UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended July ~~31, 2016~~30, 2017

- 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 Number)

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)

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 x No ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

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

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.

~~1,235,573,686~~1,178,817,584 shares of common stock, $0.05 par value, as of August ~~16, 2016~~15, 2017

THE HOME DEPOT, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q



		Page
Part I. Financial Information

Item 1.	Financial Statements

	CONSOLIDATED BALANCE SHEETS— As of July ~~31, 2016~~30, 2017 and January ~~31, 2016~~29, 2017	3

	CONSOLIDATED STATEMENTS OF EARNINGS— Three and Six Months Ended July 30, 2017 and July 31, 2016 ~~and August 2, 2015~~	4

	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME— Three and Six Months Ended July 30, 2017 and July 31, 2016 ~~and August 2, 2015~~	5

	CONSOLIDATED STATEMENTS OF CASH FLOWS— Six Months Ended July 30, 2017 and July 31, 2016 ~~and August 2, 2015~~	6

	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7

	REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	1211

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1312

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	1917

Item 4.	Controls and Procedures	1917

Part II.	Other Information

Item 1.	Legal Proceedings	1917

Item 1A.	Risk Factors	1918

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2018

Item 6.	Exhibits	2118

Signatures		2219

Index to Exhibits		2320

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

amounts in millions, except share and per share data July 31,
2016 January 31,
2016
ASSETS
Current Assets:
Cash and Cash Equivalents $ 4,018
$ 2,216
Receivables, net 1,995
1,890
Merchandise Inventories 12,323
11,809
Other Current Assets 605
569
Total Current Assets 18,941
16,484
Property and Equipment, at cost 39,834
39,266
Less Accumulated Depreciation and Amortization 17,859
17,075
Net Property and Equipment 21,975
22,191
Goodwill 2,106
2,102
Other Assets 1,225
1,196
Total Assets $ 44,247
$ 41,973
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-Term Debt $ —
$ 350
Accounts Payable 8,273
6,565
Accrued Salaries and Related Expenses 1,453
1,515
Sales Taxes Payable 663
476
Deferred Revenue 1,666
1,566
Income Taxes Payable 346
34
Current Installments of Long-Term Debt 43
77
Other Accrued Expenses 2,081
1,941
Total Current Liabilities 14,525
12,524
Long-Term Debt, excluding current installments 20,900
20,789
Other Long-Term Liabilities 1,874
1,965
Deferred Income Taxes 291
379
Total Liabilities 37,590
35,657
STOCKHOLDERS’ EQUITY
Common Stock, par value $0.05; authorized: 10 billion shares; issued: 1.775 billion shares at July 31, 2016 and 1.772 billion shares at January 31, 2016; outstanding: 1.236 billion shares at July 31, 2016 and 1.252 billion shares at January 31, 2016 88
88
Paid-In Capital 9,549
9,347
Retained Earnings 33,492
30,973
Accumulated Other Comprehensive Loss (778 ) (898 )
Treasury Stock, at cost, 539 million shares at July 31, 2016 and 520 million shares at January 31, 2016 (35,694 ) (33,194 )
Total Stockholders’ Equity 6,657
6,316
Total Liabilities and Stockholders’ Equity $ 44,247
$ 41,973



amounts in millions, except share and per share data	July 30, 2017			January 29, 2017
ASSETS
Current Assets:
Cash and Cash Equivalents	$	4,830		$	2,538
Receivables, net	2,187			2,029
Merchandise Inventories	12,868			12,549
Other Current Assets	626			608
Total Current Assets	20,511			17,724
Property and Equipment, at cost	41,405			40,426
Less Accumulated Depreciation and Amortization	19,370			18,512
Net Property and Equipment	22,035			21,914
Goodwill	2,235			2,093
Other Assets	1,178			1,235
Total Assets	$	45,959		$	42,966
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-Term Debt	$	—		$	710
Accounts Payable	8,541			7,000
Accrued Salaries and Related Expenses	1,503			1,484
Sales Taxes Payable	711			508
Deferred Revenue	1,931			1,669
Income Taxes Payable	329			25
Current Installments of Long-Term Debt	545			542
Other Accrued Expenses	2,263			2,195
Total Current Liabilities	15,823			14,133
Long-Term Debt, excluding current installments	24,422			22,349
Other Long-Term Liabilities	1,923			1,855
Deferred Income Taxes	237			296
Total Liabilities	42,405			38,633
STOCKHOLDERS’ EQUITY
Common Stock, par value $0.05; authorized: 10 billion shares; issued: 1.779 billion shares at July 30, 2017 and 1.776 billion shares at January 29, 2017; outstanding: 1.181 billion shares at July 30, 2017 and 1.203 billion shares at January 29, 2017	89			88
Paid-In Capital	9,958			9,787
Retained Earnings	38,073			35,519
Accumulated Other Comprehensive Loss	(482		)	(867		)
Treasury Stock, at cost, 598 million shares at July 30, 2017 and 573 million shares at January 29, 2017	(44,084		)	(40,194		)
Total Stockholders’ Equity	3,554			4,333
Total Liabilities and Stockholders’ Equity	$	45,959		$	42,966

See accompanying Notes to Consolidated Financial Statements.

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
amounts in millions, except per share data	July 31, 2016			August 2, 2015			July 31, 2016			August 2, 2015			July 30, 2017			July 31, 2016			July 30, 2017			July 31, 2016
NET SALES	$	26,472		$	24,829		$	49,234		$	45,720		$	28,108		$	26,472		$	51,995		$	49,234
Cost of Sales	17,545			16,464			32,516			30,176			18,647			17,545			34,380			32,516
GROSS PROFIT	8,927			8,365			16,718			15,544			9,461			8,927			17,615			16,718

Operating Expenses:
Selling, General and Administrative	4,388			4,299			8,669			8,462			4,549			4,388			8,910			8,669
Depreciation and Amortization	436			419			869			838			449			436			893			869
Total Operating Expenses	4,824			4,718			9,538			9,300			4,998			4,824			9,803			9,538

OPERATING INCOME	4,103			3,647			7,180			6,244			4,463			4,103			7,812			7,180

Interest and Other (Income) Expense:
Interest and Investment Income	(8		)	(149		)	(15		)	(153		)	(16		)	(8		)	(29		)	(15		)
Interest Expense	236			233			480			430			265			236			519			480
Interest and Other, net	228			84			465			277			249			228			490			465

EARNINGS BEFORE PROVISION FOR INCOME TAXES	3,875			3,563			6,715			5,967			4,214			3,875			7,322			6,715
Provision for Income Taxes	1,434			1,329			2,471			2,154			1,542			1,434			2,636			2,471
NET EARNINGS	$	2,441		$	2,234		$	4,244		$	3,813		$	2,672		$	2,441		$	4,686		$	4,244

Weighted Average Common Shares	1,235			1,283			1,242			1,291
Basic Weighted Average Common Shares													1,183			1,235			1,191			1,242
BASIC EARNINGS PER SHARE	$	1.98		$	1.74		$	3.42		$	2.95		$	2.26		$	1.98		$	3.93		$	3.42

Diluted Weighted Average Common Shares	1,240			1,289			1,247			1,298			1,189			1,240			1,197			1,247
DILUTED EARNINGS PER SHARE	$	1.97		$	1.73		$	3.40		$	2.94		$	2.25		$	1.97		$	3.91		$	3.40

Dividends Declared per Share	$	0.69		$	0.59		$	1.38		$	1.18		$	0.89		$	0.69		$	1.78		$	1.38

See accompanying Notes to Consolidated Financial Statements.

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended						Six Months Ended					Three Months Ended					Six Months Ended
amounts in millions	July 31, 2016			August 2, 2015			July 31, 2016		August 2, 2015			July 30, 2017		July 31, 2016			July 30, 2017			July 31, 2016
Net Earnings	$	2,441		$	2,234		$	4,244	$	3,813
Other Comprehensive (Loss) Income:
NET EARNINGS												$	2,672	$	2,441		$	4,686		$	4,244
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments	(192		)	(241		)	117		(130		)	419		(192		)	389			117
Cash Flow Hedges, net of tax	(9		)	(14		)	2		—			22		(9		)	(3		)	2
Other	1			—			1		—			—		1			(1		)	1
Total Other Comprehensive (Loss) Income	(200		)	(255		)	120		(130		)
Total Other Comprehensive Income (Loss)												441		(200		)	385			120
COMPREHENSIVE INCOME	$	2,241		$	1,979		$	4,364	$	3,683		$	3,113	$	2,241		$	5,071		$	4,364

See accompanying Notes to Consolidated Financial Statements.

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended						Six Months Ended
amounts in millions	July 31, 2016			August 2, 2015			July 30, 2017			July 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings	$	4,244		$	3,813		$	4,686		$	4,244
Reconciliation of Net Earnings to Net Cash Provided by Operating Activities:
Depreciation and Amortization	978			915			1,015			978
Stock-Based Compensation Expense	133			122			148			133
Gain on Sales of Investments	—			(144		)
Changes in Assets and Liabilities:
Changes in Assets and Liabilities, net of the effects of acquisitions:
Receivables, net	(91		)	(232		)	(96		)	(91		)
Merchandise Inventories	(495		)	(828		)	(188		)	(495		)
Other Current Assets	(38		)	(17		)	—			(38		)
Accounts Payable and Accrued Expenses	1,773			2,017			1,714			1,773
Deferred Revenue	94			187			254			94
Income Taxes Payable	389			287			299			389
Deferred Income Taxes	(86		)	(81		)	(79		)	(86		)
Other	(24		)	(105		)
Other, net							109			(24		)
Net Cash Provided by Operating Activities	6,877			5,934			7,862			6,877
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures	(697		)	(705		)	(846		)	(697		)
Proceeds from Sales of Investments	—			144
Payments for Business Acquired, net							(268		)	—
Proceeds from Sales of Property and Equipment	23			8			23			23
Net Cash Used in Investing Activities	(674		)	(553		)	(1,091		)	(674		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of Short-Term Borrowings, net	(350		)	(290		)
Proceeds from Long-Term Borrowings, net of discounts	2,989			2,492
Repayments of Short-Term Debt, net							(710		)	(350		)
Proceeds from Long-Term Debt, net of discounts							1,994			2,989
Repayments of Long-Term Debt	(3,023		)	(19		)	(21		)	(3,023		)
Repurchases of Common Stock	(2,441		)	(3,085		)	(3,921		)	(2,441		)
Proceeds from Sales of Common Stock	121			134			137			121
Cash Dividends Paid to Stockholders	(1,718		)	(1,533		)	(2,130		)	(1,718		)
Other Financing Activities	1			161			2			1
Net Cash Used in Financing Activities	(4,421		)	(2,140		)	(4,649		)	(4,421		)
Change in Cash and Cash Equivalents	1,782			3,241			2,122			1,782
Effect of Exchange Rate Changes on Cash and Cash Equivalents	20			(28		)	170			20
Cash and Cash Equivalents at Beginning of Period	2,216			1,723			2,538			2,216
Cash and Cash Equivalents at End of Period	$	4,018		$	4,936		$	4,830		$	4,018

See accompanying Notes to Consolidated Financial Statements.

Table of Contents

THE HOME DEPOT, INC. AND SUBSIDIARIES

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 Subsidiaries (the "Company") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. ~~These~~Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, these statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended January ~~31, 2016~~29, 2017, as filed with the Securities and Exchange ~~Commission.~~

~~Business~~

~~The Home Depot, Inc., together with its subsidiaries~~Commission on March 23, 2017 (the ~~"Company"~~"2016 Form 10-K"), is a home improvement retailer that sells a wide assortment of building materials, home improvement products and lawn and garden products and provides a number of services to do-it-yourself customers, do-it-for-me customers and professional customers. The Home Depot stores, which are full-service, warehouse-style stores averaging approximately ~~104,000~~ ~~square feet of enclosed space, with approximately~~ ~~24,000~~ ~~additional square feet of outside garden area, stock approximately~~ ~~30,000~~ to ~~40,000~~ ~~different kinds of products. The Company also offers a significantly broader product assortment through its Home Depot, Home Decorators Collection and Blinds.com websites.~~.

Valuation Reserves

As of July ~~31, 2016~~30, 2017 and January ~~31, 2016~~29, 2017, the valuation allowances for Merchandise Inventories and uncollectible Receivables were not material.

Recent Accounting Pronouncements

There have been no material changes to the Company’s position regarding recent accounting pronouncements pending adoption as disclosed in the 2016 Form 10-K, except as set forth below.

In ~~March 2016,~~May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, "Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting", which makes several modifications to the accounting for employee share-based payment transactions, including the requirement to recognize the income tax effects of awards that vest or settle as income tax expense. This guidance also clarifies the presentation of certain components of share-based awards in the statement of cash flows. This guidance is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods, and early adoption is permitted. The Company is evaluating the effect that ASU No. 2016-09 will have on its Consolidated Financial Statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)", which requires an entity that is a lessee to recognize the assets and liabilities arising from leases on the balance sheet. This guidance also requires disclosures about the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, using a modified retrospective approach, and early adoption is permitted. The Company is evaluating the effect that ASU No. 2016-02 will have on its Consolidated Financial Statements and related disclosures.

I~~n May 2014, the FASB issued ASU~~ No. 2014-09, "Revenue from Contracts with Customers (Topic 606)", which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. In addition, ASU No. 2014-09 requires disclosures of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU No. 2014-09 supersedes most existing U.S. GAAP revenue recognition ~~guidance in U.S. GAAP,~~principles, and it permits the use of either the retrospective or ~~cumulative effect~~modified retrospective transition method. In August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date", which delayed the effective date of ASU No. 2014-09 by one year. As a result, ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, including interim periods within those annual periods. In the first six months of fiscal 2016, the FASB issued guidance clarifying the interpretation of certain principles of ASU No. 2014-09.

The Company ~~is evaluating~~continues to evaluate the effect that ~~this revenue recognition guidance~~ASU No. 2014-09 will have on its Consolidated Financial Statements and related ~~disclosures.~~disclosures and controls. Based on its preliminary assessment, the Company has determined that the adoption of ASU No. 2014-09 could impact the timing of revenue recognition through its services, gift card and various incentive programs. ASU No. 2014-09 will impact the Company’s method of recognizing gift card breakage income, which is currently recognized based upon historical redemption patterns. ASU No. 2014-09 requires gift card breakage income to be recognized in proportion to the pattern of rights exercised by the customer when the Company expects to be entitled to breakage. The Company is also evaluating the principal versus agent considerations as it relates to certain arrangements with third parties that could impact the presentation of gross or net revenue reporting. Other areas which could be impacted may be identified as the Company continues its evaluation of ASU No. 2014-09. The Company plans to adopt ASU No. 2014-09 on January 29, 2018 using the modified retrospective transition method.

Recent accounting pronouncements pending adoption not discussed above or in the 2016 Form 10-K are either not applicable or will not have or are not expected to have a material impact on the Company.


2.	RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

On January 30, 2017, the Company adopted ASU No. 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting". Upon adoption of this update, all excess tax benefits or deficiencies related to share-based payment awards are recognized in the provision for income taxes in the period in which they occur. Previously these amounts were reflected in paid-in capital. In addition, upon adoption these amounts are classified as an operating activity in the consolidated statements of cash flows in the period in which they occur. Previously, these amounts were reflected as a financing activity. Cash paid by the Company to tax authorities when directly withholding shares for tax withholding purposes will continue to be classified as a financing activity in the consolidated statements of cash flows. Stock-based compensation expense will continue to reflect estimated forfeitures of share-based awards. The Company has adopted the applicable provisions of ASU No. 2016-09 prospectively.

Table of Contents

THE HOME DEPOT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Reclassifications~~

~~Certain amounts in prior fiscal periods have been reclassified to conform with~~As a result of the ~~presentation adopted in the current fiscal periods. See Note 2 to the Consolidated Financial Statements included in this report.~~


2.	~~RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS~~

On February 1, 2016, the Company adopted ASU No. 2015-03, "Interest–Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs". Under ASU No. 2015-03, debt issuance costs related to a recognized debt liability are presented as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The adoption of ASU No. 2015-03 has been applied retrospectively and accordingly, the Company's Consolidated Balance Sheet as of January 31, 2016 has been reclassified to reflect this adoption. The impact of this reclassification was a decrease of $99 million to Other Assets, and a corresponding decrease to Long-Term Debt, excluding current installments, as of January 31, 2016.

~~Also on February 1, 2016,~~2016-09, the Company ~~early adopted ASU No. 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification~~recognized $20 million and $85 million of ~~Deferred Taxes". Under ASU No. 2015-17, deferred~~excess tax ~~assets~~benefits related to share-based payment awards in its provision for income taxes during the second quarter and ~~liabilities are presented as noncurrent in a classified balance sheet.~~first six months of fiscal 2017, respectively. The ~~adoption~~recognition of ~~ASU No. 2015-17 has been applied retrospectively~~these benefits contributed $0.02 and ~~accordingly,~~$0.07 to Diluted Earnings per Share for the ~~Company's Consolidated Balance Sheet as~~second quarter and first six months of January 31, 2016 has been reclassified to reflect this adoption. The impact of this reclassification was a decrease of $509 million to Other Current Assets, an increase of $32 million to Other Assets, a decrease of $2 million to Other Accrued Expenses and a $475 million decrease to Deferred Income Taxes as of January 31, 2016. All future deferred tax assets and liabilities will be presented as noncurrent.fiscal 2017, respectively.


3.	LONG-TERM DEBT

In ~~February 2016,~~June 2017, the Company issued ~~$1.35 billion~~$500 million of ~~2.00%~~floating rate senior notes due ~~April 1, 2021~~June 5, 2020 (the ~~"2021~~"2020 floating rate notes"); $750 million of 1.80% senior notes due June 5, 2020 (the "2020 notes") at a discount of $1 million; and $750 million of 3.90% senior notes due June 15, 2047 (the "2047 notes") at a discount of $5 million ~~$1.3 billion of 3.00% senior~~(together, the “June 2017 issuance”). The 2020 floating rate notes ~~due April 1, 2026 (the "2026 notes")~~bear interest at a ~~discount of $8 million, and $350 million of 4.25% senior notes due April 1, 2046 (the "2046 notes"~~variable rate determined quarterly equal to the three-month London Interbank Offered Rate ("LIBOR") at a premium of $2 million (together, the "February 2016 issuance"). The 2046 notes form a single series with the Company's $1.25 billion of 4.25% senior notes due April 1, 2046 that were issued in May 2015, and have the same terms. The aggregate principal amount outstanding of the Company's senior notes due April 1, 2046 is $1.6 billion.plus 15 basis points. Interest on the ~~2021~~2020 floating rate notes is due quarterly on March 5, June 5, September 5, and ~~2026~~December 5 of each year, beginning September 5, 2017. Interest on the 2020 notes is due semi-annually on ~~April 1~~June 5 and ~~October 1~~December 5 of each year, beginning ~~October 1, 2016.~~December 5, 2017. Interest on the ~~2046~~2047 notes is due semi-annually on ~~April 1~~June 15 and ~~October 1~~December 15 of each year, beginning ~~April 1, 2016, with~~December 15, 2017. Interest payments for the 2020 notes and 2047 notes will include accrued interest ~~accruing~~ from ~~October 1, 2015.~~and including June 5, 2017. The ~~$13~~$6 million discount associated with the ~~2021 and 2026~~2020 notes and the ~~$2 million premium associated with the 2046~~2047 notes ~~are~~is being amortized over the term of the notes using the effective interest rate method. Issuance costs of ~~$17~~$12 million associated with the ~~February 2016~~June 2017 issuance were recorded as a direct deduction to the senior notes and are being amortized over the term of the notes. The net proceeds of the ~~February 2016~~June 2017 issuance ~~were~~will be used ~~to repay~~for general corporate purposes, including repurchases of the Company's ~~5.40% senior notes that matured on March 1, 2016.~~common stock.

All of the Company's senior notes, other than ~~the $500 million of~~its outstanding floating rate ~~senior~~ notes, ~~due September 15, 2017,~~ may be redeemed by the Company at any time, in whole or in part, at the redemption price plus accrued interest up to the redemption date. The redemption price is equal to the greater of (1) 100% of the principal amount of the notes to be redeemed, ~~and~~or (2) the sum of the present values of the remaining scheduled payments of principal and interest to the Par Call Date, as defined in the respective notes. Additionally, if a Change in Control Triggering Event occurs, as defined in the notes, holders of all notes have the right to require the Company to redeem those notes at 101% of the aggregate principal amount of the notes plus accrued interest up to the redemption date. The Company is generally not limited under the indentures governing the notes in its ability to incur additional indebtedness or required to maintain financial ratios or specified levels of net worth or liquidity. ~~Further, while the~~The indentures governing the notes contain various ~~restrictive covenants,~~customary covenants; however, none are expected to impact the Company's liquidity or capital resources.

~~In fiscal 2015,~~


4.	ACCELERATED SHARE REPURCHASE AGREEMENTS

The Company enters into Accelerated Share Repurchase ("ASR") agreements from time to time with third-party financial institutions to repurchase shares of the Company’s common stock. Under an ASR agreement, the Company ~~entered into forward starting interest rate swap agreements with~~pays a ~~combined notional~~specified amount to the financial institution and receives an initial delivery of ~~$1.0 billion, accounted for as cash flow hedges, to hedge interest rate fluctuations in anticipation~~shares. This initial delivery of shares represents the minimum number of shares that the Company may receive under the agreement. Upon settlement of the ~~February 2016 issuance. In connection~~ASR agreement, the financial institution delivers additional shares, with the ~~February 2016 issuance,~~final number of shares delivered determined with reference to the ~~Company paid $89 million to settle these forward starting interest rate swap agreements. This amount, net~~volume weighted average price per share of ~~income taxes, is included in Accumulated Other Comprehensive Loss and is being amortized to Interest Expense~~the Company’s common stock over the term of the ~~2026 notes.~~ASR agreement, less a negotiated discount. The transactions are accounted for as equity transactions and are included in Treasury Stock when the shares are received, at which time there is an immediate reduction in the weighted average common shares calculation for basic and diluted earnings per share.

The Company entered into an ASR agreement during the second quarter of fiscal 2017. The terms of the ASR agreement, which follow the structure outlined above, were as follows (amounts in millions):

Agreement Date

Settlement Date

Amount

Initial Shares Delivered

Additional Shares Delivered

Total Shares Delivered

Q2 2017

1,650

9.7

1.1

10.8

Table of Contents

THE HOME DEPOT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


4.	~~COMMITMENTS AND CONTINGENCIES~~

~~Data Breach~~

As previously reported, in the third quarter of fiscal 2014, the Company confirmed that its payment data systems were breached, which potentially impacted customers who used payment cards at self-checkout systems in the Company's U.S. and Canadian stores (the "Data Breach").

~~Litigation, Claims and Government Investigations~~

In fiscal 2015, the four major payment card networks made claims against the Company for costs that they assert they or their issuing banks incurred in connection with the Data Breach. The Company entered into settlement agreements with all four networks in fiscal 2015. In addition, a total of 57 putative class actions were filed in the U.S. on behalf of customers and financial institutions and in Canada on behalf of customers allegedly harmed by the Data Breach. The U.S. class actions have been consolidated for pre-trial proceedings in the United States District Court for the Northern District of Georgia (the "District Court"). In the fourth quarter of fiscal 2015 and first quarter of fiscal 2016, the Company agreed in principle to settlement terms that will resolve and dismiss the claims asserted in the U.S. and Canadian customer class actions, respectively. In August 2016, the respective courts approved the settlements. The U.S. customer class action settlement remains subject to potential appeal. The U.S. financial institution class actions remain ongoing.

The Company previously recorded accruals for estimated probable losses in connection with the payment card networks' claims and the U.S. and Canadian customer class actions. These estimates are based on currently available information associated with those matters and may change as new information becomes available or circumstances change.

Other claims have been and may be asserted against the Company on behalf of customers, payment card issuing banks, shareholders or others seeking damages or other related relief allegedly arising from the Data Breach. In fiscal 2015, two purported shareholder derivative actions were filed in the District Court against certain present and former members of the Company's Board of Directors and executive officers. The Company was also named as a nominal defendant in both suits. In the first quarter of fiscal 2016, the two actions were consolidated into a single derivative complaint, which asserts claims for breaches of fiduciary duty, waste of corporate assets and violations of the Securities Exchange Act of 1934. The complaint seeks unspecified damages, equitable relief to reform the Company's corporate governance structure, restitution, disgorgement of profits, benefits and other compensation obtained by the defendants, and reasonable costs and expenses. In addition, several state and federal agencies, including State Attorneys General, are investigating events related to the Data Breach, including how it occurred, its consequences and the Company's responses. The Company is cooperating in the governmental investigations, and the Company may be subject to fines or other obligations.

While losses from these pending matters, including the U.S. financial institution class actions, are reasonably possible, the Company is not able to estimate the costs, or range of costs, related to these matters because the proceedings remain in the early stages, alleged damages have not been specified, there is uncertainty as to the likelihood of a class or classes being certified in the U.S. financial institution matter or the ultimate size of any such class if certified, and there are significant factual and legal issues to be resolved. The Company has not concluded that a loss from these matters is probable; therefore, the Company has not recorded an accrual for litigation, claims and governmental investigations related to these matters as of the end of the second quarter of fiscal 2016. The Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable. The Company believes that the ultimate amount paid on these actions, claims and investigations could have an adverse effect on the Company's consolidated financial condition, results of operations or cash flows in future periods.

~~Expenses Incurred and Amounts Accrued~~

In the second quarter and first six months of fiscal 2016, the Company recorded $2 million and $4 million, respectively, of pretax expenses related to the Data Breach. The Company did not record any related expected insurance proceeds in the second quarter and first six months of fiscal 2016. Since the Data Breach occurred, the Company has recorded $265 million of pretax gross expenses related to the Data Breach, partially offset by $100 million of expected insurance proceeds, for pretax net expenses of $165 million. These expenses include costs to investigate the Data Breach; provide identity protection services, including credit monitoring, to impacted customers; increase call center staffing; and pay legal and other professional services, all of which were expensed as incurred. Expenses also include the accruals for estimated probable losses that the Company has incurred or expects to incur in connection with the claims made by the payment card networks or their issuing banks and the U.S. and Canadian customer class actions. These expenses are included in Selling, General and Administrative expenses in the accompanying Consolidated Statements of Earnings.

~~Table of Contents~~

~~THE HOME DEPOT, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~At July 31, 2016, accrued liabilities and insurance receivable related to the Data Breach consisted of the following (amounts in millions):~~

Accrued Liabilities Insurance Receivable
Balance at January 31, 2016 $ (34 ) $ 70
(Expenses incurred) insurance receivable recorded in the first quarter of fiscal 2016 (2 ) —
Payments made (received) in the first quarter of fiscal 2016 9
(15 )
Balance at May 1, 2016 $ (27 ) $ 55
(Expenses incurred) insurance receivable recorded in the second quarter of fiscal 2016 (2 ) —
Payments made (received) in the second quarter of fiscal 2016 —
(10 )
Balance at July 31, 2016 $ (29 ) $ 45

~~Future Costs~~

The Company expects to incur additional legal and other professional service expenses associated with the Data Breach in future periods and will recognize these expenses as services are received. Costs related to the Data Breach that may be incurred in future periods may include liabilities from current and future civil litigation, governmental investigations and enforcement proceedings; future expenses for legal, investigative, and consulting fees; and incremental expenses and capital investments for remediation activities. The Company believes that the ultimate amount paid for these services and claims could have an adverse effect on the Company's consolidated financial condition, results of operations, or cash flows in future periods.

~~Insurance Coverage~~

The Company maintained $100 million of network security and privacy liability insurance coverage in fiscal 2014, above a $7.5 million deductible, to limit the Company's exposure to losses such as those related to the Data Breach. As of July 31, 2016, the Company had received initial payments totaling $55 million of insurance reimbursements under the fiscal 2014 policy, and expects to receive additional payments. In fiscal 2016 and 2015, the Company maintained $100 million of network security and privacy liability insurance coverage, above a $10 million deductible, to limit the Company's exposure to similar losses.


5.	FAIR VALUE MEASUREMENTS

The carrying amount of Cash and Cash Equivalents, Receivables and Accounts Payable reported in the Company's Consolidated Balance Sheets approximates fair value ~~of an asset is considered~~due to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, rather than the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are:



•	~~Level 1 –~~	~~Observable inputs that reflect quoted prices in active markets~~
•	~~Level 2 –~~	~~Inputs other than quoted prices in active markets that are either directly or indirectly observable~~
•	~~Level 3 –~~	~~Unobservable inputs for which little or no market data exists, therefore requiring the Company to develop its own assumptions~~

their short-term maturities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the assets and liabilities, if any, of the Company that are measured at fair value on a recurring ~~basis as of July 31, 2016 and January 31, 2016 were as follows (amounts in millions):~~basis:

Fair Value at July 31, 2016 Using Fair Value at January 31, 2016 Using
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Derivative agreements - assets $ —
$ 253
$ —
$ —
$ 213
$ —
Derivative agreements - liabilities —
—
—
—
(82 ) —
Total $ —
$ 253
$ —
$ —
$ 131
$ —

~~Table of Contents~~

~~THE HOME DEPOT, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~



amounts in millions	Fair Value at July 30, 2017 Using						Fair Value at January 29, 2017 Using
	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	$	—	$	208	$	—	$	—	$	271	$	—

The Company uses derivative financial instruments from time to time in the management of its interest rate exposure on ~~long-term debt~~certain Long-Term Debt and its exposure onto foreign currency fluctuations. ~~The fair value of the Company's derivative financial instruments was measured using level 2 inputs.~~

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Long-lived assets were analyzed for impairment on a nonrecurring basis using fair value measurements with unobservable inputs (level 3). Impairment charges related to long-lived assets in the first six months of fiscal ~~2016~~2017 and ~~2015~~2016 were not material.

The aggregate fair ~~value~~and carrying values of the Company's senior notes ~~based on quoted market prices, was~~ were as follows:~~$23.7 billion~~ ~~and~~ ~~$21.8 billion~~ at ~~July 31, 2016~~ ~~and~~ ~~January 31, 2016, respectively, compared to a carrying value of $20.1 billion and $20.1 billion at July 31, 2016 and January 31, 2016, respectively.~~



amounts in millions	July 30, 2017				January 29, 2017
	Fair Value (Level 1)		Carrying Value		Fair Value (Level 1)		Carrying Value
Senior notes	$	26,194	$	24,005	$	23,620	$	22,013


6.	BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES

The following table presents the reconciliation of basic to diluted weighted average common shares ~~for~~as well as the ~~three and six months ended~~ ~~July 31, 2016~~ ~~and~~ ~~August 2, 2015~~ ~~was as follows (amounts in millions):~~effect of anti-dilutive securities excluded from diluted weighted average common shares:

Three Months Ended Six Months Ended
July 31,
2016 August 2,
2015 July 31,
2016 August 2,
2015
Weighted average common shares 1,235
1,283
1,242
1,291
Effect of potentially dilutive securities:
Stock plans 5
6
5
7
Diluted weighted average common shares 1,240
1,289
1,247
1,298



	Three Months Ended		Six Months Ended
amounts in millions	July 30, 2017	July 31, 2016	July 30, 2017	July 31, 2016
Basic Weighted Average Common Shares	1,183	1,235	1,191	1,242
Effect of potentially dilutive securities - stock plans	6	5	6	5
Diluted Weighted Average Common Shares	1,189	1,240	1,197	1,247

~~Stock plans consist~~



Effect of anti-dilutive securities excluded from diluted weighted average common shares	1	1	1	1

Table of ~~shares granted under~~Contents

THE HOME DEPOT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


7.	COMMITMENTS AND CONTINGENCIES

Data Breach

As previously reported, in the ~~Company's employee stock plans. Options~~third quarter of fiscal 2014, the Company confirmed that its payment data systems were breached, which potentially impacted customers who used payment cards at self-checkout systems in the Company’s U.S. and Canadian stores (the "Data Breach"). Since the end of fiscal 2016, there have been no material changes with respect to ~~purchase~~ ~~1 million~~the Data Breach, except as discussed below.

As reported in the 2016 Form 10-K, in the first quarter of fiscal 2017, the Company agreed to settlement terms that, upon approval of the court, will resolve and ~~2 million~~ ~~shares~~dismiss the claims asserted in the financial institutions class actions. In addition, in the first quarter of ~~common stock for~~fiscal 2017, the ~~three months ended~~ ~~July 31, 2016~~parties to the two purported shareholder derivative actions agreed to settlement terms that, upon approval of the court, will resolve and ~~August 2, 2015, respectively,~~dismiss the claims asserted in those actions.

As of the end of the first quarter of fiscal 2017, the Company has resolved the most significant claims relating to the Data Breach, and ~~options to purchase 1 million and 2 million shares of common stock for~~there were no material changes during the first six months ~~ended July 31, 2016 and August 2, 2015, respectively, were excluded from~~of fiscal 2017 to the ~~computation~~Company’s loss contingency assessment relating to any remaining matters. The Company does not believe that the ultimate amounts paid with respect to any remaining matters will have a material adverse effect on the Company’s consolidated financial condition, results of ~~Diluted Earnings per Share because their effect would have been anti-dilutive.~~operations or cash flows in future periods.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

The Home Depot, Inc.:

We have reviewed the Consolidated Balance Sheet of The Home Depot, Inc. and subsidiaries as of July ~~31, 2016~~,30, 2017, the related Consolidated Statements of Earnings and Comprehensive Income for the three-month and six-month periods ended July 30, 2017 and July 31, 2016, ~~and August 2, 2015,~~ and the related Consolidated ~~Statement~~Statements of Cash Flows for the six-month periods ended July 30, 2017 and July 31, ~~2016 and August 2, 2015.~~2016. These Consolidated Financial Statements are the responsibility of the Company's management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of 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 Public Company Accounting Oversight Board (United States), 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.

Based on our reviews, we are not aware of any material modifications that should be made to the Consolidated Financial Statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheet of The Home Depot, Inc. and subsidiaries as of January ~~31, 2016~~,29, 2017, 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 ~~24, 2016,~~23, 2017, we expressed an unqualified opinion on those Consolidated Financial Statements. ~~Our report on the Consolidated Financial Statements referred to a change in the presentation of certain shipping and handling costs.~~ In our opinion, the information set forth in the accompanying Consolidated Balance Sheet as of January ~~31, 2016~~,29, 2017, is fairly stated, in all material respects, in relation to the Consolidated Balance Sheet from which it has been derived.

/s/ KPMG LLP

Atlanta, Georgia

August ~~22, 2016~~21, 2017


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

FORWARD-LOOKING STATEMENTS

Certain statements contained herein 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 store sales; effects of competition; state of the economy; state of the residential construction, housing and home improvement markets; state of the credit markets, including mortgages, home equity loans and consumer credit; demand for credit offerings; inventory and in-stock positions; implementation of store, interconnected retail, ~~and~~ supply chain and technology initiatives; management of relationships with our suppliers and vendors; the impact and expected outcome of investigations, inquiries, claims and litigation, including those related to the data breach we discovered in the third quarter of fiscal ~~2014;~~2014 (the "Data Breach"); issues related to the payment methods we accept; continuation of share repurchase programs; net earnings performance; earnings per share; dividend targets; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; stock-based compensation expense; commodity price inflation and deflation; the ability to issue debt on terms and at rates acceptable to us; the effect of accounting charges; the effect of adopting certain accounting standards; store openings and closures; financial outlook; and the integration of ~~Interline Brands, Inc. ("Interline")~~acquired companies into our organization and the ability to recognize the anticipated synergies and benefits of ~~the acquisition.~~those acquisitions.

Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You should not rely on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties – many of which are beyond our control or are currently unknown to us – as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, those described in Part II, Item 1A, "Risk Factors" and elsewhere in this report. 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 Securities and Exchange Commission ("SEC").

EXECUTIVE SUMMARY AND SELECTED ~~CONSOLIDATED STATEMENTS OF EARNINGS~~FINANCIAL AND OPERATING DATA

Net Sales increased ~~6.6%~~6.2% to $28.1 billion for the second quarter of fiscal 2017 from $26.5 billion for the second quarter of fiscal ~~2016 from $24.8 billion for the second quarter of fiscal 2015.~~2016. For the first six months of fiscal ~~2016,~~2017, Net Sales increased ~~7.7%~~5.6% to ~~$49.2~~$52.0 billion from ~~$45.7~~$49.2 billion for the first six months of fiscal ~~2015.~~2016. Our total comparable store sales increased ~~4.7% in~~6.3% for the second quarter of fiscal ~~2016,~~2017, driven by a ~~2.5%~~3.6% increase in our comparable store average ticket and a ~~2.2%~~2.6% increase in our comparable store customer transactions. Comparable store sales for our U.S. stores increased ~~5.4% in~~6.6% for the second quarter of fiscal ~~2016.~~2017. For the first six months of fiscal ~~2016,~~2017, our total comparable store sales increased ~~5.5%~~6.0% and comparable store sales for our U.S. stores increased 6.3%.

For the second quarter of fiscal ~~2016,~~2017, we reported Net Earnings of $2.7 billion and Diluted Earnings per Share of $2.25 compared to Net Earnings of $2.4 billion and Diluted Earnings per Share of $1.97 ~~compared to~~for the second quarter of fiscal 2016. For the first six months of fiscal 2017, we reported Net Earnings of ~~$2.2~~$4.7 billion and Diluted Earnings per Share of ~~$1.73 for the second quarter of fiscal 2015. For the first six months of fiscal 2016, we reported~~$3.91 compared to Net Earnings of $4.2 billion and Diluted Earnings per Share of $3.40 ~~compared to Net Earnings of $3.8 billion and Diluted Earnings per Share of $2.94~~ for the first six months of fiscal ~~2015.~~2016.

~~The results~~

Results for the second quarter and first six months of fiscal ~~2015~~2017 included ~~$92~~benefits of $20 million and ~~$99~~$85 million, respectively, to our Provision for Income Taxes for share-based payment awards resulting from the adoption of ~~pretax net expenses related to a breach of our payment data systems that we discovered~~ASU No. 2016-09 in the ~~third~~first quarter of fiscal ~~2014 (the "Data Breach"). These charges resulted in a decrease of $0.05 to Diluted Earnings per Share for the second quarter~~2017. This benefit contributed $0.02 and ~~first six months of fiscal 2015.~~

The results for the second quarter and first six months of fiscal 2015 included a $144 million pretax gain related to the sale of our remaining equity ownership in HD Supply Holdings, Inc. ("HD Supply"). This gain contributed $0.07 to Diluted Earnings per Share for the second quarter and first six months of fiscal ~~2015.~~

~~The results for the first six months of fiscal 2015 included a $71 million net benefit to our Provision for Income Taxes due primarily~~2017, respectively. See Note 2 to the ~~favorable settlement of a tax audit, resulting~~Consolidated Financial Statements included in ~~a benefit of $0.05 to Diluted Earnings per Share for the first six months of fiscal 2015.~~this report.

~~Key Initiatives~~

In the second quarter and first six months of fiscal ~~2016~~,2017, we continued to focus on the ~~following key initiatives:~~following:

Customer Experience – ~~Our customer~~Customer experience ~~initiative~~ is anchored on the principles of putting customers first and taking care of our associates, and our commitment to customer service remains strong. ~~We have taken a number of steps to enhance this initiative to provide our customers with a seamless and frictionless shopping experience in our stores, online, on the job site or in their homes.~~ In the first six months of fiscal 2017, we continued to invest in our digital platforms, including content, website improvements, and the mobile experience to provide a frictionless interconnected experience online, while also remaining focused on improving the interconnected experience in the store. Sales from our online channels increased 23.3% for the second quarter of fiscal 2017 compared to the same period last year, and represented 6.4% of our total Net Sales. For the first six months of fiscal 2017, sales from our online channels increased 23.1%~~2016~~

compared to the same period last year, and represented 6.5% of our total Net Sales. We are also focused on being a valued partner to our professional customers by offering solutions in the store and at the jobsite that help them effectively manage their businesses. For example, during the second quarter of fiscal 2017, we completed the acquisition of Compact Power Equipment, Inc. ("Compact Power"), a leading national provider of equipment rental and maintenance services, to enhance our portfolio of service offerings to our professional customers. Also in the first six months of fiscal 2017, we ~~enhanced~~completed the roll out of Interline Brands, Inc.'s ("Interline") product catalog to our ~~dynamic ETA feature for online purchases. Dynamic ETA provides a timelier~~stores and ~~more accurately estimated delivery date and we believe it will lead~~continued the roll out of the capability to ~~increased conversion and~~accept payment in our stores that is linked to existing Interline customer ~~satisfaction.~~accounts.

Product Authority – ~~Our product~~Product authority ~~initiative~~ is facilitated by our merchandising transformation and portfolio strategy, which is focused on delivering product innovation, assortment and value. We strive to be the leader in product authority, connecting products and services to the needs of our customers. In the first six months of fiscal ~~2016, we~~2017, our merchants continued to collaborate with our suppliers to introduce a wide range of innovative new products to our do-it-yourself, do-it-for-me and professional customers, while remaining focused on offering everyday values in our stores and online. We also continued to leverage our merchandising assortment planning and pricing tools to better understand customer preferences and to refine our online and in-store product assortment in particular stores and geographic areas.

Productivity and Efficiency Driven by Capital Allocation – ~~Our approach to driving~~We drive productivity and efficiency ~~is advanced~~ through continuous operational improvement in our stores and supply ~~chain,~~chain. Further, our disciplined capital allocation ~~and building~~builds shareholder value through higher returns on invested capital and total value returned to shareholders in the form of dividends and share repurchases. ~~We continue~~In the first six months of fiscal 2017, we continued to optimize the flow of products from suppliers to shelves and to our customers’ locations through Project Sync. This multi-year supply chain ~~through our multi-year~~ program ~~called Project Sync, which~~ is being rolled out gradually to suppliers in several of our U.S. Rapid Deployment Centers ("RDCs"). This will allow us to significantly reduce our average lead time from supplier to shelf, reduce transportation expenses and improve inventory turns. As we continue to roll out Project Sync, we plandesigned to create an end-to-end solution that ~~benefits~~will benefit all participants in our supply chain. We plan to continue to innovate our business model and value chain ~~from~~to support our ~~suppliers to our transportation providers to our RDC~~productivity cycle and ~~store associates to our customers.~~enhance overall value for customers throughout the year.

~~We did not~~In February 2017, our Board of Directors increased our targeted dividend payout ratio to 55% of Diluted Earnings per Share for fiscal 2016. Also in February 2017, our Board of Directors authorized a new $15.0 billion share repurchase program that replaced the previous authorization. Under the program, we repurchased a total of 17.3 million shares for $2.6 billion through an Accelerated Share Repurchase ("ASR") agreement and the open ~~or close any stores~~market during the second quarter of fiscal ~~2016,~~2017.

We opened one new store in the U.S. during the second quarter of fiscal 2017, for a total store count of ~~2,275~~2,282 at the end of the quarter. As of the end of the second quarter of fiscal ~~2016,~~2017, a total of ~~298~~302 of our stores, or ~~13.1%~~13.2%, were located in Canada and Mexico.

We generated ~~$6.9~~$7.9 billion of cash flow from operations in the first six months of fiscal ~~2016.~~2017. This cash flow, along with ~~$3.0~~$2.0 billion of long-term debt issued in the first six months of fiscal ~~2016,~~2017, was used to ~~repay $3.0 billion of 5.40% senior notes that matured on March 1, 2016,~~ fund cash payments of ~~$2.4~~$3.9 billion for share repurchases, pay ~~$1.7~~$2.1 billion of dividends, fund ~~$697~~$846 million in capital expenditures and repay ~~$350~~$710 million of short-term ~~borrowings.~~debt.

Our inventory turnover ratio was 5.3 times at the end of the second quarter of fiscal 2017 compared to 5.2 times at the end of the second quarter of fiscal ~~2016 compared to 5.1 times at the end of the second quarter of fiscal 2015.~~2016. Our return on invested capital ~~(computed on~~(defined as net operating profit after tax, a non-GAAP financial measure, for the most recent twelve-month period, divided by the average of beginning and ending long-term debt, including current installments, and equity for the most recent twelve-month period) was 32.0% for the second quarter of fiscal 2017 compared to 29.0% for the second quarter of fiscal ~~2016 compared to 25.0% for the second quarter of fiscal 2015.~~2016. For a reconciliation of net operating profit after tax to Net Earnings, the most comparable GAAP financial measure, and our calculation of return on invested capital, see "Non-GAAP Financial Measures" below.

~~Interconnecting Retail~~ ~~– Our focus on interconnecting retail is based on building a competitive and seamless platform across all commerce channels. In the first six months of fiscal~~ ~~2016~~, we continued to invest in our interconnected abilities to more effectively meet customers' demands for increased fulfillment options. We completed the deployment of our new Customer Order Management platform (“COM”) in all of our U.S. stores in the second quarter of fiscal 2016. We also continued the roll out of our Buy Online, Deliver From Store ("BODFS") program, which complements our existing interconnecting retail programs, Buy Online, Ship to Store ("BOSS") and Buy Online, Pick-up In Store ("BOPIS"). We have seen strong demand for our BODFS program in certain markets where it has been piloted, and we expect to complete the roll out of BODFS by the end of fiscal 2016.

Additionally, we have fully implemented BOSS via RDC delivery capability, which enables us to fulfill BOSS orders through our RDC network, leveraging our inventory and fulfillment channels, which has resulted in significant cost savings and improved shipping times and customer satisfaction scores. In the second quarter of fiscal 2016, over 40% of our online orders were picked up in our stores through our BOPIS and BOSS offerings and approximately 90% of our online returns were processed through the convenience of our stores. Sales from our online channels increased 18.8% and 20.0% for the second quarter and first six months of fiscal 2016, respectively, compared to the same periods last year, and represented 5.6% of our total Net Sales for both the second quarter and first six months of fiscal 2016.

We believe ~~the selected sales data,~~ the percentage relationship between Net Sales and the major categories in the Consolidated Statements of Earnings and the percentage change in the dollar amounts of each of these items as well as the ~~items~~selected sales data presented below are important in evaluating the performance of our business operations.


	% of Net Sales												% Increase (Decrease) in Dollar Amounts				% of Net Sales												% Increase (Decrease) in Dollar Amounts
	Three Months Ended						Six Months Ended						% Increase (Decrease) in Dollar Amounts				Three Months Ended						Six Months Ended						% Increase (Decrease) in Dollar Amounts
	July 31, 2016			August 2, 2015			July 31, 2016			August 2, 2015			Three Months		Six Months		July 30, 2017			July 31, 2016			July 30, 2017			July 31, 2016			Three Months		Six Months
NET SALES	100.0		%	100.0		%	100.0		%	100.0		%	6.6	%	7.7	%	100.0		%	100.0		%	100.0		%	100.0		%	6.2	%	5.6	%
GROSS PROFIT	33.7			33.7			34.0			34.0			6.7		7.6		33.7			33.7			33.9			34.0			6.0		5.4
Operating Expenses:
Selling, General and Administrative	16.6			17.3			17.6			18.5			2.1		2.4		16.2			16.6			17.1			17.6			3.7		2.8
Depreciation and Amortization	1.6			1.7			1.8			1.8			4.1		3.7		1.6			1.6			1.7			1.8			3.0		2.8
Total Operating Expenses	18.2			19.0			19.4			20.3			2.2		2.6		17.8			18.2			18.9			19.4			3.6		2.8

OPERATING INCOME	15.5			14.7			14.6			13.7			12.5		15.0		15.9			15.5			15.0			14.6			8.8		8.8
Interest and Other (Income) Expense:
Interest and Investment Income	—			(0.6		)	—			(0.3		)	(94.6	)	(90.2	)	(0.1		)	—			(0.1		)	—			100.0		93.3
Interest Expense	0.9			0.9			1.0			0.9			1.3		11.6		0.9			0.9			1.0			1.0			12.3		8.1
Interest and Other, net	0.9			0.3			0.9			0.6			N/M		67.9		0.9			0.9			0.9			0.9			9.2		5.4

EARNINGS BEFORE PROVISION FOR INCOME TAXES	14.6			14.4			13.6			13.1			8.8		12.5		15.0			14.6			14.1			13.6			8.7		9.0
Provision for Income Taxes	5.4			5.4			5.0			4.7			7.9		14.7		5.5			5.4			5.1			5.0			7.5		6.7
NET EARNINGS	9.2		%	9.0		%	8.6		%	8.3		%	9.3	%	11.3	%	9.5		%	9.2		%	9.0		%	8.6		%	9.5	%	10.4	%
SELECTED SALES DATA⁽¹⁾
Number of Customer Transactions (in millions)	430.0			420.4			804.8			780.6			2.3	%	3.1	%
Number of Customer Transactions																	441.8			430.0			822.6			804.8			2.8	%	2.2	%
Average Ticket	$	60.87		$	59.42		$	60.48		$	59.04		2.4	%	2.4	%	$	63.05		$	60.87		$	62.74		$	60.48		3.6	%	3.7	%
Sales per Square Foot	$	438.61		$	420.37		$	407.64		$	387.04		4.3	%	5.3	%	$	464.38		$	438.61		$	429.17		$	407.64		5.9	%	5.3	%
Comparable Store Sales Increase (%)⁽²⁾	4.7%			4.2%			5.5		%	5.1		%	N/A		N/A		6.3		%	4.7		%	6.0		%	5.5		%	N/A		N/A
Online Sales (% of Net Sales)⁽³⁾	5.6%			5.0%			5.6		%	5.0		%	18.8	%	20.0	%	6.4		%	5.6		%	6.5		%	5.6		%	23.3	%	23.1	%

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

—————


(1)	Selected Sales Data does not include results for ~~the~~ Interline, ~~acquisition that~~which was ~~completed~~acquired in the third quarter of fiscal 2015.

(2)

Includes ~~Net Sales~~sales at locations open greater than 12 months, including relocated and remodeled stores and online sales, and excluding closed stores. Retail stores become comparable on the Monday following their 365^th day of operation. Comparable store sales is intended only as supplemental information and is not a substitute for Net Sales or Net Earnings presented in accordance with U.S. generally accepted accounting principles.


(3)	Consists of ~~Net Sales~~sales generated online through our ~~Home Depot, Home Decorators Collection and Blinds.com~~ websites for products picked up in stores or delivered to customer ~~locations through our BOPIS, BOSS and BODFS programs.~~locations.

N/A – Not Applicable

~~N/M – Not Meaningful~~

RESULTS OF OPERATIONS

Net Sales for the second quarter of fiscal ~~2016~~2017 increased~~6.6%~~ 6.2% to $~~26.5~~$28.1 billion from $~~24.8~~$26.5 billion for the second quarter of fiscal ~~2015~~.2016. For the first six months of fiscal ~~2016,~~2017, Net Sales increased ~~7.7%~~5.6% to ~~$49.2~~$52.0 billion from ~~$45.7~~$49.2 billion for the ~~comparable period~~first six months of fiscal ~~2015.~~2016. The increase in Net Sales for the second quarter and first six months of fiscal ~~2016~~2017 primarily reflects the impact of positive comparable store sales driven by increased customer transactions and average ticket ~~growth, as well as sales from Interline, which was acquired in the third quarter of fiscal 2015.~~growth. The increase in Net Sales was partially offset by pressure from ~~a stronger U.S. dollar,~~foreign currency fluctuations, which negatively impacted total sales growth by ~~$181~~$64 million and ~~$377~~$135 million infor the second quarter and first six months of fiscal ~~2016~~,2017, respectively.

Total comparable store sales increased ~~4.7%~~6.3% and ~~5.5%~~6.0% for the second quarter and first six months of fiscal ~~2016~~,2017, respectively, which reflects a number of factors, including the execution of our ~~key initiatives, continued strength in~~strategy and broad-based growth across our ~~maintenance and repair categories, and an improved U.S. home improvement market.~~stores. All of our departments posted positive comparable store sales for the second quarter and first six months of fiscal ~~2016.~~2017. Comparable store sales for our ~~Appliances,~~Lumber, Electrical, Tools, ~~Lumber, Plumbing, Décor,~~Flooring, Building Materials, Appliances, Indoor Garden ~~Building Materials~~ and ~~Lighting~~Décor product categories were above the Company average for the second quarter of fiscal ~~2016.~~2017. Further, our ~~comparable store customer transactions increased 2.2% and 3.0% for the~~ ~~second~~ ~~quarter and first six months of fiscal~~ ~~2016, respectively. Our~~ comparable store average ticket increased ~~2.5%~~3.6% and 3.8% for ~~both~~ the second quarter and first six months of fiscal ~~2016,~~2017, respectively, due in part to strong sales in big ticket purchases such as ~~HVAC,~~ appliances and ~~roofing,~~flooring, offset in part by pressure from foreign currency fluctuations. Our comparable store customer transactions increased 2.6% and 2.1% for the ~~strength~~second quarter and first six months of ~~the U.S. dollar.~~fiscal 2017, respectively.

Gross Profit increased ~~6.7%~~6.0% to $9.5 billion for the second quarter of fiscal 2017 from $8.9 billion for the second quarter of fiscal ~~2016 from $8.4 billion for~~2016. For the ~~second quarter~~first six months of fiscal ~~2015.~~2017, Gross Profit increased ~~7.6%~~5.4% to $17.6 billion from $16.7 billion for the first six months of fiscal ~~2016 from $15.5 billion for the first six months of fiscal 2015.~~2016. Gross Profit as a percent of Net Sales, or gross profit margin, was 33.7% for the second quarter of both fiscal ~~2016~~2017 and ~~2015, and~~2016. For the first six months of fiscal 2017, gross profit margin was 33.9% compared to 34.0% for the first six months of ~~both~~ fiscal ~~2016 and 2015.~~2016. Gross profit margin for the second quarter and first six months of fiscal ~~2016~~2017 reflects the impact of ~~Interline, which has a lower gross profit margin,~~product mix changes and higher shrink, offset by benefits from our supply chain driven by ~~lower fuel costs and~~ increased ~~productivity and from reaching higher levels of co-op allowances and rebates in certain category classes.~~productivity.

Selling, General and Administrative expenses ("SG&A") increased ~~2.1%~~3.7% to ~~$4.4 billion for the~~ ~~second~~ ~~quarter of fiscal~~ ~~2016~~ ~~from $4.3~~$4.5 billion for the second quarter of fiscal ~~2015, and~~2017 from $4.4 billion for the second quarter of fiscal 2016. For the first six months of fiscal 2017, SG&A increased ~~2.4%~~2.8% to $8.9 billion from $8.7 billion for the first six months of fiscal 2016 from $8.5 billion for the first six months of fiscal 2015. SG&A for the second quarter and first six months of fiscal 2015 included $92 million and $99 million, respectively, of pretax net expenses related to the Data Breach.2016. As a percent of Net Sales, SG&A was 16.2% for the second quarter of fiscal 2017 compared to 16.6% for the second quarter of fiscal ~~2016 compared to 17.3% for the second quarter of fiscal 2015.~~2016. For the first six months of fiscal ~~2016,~~2017, SG&A as a percent of Net Sales was ~~17.6%~~17.1% compared to ~~18.5%~~17.6% for the ~~same period last year.~~first six months of fiscal 2016. The decrease in SG&A as a percent of Net Sales for the second quarter and first six months of fiscal ~~2016~~2017 reflects expense leverage resulting from the positive comparable store sales environment and ~~strong~~continued expense ~~controls.~~control.

Depreciation and Amortization increased~~4.1%~~ 3.0% to $~~436~~$449 million for the second quarter of fiscal ~~2016~~2017 from $~~419~~$436 million for the second quarter of fiscal ~~2015~~.2016. For the first six months of fiscal ~~2016,~~2017, Depreciation and Amortization increased ~~3.7%~~2.8% to ~~$869~~$893 million from ~~$838~~$869 million for the first six months of fiscal ~~2015~~.2016. Depreciation and Amortization as a percent of Net Sales was 1.6% ~~for the~~ ~~second~~ ~~quarter of fiscal~~ ~~2016~~ ~~compared to 1.7%~~ for the second quarter of both fiscal ~~2015,~~2017 and 2016. For the first six months of fiscal 2017, Depreciation and Amortization as a percent of Net Sales was 1.7% compared to 1.8% for the first six months of ~~both~~ fiscal ~~2016 and 2015.~~2016. Depreciation and Amortization as a percent of Net Sales for the second quarter and first six months of fiscal ~~2016~~2017 reflects expense leverage resulting from the positive comparable store sales environment.

Operating Income increased~~12.5%~~ 8.8% to ~~$4.1~~$4.5 billion for the second quarter of fiscal ~~2016~~2017 from ~~$3.6~~$4.1 billion for the second quarter of fiscal ~~2015~~.2016. For the first six months of fiscal 2017, Operating Income increased ~~15.0%~~8.8% to $7.8 billion from $7.2 billion for the first six months of fiscal ~~2016 from $6.2 billion for the first six months of fiscal~~ ~~2015~~.2016. Operating Income as a percent of Net Sales was 15.9% for the second quarter of fiscal 2017 compared to 15.5% for the second quarter of fiscal ~~2016 compared to 14.7% for~~2016. For the ~~second quarter~~first six months of fiscal ~~2015~~.2017, Operating Income as a percent of Net Sales was 15.0% compared to 14.6% for the first six months of fiscal ~~2016~~2016.

Interest and Other, net, was $249 million for the second quarter of fiscal 2017 compared to ~~13.7%~~$228 million for the second quarter of fiscal 2016. For the first six months of fiscal 2017, Interest and Other, net, was $490 million compared to $465 million for the first six months of fiscal ~~2015~~.

~~For the~~ ~~second~~ ~~quarter of fiscal~~ ~~2016, we recognized $228 million of Interest and Other, net, compared to~~ ~~$84 million~~ ~~for the~~ ~~second~~ ~~quarter of fiscal~~ ~~2015. We recognized $465 million of Interest and Other, net, for the first six months of fiscal 2016 compared to $277 million for the same period last year. Interest and Other, net, for the~~ ~~second~~ ~~quarter and first six months of fiscal~~ ~~2015~~ ~~included a $144 million pretax gain related to the sale of our remaining equity ownership in HD Supply.~~2016. Interest and Other, net, as a percent of Net Sales was 0.9% for the second quarter and first six months of both fiscal ~~2016~~ ~~compared to 0.3% for the~~ ~~second~~ ~~quarter of fiscal~~ ~~2015. Interest~~2017 and ~~Other, net, as a percent of Net Sales~~2016.

Our combined effective income tax rate was ~~0.9%~~36.0% for the first six months of fiscal ~~2016~~2017 compared to ~~0.6% for the first six months of fiscal~~ ~~2015. These results reflect additional interest expense incurred in the second quarter and first six months of fiscal 2016 due primarily to higher long-term debt balances.~~

~~Our combined effective income tax rate was~~ 36.8% for the first six months of fiscal ~~2016~~ ~~compared to 36.1% for the first six months of fiscal~~ ~~2015~~.2016. The effective income tax rate for the first six months of fiscal ~~2015~~2017 reflects ~~a $71~~an $85 million ~~net~~ benefit to our Provision for Income Taxes ~~due primarily to~~for share-based payment awards as a result of the ~~favorable settlement~~adoption of ~~a tax audit.~~ASU No. 2016-09.

Diluted Earnings per Share were ~~$1.97~~ ~~and~~$2.25 for the second quarter of fiscal 2017 compared to $1.97 for the second quarter of fiscal 2016. For the first six months of fiscal 2017, Diluted Earnings per Share were $3.91 compared to $3.40 for the first six months of fiscal 2016. Diluted Earnings per Share for the second quarter and first six months of fiscal ~~2016~~,2017 included benefits of $0.02 and $0.07, respectively, ~~compared to $1.73~~ ~~and $2.94 for~~as a result of the ~~second~~ ~~quarter and first six months~~adoption of ~~fiscal~~ ~~2015, respectively. The gain on the sale of our remaining equity ownership in HD Supply contributed a benefit of $0.07 to Diluted Earnings per Share for the~~ ~~second~~ ~~quarter and first six months of fiscal~~ ~~2015. Expenses related to the Data Breach had a negative impact of $0.05 to Diluted Earnings per Share for the~~ ~~second~~ ~~quarter and first six months of fiscal~~ ~~2015. Diluted Earnings per Share for the first six months of fiscal~~ ~~2015~~ ~~also reflect $0.05 of benefit from the favorable settlement of a tax audit.~~ASU No. 2016-09.

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 return on invested capital ("ROIC") is meaningful for investors and management because it measures how effectively we deploy our capital base. We define ROIC as net operating profit after tax ("NOPAT"), a non-GAAP financial measure, for the most recent twelve-month period, divided by the average of beginning and ending long-term debt, including current ~~maturities,~~installments, and equity for the most recent twelve-month period.

The following table provides our ROIC calculation and reconciles NOPAT, a non-GAAP financial measure, to Net Earnings, athe most comparable GAAP financial ~~measure, for the twelve months ended July 31, 2016 and August 2, 2015 (amounts in millions):~~measure:


	For the Twelve Months Ended						For the Twelve Months Ended
	July 31, 2016			August 2, 2015
amounts in millions							July 30, 2017			July 31, 2016
Net Earnings	$	7,440		$	6,729		$	8,399		$	7,440
Add:
Interest and Other, net	941			488			961			941
Provision for Income Taxes	4,329			3,771			4,699			4,329
Operating Income	12,710			10,988			14,059			12,710
Subtract:
Income Tax Adjustment ⁽¹⁾	4,655			3,981			5,080			4,655
Net Operating Profit After Tax	$	8,055		$	7,007		$	8,979		$	8,055

Average Debt and Equity ⁽²⁾	$	27,757		$	28,010		$	28,061		$	27,757

Return on Invested Capital (NOPAT / Average Debt and Equity)	29.0		%	25.0		%
Return on Invested Capital ⁽³⁾							32.0		%	29.0		%

—————


(1)	Income Tax Adjustment is defined as Operating Income multiplied by the Company's effective tax rate.


(2)	Average Debt and Equity is defined as the average of beginning and ending long-term debt, including current ~~maturities,~~installments, and equity for the most recent twelve-month period.


(3)	Return on Invested Capital is calculated as Net Operating Profit After Tax divided by Average Debt and Equity.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow generated from operations provides us with a significant source of liquidity. For the first six months of fiscal ~~2016~~2017, Net Cash Provided by Operating Activities was $~~6.9~~7.9 billion compared to $~~5.9~~6.9 billion for the same period inof fiscal ~~2015~~2016. This increase was primarily due to a ~~$431~~$442 million increase in Net Earnings resulting from higher comparable store sales and expense leverage, ~~and~~$307 million more in cash related to the effective management of Merchandise Inventories and ~~other working capital items.~~a $160 million increase in cash related to Deferred Revenue.

Net Cash Used in Investing Activities for the first six months of fiscal ~~2016~~2017 was ~~$674 million~~$1.1 billion compared to $~~553~~674 million for the same period inof fiscal ~~2015~~2016. This change was primarily due to ~~$144~~$268 million ~~less~~ in ~~Proceeds from Sales of Investments in the first six months of fiscal 2016 compared~~Payments for Businesses Acquired, net, related to the ~~same period~~acquisition of Compact Power and a $149 million increase in ~~fiscal 2015.~~Capital Expenditures.

Net Cash Used in Financing Activities for the first six months of fiscal ~~2016~~2017 was ~~$4.4~~$4.6 billion compared to ~~$2.1~~$4.4 billion for the same period of fiscal ~~2015.~~2016. This change was primarily ~~the result~~due to $1.5 billion more in Repurchases of ~~$2.5~~Common Stock, $412 million more in Cash Dividends Paid to Stockholders and $360 million more in Repayments of Short-Term Debt, partially offset by $2.0 billion ~~less~~more in net incremental long-term debt issued in the first six months of fiscal ~~2016, partially offset by $644 million less in Repurchases of Common Stock in the first six months of fiscal 2016~~2017 compared to the same period inof fiscal ~~2015.~~2016.

In ~~February 2016,~~June 2017, we issued ~~$1.35 billion~~$500 million of ~~2.00%~~floating rate senior notes due ~~April 1, 2021 (the "2021 notes")~~June 5, 2020; $750 million of 1.80% senior notes due June 5, 2020 at a discount of $1 million; and $750 million of 3.90% senior notes due June 15, 2047 at a discount of $5 million $1.3 billion of 3.00% senior notes due April 1, 2026 (the "2026 notes") at a discount of $8 million, and $350 million of 4.25% senior notes due April 1, 2046 (the "2046 notes") at a premium of $2 million (together, the ~~"February 2016 issuance"~~“June 2017 issuance”). The 2046 notes form a single series with our $1.25 billion of 4.25% senior notes due April 1, 2046 that were issued in May 2015, and have the same terms. The aggregate principal amount outstanding of our senior notes due April 1, 2046 is $1.6 billion. Interest on the 2021 and 2026 notes is due semi-annually on April 1 and October 1 of each year, beginning October 1, 2016. Interest on the 2046 notes is due semi-annually on April 1 and October 1 of each year, beginning April 1, 2016, with interest accruing from October 1, 2015. The net proceeds of the ~~February 2016~~June 2017 issuance ~~were~~will be used for general corporate purposes,

including repurchases of shares of our common stock. See Note 3 to ~~repay our 5.40% senior notes that matured on March 1, 2016.~~the Consolidated Financial Statements included in this report.

In the second quarter of fiscal ~~2015,~~2017, we entered into forward starting interest rate swap agreements with a combined notional amount of $1.0 billion, accounted for as cash flow hedges, to hedge interest rate fluctuations in anticipation of the February 2016 issuance. In connection with the February 2016 issuance,an ASR agreement under which we paid ~~$89~~$1.65 billion to a third party financial institution and received a total of 10.8 million shares. See Note 4 to ~~settle these forward starting interest rate swap agreements. This amount, net of income taxes, is~~the Consolidated Financial Statements included in ~~Accumulated Other Comprehensive Loss and is being amortized to Interest Expense over the term of the 2026 notes.~~this report.

We have commercial paper programs that allow for borrowings up to $2.0 billion. In connection with these programs, we have a back-up credit facility with a consortium of banks for borrowings up to $2.0 billion. The credit facility expires in December 2019 and contains various ~~restrictive~~customary covenants. At July ~~31, 2016,~~30, 2017, we were in compliance with all of the covenants, and ~~they~~none are ~~not~~ expected to impact our liquidity or capital resources. During the first six months of fiscal ~~2016~~,2017, all of our short-term borrowings were under these commercial paper programs, and the maximum amount outstanding at any time during the first six months of fiscal ~~2016~~2017 was ~~$617 million.~~$1.0 billion. As of July ~~31, 2016,~~30, 2017, there were no borrowings outstanding under the commercial paper programs or the related credit facility.

As of July ~~31, 2016~~30, 2017, we had ~~$4.0~~$4.8 billion in Cash and Cash Equivalents. We believe that our current cash position, access to the long-term debt capital markets and cash flow generated from operations 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 have funds available from our commercial paper programs and the ability to obtain alternative sources of financing.

RECENT ACCOUNTING PRONOUNCEMENTS

For a summary of recently issued accounting pronouncements which may be applicable to us, see Note 1 to the Consolidated Financial Statements included in this report.

On ~~February 1, 2016,~~January 30, 2017, we adopted ~~Accounting Standards Update ("ASU") No. 2015-03, "Interest–Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs" and~~ ASU No. ~~2015-17, "Income Taxes~~2016-09, "Compensation-Stock Compensation (Topic ~~740)~~718): ~~Balance Sheet Classification of Deferred Taxes"~~Improvements to Employee Share-Based Payment Accounting". See Note 2 to the Consolidated Financial Statements included in this report.


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. There have been no material changes to our exposure to market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January ~~31, 2016~~29, 2017 as filed with the SEC on March ~~24, 2016 ("2015~~23, 2017 (the "2016 Form 10-K").


Item 4.	Controls and Procedures

~~The~~Under the direction and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, the Company ~~maintains~~evaluated its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) ~~that are designed to ensure that information required to be disclosed in the Company's Securities Exchange Act reports is recorded, processed, summarized~~ and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that ~~as of the end of the period covered by this report, the Company's~~its disclosure controls and procedures were ~~effective.~~

effective as of July 30, 2017. There ~~have not~~has been ~~any changes~~no change in the Company's internal control over financial reporting ~~(as such term is defined in Rule 13a-15(f) under the Securities Exchange Act)~~ during the fiscal quarter ended July ~~31, 2016~~30, 2017, that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION


Item 1.	Legal Proceedings

Except as set forth below, there were no material changes during the second quarter of fiscal ~~2016~~2017 to our disclosure in Item 3 of our ~~2015~~2016 Form 10-K.

For a description of the ~~litigation and government inquiries~~matters related to the Data Breach, see Note 47 to the Consolidated Financial Statements included in Part I, Item 1, "Financial Statements", which description is incorporated herein by reference.

SEC regulations require us to disclose certain information about proceedings arising under federal, state or local environmental provisions if we reasonably believe that such proceedings may result in monetary sanctions of $100,000 or more.

As previously reported, the Company has been cooperating with various District Attorneys and the California Attorney General’s office in their investigation of the Company’s disposal of hazardous waste at its California facilities. The Company currently expects to settle this matter and recorded an accrual for estimated probable losses it expects to incur. The Company does not expect the outcome of this matter to have a material adverse effect on its consolidated financial condition, results of operations or cash flows.


Item 1A.	Risk Factors

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed under Item 1A, "Risk Factors" and elsewhere in our ~~2015~~2016 Form 10-K. These risks and uncertainties could materially and adversely affect our business, financial condition and results of operations. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business. There have been no material changes in the risk factors discussed in our ~~2015~~2016 Form 10-K.


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

(a) Unregistered Sales of Equity Securities

During the second quarter of fiscal ~~2016~~2017, the Company issued ~~4,164~~4,427 deferred stock units under The Home Depot, Inc. Non-Employee Directors' Deferred Stock Compensation Plan pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act") and Rule 506 of the SEC's Regulation D thereunder. The deferred stock units were credited to the accounts of those non-employee directors who elected to receive all or a portion of board retainers in the form of deferred stock units instead of cash during the second quarter of fiscal ~~2016~~2017. 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 second quarter of fiscal ~~2016~~2017, the Company credited ~~1,126~~1,201 deferred stock units to participant accounts under The Home Depot FutureBuilder Restoration Plan pursuant to an exemption from the registration requirements of the Securities Act for involuntary, non-contributory plans. The deferred stock units convert to shares of common stock on a one-for-one basis following the termination of service as described in this plan.

(b) Purchases of Equity Securities

In the first quarter of fiscal ~~2015,~~2017, the Board of Directors authorized ~~an $18.0~~a $15.0 billion share repurchase program. Through the end of the second quarter of fiscal ~~2016~~2017, the Company has repurchased shares of its common stock having a value of approximately $~~9.5~~3.9 billion under this program. The number and average price of shares purchased in each fiscal month of the second quarter of fiscal ~~2016~~2017 are set forth in the table below:

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⁾
May 2, 2016 – May 29, 2016 2,952,801
$ 134.09
2,945,810
$ 9,355,001,347
May 30, 2016 – June 26, 2016 2,928,503
$ 128.99
2,922,690
$ 8,978,002,421
June 27, 2016 – July 31, 2016 3,590,485
$ 133.20
3,588,476
$ 8,500,002,478
9,471,789
$ 132.18
9,456,976



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⁾
May 1, 2017 – May 28, 2017	2,568,802	$	155.10	2,541,700	$	13,353,177,965
May 29, 2017 – June 25, 2017⁽³⁾	11,024,433	$	153.59	11,021,252	$	11,500,000,423
June 26, 2017 – July 30, 2017⁽³⁾	3,710,809	$	148.57	3,703,136	$	11,109,236,100
	17,304,044	$	152.74	17,266,088

~~(1)~~

These amounts include repurchases pursuant to the Company's 1997 and Amended and Restated 2005 Omnibus Stock Incentive Plans (the “Plans”). Under the Plans, participants may surrender shares as payment of applicable tax withholding on the vesting of restricted stock and deferred share awards. Participants in the Plans may also exercise stock options by surrendering shares of common stock that the participants already own as payment of the exercise price. Shares so surrendered by participants in the Plans are repurchased pursuant to the terms of the Plans and applicable award agreement and not pursuant to publicly announced share repurchase programs.


~~(2)~~	In the first quarter of fiscal 2015, the Board of Directors authorized an $18.0 billion share repurchase program that replaced the previous authorization. The program does not have a prescribed expiration date.

—————

(1) These amounts include repurchases pursuant to the Company's 1997 and Amended and Restated 2005 Omnibus Stock Incentive Plans (the "Plans"). Under the Plans, participants may surrender shares as payment of applicable tax withholding on the vesting of restricted stock and deferred share awards. Participants in the Plans may also exercise stock options by surrendering shares of common stock that the participants already own as payment of the exercise price. Shares so surrendered by participants in the Plans are repurchased pursuant to the terms of the Plans and applicable award agreement and not pursuant to publicly announced share repurchase programs.

(2) In the first quarter of fiscal 2017, the 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 second quarter of fiscal 2017, the Company paid $1.65 billion under an ASR agreement and received an initial delivery of 9.7 million shares. The transaction was completed later in the second quarter of fiscal 2017, at which time the Company received an additional 1.1 million shares. The final number of shares delivered upon settlement of the agreement was determined with reference to the volume weighted average price per share of the Company's common stock over the term of the agreement, less a negotiated discount. See Note 4 to the Consolidated Financial Statements included in this report.


Item 6.	Exhibits

For a list of the exhibits required to be filed as exhibits to this report, see the Index to Exhibits ~~marked with an asterisk (*) are incorporated by reference~~ to ~~exhibits or appendices previously filed with~~ the ~~SEC, as indicated by the references~~Consolidated Financial Statements included in ~~brackets. All other exhibits are filed or furnished herewith.~~



^*~~3.1~~		~~Amended and Restated Certificate of Incorporation of The Home Depot, Inc.~~ ~~[Form 10-Q filed on September 1, 2011, Exhibit 3.1]~~

^*~~3.2~~		~~By-Laws of The Home Depot, Inc. (Amended and Restated Effective March 3, 2016).~~ ~~[Form 8-K filed on March 8, 2016, Exhibit 3.2]~~

~~12.1~~		~~Statement of Computation of Ratio of Earnings to Fixed Charges.~~

~~15.1~~		~~Acknowledgment of Independent Registered Public Accounting Firm, dated August 22, 2016.~~

~~31.1~~		~~Certification of the Chief Executive Officer and President pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.~~

~~31.2~~		~~Certification of the Chief Financial Officer and Executive Vice President – Corporate Services pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.~~

~~32.1~~		~~Certification of Chief Executive Officer and President furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~32.2~~		Certification of Chief Financial Officer and Executive Vice President – Corporate Services furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101~~		The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2016, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Earnings; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements.

this report.

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/ CAROL B. TOMÉ
	Carol B. Tomé
	Chief Financial Officer and
	Executive Vice President – Corporate Services

August ~~22, 2016~~21, 2017

(Date)

INDEX TO EXHIBITS




Exhibit		Description

Exhibits marked with an asterisk (*) are incorporated by reference to exhibits or appendices previously filed with the SEC, as indicated by the references in brackets. All other exhibits are filed or furnished herewith.

*3.1		Amended and Restated Certificate of Incorporation of The Home Depot, Inc. ~~[Form~~[Form 10-Q filed on September 1, 2011, Exhibit 3.1]

^*3.2		By-Laws of The Home Depot, Inc. (Amended and Restated Effective March 3, 2016). ~~[Form~~[Form 8-K filed on March 8, 2016, Exhibit 3.2]

12.1		Statement of Computation of Ratio of Earnings to Fixed Charges.

15.1		~~Acknowledgment~~ Acknowledgement of Independent Registered Public Accounting Firm, dated August ~~22, 2016.~~21, 2017.

31.1		Certification of the Chief Executive Officer and President pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

31.2		Certification of the Chief Financial Officer and Executive Vice President – Corporate Services pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

32.1		Certification of Chief Executive Officer and President furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer and Executive Vice President – Corporate Services furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended July ~~31, 2016,~~30, 2017, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Earnings; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements.

2320



amounts in millions, except share and per share data	July 31, 2016			January 31, 2016
ASSETS
Current Assets:
Cash and Cash Equivalents	$	4,018		$	2,216
Receivables, net	1,995			1,890
Merchandise Inventories	12,323			11,809
Other Current Assets	605			569
Total Current Assets	18,941			16,484
Property and Equipment, at cost	39,834			39,266
Less Accumulated Depreciation and Amortization	17,859			17,075
Net Property and Equipment	21,975			22,191
Goodwill	2,106			2,102
Other Assets	1,225			1,196
Total Assets	$	44,247		$	41,973
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-Term Debt	$	—		$	350
Accounts Payable	8,273			6,565
Accrued Salaries and Related Expenses	1,453			1,515
Sales Taxes Payable	663			476
Deferred Revenue	1,666			1,566
Income Taxes Payable	346			34
Current Installments of Long-Term Debt	43			77
Other Accrued Expenses	2,081			1,941
Total Current Liabilities	14,525			12,524
Long-Term Debt, excluding current installments	20,900			20,789
Other Long-Term Liabilities	1,874			1,965
Deferred Income Taxes	291			379
Total Liabilities	37,590			35,657
STOCKHOLDERS’ EQUITY
Common Stock, par value $0.05; authorized: 10 billion shares; issued: 1.775 billion shares at July 31, 2016 and 1.772 billion shares at January 31, 2016; outstanding: 1.236 billion shares at July 31, 2016 and 1.252 billion shares at January 31, 2016	88			88
Paid-In Capital	9,549			9,347
Retained Earnings	33,492			30,973
Accumulated Other Comprehensive Loss	(778		)	(898		)
Treasury Stock, at cost, 539 million shares at July 31, 2016 and 520 million shares at January 31, 2016	(35,694		)	(33,194		)
Total Stockholders’ Equity	6,657			6,316
Total Liabilities and Stockholders’ Equity	$	44,247		$	41,973



	Accrued Liabilities			Insurance Receivable
Balance at January 31, 2016	$	(34	)	$	70
(Expenses incurred) insurance receivable recorded in the first quarter of fiscal 2016	(2		)	—
Payments made (received) in the first quarter of fiscal 2016	9			(15		)
Balance at May 1, 2016	$	(27	)	$	55
(Expenses incurred) insurance receivable recorded in the second quarter of fiscal 2016	(2		)	—
Payments made (received) in the second quarter of fiscal 2016	—			(10		)
Balance at July 31, 2016	$	(29	)	$	45



	Fair Value at July 31, 2016 Using						Fair Value at January 31, 2016 Using
	Level 1		Level 2		Level 3		Level 1		Level 2			Level 3
Derivative agreements - assets	$	—	$	253	$	—	$	—	$	213		$	—
Derivative agreements - liabilities	—		—		—		—		(82		)	—
Total	$	—	$	253	$	—	$	—	$	131		$	—

Large accelerated filer x

Accelerated filer ¨

Non-accelerated filer ¨
(Do not check if a smaller reporting company)

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. ¨