8-K
HOME DEPOT, INC. (HD)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 25, 2020
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THE HOME DEPOT, INC.
(Exact Name of Registrant as Specified in Charter)
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| Delaware | 1-8207 | 95-3261426 |
|---|---|---|
| (State or Other Jurisdiction<br><br>of Incorporation) | (Commission<br><br>File Number) | (IRS Employer<br><br>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)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
__________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
| 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 |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 2.02. Results of Operations and Financial Condition.
On February 25, 2020, The Home Depot, Inc. (the "Company") issued a press release, attached as Exhibit 99.1 and incorporated herein by reference, announcing the Company’s financial results for the fourth quarter and fiscal year ended ended February 2, 2020.
The information contained in this Item 2.02, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18. Furthermore, the information contained in this Item 2.02 and Exhibit 99.1 shall not be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended.
Item 9.01. Financial Statements and Exhibits.
| Exhibit | Description |
|---|---|
| 99.1 | Press Release of The Home Depot, Inc. |
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SIGNATURE
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 hereunto duly authorized.
| THE HOME DEPOT, INC. | |
|---|---|
| By: | /s/ Richard V. McPhail |
| Name: | Richard V. McPhail |
| Title: | Executive Vice President and Chief Financial Officer |
Date: February 24, 2020
3
Exhibit
Exhibit 99.1
The Home Depot Announces Fourth Quarter and Fiscal 2019 Results;
Reiterates Fiscal 2020 Business Outlook;
Increases Quarterly Dividend by 10 Percent
ATLANTA, February 25, 2020 -- The Home Depot^®^, the world's largest home improvement retailer, today reported fourth quarter and fiscal 2019 results.
Fourth Quarter 2019
Comparable sales for the fourth quarter of fiscal 2019 increased 5.2 percent, and comparable sales in the U.S. increased 5.3 percent.
Sales for the fourth quarter of fiscal 2019 were $25.8 billion compared to sales of $26.5 billion in the fourth quarter of fiscal 2018. Fiscal 2018 included an extra week of operations compared to fiscal 2019. The extra week of operations added approximately $1.7 billion of sales to the fourth quarter of fiscal 2018.
Net earnings for the fourth quarter of fiscal 2019 were $2.5 billion, or $2.28 per diluted share, compared to net earnings of $2.3 billion, or $2.09 per diluted share, in the fourth quarter of fiscal 2018. The extra week of operations added approximately $0.21 per diluted share to the fourth quarter of fiscal 2018.
Fiscal 2019
Comparable sales for fiscal 2019 increased 3.5 percent, and comparable sales in the U.S. increased 3.8 percent.
Sales for fiscal 2019 were $110.2 billion compared to sales of $108.2 billion in fiscal 2018.
Net earnings for fiscal 2019 were $11.2 billion, or $10.25 per diluted share, compared to net earnings of $11.1 billion, or $9.73 per diluted share in fiscal 2018.
“Fiscal 2019 was a record year for our business and one marked by significant progress as we invest to transform ourselves into The Home Depot of the future. We had a strong finish to the year as our fourth quarter results reflect strength in our core business, solid execution around our holiday events and the overall health of the consumer,” said Craig Menear, chairman, CEO and president.
“We are now two years into our multi-year investment program and have more conviction than ever that our strategic initiatives are creating a value proposition that is unique to the marketplace and will extend our leadership position for years to come. Through the second year of our One Home Depot investment program, we have grown sales by over $9 billion dollars – a level of growth unmatched in our market. I am proud of the way our associates continue to focus
on our customers, and I want to thank them for their hard work and dedication in the fourth quarter and throughout the year.”
Dividend Declaration
The Company today announced that its board of directors approved a 10 percent increase in its quarterly dividend to $1.50 per share, which equates to an annual dividend of $6.00 per share.
“As a testament to our commitment to create value for our shareholders and a demonstration of confidence in the business going forward, the board has increased the dividend for the eleventh consecutive year,” said Richard McPhail, CFO and executive vice president. The dividend is payable on March 26, 2020, to shareholders of record on the close of business on March 12, 2020. This is the 132^nd^ consecutive quarter the Company has paid a cash dividend.
Fiscal 2020 Guidance
The Company provided the following guidance for fiscal 2020:
| • | Total sales growth of approximately 3.5 percent to 4.0 percent |
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| • | Comparable sales growth of approximately 3.5 percent to 4.0 percent |
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| • | Six new stores |
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| • | Operating margin of approximately 14.0 percent |
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| • | Net interest expense of approximately $1.2 billion |
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| • | Effective tax rate assumption of approximately 24.0 percent |
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| • | Share repurchases of at least $5.0 billion |
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| • | Diluted earnings-per-share growth of approximately 2.0 percent to $10.45 |
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| • | Capital spending of approximately $2.8 billion |
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| • | Depreciation and amortization expense of approximately $2.4 billion |
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| • | Cash flow from operations of approximately $13.5 billion |
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The Home Depot will conduct a conference call today at 9 a.m. ET to discuss information included in this news release and related matters. The conference call will be available in its entirety through a webcast and replay at ir.homedepot.com/events-and-presentations.
At the end of the fourth quarter, the Company operated a total of 2,291 retail stores in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. The Company employs more than 400,000 associates. The Home Depot's stock is traded on the New York Stock Exchange (NYSE: HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index.
Certain statements contained herein constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the demand for our products and services; net sales growth; comparable sales; effects of competition; implementation of store, interconnected retail, supply chain and technology initiatives; 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; international trade disputes, natural disasters, public health issues, and other business interruptions that could disrupt supply or delivery of, or demand for, the Company’s products; continuation of share repurchase programs; net earnings performance; earnings per share; dividend targets; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; stock-based compensation expense; commodity price inflation and deflation; the ability to issue debt on terms and at rates acceptable to us; the impact and expected outcome of investigations, inquiries, claims and litigation; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of the Tax Cuts and Jobs Act of 2017 and other regulatory changes; store openings and closures; guidance for fiscal 2020 and beyond; financial outlook; and the integration of acquired companies into our organization and the ability to recognize the anticipated synergies and benefits of those acquisitions. Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You should not rely on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties – many of which are beyond our control, dependent on the actions of third parties, or are currently unknown to us – as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, those described in Item 1A, “Risk Factors,” and elsewhere in our Annual Report on Form 10-K for our fiscal year ended February 3, 2019 and in our subsequent Quarterly Reports on Form 10-Q.
Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the Securities and Exchange Commission.
| For more information, contact: | |
|---|---|
| Financial Community | News Media |
| Isabel Janci | Stephen Holmes |
| Vice President of Investor Relations and Treasurer | Vice President of Corporate Communications |
| 770-384-2666 | 770-384-5075 |
| isabel_janci@homedepot.com | stephen_holmes@homedepot.com |
THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
| Three Months Ended ^(1)^ | Fiscal Year Ended ^(1)^ | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| in millions, except per share data | February 2, <br>2020 | February 3, <br>2019 | % Change | February 2, <br>2020 | February 3, <br>2019 | % Change | ||||||||||
| Net sales | $ | 25,782 | $ | 26,491 | (2.7 | )% | $ | 110,225 | $ | 108,203 | 1.9 | % | ||||
| Cost of sales | 17,046 | 17,464 | (2.4 | ) | 72,653 | 71,043 | 2.3 | |||||||||
| Gross profit | 8,736 | 9,027 | (3.2 | ) | 37,572 | 37,160 | 1.1 | |||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | 4,814 | 4,922 | (2.2 | ) | 19,740 | 19,513 | 1.2 | |||||||||
| Depreciation and amortization | 519 | 480 | 8.1 | 1,989 | 1,870 | 6.4 | ||||||||||
| Impairment loss | — | 247 | N/M | — | 247 | N/M | ||||||||||
| Total operating expenses | 5,333 | 5,649 | (5.6 | ) | 21,729 | 21,630 | 0.5 | |||||||||
| Operating income | 3,403 | 3,378 | 0.7 | 15,843 | 15,530 | 2.0 | ||||||||||
| Interest and other (income) expense: | ||||||||||||||||
| Interest and investment income | (17 | ) | (20 | ) | (15.0 | ) | (73 | ) | (93 | ) | (21.5 | ) | ||||
| Interest expense | 309 | 269 | 14.9 | 1,201 | 1,051 | 14.3 | ||||||||||
| Other | — | 16 | N/M | — | 16 | N/M | ||||||||||
| Interest and other, net | 292 | 265 | 10.2 | 1,128 | 974 | 15.8 | ||||||||||
| Earnings before provision for income taxes | 3,111 | 3,113 | (0.1 | ) | 14,715 | 14,556 | 1.1 | |||||||||
| Provision for income taxes | 630 | 769 | (18.1 | ) | 3,473 | 3,435 | 1.1 | |||||||||
| Net earnings | $ | 2,481 | $ | 2,344 | 5.8 | % | $ | 11,242 | $ | 11,121 | 1.1 | % | ||||
| Basic weighted average common shares | 1,083 | 1,116 | (3.0 | )% | 1,093 | 1,137 | (3.9 | )% | ||||||||
| Basic earnings per share | $ | 2.29 | $ | 2.10 | 9.0 | $ | 10.29 | $ | 9.78 | 5.2 | ||||||
| Diluted weighted average common shares | 1,088 | 1,121 | (2.9 | )% | 1,097 | 1,143 | (4.0 | )% | ||||||||
| Diluted earnings per share | $ | 2.28 | $ | 2.09 | 9.1 | $ | 10.25 | $ | 9.73 | 5.3 | ||||||
| Three Months Ended | Fiscal Year Ended | |||||||||||||||
| Selected Sales Data ^(2) (3)^ | February 2, <br>2020 | February 3, <br>2019 | % Change | February 2, <br>2020 | February 3, <br>2019 | % Change | ||||||||||
| Customer transactions (in millions) | 369.6 | 394.8 | (6.4 | )% | 1,616.0 | 1,620.8 | (0.3 | )% | ||||||||
| Average ticket | $ | 68.29 | $ | 65.59 | 4.1 | $ | 67.30 | $ | 65.74 | 2.4 | ||||||
| Sales per retail square foot | $ | 425.70 | $ | 414.17 | 2.8 | $ | 454.82 | $ | 446.86 | 1.8 |
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| (1) | The three months ended February 2, 2020 include 13 weeks and the three months ended February 3, 2019 include 14 weeks. The fiscal year ended February 2, 2020 includes 52 weeks and the fiscal year ended February 3, 2019 includes 53 weeks. The additional week included in three months and fiscal year ended February 3, 2019 added approximately $1.7 billion in net sales and $0.21 in diluted earnings per share. |
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| (2) | Selected Sales Data does not include results for the legacy Interline Brands business, now operating as a part of The Home Depot Pro. |
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| (3) | The additional week included in the three months and fiscal year ended February 3, 2019 increased customer transactions by 24.5 million, added $0.01 to average ticket, and increased sales per retail square foot by $6.87. |
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THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| in millions | February 2, <br>2020 | February 3, <br>2019 | ||||
|---|---|---|---|---|---|---|
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 2,133 | $ | 1,778 | ||
| Receivables, net | 2,106 | 1,936 | ||||
| Merchandise inventories | 14,531 | 13,925 | ||||
| Other current assets | 1,040 | 890 | ||||
| Total current assets | 19,810 | 18,529 | ||||
| Net property and equipment | 22,770 | 22,375 | ||||
| Operating lease right-of-use assets | 5,595 | — | ||||
| Goodwill | 2,254 | 2,252 | ||||
| Other assets | 807 | 847 | ||||
| Total assets | $ | 51,236 | $ | 44,003 | ||
| Liabilities and Stockholders' Equity | ||||||
| Current liabilities: | ||||||
| Short-term debt | $ | 974 | $ | 1,339 | ||
| Accounts payable | 7,787 | 7,755 | ||||
| Accrued salaries and related expenses | 1,494 | 1,506 | ||||
| Current installments of long-term debt | 1,839 | 1,056 | ||||
| Current operating lease liabilities | 828 | — | ||||
| Other current liabilities | 5,453 | 5,060 | ||||
| Total current liabilities | 18,375 | 16,716 | ||||
| Long-term debt, excluding current installments | 28,670 | 26,807 | ||||
| Long-term operating lease liabilities | 5,066 | — | ||||
| Other liabilities | 2,241 | 2,358 | ||||
| Total liabilities | 54,352 | 45,881 | ||||
| Total stockholders’ (deficit) equity | (3,116 | ) | (1,878 | ) | ||
| Total liabilities and stockholders’ equity | $ | 51,236 | $ | 44,003 |
THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Fiscal Year Ended ^(1)^ | ||||||
|---|---|---|---|---|---|---|
| in millions | February 2, <br>2020 | February 3, <br>2019 | ||||
| Cash Flows from Operating Activities: | ||||||
| Net earnings | $ | 11,242 | $ | 11,121 | ||
| Reconciliation of net earnings to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 2,296 | 2,152 | ||||
| Stock-based compensation expense | 251 | 282 | ||||
| Impairment loss | — | 247 | ||||
| Changes in working capital | (452 | ) | (687 | ) | ||
| Changes in deferred income taxes | 202 | 26 | ||||
| Other operating activities | 184 | (103 | ) | |||
| Net cash provided by operating activities | 13,723 | 13,038 | ||||
| Cash Flows from Investing Activities: | ||||||
| Capital expenditures, net of non-cash capital expenditures | (2,678 | ) | (2,442 | ) | ||
| Payments for business acquired, net | — | (21 | ) | |||
| Proceeds from sales of property and equipment | 37 | 33 | ||||
| Other investing activities | (12 | ) | 14 | |||
| Net cash used in investing activities | (2,653 | ) | (2,416 | ) | ||
| Cash Flows from Financing Activities: | ||||||
| Repayments of short-term debt, net | (365 | ) | (220 | ) | ||
| Proceeds from long-term debt, net of discounts and premiums | 3,420 | 3,466 | ||||
| Repayments of long-term debt | (1,070 | ) | (1,209 | ) | ||
| Repurchases of common stock | (6,965 | ) | (9,963 | ) | ||
| Proceeds from sales of common stock | 280 | 236 | ||||
| Cash dividends | (5,958 | ) | (4,704 | ) | ||
| Other financing activities | (176 | ) | (26 | ) | ||
| Net cash used in financing activities | (10,834 | ) | (12,420 | ) | ||
| Change in cash and cash equivalents | 236 | (1,798 | ) | |||
| Effect of exchange rate changes on cash and cash equivalents | 119 | (19 | ) | |||
| Cash and cash equivalents at beginning of year | 1,778 | 3,595 | ||||
| Cash and cash equivalents at end of year | $ | 2,133 | $ | 1,778 |
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| (1) | Fiscal year ended February 2, 2020 includes 52 weeks. Fiscal year ended February 3, 2019 includes 53 weeks. |
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