% senior notes due June 15, 2029 (the “2029 notes”) at a discount of $6 million. Interest on the 2029 notes is due semi-annually on June 15 and December 15 of each year, beginning December 15, 2019.

• The second tranche consisted of $400 million of 3.90% senior notes due June 15, 2047 (the “2047 notes”) at a premium of $10 million. The 2047 notes form a single series with the Company’s $750 million 3.90% senior notes due June 15, 2047 that were issued in June 2017 and have the same terms. The aggregate principal amount outstanding of the Company’s senior notes due June 15, 2047 is $1.2 billion. Interest on the 2047 notes is due semi-annually on June 15 and December 15 of each year, beginning December 15, 2019, with interest accruing from June 15, 2019.

• Issuance costs totaled $9.9 million. The net proceeds of the June 2019 issuance were used to repay the Company's 2.00% senior notes that matured on June 15, 2019 and for general corporate purposes, including repurchases of common stock.

The 2029 notes and 2047 notes may be redeemed by us 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, as defined in the notes, occurs, holders of all notes have the right to require us to redeem those notes at 101% of the aggregate principal amount of the notes plus accrued interest up to the redemption date. We are generally not limited under the indentures governing the notes in our ability to incur additional indebtedness or required to maintain financial ratios or specified levels of net worth or liquidity. The indentures governing the notes contain various customary covenants; however, none are expected to impact our liquidity or capital resources.

Also, in June 2019, we entered into an interest rate swap agreement with a notional amount of $350 million, accounted for as a fair value hedge, to hedge against changes in the fair value of the 2029 notes attributable to changes in the designated benchmark interest rate.

5. STOCKHOLDERS' EQUITY

Stock Rollforward

A reconciliation of the number of shares of our common stock and dividends per share follows.

shares in millions	Three Months Ended						Nine Months Ended
	November 3, 2019			October 28, 2018			November 3, 2019			October 28, 2018
Common stock:
Balance at beginning of period	1,785			1,782			1,782			1,780
Shares issued under employee stock plans	—			—			3			2
Balance at end of period	1,785			1,782			1,785			1,782
Treasury stock:
Balance at beginning of period	(689		)	(637		)	(677		)	(622		)
Repurchases of common stock	(6		)	(14		)	(18		)	(29		)
Balance at end of period	(695		)	(651		)	(695		)	(651		)
Shares outstanding at end of period	1,090			1,131			1,090			1,131
Cash dividends per share	$	1.36		$	1.03		$	4.08		$	3.09

11

Accelerated Share Repurchase Agreements

We enter into ASR agreements from time to time with third-party financial institutions to repurchase shares of our common stock. These agreements are structured as outlined in the 2018 Form 10-K. The terms of the ASR agreements entered into during the nine months ended November 3, 2019 follow (in millions).

Agreement Date	Settlement Date	Agreement Amount		Initial Shares Delivered	Additional Shares Delivered	Total Shares Delivered
Q3 2019 (1)	Q4 2019 (2)	$	820	3.2	0.4	3.6

—————

(1) The fair market value of the initial 3.2 million shares on the date of delivery was $720 million and is included in treasury stock as of November 3, 2019, with the remaining $100 million included in paid-in capital.

(2) We received an additional 0.4 million shares upon termination of the ASR agreement in November 2019.

See Note 6 to the consolidated financial statements in the 2018 Form 10-K for further discussion.

6. 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.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities that are measured at fair value on a recurring basis follow.

	Fair Value at November 3, 2019 Using						Fair Value at February 3, 2019 Using
in millions	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Derivative agreements – assets	$	—	$	92	$	—	$	—	$	138		$	—
Derivative agreements – liabilities	—		—		—		—		(11		)	—
Total	$	—	$	92	$	—	$	—	$	127		$	—

We use derivative financial instruments from time to time in the management of our interest rate exposure on long-term debt and our exposure on foreign currency fluctuations. The fair value of our derivative financial instruments was measured using observable market information (level 2).

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The carrying amounts of cash and cash equivalents, receivables, short-term debt, and accounts payable approximate fair value due to the short-term maturities of these financial instruments.

Long-lived assets and other intangible assets are subject to nonrecurring fair value measurement for the assessment of impairment or as the result of business acquisitions. During the third quarter of fiscal 2019, we completed our annual assessment of the recoverability of goodwill for our 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 impairment charges related to goodwill were recorded for these reporting units.

Including goodwill as described above, we did not have any material assets or liabilities that were measured at fair value on a nonrecurring basis as of November 3, 2019 or February 3, 2019, respectively.

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The aggregate fair values and carrying values of our senior notes follow.

	November 3, 2019				February 3, 2019
in millions	Fair Value (Level 1)		Carrying Value		Fair Value (Level 1)		Carrying Value
Senior notes	$	31,545	$	27,311	$	28,348	$	26,814

7. WEIGHTED AVERAGE COMMON SHARES

The reconciliation of our basic to diluted weighted average common shares follows.

	Three Months Ended		Nine Months Ended
in millions	November 3, 2019	October 28, 2018	November 3, 2019	October 28, 2018
Basic weighted average common shares	1,089	1,135	1,096	1,144
Effect of potentially dilutive securities	5	6	4	6
Diluted weighted average common shares	1,094	1,141	1,100	1,150
Anti-dilutive securities excluded from diluted weighted average common shares	—	—	—	—

8. COMMITMENTS AND CONTINGENCIES

We are involved in litigation arising in the normal course of business. In management’s opinion, any such litigation is not expected to have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

13

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

The Home Depot, Inc.:

Results of Review of Interim Financial Information

We have reviewed the Consolidated Balance Sheet of The Home Depot, Inc. and its subsidiaries (the “Company”) as of November 3, 2019, the related Consolidated Statements of Earnings, Comprehensive Income, and Stockholders’ Equity for the three-month and nine-month periods ended November 3, 2019 and October 28, 2018, the related Consolidated Statements of Cash Flows for the nine-month periods ended November 3, 2019 and October 28, 2018, and the related notes (collectively, the “Consolidated Interim Financial Information”). Based on our reviews, we are not aware of any material modifications that should be made to the Consolidated Interim Financial Information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Consolidated Balance Sheet of the Company as of February 3, 2019, and the related Consolidated Statements of Earnings, Comprehensive Income, Stockholders’ Equity, and Cash Flows for the year then ended (not presented herein); and in our report dated March 28, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying Consolidated Balance Sheet as of February 3, 2019, is fairly stated, in all material respects, in relation to the Consolidated Balance Sheet from which it has been derived.

Basis for Review Results

This Consolidated Interim Financial Information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ KPMG LLP

Atlanta, Georgia

November 25, 2019

14

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Our MD&A includes the following sections:

• Executive Summary

• Results of Operations and Non-GAAP Financial Measures

• Liquidity and Capital Resources

• Critical Accounting Policies

Executive Summary

Quarter to date and year to date highlights of our financial performance follow.

dollars in millions, except per share data	Three Months Ended						Nine Months Ended
	November 3, 2019			October 28, 2018			November 3, 2019			October 28, 2018
Net sales	$	27,223		$	26,302		$	84,443		$	81,712
Net earnings	$	2,769		$	2,867		$	8,761		$	8,777
Effective tax rate	24.5		%	21.4		%	24.5		%	23.3		%
Diluted earnings per share	$	2.53		$	2.51		$	7.96		$	7.63
Net cash provided by operating activities							$	10,664		$	10,036
Proceeds from long-term debt, net of discounts and premiums							$	1,404		$	—
Repayments of long-term debt							$	1,046		$	1,192
Repurchases of common stock							$	3,909		$	5,518

We reported net sales of $27.2 billion in the third quarter of fiscal 2019. Net earnings were $2.8 billion, or $2.53 per diluted share. For the first nine months of fiscal 2019, net sales were $84.4 billion and net earnings were $8.8 billion, or $7.96 per diluted share.

We closed one store in the U.S. during the third quarter of fiscal 2019 due to a natural disaster, resulting in a total store count of 2,290 at the end of the quarter. As of November 3, 2019, a total of 306 of our stores, or 13.4%, were located in Canada and Mexico. For the third quarter of fiscal 2019, total sales per square foot were $449.17 and our inventory turnover ratio was 5.0 times.

During the third quarter of fiscal 2019, we repurchased a total of 5.2 million shares of our common stock for $1.3 billion through an ASR agreement and open market transactions.

We generated $10.7 billion of cash flow from operations and issued $1.4 billion of long-term debt, net of discounts and premiums, during the first nine months of fiscal 2019. These funds, together with cash on hand, were used to pay $4.5 billion of dividends, fund cash payments of $3.9 billion for share repurchases, repay $644 million of net short-term borrowings, fund $1.9 billion in capital expenditures, and repay $1.0 billion of senior notes that matured in June 2019. In February 2019, we announced a 32.0% increase in our quarterly cash dividend to $1.36 per share.

Our ROIC for the trailing twelve-month period was 45.1% at the end of the third quarter of fiscal 2019. See the "Non-GAAP Financial Measures" section below for our definition and calculation of ROIC, as well as a reconciliation of NOPAT, a non-GAAP financial measure, to net earnings (the most comparable GAAP financial measure).

Results of Operations and Non-GAAP Financial Measures

The tables and discussion below should be read in conjunction with our consolidated financial statements and related notes included in this report and in the 2018 Form 10-K and with our MD&A included in the 2018 Form 10-K. We believe the percentage relationship between net sales and major categories in our consolidated statements of earnings, as well as the percentage change in the associated dollar amounts, are relevant to an evaluation of our business.

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Fiscal 2019 and Fiscal 2018 Three Month Comparisons

	Three Months Ended
	November 3, 2019					October 28, 2018
dollars in millions	$			% of Net Sales		$			% of Net Sales
Net sales	$	27,223				$	26,302
Gross profit	9,387			34.5	%	9,151			34.8	%
Operating expenses:
Selling, general and administrative	4,942			18.2		4,808			18.3
Depreciation and amortization	498			1.8		473			1.8
Total operating expenses	5,440			20.0		5,281			20.1
Operating income	3,947			14.5		3,870			14.7
Interest and other (income) expense:
Interest and investment income	(22		)	(0.1	)	(25		)	(0.1	)
Interest expense	302			1.1		249			0.9
Interest and other, net	280			1.0		224			0.9
Earnings before provision for income taxes	3,667			13.5		3,646			13.9
Provision for income taxes	898			3.3		779			3.0
Net earnings	$	2,769		10.2	%	$	2,867		10.9	%

—————

Note: Certain percentages may not sum to totals due to rounding.

	Three Months Ended
Selected financial and sales data:	November 3, 2019		October 28, 2018		% Change
Comparable sales (% change)	3.6%		4.8%		N/A
Comparable customer transactions (% change) (1)	1.8%		1.2%		N/A
Comparable average ticket (% change) (1)	1.8%		3.5%		N/A
Customer transactions (in millions) (1)	400.9		394.8		1.5%
Average ticket (1)	$	66.36	$	65.11	1.9%
Sales per square foot (1)	$	449.17	$	433.99	3.5%
Diluted earnings per share	$	2.53	$	2.51	0.8%

—————

(1) Does not include results for Interline.

Sales. We assess our sales performance by evaluating both net sales and comparable sales.

Net Sales. Net sales for the third quarter of fiscal 2019 increased 3.5% to $27.2 billion from $26.3 billion in the third quarter of fiscal 2018. The increase in net sales in the third quarter of fiscal 2019 primarily reflected the impact of positive comparable sales driven by an increase in comparable average ticket and comparable customer transactions. Online sales, which consist of sales generated online through our websites for products picked up in our stores or delivered to customer locations, represented 8.9% of net sales and grew 21.9% during the third quarter of fiscal 2019. A stronger U.S. dollar negatively impacted sales growth by $41 million in the third quarter of fiscal 2019.

Comparable Sales. Comparable sales is a measure that highlights the performance of our existing locations and websites by measuring the change in net sales for a period over the comparable prior-period of equivalent length. Comparable sales includes sales at all locations, physical and online, open greater than 52 weeks (including remodels and relocations) and excluding closed stores. Retail stores become comparable on the Monday following their 365^th day of operation. Acquisitions, digital or otherwise, are included in comparable sales after we own the acquired assets for more than 52 weeks. Comparable sales includes new product and service offering sales that have been offered for more than 52 weeks. Comparable sales excludes prior-year sales of product and service offerings that we have exited in the current period. Fiscal 2019 includes 52 weeks and fiscal 2018 included 53

16

weeks. For our calculation of comparable sales in fiscal 2019, we will compare weeks 1 through 52 in fiscal 2019 against weeks 2 through 53 in fiscal 2018. Comparable sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

Total comparable sales increased 3.6% in the third quarter of fiscal 2019, consisting of a 1.8% increase in comparable average ticket and a 1.8% increase in comparable customer transactions. The increase in comparable sales reflected a number of factors, including traffic growth across a number of our core categories and the execution of our strategic efforts to drive an enhanced interconnected experience in both the physical and digital worlds.

All of our departments posted positive comparable sales in the third quarter of fiscal 2019 except for Electrical/Lighting and Lumber. Comparable sales for our Appliances, Indoor Garden, Décor/Storage, Hardware, Tools, Outdoor Garden, Paint, and Plumbing merchandising departments were above the Company average in the third quarter of fiscal 2019. Comparable sales for Electrical/Lighting were slightly negative due to the lengthening replacement cycle of light bulbs and copper price deflation. Comparable sales for Lumber were negatively impacted by commodity price deflation.

The difference between our comparable sales growth and total sales growth in the third quarter of fiscal 2019 was due to the shift in our fiscal calendar as a result of the 53^rd week in fiscal 2018.

Gross Profit. Gross profit for the third quarter of fiscal 2019 increased 2.6% to $9.4 billion from $9.2 billion in the third quarter of fiscal 2018. Gross profit as a percent of net sales, or gross profit margin, was 34.5% in the third quarter of fiscal 2019 compared to 34.8% for the third quarter of fiscal 2018. The decrease in gross profit margin was primarily driven by higher shrink and a change in product mix.

Operating Expenses. Our operating expenses are composed of SG&A and depreciation and amortization.

Selling, General & Administrative. SG&A for the third quarter of fiscal 2019 increased 2.8% to $4.9 billion from $4.8 billion in the third quarter of fiscal 2018. As a percent of net sales, SG&A was 18.2% in the third quarter of fiscal 2019 compared to 18.3% for the third quarter of fiscal 2018, driven by expense leverage resulting from positive comparable sales and continued expense control, partially offset by expenses related to strategic investments in the business.

Depreciation and Amortization. Depreciation and amortization increased $25 million to $498 million in the third quarter of fiscal 2019 from $473 million in the third quarter of fiscal 2018. As a percent of net sales, depreciation and amortization was 1.8% in the third quarter of both fiscal 2019 and fiscal 2018, reflecting strategic investments in the business, leverage resulting from positive comparable sales, and timing of asset additions.

Interest and Other, net. Interest and other, net, was $280 million in the third quarter of fiscal 2019 compared to $224 million in the third quarter of fiscal 2018. Interest and other, net, as a percent of net sales was 1.0% in the third quarter of fiscal 2019 and 0.9% in the third quarter of fiscal 2018, with the increase due primarily to higher interest expense resulting from higher debt balances.

Provision for Income Taxes. Our combined effective income tax rate was 24.5% for the third quarter of fiscal 2019 compared to 21.4% for the third quarter of fiscal 2018. The increase in the provision for income taxes in the third quarter of fiscal 2019 was primarily due to the nonrecurring tax benefits relating to the Tax Act and the settlement of uncertain tax positions in the prior year.

Diluted Earnings per Share. Diluted earnings per share were $2.53 for the third quarter of fiscal 2019 compared to $2.51 for the third quarter of fiscal 2018.

17

Fiscal 2019 and Fiscal 2018 Nine Month Comparisons

	Nine Months Ended
	November 3, 2019					October 28, 2018
dollars in millions	$			% of Net Sales		$			% of Net Sales
Net sales	$	84,443				$	81,712
Gross profit	28,836			34.1	%	28,133			34.4	%
Operating expenses:
Selling, general and administrative	14,926			17.7		14,591			17.9
Depreciation and amortization	1,470			1.7		1,390			1.7
Total operating expenses	16,396			19.4		15,981			19.6
Operating income	12,440			14.7		12,152			14.9
Interest and other (income) expense:
Interest and investment income	(56		)	(0.1	)	(73		)	(0.1	)
Interest expense	892			1.1		782			1.0
Interest and other, net	836			1.0		709			0.9
Earnings before provision for income taxes	11,604			13.7		11,443			14.0
Provision for income taxes	2,843			3.4		2,666			3.3
Net earnings	$	8,761		10.4	%	$	8,777		10.7	%

—————

Note: Certain percentages may not sum to totals due to rounding.

	Nine Months Ended
Selected financial and sales data:	November 3, 2019		October 28, 2018		% Change
Comparable sales (% change)	3.0%		5.8%		N/A
Comparable customer transactions (% change) (1)	1.1%		1.0%		N/A
Comparable average ticket (% change) (1)	1.9%		4.7%		N/A
Customer transactions (in millions) (1)	1,246.4		1,226.0		1.7%
Average ticket (1)	$	67.00	$	65.79	1.8%
Sales per square foot (1)	$	464.68	$	449.94	3.3%
Diluted earnings per share	$	7.96	$	7.63	4.3%

—————

(1) Does not include results for Interline.

Sales. We assess our sales performance by evaluating both net sales and comparable sales.

Net Sales. For the first nine months of fiscal 2019, net sales increased 3.3% to $84.4 billion from $81.7 billion in the first nine months of fiscal 2018. The increase in net sales for the first nine months of fiscal 2019 primarily reflected the impact of positive comparable sales driven by an increase in comparable average ticket growth and comparable customer transactions. Online sales, which consist of sales generated online through our websites for products picked up in our stores or delivered to customer locations, represented 8.9% of net sales and grew 21.6% during the first nine months of fiscal 2019. A stronger U.S. dollar negatively impacted sales growth by $146 million in the first nine months of fiscal 2019.

Comparable Sales. For the first nine months of fiscal 2019, total comparable sales increased 3.0%, consisting of a 1.9% increase in comparable average ticket and a 1.1% increase in comparable customer transactions.This increase reflected a number of factors, including traffic growth across a number of our core categories and the execution of our strategic efforts to drive an enhanced interconnected experience in both the physical and digital worlds. Our comparable average ticket increased 1.9% for the first nine months of fiscal 2019, due in part to big ticket purchases.

During the first nine months of fiscal 2019, all of our departments except for Lumber and Electrical/Lighting posted positive comparable sales. Comparable sales for our Appliances, Indoor Garden, Décor/Storage, Tools, Hardware,

18

Outdoor Garden, Plumbing, Building Materials, and Paint merchandising departments were above the Company average for the first nine months of fiscal 2019. Comparable sales for Electrical/Lighting were slightly negative due to the lengthening replacement cycle and price deflation in light bulbs. Comparable sales for Lumber were negatively impacted by commodity price deflation.

Gross Profit. For the first nine months of fiscal 2019, gross profit increased $703 million to $28.8 billion from $28.1 billion in the first nine months of fiscal 2018. Gross profit as a percent of net sales, or gross profit margin, was 34.1% in the first nine months of fiscal 2019 compared to 34.4% for the first nine months of fiscal 2018. The decrease in gross profit margin was primarily driven by higher shrink and a change in product mix.

Operating Expenses. Our operating expenses are composed of SG&A and depreciation and amortization.

Selling, General & Administrative. SG&A increased $335 million to $14.9 billion for the first nine months of fiscal 2019 from $14.6 billion in the first nine months of fiscal 2018. As a percent of net sales, SG&A was 17.7% in the first nine months of fiscal 2019 compared to 17.9% for the first nine months of fiscal 2018. The decrease in SG&A as a percent of net sales for the first nine months of fiscal 2019 was primarily driven by expense leverage resulting from positive comparable sales and continued expense control, partially offset by expenses related to strategic investments in the business.

Depreciation and Amortization. Depreciation and amortization increased $80 million to $1.5 billion in the first nine months of fiscal 2019 from $1.4 billion in the first nine months of fiscal 2018. As a percent of net sales, depreciation and amortization was unchanged at 1.7% for the first nine months of both fiscal 2019 and fiscal 2018, reflecting strategic investments in the business, leverage resulting from positive comparable sales, and timing of asset additions.

Interest and Other, net. Interest and other, net was $836 million in the first nine months of fiscal 2019, compared to $709 million for the first nine months of fiscal 2018. As a percent of net sales, it was 1.0% for the first nine months of fiscal 2019 compared to 0.9% for the first nine months of fiscal 2018. The increase in interest and other, net as a percent of sales was due primarily to higher interest expense resulting from higher debt balances.

Provision for Income Taxes. Our combined effective income tax rate was 24.5% for the first nine months of fiscal 2019 compared to 23.3% for the first nine months of fiscal 2018. The increase in the provision for income taxes in the first nine months of fiscal 2019 was primarily due to nonrecurring tax benefits relating to the Tax Act and the settlement of uncertain tax positions in the prior year.

Diluted Earnings per Share. Diluted earnings per share were $7.96 for the first nine months of fiscal 2019, compared to $7.63 for the first nine months of fiscal 2018.

Non-GAAP Financial Measures

To provide clarity, internally and externally, about our operating performance, we supplement our reporting with certain non-GAAP financial measures. However, this supplemental information should not be considered in isolation or as a substitute for the related GAAP measures. Non-GAAP financial measures presented herein may differ from similar measures used by other companies.

Return on Invested Capital. We believe ROIC is meaningful for investors and management because it measures how effectively we deploy our capital base. We define ROIC as NOPAT, a non-GAAP financial measure, for the most recent twelve-month period, divided by average debt and equity. We define average debt and equity as the average of beginning and ending long-term debt (including current installments) and equity for the most recent twelve-month period.

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The calculation of ROIC, together with a reconciliation of NOPAT to net earnings (the most comparable GAAP measure), follows.

	Twelve Months Ended
dollars in millions	November 3, 2019			October 28, 2018
Net earnings	$	11,105		$	10,556
Interest and other, net	1,101			955
Provision for income taxes	3,612			3,830
Operating income	15,818			15,341
Income tax adjustment (1)	(3,845		)	(4,012		)
NOPAT	$	11,973		$	11,329
Average debt and equity	$	26,520		$	26,857
ROIC	45.1		%	42.2		%

—————

(1) Income tax adjustment is defined as operating income multiplied by our effective tax rate for the trailing twelve months.

Additional Information

For information on accounting pronouncements that have impacted or are expected to materially impact our consolidated financial condition, results of operations, or cash flows, see Note 1 to our consolidated financial statements.

Liquidity and Capital Resources

Cash and Cash Equivalents

At November 3, 2019, we had $2.2 billion in cash and cash equivalents, of which $1.8 billion was held by our foreign subsidiaries. We believe that our current cash position, access to the long-term debt capital markets, cash flow generated from operations, and funds available under our commercial paper programs should be sufficient not only for our operating requirements but also to enable us to complete our capital expenditure programs and fund dividend payments, share repurchases, and any required long-term debt payments through the next several fiscal years. In addition, we believe that we have the ability to obtain alternative sources of financing.

As we continue our investments in the business, we expect capital expenditures of approximately $2.7 billion in fiscal 2019.

Debt and Derivatives

We have commercial paper programs that allow for borrowings of up to $3.0 billion. All of our short-term borrowings in the first nine months of fiscal 2019 were under these commercial paper programs, and the maximum amount outstanding at any time was $2.1 billion. In connection with these programs, we have back-up credit facilities with a consortium of banks for borrowings up to $3.0 billion, which consist of a five-year $2.0 billion credit facility scheduled to expire in December 2022 and a 364-day $1.0 billion credit facility scheduled to expire in December 2019. At November 3, 2019, we were in compliance with all of the covenants contained in the credit facilities, and none are expected to impact our liquidity or capital resources. At November 3, 2019, $695 million was outstanding under the commercial paper programs. We also issue senior notes from time to time as part of our capital management strategy.

We use derivative financial instruments in the management of our exposure to fluctuations in foreign currency exchange rates and interest rates on certain long-term debt. See Note 4 to our consolidated financial statements for further discussion of our senior notes issuances and our derivative financial instruments.

Share Repurchases

In February 2019, our Board of Directors authorized a new $15.0 billion share repurchase program that replaced the previous authorization. In the first nine months of fiscal 2019, we had cash payments of $3.9 billion for repurchases of our common stock through ASR agreements and open market purchases.

20

Cash Flows Summary

Operating Activities. Cash flow generated from operations provides us with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and services, employee compensation, operations, and occupancy costs.

Cash provided by or used in operating activities is also subject to changes in working capital. Working capital at any point in time is subject to many variables, including seasonality, inventory management and category expansion, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates.

Net cash provided by operating activities increased $628 million in the first nine months of fiscal 2019 compared to the first nine months of fiscal 2018 and was primarily driven by changes in working capital and deferred income taxes.

Investing Activities. Cash used in investing activities primarily reflected capital expenditures from the continuation of our strategic investments in our business of $1.9 billion during the first nine months of fiscal 2019 compared to $1.7 billion of capital expenditures in the first nine months of fiscal 2018.

Financing Activities. Cash used in financing activities primarily reflected:

• $4.5 billion of cash dividends paid, $3.9 billion of share repurchases, $1.0 billion of net repayments of long-term debt, and $644 million of net repayments of short-term debt, partially offset by $1.4 billion of net proceeds from long-term debt in the first nine months of fiscal 2019, and

• $5.5 billion of share repurchases, $3.5 billion of cash dividends paid, and $1.2 billion of net repayments of long-term debt in the first nine months of fiscal 2018.

Critical Accounting Policies

There were no changes during fiscal 2019 to our critical accounting policies as disclosed in the 2018 Form 10-K. Our significant accounting policies are disclosed in Note 1 to our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Our exposure to market risks results primarily from fluctuations in interest rates. We are also exposed to risks from foreign currency exchange rate fluctuations on the translation of our foreign operations into U.S. dollars and on the purchase of goods by these foreign operations that are not denominated in their local currencies. Additionally, we experience inflation and deflation related to our purchase of certain commodity products. There have been no material changes to our exposure to market risks from those disclosed in the 2018 Form 10-K.

Item 4. Controls and Procedures.

Under the direction and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) and concluded that our disclosure controls and procedures were effective as of November 3, 2019. There has been no change in our internal control over financial reporting during the fiscal quarter ended November 3, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed under Item 1A, "Risk Factors" and elsewhere in the 2018 Form 10-K. These risks and uncertainties could materially and adversely affect our business, consolidated financial condition, results of operations, or cash flows. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently do not consider material to our business. There have been no material changes in the risk factors discussed in the 2018 Form 10-K.

21

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

The number and average price of shares purchased in each fiscal month of the third quarter of fiscal 2019 follow.

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 5, 2019 – September 1, 2019		1,846,988	$	212.68	1,842,151	$	12,385,451,643
September 2, 2019 – September 29, 2019	(3)	3,336,987	227.92		3,324,530	11,527,253,300
September 30, 2019 – November 3, 2019		1,347	232.23		—	11,527,253,300
Total		5,185,322	222.49		5,166,681

—————

(1) These amounts include repurchases pursuant to our Amended and Restated 2005 Omnibus Stock Incentive Plan and our 1997 Omnibus Stock Incentive Plan (collectively, 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 February 2019, our Board of Directors authorized a $15.0 billion share repurchase program that replaced the previous authorization. The program does not have a prescribed expiration date.

(3) In the third quarter of fiscal 2019, we paid $820 million under an ASR agreement and received an initial delivery of 3.2 million shares. See Note 5 to our consolidated financial statements for further discussion.

Sales of Unregistered Securities

During the third quarter of fiscal 2019, we issued 446 deferred stock units under the Home Depot, Inc. Nonemployee Directors’ Deferred Stock Compensation Plan pursuant to the exemption from registration provided by Section 4(a)(2) of 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 2019. 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.

During the third quarter of fiscal 2019, we credited 1,143 deferred stock units to participant accounts under the 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 a termination of service as described in this plan.

22

Item 6. Exhibits.

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.

Exhibit		Description
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 February 28, 2019)
		[Form 8-K filed on March 4, 2019, Exhibit 3.2]
10.1	†	Employment Arrangement between Richard McPhail and The Home Depot, Inc., dated August 13, 2019
15.1		Acknowledgement of Independent Registered Public Accounting Firm
31.1		Certification of the Chief Executive Officer and President pursuant to Rule 13a-14(a)
31.2		Certification of the Chief Financial Officer and Executive Vice President – Corporate Services pursuant to Rule 13a-14(a)
32.1		Certification of the Chief Executive Officer and President furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of the Chief Financial Officer and Executive Vice President – Corporate Services furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

—————

† Management contract or compensatory plan or arrangement

23

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

THE HOME DEPOT, INC. (Registrant)
By:	/s/ CRAIG A. MENEAR
	Craig A. Menear, Chairman, Chief Executive Officer and President
	/s/ RICHARD V. MCPHAIL
	Richard V. McPhail, Executive Vice President and Chief Financial Officer
Date:	November 25, 2019

24

EX-10.1

Exhibit 10.1

[Home Depot Letterhead]

August 13, 2019

Richard McPhail

Dear Richard:

I am pleased to confirm The Home Depot, Inc.’s (the “Company”) offer to you of the position of EVP, Chief Financial Officer reporting directly to me, effective September 1, 2019. Your annual base salary will be $700,000, payable in equal bi-weekly installments. Your next salary review will be held in April of 2020, with salary reviews held annually thereafter.

In addition to your base salary, you will be eligible to participate in the Management Incentive Plan (“MIP”) for Officers which provides an annual incentive target of up to 100% of your base salary. MIP will be paid annually based on achievement of the established financial goals. The earned incentive, if any, will be prorated based on the number of full months since the effective date of your new position. To be eligible for payment of any incentive, you must be employed on the day on which the incentive is paid.

The Home Depot has typically awarded an annual equity grant to Executive Vice Presidents in March of each year under the Amended and Restated 2005 Omnibus Stock Incentive Plan (the “Omnibus Plan”).  Currently, equity awards for Officers in March 2020 are expected to consist of performance based restricted stock, stock options, and performance shares.  Vesting and performance goals for these awards are established annually for each grant. Annual equity awards are not guaranteed as compensation, and there is no minimum or guaranteed award.

At the next regularly scheduled quarterly meeting of the Leadership Development and Compensation Committee of The Home Depot, Inc. Board of Directors following the effective date of your new position, you will receive a grant under the Omnibus Plan of the greatest number of whole shares of restricted common stock of The Home Depot, Inc. (“Common Stock”) resulting from dividing $250,000 by the closing stock price on the grant date, vesting 50% after 30 months and 50% after 60 months. Once these provisions lapse, the shares will be yours, free and clear of restrictions, subject to the applicable provisions of the Omnibus Plan and award document. You will also receive a grant of nonqualified stock options under the Omnibus Plan equal to the greatest number of whole shares of Common Stock resulting from dividing $250,000 by the grant date accounting cost of the stock options, with an exercise price equal to the closing stock price on the grant date. Twenty-five percent of the stock options will become exercisable on the second, third, fourth and fifth anniversaries of the grant date. Expiration of all stock options will be the earlier of ten years from the grant date, employment termination, or any earlier time provided by the Omnibus Plan or your award document. As a condition to receiving any equity grant, you agree to comply with The Home Depot, Inc.’s Securities Laws Policy.

You will continue to be eligible to participate in The Home Depot, Inc.’s Employee Stock Purchase Plan. The plan affords you the opportunity to purchase The Home Depot, Inc. common stock at a 15% discount through payroll deductions.

You will continue to eligible to participate in The Home Depot Deferred Compensation Plan for Officers. This plan affords you the opportunity to defer up to 50% of your base salary and 100% of your MIP payment into the plan.

The terms of your annual base salary, the MIP and other benefits set forth herein are subject to future modification or termination at the Company’s discretion. All compensation and benefits are subject to any required tax withholding.

You agree that you will devote your full business time and attention to your job with The Home Depot and that your job with The Home Depot will be your sole occupation during the time you are employed with the Company. Except

Exhibit 10.1

for passive personal investment or charitable work for nonprofit organizations, as of the date you begin employment with The Home Depot, you will not perform any work for any person or entity for which you receive any form of compensation, including cash, equity, or in-kind payments, without the express written consent of the Executive Vice President - Human Resources of The Home Depot, Inc.

You agree that you shall not, without the prior express written consent of the Executive Vice President - Human Resources of The Home Depot, Inc., engage in or have any financial or other interests in, or render any service in any capacity to any Competitor or supplier of the Company, its parents, subsidiaries, affiliates, or related entities during the course of your employment with the Company. Hereinafter, the Company and its parents, subsidiaries, affiliates and related entities are referred to collectively as the “Company-Related Parties.” Notwithstanding the foregoing, you shall not be restricted from owning securities of corporations listed on a national securities exchange or regularly traded by national securities dealers, provided that such ownership was acquired in a manner not prohibited by the Company’s Conflict of Interest policy. The provisions of this paragraph shall apply to you and your immediate family members.

You acknowledge that through your employment with the Company, you will acquire and have access to Confidential Information of the Company-Related Parties. You agree that the Company may prevent the use or disclosure of its Confidential Information through use of an injunction or other means and acknowledge that the Company-Related Parties have taken reasonable steps necessary to protect the secrecy of the Confidential Information. You agree that you will not disclose any Confidential Information to any third party, and you further agree to return all documents or any other item or source containing Confidential Information or any other property of the Company-Related Parties, to the Company immediately upon termination for any reason of your employment with the Company. This obligation shall remain in effect, both during and after your employment, for as long as the information or materials in question retain their status as Confidential Information. This letter is not intended to, and does not, alter either the Company-Related Parties’ rights or your obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. For purposes of this letter, “Confidential Information” means any data or information that belongs and is valuable to the Company-Related Parties and not generally known to competitors of the Company-Related Parties or other outsiders, regardless of whether the Confidential Information is in printed, written or electronic form, retained in your memory or has been compiled or created by you, including but not limited to information related to: operations, services, information technology, computer systems, marketing, advertising, e-commerce, interconnected retail, technical, financial, human resources, personnel, staffing, payroll, information about employee compensation and performance, merchandising, pricing, strategic planning, product, vendor, supplier, customer or store planning data, construction, data security information, private brands, supply chain, or other information similar to the foregoing.

By accepting this offer, you acknowledge and agree that, as a key executive of the Company, you will receive training and Confidential Information regarding, among other things, the Company-Related Parties’ operations, services, information technology, computer systems, marketing, advertising, e-commerce, interconnected retail, technical, financial, human resources, personnel, staffing, payroll, information about employee compensation and performance, merchandising, pricing, strategic planning, product, vendor, supplier, customer or store planning data, construction, data security information, private brands, supply chain, and/or other business processes, and that you have been and will be provided and entrusted with access to the Company-Related Parties’ customer and employee relationships and goodwill. You further acknowledge that such Confidential Information, including trade secrets and other business processes, are utilized by the Company-Related Parties throughout the entire United States and in other locations in which it conducts business. You further acknowledge and agree that the Company-Related Parties’ Confidential Information, customer, service provider, vendor and employee relationships, and goodwill are valuable assets of the Company-Related Parties and are legitimate business interests that are properly subject to protection through the covenants contained in this letter. Consequently, you agree that during the Restricted Period you shall not, directly or indirectly, enter into or maintain an employment, contractual or other business relationship, in the United States, in which (A) you own an equity interest in a Competitor greater than one percent (1%) of its outstanding equity, or manage, operate, finance, or control a Competitor; or (B) you provide services or perform duties for a Competitor that (i) are the same as or similar to the services or job duties you performed for the Company at any point during the two-year period prior to the termination of your employment, or (ii) involve executive, managerial, financial, or other significant leadership responsibilities. “Competitor” shall mean (X) the following companies or entities, including their subsidiaries, affiliates, franchisees, or business units: Lowe’s Companies, Inc.; Sears Holding Corp.; Amazon.com; Menard, Inc.; HD Supply Holdings, Inc.; Floor & Decor; Ace Hardware; True Value Company; Lumber Liquidators; J.C. Penney; Wayfair; and Wal-Mart; or (Y) any company or entity that sells or offers Competitive Products or Services that, in combination with its subsidiaries, affiliates, franchisees, or business units (a) operates more than 100 retail outlets in the United States; or (b) generates more than $150 million in annual revenue. To the extent that any Competitor is sold, merged, combined, renamed, or restructured, the terms of this letter shall apply with regard to such Competitor’s

Exhibit 10.1

successors-in-interest and assigns. “Competitive Products or Services” means anything of commercial value of the type offered, provided or sold by the Company-Related Parties, in the United States, within two (2) years prior to termination of your employment and during the Restricted Period, including, without limitation: goods; personal, real, or intangible property; services; financial products; business opportunities or assistance; or any other object or aspect of business conducted or provided by Company-Related Parties. “Restricted Period” shall mean the period during which you are employed with the Company and for a period of eighteen (18) months following the termination of your employment, regardless of the reason for such termination.

In the event you wish to enter into any relationship or employment prior to the end of the Restricted Period which may be covered by the above non-compete provision, you agree to request and first receive written permission from the Executive Vice President - Human Resources before entering any such relationship or employment. The Company may approve or may not approve of the relationship or employment in its sole and absolute discretion.

You acknowledge that through your employment with the Company you will acquire and have access to confidential and proprietary information concerning the performance and qualifications of Company employees. Accordingly, you agree that during the course of your employment and for a period of twenty-four (24) months following the termination of your employment with the Company, you will not directly or indirectly, on your own behalf or on behalf of any other entity or person, Solicit any person who is, or during the last twelve (12) months of your employment with the Company was, an employee of any of the Company-Related Parties, with whom you had material contact during your employment, or with respect to whom you obtained or had access to Confidential Information while employed with the Company, to terminate his or her employment or other relationship with any of the Company-Related Parties, or to refer any such employee to anyone, without the prior written approval from the Executive Vice President - Human Resources. For purposes of this paragraph, “Solicit” shall include any solicitation, enticement, or encouragement whatsoever, regardless of which party initiated the initial contact, as well as any direct or indirect involvement in the recruitment, referral, interviewing, hiring, or setting of the initial terms and conditions of employment.

This is a conditional offer contingent on drug test results. As a condition to your employment, you must take and pass a drug test. A positive drug test result will result in the denial of your employment. Drug testing must be done within 48 hours from receipt of this letter. Information about the process for taking the drug test is enclosed.

You acknowledge and agree that each of the covenants in this letter is reasonable, appropriate, and narrowly tailored to protect the Company’s legitimate interest, including but not limited to its legitimate interest in protecting Company Related Parties’ Confidential Information, and that your full compliance with such restrictions will not unduly or unreasonably interfere with your ability to obtain other gainful employment. If any of the provisions of such covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Company’s legitimate business interests.

You further acknowledge that you had a full and free choice as to whether to accept the terms of this letter, and that by accepting the position offered herein, you consent to be bound by all terms of this letter.

Nothing herein is intended to prohibit you from reporting possible violations of law or regulation to any governmental agency or entity having responsibility to investigate same or from making any truthful statement in

connection with any legal proceeding or investigation by any governmental agency or entity.

Pursuant to 18 U.S.C. § 1833(b), nothing in this letter shall be interpreted to expose you to criminal or civil liability under Federal or state trade secret law for disclosure, in confidence, of trade secrets (i) to Federal, state, and local government officials, directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding, provided the filing is made under seal and otherwise protected from disclosure except pursuant to court order.  If you file a lawsuit for retaliation for reporting a suspected violation of law, you may disclose trade secrets to your attorney and use the trade secret information in a court proceeding, provided that you file any document containing the trade secret under seal and you do not otherwise disclose the trade secret, except pursuant to court order.

This letter should not be construed, nor is it intended, to be a contract of employment for a specified period of time or in any way limiting the Company’s right to terminate the employment relationship. Your employment relationship is “at will.” The Company reserves the right to terminate your employment with or without cause at any time.

This letter supersedes any prior employment agreement or understandings, written or oral between you and the

Exhibit 10.1

Company-Related Parties and contains the entire understanding of the Company and you with respect to the subject matter hereof, except that this letter does not supersede or limit your post-employment restrictions or obligations to the Company-Related Parties that may be contained in any other agreement between you and the Company-Related Parties, such as equity award agreements.

The terms of this letter shall be binding on, and in favor of, the Company’s successors in interest and assigns.

This letter shall be construed, interpreted and applied in accordance with the law of the State of Georgia, without giving effect to any choice of law provisions thereof that would require the application of any other jurisdiction’s laws. You agree to irrevocably submit any dispute arising out of or relating to this letter to the exclusive jurisdiction of the Atlanta Division of the U.S. District Court for the Northern District of Georgia, or if federal jurisdiction is not available, the Superior Court of Cobb County, Georgia. You also irrevocably waive, to the fullest extent permitted by applicable law, any objection you may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute, and you agree to personal jurisdiction and to accept service of legal process from the courts of Georgia. Subject to the parties agreement set forth above regarding modification, in the event any provision in this letter is determined to be legally invalid or unenforceable by any court of competent jurisdiction, and cannot be modified to be enforceable, the affected provision shall be stricken from the letter, and the remaining terms of the letter and its enforceability shall remain unaffected. You agree to accept service of process by mail or by any other means sufficient to ensure that you receive a copy of the items served.

Richard, we are pleased to extend this offer to you, and we are excited about the opportunities that your leadership will bring to this new role. We have enclosed a copy of this letter for your records. Please sign, date and return the original to us.

Sincerely,

/s/ CRAIG MENEAR

Craig Menear

CEO

I accept this offer as EVP, Chief Financial Officer to the foregoing terms and conditions:

/s/ Richard McPhail	8/20/2019
Richard McPhail	Date Signed

EX-15.1

Exhibit 15.1

ACKNOWLEDGEMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

The Home Depot, Inc.:

We acknowledge our awareness of the use of our report dated November 25, 2019 related to our review of interim financial information, included within the Quarterly Report on Form 10-Q of The Home Depot, Inc. for the three-month and nine-month periods ended November 3, 2019, and incorporated by reference in the following Registration Statements:

Description	Registration Statement Number
Form S-3
Depot Direct stock purchase program	333-221739
Debt securities	333-227052
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

Pursuant to Rule 436 under the Securities Act of 1933 (“the Act”), such report is not considered part of a registration statement prepared or certified by an independent registered public accounting firm, or a report prepared or certified by an independent registered public accounting firm within the meaning of Sections 7 and 11 of the Act.

/s/ KPMG LLP

Atlanta, Georgia

November 25, 2019

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Craig A. Menear, certify that:

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.

Date: November 25, 2019

/s/ Craig A. Menear    

Craig A. Menear

Chairman, Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Richard V. McPhail, certify that:

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.

Date: November 25, 2019

/s/ Richard V. McPhail     

Richard V. McPhail

Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Home Depot, Inc. (the “Company”) on Form 10-Q (“Form 10-Q”) for the period ended November 3, 2019 as filed with the Securities and Exchange Commission, I, Craig A. Menear, Chairman, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(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 25, 2019

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Home Depot, Inc. (the “Company”) on Form 10-Q (“Form 10-Q”) for the period ended November 3, 2019 as filed with the Securities and Exchange Commission, I, Richard V. McPhail, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(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/ Richard V. McPhail     

Richard V. McPhail

Executive Vice President and Chief Financial Officer

November 25, 2019

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Stockholders' Equity (Tables)

9 Months Ended

Nov. 03, 2019

Equity [Abstract]

Reconciliation of the number of shares of common stock and dividends per share

A reconciliation of the number of shares of our common stock and dividends per share follows.

shares in millions	Three Months Ended						Nine Months Ended
	November 3, 2019			October 28, 2018			November 3, 2019			October 28, 2018
Common stock:
Balance at beginning of period	1,785			1,782			1,782			1,780
Shares issued under employee stock plans	—			—			3			2
Balance at end of period	1,785			1,782			1,785			1,782
Treasury stock:
Balance at beginning of period	(689		)	(637		)	(677		)	(622		)
Repurchases of common stock	(6		)	(14		)	(18		)	(29		)
Balance at end of period	(695		)	(651		)	(695		)	(651		)
Shares outstanding at end of period	1,090			1,131			1,090			1,131
Cash dividends per share	$	1.36		$	1.03		$	4.08		$	3.09

Accelerated share repurchases

The terms of the ASR agreements entered into during the nine months ended November 3, 2019 follow (in millions).

Agreement Date	Settlement Date	Agreement Amount		Initial Shares Delivered	Additional Shares Delivered	Total Shares Delivered
Q3 2019 (1)	Q4 2019 (2)	$	820	3.2	0.4	3.6

—————

(1) The fair market value of the initial 3.2 million shares on the date of delivery was $720 million and is included in treasury stock as of November 3, 2019, with the remaining $100 million included in paid-in capital.

(2)

We received an additional 0.4 million shares upon termination of the ASR agreement in November 2019.

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Commitments and Contingencies

9 Months Ended

Nov. 03, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

COMMITMENTS AND CONTINGENCIES

We are involved in litigation arising in the normal course of business. In management’s opinion, any such litigation is not expected to have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

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Debt and Derivative Instruments

9 Months Ended

Nov. 03, 2019

Debt Disclosure [Abstract]

Debt and Derivative Instruments

DEBT AND DERIVATIVE INSTRUMENTS

June 2019 Issuance. In June 2019, we issued two tranches of senior notes.

• The first tranche consisted of $1.0 billion of 2.95% senior notes due June 15, 2029 (the “2029 notes”) at a discount of $6 million. Interest on the 2029 notes is due semi-annually on June 15 and December 15 of each year, beginning December 15, 2019.

• The second tranche consisted of $400 million of 3.90% senior notes due June 15, 2047 (the “2047 notes”) at a premium of $10 million. The 2047 notes form a single series with the Company’s $750 million 3.90% senior notes due June 15, 2047 that were issued in June 2017 and have the same terms. The aggregate principal amount outstanding of the Company’s senior notes due June 15, 2047 is $1.2 billion. Interest on the 2047 notes is due semi-annually on June 15 and December 15 of each year, beginning December 15, 2019, with interest accruing from June 15, 2019.

• Issuance costs totaled $9.9 million. The net proceeds of the June 2019 issuance were used to repay the Company's 2.00% senior notes that matured on June 15, 2019 and for general corporate purposes, including repurchases of common stock.

The 2029 notes and 2047 notes may be redeemed by us 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, as defined in the notes, occurs, holders of all notes have the right to require us to redeem those notes at 101% of the aggregate principal amount of the notes plus accrued interest up to the redemption date. We are generally not limited under the indentures governing the notes in our ability to incur additional indebtedness or required to maintain financial ratios or specified levels of net worth or liquidity. The indentures governing the notes contain various customary covenants; however, none are expected to impact our liquidity or capital resources.

Also, in June 2019, we entered into an interest rate swap agreement with a notional amount of $350 million, accounted for as a fair value hedge, to hedge against changes in the fair value of the 2029 notes attributable to changes in the designated benchmark interest rate.

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions	9 Months Ended
	Nov. 03, 2019	Oct. 28, 2018
Cash Flows from Operating Activities:
Net earnings	$ 8,761	$ 8,777
Reconciliation of net earnings to net cash provided by operating activities:
Depreciation and amortization	1,701	1,603
Stock-based compensation expense	197	204
Changes in receivables, net	(298)	(196)
Changes in merchandise inventories	(1,788)	(2,041)
Changes in other current assets	(152)	(480)
Changes in accounts payable and accrued expenses	1,616	2,134
Changes in deferred revenue	340	156
Changes in income taxes payable	116	61
Changes in deferred income taxes	107	(64)
Other operating activities	64	(118)
Net cash provided by operating activities	10,664	10,036
Cash Flows from Investing Activities:
Capital expenditures, net of non-cash capital expenditures	(1,891)	(1,711)
Proceeds from sales of property and equipment	21	21
Other investing activities	(10)	(3)
Net cash used in investing activities	(1,880)	(1,693)
Cash Flows from Financing Activities:
Repayments of short-term debt, net	(644)	(161)
Proceeds from long-term debt, net of discounts and premiums	1,404	0
Repayments of long-term debt	(1,046)	(1,192)
Repurchases of common stock	(3,909)	(5,518)
Proceeds from sales of common stock	185	140
Cash dividends	(4,477)	(3,548)
Other financing activities	9	99
Net cash used in financing activities	(8,478)	(10,180)
Change in cash and cash equivalents	306	(1,837)
Effect of exchange rate changes on cash and cash equivalents	109	6
Cash and cash equivalents at beginning of period	1,778	3,595
Cash and cash equivalents at end of period	2,193	1,764
Supplemental Disclosures:
Cash paid for interest, net of interest capitalized	910	855
Cash paid for income taxes	$ 2,660	$ 3,017

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Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Millions	Nov. 03, 2019	Feb. 03, 2019
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.05	$ 0.05
Common stock, shares authorized (in shares)	10,000	10,000
Common stock, shares, issued (in shares)	1,785	1,782
Common stock, shares outstanding (in shares)	1,090	1,105
Treasury stock, shares (in shares)	695	677

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Stockholders' Equity - Schedule of Reconciliation of the Number of Shares of Common Stock and Dividends Per Share (Details) - $ / shares shares in Millions	3 Months Ended		9 Months Ended
	Nov. 03, 2019	Oct. 28, 2018	Nov. 03, 2019	Oct. 28, 2018	Feb. 03, 2019
Common stock:
Balance at beginning of period (in shares)	1,785	1,782	1,782	1,780
Shares issued under employee stock plans (in shares)	0	0	3	2
Balance at end of period (in shares)	1,785	1,782	1,785	1,782
Treasury stock:
Balance at beginning of period (in shares)	(689)	(637)	(677)	(622)
Repurchases of common stock (in shares)	(6)	(14)	(18)	(29)
Balance at end of period (in shares)	(695)	(651)	(695)	(651)
Shares outstanding at end of period (in shares)	1,090	1,131	1,090	1,131	1,105
Cash dividends per share (in usd per share)	$ 1.36	$ 1.03	$ 4.08	$ 3.09

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Weighted Average Common Shares (Reconciliation of Basic to Diluted Weighted Average Common Shares) (Details) - shares shares in Millions	3 Months Ended		9 Months Ended
	Nov. 03, 2019	Oct. 28, 2018	Nov. 03, 2019	Oct. 28, 2018
Reconciliation of Basic to Diluted Weighted Average Common Shares:
Basic weighted average common shares (in shares)	1,089	1,135	1,096	1,144
Effect of potentially dilutive securities (in shares)	5	6	4	6
Diluted weighted average common shares (in shares)	1,094	1,141	1,100	1,150
Anti-dilutive securities excluded from diluted weighted average common shares (in shares)	0	0	0	0

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Property and Leases - Schedule of Lease Terms and Discount Rates (Details)	Nov. 03, 2019
Weighted Average Remaining Lease Term (Years):
Operating leases	10 years
Finance leases	13 years
Weighted Average Discount Rate:
Operating leases	3.10%
Finance leases	10.90%

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Net Sales (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Nov. 03, 2019	Oct. 28, 2018	Nov. 03, 2019	Oct. 28, 2018
Disaggregation of Revenue [Line Items]
Net sales	$ 27,223	$ 26,302	$ 84,443	$ 81,712
Products
Disaggregation of Revenue [Line Items]
Net sales	25,887	24,922	80,599	77,733
Services
Disaggregation of Revenue [Line Items]
Net sales	1,336	1,380	3,844	3,979
Building Materials
Disaggregation of Revenue [Line Items]
Net sales	10,299	10,243	30,198	30,224
Décor
Disaggregation of Revenue [Line Items]
Net sales	9,383	8,919	28,178	26,985
Hardlines
Disaggregation of Revenue [Line Items]
Net sales	7,541	7,140	26,067	24,503
In the U.S.
Disaggregation of Revenue [Line Items]
Net sales	24,995	24,083	77,634	74,978
Outside the U.S.
Disaggregation of Revenue [Line Items]
Net sales	$ 2,228	$ 2,219	$ 6,809	$ 6,734

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Property and Leases - Components of Lease Costs (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Nov. 03, 2019	Nov. 03, 2019
Leases [Abstract]
Operating lease cost	$ 211	$ 626
Finance lease cost:
Amortization of leased assets	21	64
Interest on lease liabilities	23	69
Short-term lease cost	30	73
Variable lease cost	53	175
Sublease income	(3)	(10)
Net lease cost	$ 335	$ 997

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Summary of Significant Accounting Policies - Recently Adopted and Issued Accounting Pronouncements (Details) $ in Millions	Feb. 04, 2019 USD ($)
Retained Earnings | Accounting standards update 2018-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of accounting changes	$ 31
Accumulated other comprehensive income (loss) | Accounting standards update 2018-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of accounting changes	31
Operating lease right-of-use assets | Accounting standards update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of accounting changes	5,700
Operating lease liabilities | Accounting standards update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of accounting changes	$ 6,000

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Weighted Average Common Shares

9 Months Ended

Nov. 03, 2019

Earnings Per Share [Abstract]

Weighted Average Common Shares

WEIGHTED AVERAGE COMMON SHARES

The reconciliation of our basic to diluted weighted average common shares follows.

	Three Months Ended		Nine Months Ended
in millions	November 3, 2019	October 28, 2018	November 3, 2019	October 28, 2018
Basic weighted average common shares	1,089	1,135	1,096	1,144
Effect of potentially dilutive securities	5	6	4	6
Diluted weighted average common shares	1,094	1,141	1,100	1,150
Anti-dilutive securities excluded from diluted weighted average common shares	—	—	—	—

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Property and Leases

9 Months Ended

Nov. 03, 2019

Leases [Abstract]

Property and Leases

PROPERTY AND LEASES

Net Property and Equipment

Net property and equipment includes accumulated depreciation and amortization of $21.7 billion as of November 3, 2019 and $20.6 billion as of February 3, 2019.

Leases

We lease certain retail locations, office space, warehouse and distribution space, equipment, and vehicles. While most of these leases are operating leases, certain retail locations and equipment are leased under finance leases. We consider various factors such as market conditions and the terms of any renewal options that may exist to determine whether we will renew or replace the lease. A substantial majority of our leases have remaining lease terms of one to 20 years, typically with the option to extend the leases for up to five years. Some of our leases may include the option to terminate in less than five years. In the event we are reasonably certain to exercise the option to extend a lease, we will include the extended terms in the related lease assets and liabilities. Real estate taxes, insurance, maintenance, and operating expenses applicable to the leased property are generally our obligations under the lease agreements.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Further, certain lease agreements include rental payments based on an index or rate and others include rental payments based on a percentage of sales.

The consolidated balance sheet location of assets and liabilities related to operating and finance leases follow.

in millions	Consolidated Balance Sheet Caption	November 3, 2019
Assets:
Operating lease assets	Operating lease right-of-use assets	$	5,638
Finance lease assets	Net property and equipment	876
Total lease assets		$	6,514
Liabilities:
Current:
Operating lease liabilities	Current operating lease liabilities	$	828
Finance lease liabilities	Current installments of long-term debt	69
Long-term:
Operating lease liabilities	Long-term operating lease liabilities	5,113
Finance lease liabilities	Long-term debt, excluding current installments	1,035
Total lease liabilities		$	7,045

The components of lease cost follow.

in millions	Consolidated Statement of Earnings Caption	Three Months Ended November 3, 2019			Nine Months Ended November 3, 2019
Operating lease cost	Selling, general and administrative	$	211		$	626
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	21			64
Interest on lease liabilities	Interest expense	23			69
Short-term lease cost	Selling, general and administrative	30			73
Variable lease cost	Selling, general and administrative	53			175
Sublease income	Selling, general and administrative	(3		)	(10		)
Net lease cost		$	335		$	997

ASU 2016-02 requires that public companies use a secured incremental borrowing rate as the discount rate for the present value of lease payments when the rate implicit in the contract is not readily determinable. We determine a secured rate on a quarterly basis and update the weighted average discount rate accordingly. Lease terms and discount rates follow.

	November 3, 2019
Weighted Average Remaining Lease Term (Years):
Operating leases	10
Finance leases	13
Weighted Average Discount Rate:
Operating leases	3.1	%
Finance leases	10.9	%

The approximate future minimum lease payments under operating and finance leases at November 3, 2019 follow.

in millions	Operating Leases		Finance Leases
Fiscal 2019	$	239	$	40
Fiscal 2020	953		156
Fiscal 2021	845		154
Fiscal 2022	745		153
Fiscal 2023	650		147
Thereafter	3,274		1,074
Total lease payments	6,706		1,724
Less imputed interest	765		620
Present value of lease liabilities	$	5,941	$	1,104

—————

Note: Amounts presented do not include payments relating to immaterial leases excluded from the consolidated balance sheets as part of transition elections adopted upon implementation of Topic 842. Additionally, we have excluded approximately $1.6 billion of leases (undiscounted basis) that have not yet commenced. These leases will commence between 2019 and 2020 with lease terms of one to 20 years.

The approximate future minimum lease payments under capital and operating leases at February 3, 2019 and accounted for under previous lease guidance follow.

in millions	Operating Leases		Capital Leases
Fiscal 2019	$	976	$	150
Fiscal 2020	912		167
Fiscal 2021	792		143
Fiscal 2022	682		142
Fiscal 2023	584		137
Thereafter	3,090		970
	$	7,036	1,709
Less imputed interest			660
Net present value of capital lease obligations			1,049
Less current installments			57
Long-term capital lease obligations, excluding current installments			$	992

Other lease information follows.

in millions	Nine Months Ended November 3, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – operating leases	$	750
Operating cash flows – finance leases	69
Financing cash flows – finance leases	46
Leased assets obtained in exchange for new operating lease liabilities	589
Leased assets obtained in exchange for new finance lease liabilities	101

Property and Leases

PROPERTY AND LEASES

Net Property and Equipment

Net property and equipment includes accumulated depreciation and amortization of $21.7 billion as of November 3, 2019 and $20.6 billion as of February 3, 2019.

Leases

We lease certain retail locations, office space, warehouse and distribution space, equipment, and vehicles. While most of these leases are operating leases, certain retail locations and equipment are leased under finance leases. We consider various factors such as market conditions and the terms of any renewal options that may exist to determine whether we will renew or replace the lease. A substantial majority of our leases have remaining lease terms of one to 20 years, typically with the option to extend the leases for up to five years. Some of our leases may include the option to terminate in less than five years. In the event we are reasonably certain to exercise the option to extend a lease, we will include the extended terms in the related lease assets and liabilities. Real estate taxes, insurance, maintenance, and operating expenses applicable to the leased property are generally our obligations under the lease agreements.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Further, certain lease agreements include rental payments based on an index or rate and others include rental payments based on a percentage of sales.

The consolidated balance sheet location of assets and liabilities related to operating and finance leases follow.

in millions	Consolidated Balance Sheet Caption	November 3, 2019
Assets:
Operating lease assets	Operating lease right-of-use assets	$	5,638
Finance lease assets	Net property and equipment	876
Total lease assets		$	6,514
Liabilities:
Current:
Operating lease liabilities	Current operating lease liabilities	$	828
Finance lease liabilities	Current installments of long-term debt	69
Long-term:
Operating lease liabilities	Long-term operating lease liabilities	5,113
Finance lease liabilities	Long-term debt, excluding current installments	1,035
Total lease liabilities		$	7,045

The components of lease cost follow.

in millions	Consolidated Statement of Earnings Caption	Three Months Ended November 3, 2019			Nine Months Ended November 3, 2019
Operating lease cost	Selling, general and administrative	$	211		$	626
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	21			64
Interest on lease liabilities	Interest expense	23			69
Short-term lease cost	Selling, general and administrative	30			73
Variable lease cost	Selling, general and administrative	53			175
Sublease income	Selling, general and administrative	(3		)	(10		)
Net lease cost		$	335		$	997

ASU 2016-02 requires that public companies use a secured incremental borrowing rate as the discount rate for the present value of lease payments when the rate implicit in the contract is not readily determinable. We determine a secured rate on a quarterly basis and update the weighted average discount rate accordingly. Lease terms and discount rates follow.

	November 3, 2019
Weighted Average Remaining Lease Term (Years):
Operating leases	10
Finance leases	13
Weighted Average Discount Rate:
Operating leases	3.1	%
Finance leases	10.9	%

The approximate future minimum lease payments under operating and finance leases at November 3, 2019 follow.

in millions	Operating Leases		Finance Leases
Fiscal 2019	$	239	$	40
Fiscal 2020	953		156
Fiscal 2021	845		154
Fiscal 2022	745		153
Fiscal 2023	650		147
Thereafter	3,274		1,074
Total lease payments	6,706		1,724
Less imputed interest	765		620
Present value of lease liabilities	$	5,941	$	1,104

—————

Note: Amounts presented do not include payments relating to immaterial leases excluded from the consolidated balance sheets as part of transition elections adopted upon implementation of Topic 842. Additionally, we have excluded approximately $1.6 billion of leases (undiscounted basis) that have not yet commenced. These leases will commence between 2019 and 2020 with lease terms of one to 20 years.

The approximate future minimum lease payments under capital and operating leases at February 3, 2019 and accounted for under previous lease guidance follow.

in millions	Operating Leases		Capital Leases
Fiscal 2019	$	976	$	150
Fiscal 2020	912		167
Fiscal 2021	792		143
Fiscal 2022	682		142
Fiscal 2023	584		137
Thereafter	3,090		970
	$	7,036	1,709
Less imputed interest			660
Net present value of capital lease obligations			1,049
Less current installments			57
Long-term capital lease obligations, excluding current installments			$	992

Other lease information follows.

in millions	Nine Months Ended November 3, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – operating leases	$	750
Operating cash flows – finance leases	69
Financing cash flows – finance leases	46
Leased assets obtained in exchange for new operating lease liabilities	589
Leased assets obtained in exchange for new finance lease liabilities	101

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Property and Leases (Tables)

9 Months Ended

Nov. 03, 2019

Leases [Abstract]

Schedule of assets and liabilities related to operating and finance leases

The consolidated balance sheet location of assets and liabilities related to operating and finance leases follow.

in millions	Consolidated Balance Sheet Caption	November 3, 2019
Assets:
Operating lease assets	Operating lease right-of-use assets	$	5,638
Finance lease assets	Net property and equipment	876
Total lease assets		$	6,514
Liabilities:
Current:
Operating lease liabilities	Current operating lease liabilities	$	828
Finance lease liabilities	Current installments of long-term debt	69
Long-term:
Operating lease liabilities	Long-term operating lease liabilities	5,113
Finance lease liabilities	Long-term debt, excluding current installments	1,035
Total lease liabilities		$	7,045

Lease information

Other lease information follows.

in millions	Nine Months Ended November 3, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – operating leases	$	750
Operating cash flows – finance leases	69
Financing cash flows – finance leases	46
Leased assets obtained in exchange for new operating lease liabilities	589
Leased assets obtained in exchange for new finance lease liabilities	101

The components of lease cost follow.

in millions	Consolidated Statement of Earnings Caption	Three Months Ended November 3, 2019			Nine Months Ended November 3, 2019
Operating lease cost	Selling, general and administrative	$	211		$	626
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	21			64
Interest on lease liabilities	Interest expense	23			69
Short-term lease cost	Selling, general and administrative	30			73
Variable lease cost	Selling, general and administrative	53			175
Sublease income	Selling, general and administrative	(3		)	(10		)
Net lease cost		$	335		$	997

ASU 2016-02 requires that public companies use a secured incremental borrowing rate as the discount rate for the present value of lease payments when the rate implicit in the contract is not readily determinable. We determine a secured rate on a quarterly basis and update the weighted average discount rate accordingly. Lease terms and discount rates follow.

	November 3, 2019
Weighted Average Remaining Lease Term (Years):
Operating leases	10
Finance leases	13
Weighted Average Discount Rate:
Operating leases	3.1	%
Finance leases	10.9	%

Schedule of future minimum rental payments for operating leases

The approximate future minimum lease payments under operating and finance leases at November 3, 2019 follow.

in millions	Operating Leases		Finance Leases
Fiscal 2019	$	239	$	40
Fiscal 2020	953		156
Fiscal 2021	845		154
Fiscal 2022	745		153
Fiscal 2023	650		147
Thereafter	3,274		1,074
Total lease payments	6,706		1,724
Less imputed interest	765		620
Present value of lease liabilities	$	5,941	$	1,104

—————

Note: Amounts presented do not include payments relating to immaterial leases excluded from the consolidated balance sheets as part of transition elections adopted upon implementation of Topic 842. Additionally, we have excluded approximately $1.6 billion of leases (undiscounted basis) that have not yet commenced. These leases will commence between 2019 and 2020 with lease terms of one to 20 years.

Schedule of future minimum rental payments for financing leases

The approximate future minimum lease payments under operating and finance leases at November 3, 2019 follow.

in millions	Operating Leases		Finance Leases
Fiscal 2019	$	239	$	40
Fiscal 2020	953		156
Fiscal 2021	845		154
Fiscal 2022	745		153
Fiscal 2023	650		147
Thereafter	3,274		1,074
Total lease payments	6,706		1,724
Less imputed interest	765		620
Present value of lease liabilities	$	5,941	$	1,104

—————

Note: Amounts presented do not include payments relating to immaterial leases excluded from the consolidated balance sheets as part of transition elections adopted upon implementation of Topic 842. Additionally, we have excluded approximately $1.6 billion of leases (undiscounted basis) that have not yet commenced. These leases will commence between 2019 and 2020 with lease terms of one to 20 years.

Schedule of future minimum rental payments for operating leases

The approximate future minimum lease payments under capital and operating leases at February 3, 2019 and accounted for under previous lease guidance follow.

in millions	Operating Leases		Capital Leases
Fiscal 2019	$	976	$	150
Fiscal 2020	912		167
Fiscal 2021	792		143
Fiscal 2022	682		142
Fiscal 2023	584		137
Thereafter	3,090		970
	$	7,036	1,709
Less imputed interest			660
Net present value of capital lease obligations			1,049
Less current installments			57
Long-term capital lease obligations, excluding current installments			$	992

Schedule of future minimum lease payments for capital leases

The approximate future minimum lease payments under capital and operating leases at February 3, 2019 and accounted for under previous lease guidance follow.

in millions	Operating Leases		Capital Leases
Fiscal 2019	$	976	$	150
Fiscal 2020	912		167
Fiscal 2021	792		143
Fiscal 2022	682		142
Fiscal 2023	584		137
Thereafter	3,090		970
	$	7,036	1,709
Less imputed interest			660
Net present value of capital lease obligations			1,049
Less current installments			57
Long-term capital lease obligations, excluding current installments			$	992

XML

Stockholders' Equity - Accelerated Share Repurchase Agreements (Details) - USD ($) shares in Millions, $ in Millions			3 Months Ended		9 Months Ended
	Nov. 18, 2019	Nov. 03, 2019	Nov. 18, 2019	Nov. 03, 2019	Nov. 03, 2019	Oct. 28, 2018
Accelerated Share Repurchases [Line Items]
Agreement Amount					$ 3,909	$ 5,518
Q3 Accelerated Share Repurchase Agreement
Accelerated Share Repurchases [Line Items]
Agreement Amount				$ 820
Shares repurchased				3.2
Treasury stock value				$ 720
Subsequent Event | Q3 Accelerated Share Repurchase Agreement
Accelerated Share Repurchases [Line Items]
Shares repurchased	0.4		3.6
Paid-in Capital | Q3 Accelerated Share Repurchase Agreement
Accelerated Share Repurchases [Line Items]
Treasury stock value		$ 100

XML

Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Millions	Total	Common Stock	Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of accounting changes				$ 75	$ 0
Balance at beginning of period at Jan. 28, 2018		$ 89	$ 10,192	39,935	(566)	$ (48,196)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued under employee stock plans		0	21
Stock-based compensation expense			196
Repurchases of common stock			0
Net earnings	$ 8,777			8,777
Cash dividends				(3,548)
Other				(4)
Foreign currency translation adjustments					(204)
Cash flow hedges, net of tax	46				46
Other	7				7
Repurchases of common stock						(5,500)
Balance at end of period at Oct. 28, 2018	1,320	89	10,409	45,235	(717)	(53,696)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of accounting changes				0	0
Balance at beginning of period at Jul. 29, 2018		89	10,079	43,543	(774)	(50,928)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued under employee stock plans		0	10
Stock-based compensation expense			52
Repurchases of common stock			268
Net earnings	2,867			2,867
Cash dividends				(1,175)
Other				0
Foreign currency translation adjustments					59
Cash flow hedges, net of tax	(2)				(2)
Other	0				0
Repurchases of common stock						(2,768)
Balance at end of period at Oct. 28, 2018	1,320	89	10,409	45,235	(717)	(53,696)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of accounting changes				26	(31)
Balance at beginning of period at Feb. 03, 2019	(1,878)	89	10,578	46,423	(772)	(58,196)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued under employee stock plans		0	79
Stock-based compensation expense			190
Repurchases of common stock			(100)
Net earnings	8,761			8,761
Cash dividends				(4,477)
Other				(4)
Foreign currency translation adjustments					(7)
Cash flow hedges, net of tax	4				4
Other	5				5
Repurchases of common stock						(3,650)
Balance at end of period at Nov. 03, 2019	(1,082)	89	10,747	50,729	(801)	(61,846)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of accounting changes				0	0
Balance at beginning of period at Aug. 04, 2019		89	10,777	49,446	(776)	(60,696)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued under employee stock plans		0	20
Stock-based compensation expense			50
Repurchases of common stock			(100)
Net earnings	2,769			2,769
Cash dividends				(1,486)
Other				0
Foreign currency translation adjustments					(23)
Cash flow hedges, net of tax	(2)				(2)
Other	0				0
Repurchases of common stock						(1,150)
Balance at end of period at Nov. 03, 2019	$ (1,082)	$ 89	$ 10,747	$ 50,729	$ (801)	$ (61,846)

XML

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions	Nov. 03, 2019	Feb. 03, 2019
Current assets:
Cash and cash equivalents	$ 2,193	$ 1,778
Receivables, net	2,231	1,936
Merchandise inventories	15,711	13,925
Other current assets	1,039	890
Total current assets	21,174	18,529
Net property and equipment	22,472	22,375
Operating lease right-of-use assets	5,638	0
Goodwill	2,253	2,252
Other assets	772	847
Total assets	52,309	44,003
Current liabilities:
Short-term debt	695	1,339
Accounts payable	9,240	7,755
Accrued salaries and related expenses	1,467	1,506
Sales taxes payable	686	656
Deferred revenue	2,121	1,782
Current installments of long-term debt	1,818	1,056
Current operating lease liabilities	828	0
Other accrued expenses	2,710	2,622
Total current liabilities	19,565	16,716
Long-term debt, excluding current installments	26,597	26,807
Long-term operating lease liabilities	5,113	0
Other long-term liabilities	2,116	2,358
Total liabilities	53,391	45,881
Common stock, par value $0.05; authorized: 10,000 shares; issued: 1,785 shares at November 3, 2019 and 1,782 shares at February 3, 2019; outstanding: 1,090 shares at November 3, 2019 and 1,105 shares at February 3, 2019	89	89
Paid-in capital	10,747	10,578
Retained earnings	50,729	46,423
Accumulated other comprehensive loss	(801)	(772)
Treasury stock, at cost, 695 shares at November 3, 2019 and 677 shares at February 3, 2019	(61,846)	(58,196)
Total stockholders’ (deficit) equity	(1,082)	(1,878)
Total liabilities and stockholders’ equity	$ 52,309	$ 44,003

XML

Property and Leases - Schedules of Future Minimum Lease Payments Under Operating and Finance Leases (Details) $ in Millions	9 Months Ended
	Nov. 03, 2019 USD ($)
Operating Lease Liabilities, Payments Due [Abstract]
Fiscal 2019	$ 239
Fiscal 2020	953
Fiscal 2021	845
Fiscal 2022	745
Fiscal 2023	650
Thereafter	3,274
Total lease payments	6,706
Less imputed interest	765
Present value of lease liabilities	5,941
Finance Lease Liabilities, Payments, Due [Abstract]
Fiscal 2019	40
Fiscal 2020	156
Fiscal 2021	154
Fiscal 2022	153
Fiscal 2023	147
Thereafter	1,074
Total lease payments	1,724
Less imputed interest	620
Present value of lease liabilities	1,104
Leases that have not yet commenced	$ 1,600
Minimum
Finance Lease Liabilities, Payments, Due [Abstract]
Terms of contract	1 year
Maximum
Finance Lease Liabilities, Payments, Due [Abstract]
Terms of contract	20 years

XML

Property and Leases - Narrative (Details) - USD ($) $ in Billions	9 Months Ended
	Nov. 03, 2019	Feb. 03, 2019
Leases [Abstract]
Accumulated depreciation and amortization	$ 21.7	$ 20.6
Minimum
Lessor, Lease, Description [Line Items]
Remaining lease terms	1 year
Maximum
Lessor, Lease, Description [Line Items]
Remaining lease terms	20 years
Option to extend	5 years
Option to terminate	5 years

XML

Fair Value Measurements (Tables)

9 Months Ended

Nov. 03, 2019

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value on a recurring basis

Assets and liabilities that are measured at fair value on a recurring basis follow.

	Fair Value at November 3, 2019 Using						Fair Value at February 3, 2019 Using
in millions	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Derivative agreements – assets	$	—	$	92	$	—	$	—	$	138		$	—
Derivative agreements – liabilities	—		—		—		—		(11		)	—
Total	$	—	$	92	$	—	$	—	$	127		$	—

Assets and liabilities measured at fair value on a nonrecurring basis

The aggregate fair values and carrying values of our senior notes follow.

	November 3, 2019				February 3, 2019
in millions	Fair Value (Level 1)		Carrying Value		Fair Value (Level 1)		Carrying Value
Senior notes	$	31,545	$	27,311	$	28,348	$	26,814

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Debt and Derivative Instruments (Details) - USD ($)	9 Months Ended
	Nov. 03, 2019	Jun. 30, 2019	Jun. 15, 2019	Feb. 03, 2019	Jun. 15, 2017
Debt Instrument [Line Items]
Senior notes	$ 27,311,000,000			$ 26,814,000,000
Debt instrument redemption price (in percentage)	100.00%
Debt instrument change of control redemption price (in percentage)	101.00%
Senior notes due June 15, 2047
Debt Instrument [Line Items]
Senior notes		$ 1,200,000,000
Senior notes
Debt Instrument [Line Items]
Issuance costs			$ 9,900,000
Senior notes | Senior notes due June 15, 2029
Debt Instrument [Line Items]
Debt instrument face amount			$ 1,000,000,000.0
Debt instrument interest rate (in percentage)			2.95%
Debt instrument unamortized discount			$ 6,000,000
Senior notes | Senior notes due June 15, 2047
Debt Instrument [Line Items]
Debt instrument face amount			$ 400,000,000		$ 750,000,000
Debt instrument interest rate (in percentage)			3.90%		3.90%
Debt instrument unamortized premium			$ 10,000,000
Senior notes | Senior notes due June 15, 2019
Debt Instrument [Line Items]
Debt instrument interest rate (in percentage)			2.00%
Interest rate swap
Debt Instrument [Line Items]
Interest rate swap agreement notional amount			$ 350,000,000

XML

Summary of Significant Accounting Policies

9 Months Ended

Nov. 03, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements of The Home Depot, Inc. and its subsidiaries (the "Company," "Home Depot," "we," "our" or "us") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by 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. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2018 Form 10-K.

There were no significant changes to our significant accounting policies as disclosed in the 2018 Form 10-K, except as set forth below.

Leases

On February 4, 2019, we adopted the new leases standard using the modified retrospective transition method, which requires that we recognize leases differently pre- and post-adoption. See "Recently Adopted Accounting Pronouncements—ASU No. 2016-02" below for more information.

We categorize leases at their inception as either operating or finance leases. Lease agreements cover certain retail locations, office space, warehouse and distribution space, equipment, and vehicles. Most of these leases are operating leases; however, certain retail locations and equipment are leased under finance leases. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and long-term operating lease liabilities in our consolidated balance sheets. Finance leases are included in net property and equipment, current installments of long-term debt, and long-term debt, excluding current installments in our consolidated balance sheets.

Leased assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use a secured incremental borrowing rate as the discount rate for present value of lease payments when the rate implicit in the contract is not readily determinable. We determine a secured rate on a quarterly basis and update the weighted average discount rate accordingly. For operating leases with variable payments dependent upon an index or rate that commenced subsequent to adoption of ASU No. 2016-02, we apply the active index or rate as of the lease commencement date. Variable lease payments not based on an index or rate are not included in the operating lease liability as they cannot be reasonably estimated and are recognized in the period in which the obligation for those payments is incurred. Leases that have a term of twelve months or less upon commencement date are considered short-term in nature. Accordingly, short-term leases are not included on the consolidated balance sheets and are expensed on a straight-line basis over the lease term, which commences on the date we have the right to control the property.

Recently Adopted Accounting Pronouncements

ASU No. 2018-02. In February 2018, the FASB issued ASU No. 2018-02, "Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which allows for an optional reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects as a result of the Tax Act. On February 4, 2019, we adopted ASU No. 2018-02, resulting in an increase of $31 million to retained earnings and a decrease of $31 million to accumulated other comprehensive income.

ASU No. 2017-12. In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which amends the hedge accounting recognition and presentation requirements. ASU No. 2017-12 eliminates the concept of recognizing periodic hedge ineffectiveness for cash flow and net investment hedges and allows an entity to apply the shortcut method to partial-term fair value hedges of interest rate risk. On February 4, 2019, we adopted ASU No. 2017-12 with no impact to our consolidated financial statements. We expect the impact of the adoption to be immaterial to our financial position, results of operations, and cash flows on an ongoing basis.

ASU No. 2016-02. In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)," which establishes a right-of-use model and requires an entity that is a lessee to recognize the right-of-use assets and liabilities arising from leases on the balance sheets. ASU No. 2016-02 also requires disclosures about the amount, timing, and uncertainty of cash flows arising from leases. Leases will be classified as finance or operating, with classification affecting both the pattern and classification of expense recognition in the statements of earnings. This guidance was subsequently amended by ASU No. 2018-01, "Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842;" ASU No. 2018-10, "Codification Improvements to Topic 842;" and ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements." ASU No. 2016-02 and subsequent updates require a modified retrospective transition, with the cumulative effect of transition, including initial recognition of lease assets and liabilities for existing operating leases, as of (i) the effective date or (ii) the beginning of the earliest comparative period presented. These updates also provide a number of practical expedients for implementation which we are applying, as discussed below.

On February 4, 2019 (the “effective date”), we adopted ASU No. 2016-02 and subsequent updates, collectively referred to as Topic 842, using the modified retrospective transition method. In addition, we adopted the package of practical expedients in transition, which permits us to not reassess our prior conclusions pertaining to lease identification, lease classification, and initial direct costs on leases that commenced prior to our adoption of the new standard. We also elected the ongoing practical expedient to not recognize operating lease right-of-use assets and operating lease liabilities related to short-term leases. We did not elect the use-of-hindsight or land easements practical expedients. For leases beginning subsequent to the effective date, we elected to not separate lease and non-lease components for certain classes of assets including real estate and certain equipment. To determine the measurement of the lease liability for operating leases with variable payments based on an index or rate that commenced prior to the adoption of Topic 842, we elected to apply the active index or rate at the effective date.

As a result of adopting Topic 842, we recognized net operating lease right-of-use assets of $5.7 billion and operating lease liabilities of $6.0 billion on the effective date. Existing prepaid rent, accrued rent, and closed store reserves were recorded as an offset to our gross operating lease right-of-use assets. The cumulative effect of the adoption resulted in an immaterial adjustment to the opening balance of retained earnings as of February 4, 2019. The standard did not have a material impact on our results of operations or cash flows.

Recently Issued Accounting Pronouncements

Recent accounting pronouncements pending adoption not discussed above or in the 2018 Form 10-K are either not applicable or will not have or are not expected to have a material impact on our consolidated financial condition, results of operations, or cash flows.

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Fair Value Measurements (Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis) (Details) - USD ($)	3 Months Ended
	Nov. 03, 2019	Feb. 03, 2019
Fair Value, Assets and Liabilities Measured on a Nonrecurring Basis [Line Items]
Carrying value of senior notes	$ 27,311,000,000	$ 26,814,000,000
Senior notes | Fair Value measurements nonrecurring | Fair value inputs level 1
Fair Value, Assets and Liabilities Measured on a Nonrecurring Basis [Line Items]
Fair value of senior notes	31,545,000,000	$ 28,348,000,000
US, Canada, and Mexico
Fair Value, Assets and Liabilities Measured on a Nonrecurring Basis [Line Items]
Goodwill impairment	$ 0

XML

Consolidated Statements of Earnings (Unaudited) - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Nov. 03, 2019	Oct. 28, 2018	Nov. 03, 2019	Oct. 28, 2018
Income Statement [Abstract]
Net sales	$ 27,223	$ 26,302	$ 84,443	$ 81,712
Cost of sales	17,836	17,151	55,607	53,579
Gross profit	9,387	9,151	28,836	28,133
Operating expenses:
Selling, general and administrative	4,942	4,808	14,926	14,591
Depreciation and amortization	498	473	1,470	1,390
Total operating expenses	5,440	5,281	16,396	15,981
Operating income	3,947	3,870	12,440	12,152
Interest and other (income) expense:
Interest and investment income	(22)	(25)	(56)	(73)
Interest expense	302	249	892	782
Interest and other, net	280	224	836	709
Earnings before provision for income taxes	3,667	3,646	11,604	11,443
Provision for income taxes	898	779	2,843	2,666
Net earnings	$ 2,769	$ 2,867	$ 8,761	$ 8,777
Basic weighted average common shares (in shares)	1,089	1,135	1,096	1,144
Basic earnings per share (in dollars per share)	$ 2.54	$ 2.53	$ 7.99	$ 7.67
Diluted weighted average common shares (in shares)	1,094	1,141	1,100	1,150
Diluted earnings per share (in dollars per share)	$ 2.53	$ 2.51	$ 7.96	$ 7.63

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Nov. 03, 2019

Accounting Policies [Abstract]

Basis of presentation

Basis of Presentation

The accompanying consolidated financial statements of The Home Depot, Inc. and its subsidiaries (the "Company," "Home Depot," "we," "our" or "us") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by 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. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2018 Form 10-K.

There were no significant changes to our significant accounting policies as disclosed in the 2018 Form 10-K, except as set forth below.

Leases

Leases

On February 4, 2019, we adopted the new leases standard using the modified retrospective transition method, which requires that we recognize leases differently pre- and post-adoption. See "Recently Adopted Accounting Pronouncements—ASU No. 2016-02" below for more information.

We categorize leases at their inception as either operating or finance leases. Lease agreements cover certain retail locations, office space, warehouse and distribution space, equipment, and vehicles. Most of these leases are operating leases; however, certain retail locations and equipment are leased under finance leases. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and long-term operating lease liabilities in our consolidated balance sheets. Finance leases are included in net property and equipment, current installments of long-term debt, and long-term debt, excluding current installments in our consolidated balance sheets.

Leased assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use a secured incremental borrowing rate as the discount rate for present value of lease payments when the rate implicit in the contract is not readily determinable. We determine a secured rate on a quarterly basis and update the weighted average discount rate accordingly. For operating leases with variable payments dependent upon an index or rate that commenced subsequent to adoption of ASU No. 2016-02, we apply the active index or rate as of the lease commencement date. Variable lease payments not based on an index or rate are not included in the operating lease liability as they cannot be reasonably estimated and are recognized in the period in which the obligation for those payments is incurred. Leases that have a term of twelve months or less upon commencement date are considered short-term in nature. Accordingly, short-term leases are not included on the consolidated balance sheets and are expensed on a straight-line basis over the lease term, which commences on the date we have the right to control the property.

Recently adopted and issued accounting pronouncements

Recently Adopted Accounting Pronouncements

ASU No. 2018-02. In February 2018, the FASB issued ASU No. 2018-02, "Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which allows for an optional reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects as a result of the Tax Act. On February 4, 2019, we adopted ASU No. 2018-02, resulting in an increase of $31 million to retained earnings and a decrease of $31 million to accumulated other comprehensive income.

ASU No. 2017-12. In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which amends the hedge accounting recognition and presentation requirements. ASU No. 2017-12 eliminates the concept of recognizing periodic hedge ineffectiveness for cash flow and net investment hedges and allows an entity to apply the shortcut method to partial-term fair value hedges of interest rate risk. On February 4, 2019, we adopted ASU No. 2017-12 with no impact to our consolidated financial statements. We expect the impact of the adoption to be immaterial to our financial position, results of operations, and cash flows on an ongoing basis.

ASU No. 2016-02. In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)," which establishes a right-of-use model and requires an entity that is a lessee to recognize the right-of-use assets and liabilities arising from leases on the balance sheets. ASU No. 2016-02 also requires disclosures about the amount, timing, and uncertainty of cash flows arising from leases. Leases will be classified as finance or operating, with classification affecting both the pattern and classification of expense recognition in the statements of earnings. This guidance was subsequently amended by ASU No. 2018-01, "Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842;" ASU No. 2018-10, "Codification Improvements to Topic 842;" and ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements." ASU No. 2016-02 and subsequent updates require a modified retrospective transition, with the cumulative effect of transition, including initial recognition of lease assets and liabilities for existing operating leases, as of (i) the effective date or (ii) the beginning of the earliest comparative period presented. These updates also provide a number of practical expedients for implementation which we are applying, as discussed below.

On February 4, 2019 (the “effective date”), we adopted ASU No. 2016-02 and subsequent updates, collectively referred to as Topic 842, using the modified retrospective transition method. In addition, we adopted the package of practical expedients in transition, which permits us to not reassess our prior conclusions pertaining to lease identification, lease classification, and initial direct costs on leases that commenced prior to our adoption of the new standard. We also elected the ongoing practical expedient to not recognize operating lease right-of-use assets and operating lease liabilities related to short-term leases. We did not elect the use-of-hindsight or land easements practical expedients. For leases beginning subsequent to the effective date, we elected to not separate lease and non-lease components for certain classes of assets including real estate and certain equipment. To determine the measurement of the lease liability for operating leases with variable payments based on an index or rate that commenced prior to the adoption of Topic 842, we elected to apply the active index or rate at the effective date.

As a result of adopting Topic 842, we recognized net operating lease right-of-use assets of $5.7 billion and operating lease liabilities of $6.0 billion on the effective date. Existing prepaid rent, accrued rent, and closed store reserves were recorded as an offset to our gross operating lease right-of-use assets. The cumulative effect of the adoption resulted in an immaterial adjustment to the opening balance of retained earnings as of February 4, 2019. The standard did not have a material impact on our results of operations or cash flows.

Recently Issued Accounting Pronouncements

Recent accounting pronouncements pending adoption not discussed above or in the 2018 Form 10-K are either not applicable or will not have or are not expected to have a material impact on our consolidated financial condition, results of operations, or cash flows.

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Stockholders' Equity

9 Months Ended

Nov. 03, 2019

Equity [Abstract]

Stockholders' equity

STOCKHOLDERS' EQUITY

Stock Rollforward

A reconciliation of the number of shares of our common stock and dividends per share follows.

shares in millions	Three Months Ended						Nine Months Ended
	November 3, 2019			October 28, 2018			November 3, 2019			October 28, 2018
Common stock:
Balance at beginning of period	1,785			1,782			1,782			1,780
Shares issued under employee stock plans	—			—			3			2
Balance at end of period	1,785			1,782			1,785			1,782
Treasury stock:
Balance at beginning of period	(689		)	(637		)	(677		)	(622		)
Repurchases of common stock	(6		)	(14		)	(18		)	(29		)
Balance at end of period	(695		)	(651		)	(695		)	(651		)
Shares outstanding at end of period	1,090			1,131			1,090			1,131
Cash dividends per share	$	1.36		$	1.03		$	4.08		$	3.09

Accelerated Share Repurchase Agreements

We enter into ASR agreements from time to time with third-party financial institutions to repurchase shares of our common stock. These agreements are structured as outlined in the 2018 Form 10-K. The terms of the ASR agreements entered into during the nine months ended November 3, 2019 follow (in millions).

Agreement Date	Settlement Date	Agreement Amount		Initial Shares Delivered	Additional Shares Delivered	Total Shares Delivered
Q3 2019 (1)	Q4 2019 (2)	$	820	3.2	0.4	3.6

—————

(1) The fair market value of the initial 3.2 million shares on the date of delivery was $720 million and is included in treasury stock as of November 3, 2019, with the remaining $100 million included in paid-in capital.

(2) We received an additional 0.4 million shares upon termination of the ASR agreement in November 2019.

See Note 6 to the consolidated financial statements in the 2018 Form 10-K for further discussion.

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Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Nov. 03, 2019	Oct. 28, 2018	Nov. 03, 2019	Oct. 28, 2018
Statement of Comprehensive Income [Abstract]
Net earnings	$ 2,769	$ 2,867	$ 8,761	$ 8,777
Other comprehensive income (loss):
Foreign currency translation adjustments	(23)	59	(7)	(204)
Cash flow hedges, net of tax	(2)	(2)	4	46
Other	0	0	5	7
Total other comprehensive income (loss)	(25)	57	2	(151)
Comprehensive income	$ 2,744	$ 2,924	$ 8,763	$ 8,626

XML

Cover Page - shares	9 Months Ended
	Nov. 03, 2019	Nov. 19, 2019
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Nov. 03, 2019
Document Transition Report	false
Entity File Number	1-8207
Entity Registrant Name	HOME DEPOT, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	95-3261426
Entity Address, Address Line One	2455 Paces Ferry Road
Entity Address, City or Town	Atlanta,
Entity Address, State or Province	GA
Entity Address, Postal Zip Code	30339
City Area Code	770
Local Phone Number	433-8211
Title of 12(b) Security	Common Stock, $0.05 Par Value Per Share
Trading Symbol	HD
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		1,090,831,020
Entity Central Index Key	0000354950
Current Fiscal Year End Date	--02-02
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false

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Net Sales

9 Months Ended

Nov. 03, 2019

Revenue from Contract with Customer [Abstract]

Net Sales

NET SALES

No sales to an individual customer accounted for more than 10% of net sales during the three and nine months ended November 3, 2019 and October 28, 2018. Net sales, classified by geography, follow.

	Three Months Ended				Nine Months Ended
in millions	November 3, 2019		October 28, 2018		November 3, 2019		October 28, 2018
Net sales – in the U.S.	$	24,995	$	24,083	$	77,634	$	74,978
Net sales – outside the U.S.	2,228		2,219		6,809		6,734
Net sales	$	27,223	$	26,302	$	84,443	$	81,712

Net sales by products and services follow.

	Three Months Ended				Nine Months Ended
in millions	November 3, 2019		October 28, 2018		November 3, 2019		October 28, 2018
Net sales – products	$	25,887	$	24,922	$	80,599	$	77,733
Net sales – services	1,336		1,380		3,844		3,979
Net sales	$	27,223	$	26,302	$	84,443	$	81,712

Major product lines, as well as the associated merchandising departments (and related services), follow.

Major Product Line	Merchandising Departments
Building Materials	Building Materials, Electrical/Lighting, Lumber, Millwork, and Plumbing
Décor	Appliances, Décor/Storage, Flooring, Kitchen and Bath, and Paint
Hardlines	Hardware, Indoor Garden, Outdoor Garden, and Tools

During the first quarter of fiscal 2019, we combined the Electrical and Lighting merchandising departments into one department, Electrical/Lighting, and we renamed the Décor merchandising department to Décor/Storage. These changes had no impact on our net sales presentations.

Net sales by major product lines (and related services) follow.

	Three Months Ended				Nine Months Ended
in millions	November 3, 2019		October 28, 2018		November 3, 2019		October 28, 2018
Building Materials	$	10,299	$	10,243	$	30,198	$	30,224
Décor	9,383		8,919		28,178		26,985
Hardlines	7,541		7,140		26,067		24,503
Net sales	$	27,223	$	26,302	$	84,443	$	81,712

—————

Note: Net sales for certain merchandising departments were reclassified in the first quarter of fiscal 2019. As a result, prior-period amounts have been reclassified to conform with the current-period presentation.

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Property and Leases - Other Lease Information (Details) $ in Millions	9 Months Ended
	Nov. 03, 2019 USD ($)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – operating leases	$ 750
Operating cash flows – finance leases	69
Financing cash flows – finance leases	46
Leased assets obtained in exchange for new operating lease liabilities	589
Leased assets obtained in exchange for new finance lease liabilities	$ 101

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Fair Value Measurements (Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) - Fair value measurements recurring - USD ($) $ in Millions	Nov. 03, 2019	Feb. 03, 2019
Fair value inputs level 1
Fair Value, Assets and Liabilities Measured on a Recurring Basis [Line Items]
Derivative agreements – assets	$ 0	$ 0
Derivative agreements – liabilities	0	0
Total	0	0
Fair value inputs level 2
Fair Value, Assets and Liabilities Measured on a Recurring Basis [Line Items]
Derivative agreements – assets	92	138
Derivative agreements – liabilities	0	(11)
Total	92	127
Fair value inputs level 3
Fair Value, Assets and Liabilities Measured on a Recurring Basis [Line Items]
Derivative agreements – assets	0	0
Derivative agreements – liabilities	0	0
Total	$ 0	$ 0

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Net Sales (Tables)

9 Months Ended

Nov. 03, 2019

Revenue from Contract with Customer [Abstract]

Summary of net sales, classified by geography

Net sales, classified by geography, follow.

	Three Months Ended				Nine Months Ended
in millions	November 3, 2019		October 28, 2018		November 3, 2019		October 28, 2018
Net sales – in the U.S.	$	24,995	$	24,083	$	77,634	$	74,978
Net sales – outside the U.S.	2,228		2,219		6,809		6,734
Net sales	$	27,223	$	26,302	$	84,443	$	81,712

Summary of net sales by products and services

Net sales by products and services follow.

	Three Months Ended				Nine Months Ended
in millions	November 3, 2019		October 28, 2018		November 3, 2019		October 28, 2018
Net sales – products	$	25,887	$	24,922	$	80,599	$	77,733
Net sales – services	1,336		1,380		3,844		3,979
Net sales	$	27,223	$	26,302	$	84,443	$	81,712

Summary of net sales by major product line

Net sales by major product lines (and related services) follow.

	Three Months Ended				Nine Months Ended
in millions	November 3, 2019		October 28, 2018		November 3, 2019		October 28, 2018
Building Materials	$	10,299	$	10,243	$	30,198	$	30,224
Décor	9,383		8,919		28,178		26,985
Hardlines	7,541		7,140		26,067		24,503
Net sales	$	27,223	$	26,302	$	84,443	$	81,712

—————

Note: Net sales for certain merchandising departments were reclassified in the first quarter of fiscal 2019. As a result, prior-period amounts have been reclassified to conform with the current-period presentation.

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Fair Value Measurements

9 Months Ended

Nov. 03, 2019

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.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities that are measured at fair value on a recurring basis follow.

	Fair Value at November 3, 2019 Using						Fair Value at February 3, 2019 Using
in millions	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Derivative agreements – assets	$	—	$	92	$	—	$	—	$	138		$	—
Derivative agreements – liabilities	—		—		—		—		(11		)	—
Total	$	—	$	92	$	—	$	—	$	127		$	—

We use derivative financial instruments from time to time in the management of our interest rate exposure on long-term debt and our exposure on foreign currency fluctuations. The fair value of our derivative financial instruments was measured using observable market information (level 2).

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The carrying amounts of cash and cash equivalents, receivables, short-term debt, and accounts payable approximate fair value due to the short-term maturities of these financial instruments.

Long-lived assets and other intangible assets are subject to nonrecurring fair value measurement for the assessment of impairment or as the result of business acquisitions. During the third quarter of fiscal 2019, we completed our annual assessment of the recoverability of goodwill for our 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 impairment charges related to goodwill were recorded for these reporting units.

Including goodwill as described above, we did not have any material assets or liabilities that were measured at fair value on a nonrecurring basis as of November 3, 2019 or February 3, 2019, respectively.

The aggregate fair values and carrying values of our senior notes follow.

	November 3, 2019				February 3, 2019
in millions	Fair Value (Level 1)		Carrying Value		Fair Value (Level 1)		Carrying Value
Senior notes	$	31,545	$	27,311	$	28,348	$	26,814

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Property and Leases - Schedule of assets and liabilities related to operating and finance leases (Details) - USD ($) $ in Millions	Nov. 03, 2019	Feb. 03, 2019
Assets [Abstract]
Operating lease assets	$ 5,638	$ 0
Finance lease assets	876
Total lease assets	6,514
Current:
Operating lease liabilities	828	0
Finance lease liabilities	69
Long-term:
Operating lease liabilities	5,113	$ 0
Finance lease liabilities	1,035
Total lease liabilities	$ 7,045

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Weighted Average Common Shares (Tables)

9 Months Ended

Nov. 03, 2019

Earnings Per Share [Abstract]

Schedule of weighted average number of shares

The reconciliation of our basic to diluted weighted average common shares follows.

	Three Months Ended		Nine Months Ended
in millions	November 3, 2019	October 28, 2018	November 3, 2019	October 28, 2018
Basic weighted average common shares	1,089	1,135	1,096	1,144
Effect of potentially dilutive securities	5	6	4	6
Diluted weighted average common shares	1,094	1,141	1,100	1,150
Anti-dilutive securities excluded from diluted weighted average common shares	—	—	—	—

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Property and Leases - Schedule of Future Minimum Lease Payments Under Operating and Capital Leases (Details) $ in Millions	Feb. 03, 2019 USD ($)
Operating Leases
Fiscal 2019	$ 976
Fiscal 2020	912
Fiscal 2021	792
Fiscal 2022	682
Fiscal 2023	584
Thereafter	3,090
Total future minimum lease payments	7,036
Capital Leases
Fiscal 2019	150
Fiscal 2020	167
Fiscal 2021	143
Fiscal 2022	142
Fiscal 2023	137
Thereafter	970
Total future minimum lease payments	1,709
Less imputed interest	660
Net present value of capital lease obligations	1,049
Less current installments	57
Long-term capital lease obligations, excluding current installments	$ 992