UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON,~~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~~

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

For the quarterly period ended ~~October 29, 2017~~November 3, 2019

-or

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


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

For the transition period from to

Commission ~~file number~~ File Number: 1-8207

THE HOME DEPOT, INC.

(Exact name of ~~Registrant~~registrant as specified in its charter)



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



~~Delaware~~2455 Paces Ferry Road			~~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)~~ (770) 433-8211

(Registrant’s telephone number, including area code)

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



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

Indicate by check mark whether the ~~Registrant~~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~~registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx☒ No ¨☐

Indicate by check mark whether the ~~Registrant~~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~~registrant was required to submit ~~and post~~ such files). Yesx☒ No ¨☐

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

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

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

Indicate by check mark whether the ~~Registrant~~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.

~~1,167,748,619~~1,090,831,020 shares of common stock, $0.05 par value, as of November ~~14, 2017~~

19, 2019

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

TABLE OF CONTENTS



Commonly Used or Defined Terms			~~Page~~ ii
~~Part I.~~Forward-Looking Statements		~~Financial Information~~	3iii

~~Item 1.~~PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements.	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Earnings	2
	Consolidated Statements of Comprehensive Income	3

	~~CONSOLIDATED BALANCE SHEETS—~~ AsConsolidated Statements of ~~October 29, 2017 and January 29, 2017~~Stockholders' Equity	3

	~~CONSOLIDATED STATEMENTS OF EARNINGS—~~ ~~Three and Nine Months Ended October 29, 2017 and October 30, 2016~~	4

	~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME—~~ ~~Three and Nine Months Ended October 29, 2017 and October 30, 2016~~Consolidated Statements of Cash Flows	5

	~~CONSOLIDATED STATEMENTS OF CASH FLOWS—~~ ~~Nine Months Ended October 29, 2017 and October 30, 2016~~Notes to Consolidated Financial Statements	6
	Note 1. Summary of Significant Accounting Policies	6
	~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Note 2. Net Sales	7
	Note 3. Property and Leases	8
	~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~Note 4. Debt and Derivative Instruments	11
	Note 5. Stockholders' Equity	11
	Note 6. Fair Value Measurements	12
	Note 7. Weighted Average Common Shares	13
	Note 8. Commitments and Contingencies	13
	Report of Independent Registered Public Accounting Firm	14
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	21
Item 4.	Controls and Procedures.	21

~~Item 2.~~PART II – OTHER INFORMATION		21
Item 1A.	Risk Factors.	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	22
Item 6.	Exhibits.	23

SIGNATURES		24

Table of Contents

COMMONLY USED OR DEFINED TERMS



Term		Definition
ASR		Accelerated share repurchase
ASU		Accounting Standards Update
Comparable sales		As defined in the Results of Operations and Non-GAAP Financial Measures section of MD&A
Exchange Act		Securities Exchange Act of 1934, as amended
FASB		Financial Accounting Standards Board
fiscal 2018		Fiscal year ended February 3, 2019 (includes 53 weeks)
fiscal 2019		Fiscal year ending February 2, 2020 (includes 52 weeks)
GAAP		U.S. generally accepted accounting principles
Interline		The legacy Interline Brands business, now operating as a part of The Home Depot Pro
MD&A		Management's Discussion and Analysis of Financial Condition and Results of Operations	12
NOPAT		Net operating profit after tax
~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~	17
Restoration Plan		Home Depot FutureBuilder Restoration Plan
~~Item 4.~~	~~Controls and Procedures~~	17

~~Part II.~~	~~Other Information~~	18
ROIC		Return on invested capital
~~Item 1.~~	~~Legal Proceedings~~	18
SEC		Securities and Exchange Commission
~~Item 1A.~~	~~Risk Factors~~	18
Securities Act		Securities Act of 1933, as amended
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	18
SG&A		Selling, general and administrative
~~Item 6.~~ Tax Act	~~Exhibits~~	19 2017 tax reform, commonly referred to as the Tax Cuts and Jobs Act of 2017
2018 Form 10-K
~~Signatures~~	20 Annual Report on Form 10-K for fiscal 2018 as filed with the SEC on March 28, 2019

Table of Contents

FORWARD-LOOKING STATEMENTS

Certain statements contained herein, as well as in other filings we make with the SEC and other written and oral information we release, regarding our future performance constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the demand for our products and services; net sales growth; comparable sales; effects of competition; implementation of store, interconnected retail, supply chain and technology initiatives; inventory and in-stock positions; state of the economy; state of the housing and home improvement markets; state of the credit markets, including mortgages, home equity loans, and consumer credit; impact of tariffs; issues related to the payment methods we accept; demand for credit offerings; management of relationships with our associates, suppliers and vendors; continuation of share repurchase programs; net earnings performance; earnings per share; dividend targets; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; stock-based compensation expense; commodity price inflation and deflation; the ability to issue debt on terms and at rates acceptable to us; the impact and expected outcome of investigations, inquiries, claims, and litigation; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of the Tax Act and other regulatory changes; store openings and closures; financial outlook; and the integration of acquired companies into our organization and the ability to recognize the anticipated synergies and benefits of those acquisitions.

Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You should not rely on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties – many of which are beyond our control, dependent on the actions of third parties, or currently unknown to us – as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, those described in Part II, Item 1A, "Risk Factors" and elsewhere in this report and as also may be described from time to time in future reports we file with the SEC. You should read such information in conjunction with our consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. There also may be other factors that we cannot anticipate or that are not described in this report, generally because we do not currently perceive them to be material. Such factors could cause results to differ materially from our expectations.

Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the SEC.

iii

Table of Contents

PART I.I – FINANCIAL INFORMATION

Item 1.Financial Statements.

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

CONSOLIDATED BALANCE SHEETS

(Unaudited)

amounts in millions, except per share data October 29,
2017 January 29,
2017
ASSETS
Current Assets:
Cash and Cash Equivalents $ 3,549
$ 2,538
Receivables, net 2,166
2,029
Merchandise Inventories 13,419
12,549
Other Current Assets 548
608
Total Current Assets 19,682
17,724
Property and Equipment, at cost 41,614
40,426
Less Accumulated Depreciation and Amortization 19,654
18,512
Net Property and Equipment 21,960
21,914
Goodwill 2,217
2,093
Other Assets 1,164
1,235
Total Assets $ 45,023
$ 42,966
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-Term Debt $ 125
$ 710
Accounts Payable 8,570
7,000
Accrued Salaries and Related Expenses 1,488
1,484
Sales Taxes Payable 629
508
Deferred Revenue 1,788
1,669
Income Taxes Payable 139
25
Current Installments of Long-Term Debt 1,198
542
Other Accrued Expenses 2,065
2,195
Total Current Liabilities 16,002
14,133
Long-Term Debt, excluding current installments 24,266
22,349
Other Long-Term Liabilities 1,968
1,855
Deferred Income Taxes 244
296
Total Liabilities 42,480
38,633

Common Stock, par value $0.05; authorized: 10,000 shares; issued: 1,779 shares at October 29, 2017 and 1,776 shares at January 29, 2017; outstanding: 1,168 shares at October 29, 2017 and 1,203 shares at January 29, 2017 89
88
Paid-In Capital 9,883
9,787
Retained Earnings 39,193
35,519
Accumulated Other Comprehensive Loss (629 ) (867 )
Treasury Stock, at cost, 611 shares at October 29, 2017 and 573 shares at January 29, 2017 (45,993 ) (40,194 )
Total Stockholders’ Equity 2,543
4,333
Total Liabilities and Stockholders’ Equity $ 45,023
$ 42,966



in millions, except per share data	November 3, 2019			February 3, 2019
Assets
Current assets:
Cash and cash equivalents	$	2,193		$	1,778
Receivables, net	2,231			1,936
Merchandise inventories	15,711			13,925
Other current assets	1,039			890
Total current assets	21,174			18,529
Net property and equipment	22,472			22,375
Operating lease right-of-use assets	5,638			—
Goodwill	2,253			2,252
Other assets	772			847
Total assets	$	52,309		$	44,003

Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt	$	695		$	1,339
Accounts payable	9,240			7,755
Accrued salaries and related expenses	1,467			1,506
Sales taxes payable	686			656
Deferred revenue	2,121			1,782
Current installments of long-term debt	1,818			1,056
Current operating lease liabilities	828			—
Other accrued expenses	2,710			2,622
Total current liabilities	19,565			16,716
Long-term debt, excluding current installments	26,597			26,807
Long-term operating lease liabilities	5,113			—
Other long-term liabilities	2,116			2,358
Total liabilities	53,391			45,881

Common stock, par value $0.05; authorized: 10,000 shares; issued: 1,785 shares at November 3, 2019 and 1,782 shares at February 3, 2019; outstanding: 1,090 shares at November 3, 2019 and 1,105 shares at February 3, 2019	89			89
Paid-in capital	10,747			10,578
Retained earnings	50,729			46,423
Accumulated other comprehensive loss	(801		)	(772		)
Treasury stock, at cost, 695 shares at November 3, 2019 and 677 shares at February 3, 2019	(61,846		)	(58,196		)
Total stockholders’ (deficit) equity	(1,082		)	(1,878		)
Total liabilities and stockholders’ equity	$	52,309		$	44,003

See accompanying ~~Notes~~notes to ~~Consolidated Financial Statements.~~

consolidated financial statements.

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

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

Three Months Ended Nine Months Ended
amounts in millions, except per share data October 29,
2017 October 30,
2016 October 29,
2017 October 30,
2016
NET SALES $ 25,026
$ 23,154
$ 77,021
$ 72,388
Cost of Sales 16,378
15,112
50,758
47,628
GROSS PROFIT 8,648
8,042
26,263
24,760

Operating Expenses:
Selling, General and Administrative 4,514
4,280
13,424
12,949
Depreciation and Amortization 454
442
1,347
1,311
Total Operating Expenses 4,968
4,722
14,771
14,260

OPERATING INCOME 3,680
3,320
11,492
10,500

Interest and Other (Income) Expense:
Interest and Investment Income (22 ) (10 ) (51 ) (25 )
Interest Expense 269
246
788
726
Interest and Other, net 247
236
737
701

EARNINGS BEFORE PROVISION FOR
INCOME TAXES
3,433
3,084
10,755
9,799
Provision for Income Taxes 1,268
1,115
3,904
3,586
NET EARNINGS $ 2,165
$ 1,969
$ 6,851
$ 6,213

Basic Weighted Average Common Shares 1,168
1,224
1,184
1,236
BASIC EARNINGS PER SHARE $ 1.85
$ 1.61
$ 5.79
$ 5.03

Diluted Weighted Average Common Shares 1,174
1,229
1,190
1,242
DILUTED EARNINGS PER SHARE $ 1.84
$ 1.60
$ 5.76
$ 5.00

Dividends Declared per Share $ 0.89
$ 0.69
$ 2.67
$ 2.07



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

Basic weighted average common shares	1,089			1,135			1,096			1,144
Basic earnings per share	$	2.54		$	2.53		$	7.99		$	7.67

Diluted weighted average common shares	1,094			1,141			1,100			1,150
Diluted earnings per share	$	2.53		$	2.51		$	7.96		$	7.63

See accompanying ~~Notes~~notes to ~~Consolidated Financial Statements.~~consolidated financial statements.

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended Nine Months Ended
amounts in millions October 29,
2017 October 30,
2016 October 29,
2017 October 30,
2016
NET EARNINGS $ 2,165
$ 1,969
$ 6,851
$ 6,213
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments (145 ) (125 ) 244
(8 )
Cash Flow Hedges, net of tax (2 ) 21
(5 ) 23
Other —
(1 ) (1 ) —
Total Other Comprehensive Income (Loss) (147 ) (105 ) 238
15
COMPREHENSIVE INCOME $ 2,018
$ 1,864
$ 7,089
$ 6,228



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

See accompanying ~~Notes~~notes to ~~Consolidated Financial Statements.~~consolidated financial statements.

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)



	Three Months Ended						Nine Months Ended
in millions	November 3, 2019			October 28, 2018			November 3, 2019			October 28, 2018
Common Stock:
Balance at beginning of period	$	89		$	89		$	89		$	89
Shares issued under employee stock plans	—			—			—			—
Balance at end of period	89			89			89			89

Paid-in Capital:
Balance at beginning of period	10,777			10,079			10,578			10,192
Shares issued under employee stock plans	20			10			79			21
Stock-based compensation expense	50			52			190			196
Repurchases of common stock	(100		)	268			(100		)	—
Balance at end of period	10,747			10,409			10,747			10,409

Retained Earnings:
Balance at beginning of period	49,446			43,543			46,423			39,935
Cumulative effect of accounting changes	—			—			26			75
Net earnings	2,769			2,867			8,761			8,777
Cash dividends	(1,486		)	(1,175		)	(4,477		)	(3,548		)
Other	—			—			(4		)	(4		)
Balance at end of period	50,729			45,235			50,729			45,235

Accumulated Other Comprehensive Income (Loss):
Balance at beginning of period	(776		)	(774		)	(772		)	(566		)
Cumulative effect of accounting change	—			—			(31		)	—
Foreign currency translation adjustments	(23		)	59			(7		)	(204		)
Cash flow hedges, net of tax	(2		)	(2		)	4			46
Other	—			—			5			7
Balance at end of period	(801		)	(717		)	(801		)	(717		)

Treasury Stock:
Balance at beginning of period	(60,696		)	(50,928		)	(58,196		)	(48,196		)
Repurchases of common stock	(1,150		)	(2,768		)	(3,650		)	(5,500		)
Balance at end of period	(61,846		)	(53,696		)	(61,846		)	(53,696		)
Total stockholders' (deficit) equity	$	(1,082	)	$	1,320		$	(1,082	)	$	1,320

See accompanying notes to consolidated financial statements.

THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended
amounts in millions October 29,
2017 October 30,
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 6,851
$ 6,213
Reconciliation of Net Earnings to Net Cash Provided by Operating Activities:
Depreciation and Amortization 1,533
1,474
Stock-Based Compensation Expense 214
199
Changes in Assets and Liabilities, net of acquisition effects:
Receivables, net (95 ) (108 )
Merchandise Inventories (776 ) (1,453 )
Other Current Assets 75
36
Accounts Payable and Accrued Expenses 1,597
1,449
Deferred Revenue 115
64
Income Taxes Payable 113
184
Deferred Income Taxes (76 ) (131 )
Other, net 190
(8 )
Net Cash Provided by Operating Activities 9,741
7,919

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (1,354 ) (1,145 )
Payments for Business Acquired, net (260 ) —
Proceeds from Sales of Property and Equipment 38
30
Net Cash Used in Investing Activities (1,576 ) (1,115 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of Short-Term Debt, net (585 ) (350 )
Proceeds from Long-Term Debt, net of discounts 2,991
4,959
Repayments of Long-Term Debt (534 ) (3,034 )
Repurchases of Common Stock (6,067 ) (4,535 )
Proceeds from Sales of Common Stock 157
136
Cash Dividends Paid to Stockholders (3,174 ) (2,567 )
Other Financing Activities (41 ) (33 )
Net Cash Used in Financing Activities (7,253 ) (5,424 )

Change in Cash and Cash Equivalents 912
1,380
Effect of Exchange Rate Changes on Cash and Cash Equivalents 99
(7 )
Cash and Cash Equivalents at Beginning of Period 2,538
2,216
Cash and Cash Equivalents at End of Period $ 3,549
$ 3,589



	Nine Months Ended
in millions	November 3, 2019			October 28, 2018
Cash Flows from Operating Activities:
Net earnings	$	8,761		$	8,777
Reconciliation of net earnings to net cash provided by operating activities:
Depreciation and amortization	1,701			1,603
Stock-based compensation expense	197			204
Changes in receivables, net	(298		)	(196		)
Changes in merchandise inventories	(1,788		)	(2,041		)
Changes in other current assets	(152		)	(480		)
Changes in accounts payable and accrued expenses	1,616			2,134
Changes in deferred revenue	340			156
Changes in income taxes payable	116			61
Changes in deferred income taxes	107			(64		)
Other operating activities	64			(118		)
Net cash provided by operating activities	10,664			10,036

Cash Flows from Investing Activities:
Capital expenditures, net of non-cash capital expenditures	(1,891		)	(1,711		)
Proceeds from sales of property and equipment	21			21
Other investing activities	(10		)	(3		)
Net cash used in investing activities	(1,880		)	(1,693		)

Cash Flows from Financing Activities:
Repayments of short-term debt, net	(644		)	(161		)
Proceeds from long-term debt, net of discounts and premiums	1,404			—
Repayments of long-term debt	(1,046		)	(1,192		)
Repurchases of common stock	(3,909		)	(5,518		)
Proceeds from sales of common stock	185			140
Cash dividends	(4,477		)	(3,548		)
Other financing activities	9			99
Net cash used in financing activities	(8,478		)	(10,180		)
Change in cash and cash equivalents	306			(1,837		)
Effect of exchange rate changes on cash and cash equivalents	109			6
Cash and cash equivalents at beginning of period	1,778			3,595
Cash and cash equivalents at end of period	$	2,193		$	1,764

Supplemental Disclosures:
Cash paid for interest, net of interest capitalized	$	910		$	855
Cash paid for income taxes	2,660			3,017

See accompanying ~~Notes~~notes to ~~Consolidated Financial Statements.~~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~~consolidated financial statements of The Home Depot, Inc. and ~~Subsidiaries~~its subsidiaries (the ~~"Company"~~"Company," "Home Depot," "we," "our" or "us") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by ~~U.S. generally accepted accounting principles ("GAAP")~~GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, these consolidated financial statements should be read in conjunction with the ~~Consolidated Financial Statements~~consolidated financial statements and notes thereto included in ~~the Company's Annual Report on~~our 2018 Form ~~10-K for the year ended~~ ~~January 29, 2017, as filed with the Securities and Exchange Commission on March 23, 2017 (the "2016 Form 10-K").~~

~~Valuation Reserves~~

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

~~Recent Accounting Pronouncements~~10-K.

There ~~have been~~were no ~~material~~significant changes to ~~the Company’s position regarding recent~~our significant accounting ~~pronouncements pending adoption~~policies as disclosed in the ~~2016~~2018 Form 10-K, except as set forth below.

Leases

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

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

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

Recently Adopted Accounting Pronouncements

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

ASU No. 2017-12. In August 2017, the ~~Financial Accounting Standards Board ("FASB")~~FASB issued ~~Accounting Standards Update ("ASU")~~ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging ~~Activities"~~Activities," which amends the hedge accounting recognition and presentation requirements. ASU No. 2017-12 eliminates the concept of recognizing periodic hedge ineffectiveness for cash flow and net investment hedges and allows ~~the~~an entity to apply the shortcut method to partial-term fair value hedges of interest rate risk. On February 4, 2019, we adopted ASU No. 2017-12 ~~is effective for fiscal years beginning after December 15, 2018,~~with no impact to our consolidated financial statements. We expect the impact of the adoption to be immaterial to our financial position, results of operations, and ~~interim periods within those fiscal years, with early adoption permitted in any interim period after issuance of this update. The Company is evaluating the effect that~~ cash flows on an ongoing basis.

ASU No. ~~2017-12 will have on its Consolidated Financial Statements and related disclosures.~~

2016-02.In ~~May 2014,~~February 2016, the FASB issued ~~a new standard related to revenue recognition. Under~~ ASU No. ~~2014-09, "Revenue~~2016-02, "Leases (Topic 842)," which establishes a right-of-use model and requires an entity that is a lessee to recognize the right-of-use assets and liabilities arising from ~~Contracts with Customers (Topic 606)", revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects~~leases on the ~~consideration~~balance sheets. ASU No. 2016-02 also requires disclosures about the ~~entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature,~~ amount, timing, and uncertainty of ~~revenue and~~ cash flows arising from ~~contracts~~leases. Leases will be classified as finance or operating, with ~~customers. The~~classification affecting both the pattern and classification of expense recognition in the statements of earnings. This guidance ~~permits two methods of adoption: retrospectively~~was subsequently amended by ASU No. 2018-01, "Leases (Topic 842): Land Easement Practical Expedient for Transition to ~~each prior reporting period presented (full~~Topic 842;" ASU No. 2018-10, "Codification Improvements to Topic 842;" and ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements." ASU No. 2016-02 and subsequent updates require a modified retrospective ~~method), or retrospectively~~transition, with the cumulative effect of ~~initially~~transition, including initial recognition of lease assets and liabilities for existing operating leases, as of (i) the effective date or (ii) the beginning of the earliest comparative period presented. These updates also provide a number of practical expedients for implementation which we are applying, ~~the guidance recognized at the date of initial application (modified retrospective method).~~as discussed below.

On February 4, 2019 (the “effective date”), we adopted ASU No. ~~2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods.~~

~~The Company continues~~2016-02 and subsequent updates, collectively referred to evaluate the effect that ASU No. 2014-09 will have on its Consolidated Financial Statements and related disclosures and controls. The Company has determined that the adoption of 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. 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~~Topic 842, using the modified retrospective transition method. In addition, we adopted the package of practical expedients in transition, which permits us to not reassess our prior conclusions pertaining to lease identification, lease classification, and initial direct costs on leases that commenced prior to our adoption of the new standard. We also elected the ongoing practical expedient to not recognize operating lease right-of-use assets and operating lease liabilities related to short-term leases. We did not elect the use-of-hindsight or land easements practical expedients. For leases beginning subsequent to the effective date, we elected to not separate lease and non-lease components for certain classes of assets including real estate and certain equipment. To determine the measurement of the lease liability for operating leases with variable payments based on an index or rate that commenced prior to the adoption of Topic 842, we elected to apply the active index or rate at the effective date.

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

Recently Issued Accounting Pronouncements

Recent accounting pronouncements pending adoption not discussed above or in the ~~2016~~2018 Form 10-K are either not applicable or will not have or are not expected to have a material impact on ~~the Company.~~our consolidated financial condition, results of operations, or cash flows.


2.	~~RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS~~NET SALES

~~On January 30, 2017,~~No sales to an individual customer accounted for more than 10% of net sales during 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 arethree and nine months ended November 3, 2019 and October 28, 2018. Net sales, classified ~~as an operating activity in the Consolidated Statements of Cash Flows in the period in which they occur. Previously, these~~by geography, follow.



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

Net sales by products and services follow.



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

7Major product lines, as well as the associated merchandising departments (and related services), follow.

~~Table~~



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

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

~~THE HOME DEPOT, INC. AND SUBSIDIARIES~~Net sales by major product lines (and related services) follow.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~



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

~~amounts~~—————

Note: Net sales for certain merchandising departments 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~~reclassified in the ~~Consolidated Statements~~first quarter 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.~~

fiscal 2019. As a result, ofprior-period amounts have been reclassified to conform with the adoption of ASU No. 2016-09, the Company recognized $7 million and $92 million of excess tax benefits related to share-based payment awards in its Provision for Income Taxes during the third quarter and first nine months of fiscal 2017, respectively. The recognition of these benefits contributed $0.01 and $0.08 to Diluted Earnings per Share for the third quarter and first nine months of fiscal 2017, respectively.current-period presentation.


3.	~~LONG-TERM DEBT~~PROPERTY AND LEASES

Net Property and Equipment

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

Leases

We lease certain retail locations, office space, warehouse and distribution space, equipment, and vehicles. While most of these leases are operating leases, certain retail locations and equipment are leased under finance leases. We consider various factors such as market conditions and the terms of any renewal options that may exist to determine whether we will renew or replace the lease. A substantial majority of our leases have remaining lease terms of one to 20 years, typically with the option to extend the leases for up to five years. Some of our leases may include the option to terminate in less than five years. In ~~September 2017,~~ the ~~Company~~event we are reasonably certain to exercise the option to extend a lease, we will include the extended terms in the related lease assets and liabilities. Real estate taxes, insurance, maintenance, and operating expenses applicable to the leased property are generally our obligations under the lease agreements.

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

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



in millions	Consolidated Balance Sheet Caption	November 3, 2019
Assets:
Operating lease assets	Operating lease right-of-use assets	$	5,638
Finance lease assets	Net property and equipment	876
Total lease assets		$	6,514

Liabilities:
Current:
Operating lease liabilities	Current operating lease liabilities	$	828
Finance lease liabilities	Current installments of long-term debt	69
Long-term:
Operating lease liabilities	Long-term operating lease liabilities	5,113
Finance lease liabilities	Long-term debt, excluding current installments	1,035
Total lease liabilities		$	7,045

The components of lease cost follow.



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

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



	November 3, 2019
Weighted Average Remaining Lease Term (Years):
Operating leases	10
Finance leases	13

Weighted Average Discount Rate:
Operating leases	3.1	%
Finance leases	10.9	%

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



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

—————

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

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



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

Other lease information follows.



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


4.	DEBT AND DERIVATIVE INSTRUMENTS

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

The first tranche consisted of $1.0 billion of ~~2.80%~~2.95% senior notes due ~~September 14, 2027~~June 15, 2029 (the ~~"2027 notes"~~“2029 notes”) at a discount of $3$6 million. Interest on the ~~2027~~2029 notes is due semi-annually on ~~March 14~~June 15 and ~~September 14~~December 15 of each year, beginning ~~March 14, 2018.~~ December 15, 2019.

The ~~$3 million discount associated with the 2027 notes is being amortized over the term~~second tranche consisted of the notes using the effective interest rate method. Issuance costs of $6 million associated with the 2027 notes were recorded as a direct deduction to the carrying value of the senior notes and are being amortized over the term of the notes. The net proceeds of the 2027 notes were used to repay the Company's floating rate notes due September 15, 2017 and for general corporate purposes, including repurchases of the Company's common stock.

In June 2017, the Company issued $500 million of floating rate senior notes due June 5, 2020 (the "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$400 million of 3.90% senior notes due June 15, 2047 (the ~~"2047 notes"~~“2047 notes”) at a ~~discount~~premium of $5$10 million. The 2047 notes form a single series with the Company’s $750 million ~~(together,~~3.90% senior notes due June 15, 2047 that were issued in June 2017 and have the ~~"June 2017 issuance").~~same terms. The ~~2020 floating rate~~aggregate principal amount outstanding of the Company’s senior notes ~~bear interest at a variable rate determined quarterly equal to the three-month London Interbank Offered Rate ("LIBOR") plus~~due June 15, ~~basis points. Interest on the 2020 floating rate notes~~2047 is due quarterly on March 5, June 5, September 5, and December 5 of each year, beginning September 5, 2017. Interest on the 2020 notes is due semi-annually on June 5 and December 5 of each year, beginning December 5, 2017.$1.2 billion. Interest on the 2047 notes is due semi-annually on June 15 and December 15 of each year, beginning December 15, ~~2017. Interest payments for the 2020 notes and 2047 notes will include accrued~~2019, with interest accruing from ~~and including~~ June ~~5, 2017. The $6 million discount associated with the 2020 notes and the 2047 notes is being amortized over the term of the notes using the effective interest rate method.~~ 15, 2019.

Issuance costs ~~of $12 million associated with the June 2017 issuance were recorded as a direct deduction to the carrying value of the senior notes and are being amortized over the term of the notes.~~totaled $9.9 million. The net proceeds of the June ~~2017~~2019 issuance were used to repay the Company's 2.00% senior notes that matured on June 15, 2019 and for general corporate purposes, including repurchases of ~~the Company's~~ common stock.

~~All of the Company's senior~~The 2029 notes ~~other than its outstanding floating rate~~and 2047 notes may be redeemed by ~~the Company~~us at any time, in whole or in part, at the redemption price plus accrued interest up to the redemption date. The redemption price is equal to the greater of (1) 100% of the principal amount of the notes to be redeemed, or (2) the sum of the present values of the remaining scheduled payments of principal and interest to the Par Call Date, as defined in the respective notes. Additionally, if a Change in Control Triggering Event, ~~occurs,~~ as defined in the notes, occurs, holders of all notes have the right to require ~~the Company~~us 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~~We are generally not limited under the indentures governing the notes in ~~its~~our ability to incur additional indebtedness or required to maintain financial ratios or specified levels of net worth or liquidity. The indentures governing the notes contain various customary covenants; however, none are expected to impact ~~the Company's~~our liquidity or capital resources.

Also, in ~~September 2017,~~June 2019, we entered into an interest rate swap agreement with a notional amount of ~~$250~~$350 million, accounted for as a fair value hedge, to hedge against changes in the fair value of the ~~2027~~2029 notes attributable to changes in the designated benchmark interest rate.


4.5.	~~ACCELERATED SHARE REPURCHASE AGREEMENTS~~STOCKHOLDERS' EQUITY

~~The Company enters into~~ Stock Rollforward

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



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

Cash dividends per share	$	1.36		$	1.03		$	4.08		$	3.09

Accelerated Share Repurchase ~~("ASR")~~Agreements

We enter into ASR agreements from time to time with third-party financial institutions to repurchase shares of ~~the Company’s~~our common stock. Under an ASR agreement, the Company pays a specified amount to the financial institution and receives an initial delivery of shares. This initial delivery of shares represents the minimum number of shares that the Company may receive under the agreement. Upon settlement of the ASR agreement, the financial institution delivers additional shares, with the final number of shares delivered determined with reference to the volume weighted average price per share of the Company’s common stock over the term of the ASR agreement, less a negotiated discount. The transactionsThese agreements are ~~accounted for~~structured as ~~equity transactions and are included in Treasury Stock when the~~

~~Table of Contents~~

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~shares are received, at which time there is an immediate reduction~~outlined in the ~~weighted average common shares calculation for Basic and Diluted Earnings per Share.~~

2018 Form 10-K. The ~~following table provides the~~ terms ~~for each~~ of the ASR agreements ~~the Company~~ entered into during the ~~first~~ nine months ~~of fiscal 2017. Each of these agreements followed the structure outlined above (amounts in~~ended November 3, 2019 follow (in millions):.

Agreement Date Settlement Date Agreement Amount Initial Shares Delivered Additional Shares Delivered Total Shares Delivered
Q2 2017 Q2 2017 $ 1,650
9.7 1.1 10.8
Q3 2017⁽¹⁾
Q4 2017 $ 1,200
6.7 0.7 7.4

Agreement

Date

Settlement

Date

Agreement

Amount

Initial

Shares Delivered

Additional

Shares Delivered

Total

Shares Delivered

Q3 2019 ⁽¹⁾

Q4 2019 ⁽²⁾

820

3.2

0.4

3.6

—————

(1)

The fair market value of the initial ~~6.7~~3.2 million shares on the date of delivery was ~~$1,053~~$720 million and is included in ~~Treasury Stock in the accompanying Consolidated Balance Sheets~~treasury stock as of ~~October 29, 2017. The~~November 3, 2019, with the remaining ~~$147~~$100 million is included in Paid-In Capital in the accompanying Consolidated Balance Sheets as of October 29, 2017. The ASR agreement terminated on November 17, 2017, at which time the Company became contractually entitled to receivepaid-in capital.


(2)	We received an additional ~~0.7~~0.4 million shares upon ~~settlement.~~termination of the ASR agreement in November 2019.

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


5.6.	FAIR VALUE MEASUREMENTS

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

~~The following table presents the assets~~Assets and liabilities ~~if any, of the Company~~ that are measured at fair value on a recurring ~~basis:~~basis follow.



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

Fair Value at October 29, 2017 Using Fair Value at January 29, 2017 Using
amounts in millions
Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)

Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
Derivative agreements - assets $ —
$ 189
$ —
$ —
$ 271
$ —
Derivative agreements - liabilities —
(9 ) —
—
—
—
Total $ —
$ 180
$ —
$ —
$ 271
$ —

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

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

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

impairment or as the result of business acquisitions. During the third quarter of fiscal ~~2017, the Company~~2019, we completed ~~its~~our annual assessment of the recoverability of ~~Goodwill~~goodwill for ~~its~~our U.S., Canada and Mexico reporting units. The ~~Company performed qualitative assessments, concluding that~~fair values of these reporting units were estimated using the present value of expected future discounted cash flows through unobservable inputs (level 3), and the fair value ~~of the reporting units was not more likely than not less than~~exceeded the carrying ~~value.~~value for each respective reporting unit. Accordingly, ~~no Goodwill impairments~~0 impairment charges related to goodwill were recorded for these reporting units.

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

The aggregate fair values and carrying values of ~~the Company's~~our senior notes ~~were as follows:~~

October 29, 2017 January 29, 2017
amounts in millions
Fair Value
(Level 1)

Carrying
Value

Fair Value
(Level 1)

Carrying
Value
Senior notes $ 26,650
$ 24,482
$ 23,620
$ 22,013

follow.



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

~~Table of Contents~~

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


6.	~~BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES~~

The following table presents the reconciliation of basic to diluted weighted average common shares as well as the effect of anti-dilutive securities excluded from diluted weighted average common shares:

Three Months Ended Nine Months Ended
amounts in millions October 29,
2017 October 30,
2016 October 29,
2017 October 30,
2016
Basic Weighted Average Common Shares 1,168
1,224
1,184
1,236
Effect of potentially dilutive securities 6
5
6
6
Diluted Weighted Average Common Shares 1,174
1,229
1,190
1,242

Effect of anti-dilutive securities excluded from Diluted Weighted Average Common Shares —
1
1
1


7.	WEIGHTED AVERAGE COMMON SHARES

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



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

Anti-dilutive securities excluded from diluted weighted average common shares	—	—	—	—


8.	COMMITMENTS AND CONTINGENCIES

~~Data Breach~~

~~As previously reported,~~We are involved in litigation arising in the ~~third quarter~~normal course 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 respectbusiness. In management’s opinion, any such litigation is not expected to ~~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 dismiss the claims asserted in the financial institutions class actions. In addition, in the first quarter of fiscal 2017, the parties to the purported shareholder derivative actions agreed to settlement terms that, upon approval of the court, will resolve and dismiss the claims asserted in those actions. In the third quarter of fiscal 2017, both of these settlement agreements were approved by the court.

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 there were no material changes during the first nine months of fiscal 2017 to the 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~~our consolidated financial condition, results of operations, or cash ~~flows in future periods.~~flows.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~The~~To the Stockholders and Board of Directors ~~and Stockholders~~

The Home Depot, Inc.:

Results of Review of Interim Financial Information

We have reviewed the Consolidated Balance Sheet of The Home Depot, Inc. and ~~Subsidiaries~~its subsidiaries (the “Company”) as of ~~October 29, 2017,~~November 3, 2019, the related Consolidated Statements of Earnings, ~~and~~ Comprehensive Income, and Stockholders’ Equity for the three-month and nine-month periods ended ~~October 29, 2017~~November 3, 2019 and October ~~30, 2016, and~~28, 2018, the related Consolidated Statements of Cash Flows for the nine-month periods ended ~~October 29, 2017~~November 3, 2019 and October ~~30, 2016. These~~28, 2018, and the related notes (collectively, the “Consolidated Interim Financial Information”). Based on our reviews, we are not aware of any material modifications that should be made to the Consolidated Interim Financial ~~Statements are the responsibility of the Company's management.~~Information for it to be in conformity with U.S. generally accepted accounting principles.

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

Basis for Review Results

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

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

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 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 23, 2017, we expressed an unqualified opinion on those Consolidated Financial Statements. In our opinion, the information set forth in the accompanying Consolidated Balance Sheet as of January 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

November ~~20, 2017~~25, 2019


~~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, 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; 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 acquired companies into our organization and the ability to recognize the anticipated synergies and benefits of those acquisitions.

Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You should not rely on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties – many of which are beyond our control or are currently unknown to us – as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, those described in 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~~2. 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.Operations.

~~Forward-looking statements speak only as of~~Our MD&A includes 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").following sections:


•	Executive Summary


•	Results of Operations and Non-GAAP Financial Measures


•	Liquidity and Capital Resources


•	Critical Accounting Policies

Executive Summary

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

~~EXECUTIVE SUMMARY AND SELECTED FINANCIAL AND OPERATING DATA~~

~~Net Sales increased 8.1% to $25.0~~



dollars in millions, except per share data	Three Months Ended						Nine Months Ended
dollars in millions, except per share data	November 3, 2019			October 28, 2018			November 3, 2019			October 28, 2018
Net sales	$	27,223		$	26,302		$	84,443		$	81,712
Net earnings	$	2,769		$	2,867		$	8,761		$	8,777
Effective tax rate	24.5		%	21.4		%	24.5		%	23.3		%

Diluted earnings per share	$	2.53		$	2.51		$	7.96		$	7.63

Net cash provided by operating activities							$	10,664		$	10,036
Proceeds from long-term debt, net of discounts and premiums							$	1,404		$	—
Repayments of long-term debt							$	1,046		$	1,192
Repurchases of common stock							$	3,909		$	5,518

We reported net sales of $27.2 billion ~~for~~in the third quarter of fiscal ~~2017 from $23.2~~2019. Net earnings were $2.8 billion, ~~for the third quarter of fiscal 2016.~~or $2.53 per diluted share. For the first nine months of fiscal ~~2017, Net Sales increased 6.4% to $77.0 billion from $72.4 billion for the first nine months of fiscal 2016. Our total comparable store~~2019, net sales increased 7.9% for the third quarter of fiscal 2017, driven by a 5.1% increase in our comparable store average ticket and a 2.7% increase in our comparable store customer transactions. Comparable store sales for our U.S. stores increased 7.7% for the third quarter of fiscal 2017. For the first nine months of fiscal 2017, our total comparable store sales increased 6.6% and comparable store sales for our U.S. stores increased 6.8%.

~~For the third quarter of fiscal 2017, we reported Net Earnings of $2.2~~were $84.4 billion and ~~Diluted Earnings~~net earnings were $8.8 billion, or $7.96 per Share of $1.84 compared to Net Earnings of $2.0 billion and Diluted Earnings per Share of $1.60 for the third quarter of fiscal 2016. For the first nine months of fiscal 2017, we reported Net Earnings of $6.9 billion and Diluted Earnings per Share of $5.76 compared to Net Earnings of $6.2 billion and Diluted Earnings per Share of $5.00 for the first nine months of fiscal 2016.diluted share.

~~In the third quarter of fiscal 2017, three hurricanes impacted our operations~~We closed one store in the ~~continental~~ U.S., Puerto Rico and the U.S. Virgin Islands. Hurricane-related sales positively impacted total sales growth by approximately $282 million in the third quarter of fiscal 2017. The gross margin on these hurricane-related sales was considerably less than the Company average. We also incurred approximately $104 million of hurricane-related expense in the third quarter of fiscal 2017. As a result of the hurricanes, operating profit was negatively impacted by approximately $51 million in the third quarter of fiscal 2017.

~~We opened one new store in Mexico~~ during the third quarter of fiscal ~~2017, for~~2019 due to a natural disaster, resulting in a total store count of ~~2,283~~2,290 at the end of the quarter. As of ~~the end of the third quarter of fiscal 2017,~~November 3, 2019, a total of ~~303~~306 of our stores, or ~~13.3%~~13.4%, were located in Canada and Mexico. ~~Total sales per square foot for~~For the third quarter of fiscal ~~2017 were $412.49, up 7.9% from last year. For the first nine months of 2017,~~2019, total sales per square foot were ~~$423.60, up 6.1% from last year. Our~~$449.17 and our inventory turnover ratio was 5.0 times.

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

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

Our ROIC for the trailing twelve-month period was 45.1% at the end of the third quarter of fiscal ~~2017 compared to 5.0 times at~~2019. See the ~~end~~"Non-GAAP Financial Measures" section below for our definition and calculation of ~~the third quarter of fiscal 2016.~~

~~In the third quarter and first nine months of fiscal 2017, we continued to focus on the following:~~

~~Customer Experience~~ – Customer experience is anchored on the principles of putting customers first and taking care of our associates, and our commitment to customer service remains strong. In the first nine 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 18.6% for the third quarter of fiscal 2017 compared to the same period last year, and represented 6.2% of our total Net Sales. For the first nine months of fiscal 2017, sales from our online channels increased 21.6% compared to the same period last year, and represented 6.4% of our total Net Sales. We also continued to focus 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.

~~Product Authority~~ – Product authority 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 nine months of fiscal 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.

~~Productivity and Efficiency Driven by Capital Allocation~~ – We drive productivity and efficiency through continuous operational improvement in our stores and supply chain. Further, our disciplined capital allocation builds shareholder value through higher returns on invested capital and total value returned to shareholders in the form of dividends and share repurchases. We plan to continue to innovate our business model and value chain to support our productivity cycle and enhance overall value for customers throughout the year.

In February 2017, our Board of Directors increased our targeted dividend payout ratio to 55% of Diluted Earnings per Share. 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 12.3 million shares of our common stock for $2.1 billion through an ASR agreement and the open market during the third quarter of fiscal 2017. During the first nine months of fiscal 2017, we repurchased 38.0 million shares of our common stock for $5.9 billion through ASR agreements and the open market.

We generated $9.7 billion of cash flow from operations in the first nine months of fiscal 2017. This cash flow, along with $3.0 billion of long-term debt issued in the first nine months of fiscal 2017, was used to fund cash payments of $6.1 billion for share repurchases, pay $3.2 billion of dividends, fund $1.4 billion in capital expenditures, repay $585 million of short-term debt, and repay $500 million of floating rate senior notes that matured on September 15, 2017.

~~Our return on invested capital ("ROIC") was 32.5% for the third quarter of fiscal 2017 compared to 29.1% for the third quarter of fiscal 2016. We define~~ ROIC, as ~~net operating profit after tax ("NOPAT"),~~well as a reconciliation of 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 installments, and equity for the most recent twelve-month period. For a reconciliation of NOPAT to ~~Net Earnings, the~~net earnings (the most comparable GAAP financial ~~measure,~~measure).

Results of Operations and Non-GAAP Financial Measures

The tables and discussion below should be read in conjunction with our ~~calculation of ROIC, see "Non-GAAP Financial Measures" below.~~

consolidated financial statements and related notes included in this report and in the 2018 Form 10-K and with our MD&A included in the 2018 Form 10-K. We believe the percentage relationship between ~~Net Sales~~net sales and ~~the~~ major categories in ~~the Consolidated Statements~~our consolidated statements of ~~Earnings and~~earnings, as well as the percentage change in the associated dollar amounts, ~~of each of these items as well as the selected sales data presented below~~ are ~~important in evaluating the performance~~relevant to an evaluation of our ~~business operations.~~business.

Fiscal 2019 and Fiscal 2018 Three Month Comparisons

% of Net Sales % Increase (Decrease)
in Dollar Amounts
Three Months Ended Nine Months Ended
October 29, 2017 October 30, 2016 October 29, 2017 October 30, 2016 Three Months
Nine
Months
NET SALES 100.0 % 100.0 % 100.0 % 100.0 % 8.1 % 6.4 %
GROSS PROFIT 34.6
34.7
34.1
34.2
7.5
6.1
Operating Expenses:

Selling, General and Administrative 18.0
18.5
17.4
17.9
5.5
3.7
Depreciation and Amortization 1.8
1.9
1.7
1.8
2.7
2.7
Total Operating Expenses 19.9
20.4
19.2
19.7
5.2
3.6

OPERATING INCOME 14.7
14.3
14.9
14.5
10.8
9.4
Interest and Other (Income) Expense:
Interest and Investment Income (0.1 ) —
(0.1 ) —
N/M
N/M
Interest Expense 1.1
1.1
1.0
1.0
9.3
8.5
Interest and Other, net 1.0
1.0
1.0
1.0
4.7
5.1

EARNINGS BEFORE PROVISION
FOR INCOME TAXES
13.7
13.3
14.0
13.5
11.3
9.8
Provision for Income Taxes 5.1
4.8
5.1
5.0
13.7
8.9
NET EARNINGS 8.7 % 8.5 % 8.9 % 8.6 % 10.0 % 10.3 %

SELECTED SALES DATA ⁽¹⁾

Number of Customer Transactions (millions) 389.5
380.0
1,212.0
1,184.8
2.5 % 2.3 %
Average Ticket (actual) $ 62.84
$ 59.78
$ 62.78
$ 60.26
5.1 % 4.2 %
Sales per Square Foot (actual) $ 412.49
$ 382.18
$ 423.60
$ 399.12
7.9 % 6.1 %
Comparable Store Sales Increase (%) ⁽²⁾
7.9 % 5.5 % 6.6 % 5.5 % N/A
N/A
Online Sales (% of Net Sales) ⁽³⁾
6.2 % 5.6 % 6.4 % 5.6 % 18.6 % 21.6 %



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

—————

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



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

—————


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


~~(2)~~	Includes 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 GAAP.~~


~~(3)~~	~~Consists of sales generated online through our websites for products picked up in stores or delivered to customer locations.~~Interline.

~~N/M – Not Meaningful~~Sales. We assess our sales performance by evaluating both net sales and comparable sales.

~~N/A – Not Applicable~~

~~RESULTS OF OPERATIONS~~

Net Sales. Net sales for the third quarter of fiscal ~~2017~~2019 increased ~~8.1%~~3.5% to ~~$25.0~~$27.2 billion from ~~$23.2~~$26.3 billion in the third quarter of fiscal 2018. The increase in net sales in the third quarter of fiscal 2019 primarily reflected the impact of positive comparable sales driven by an increase in comparable average ticket and comparable customer transactions. Online sales, which consist of sales generated online through our websites for products picked up in our stores or delivered to customer locations, represented 8.9% of net sales and grew 21.9% during the third quarter of fiscal 2019. A stronger U.S. dollar negatively impacted sales growth by $41 million in the third quarter of fiscal 2019.

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

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

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

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

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

Gross Profit.Gross profit for the third quarter of fiscal ~~2016.~~2019 increased 2.6% to $9.4 billion from $9.2 billion in the third quarter of fiscal 2018. Gross profit as a percent of net sales, or gross profit margin, was 34.5% in the third quarter of fiscal 2019 compared to 34.8% for the third quarter of fiscal 2018. The decrease in gross profit margin was primarily driven by higher shrink and a change in product mix.

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

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

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

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

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

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

Fiscal 2019 and Fiscal 2018 Nine Month Comparisons



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

—————

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



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

—————


(1)	Does not include results for Interline.

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

Net Sales. For the first nine months of fiscal ~~2017, Net Sales~~2019, net sales increased ~~6.4%~~3.3% to ~~$77.0~~$84.4 billion from ~~$72.4~~$81.7 billion in the first nine months of fiscal 2018. The increase in net sales for the first nine months of fiscal 2019 primarily reflected the impact of positive comparable sales driven by an increase in comparable average ticket growth and comparable customer transactions. Online sales, which consist of sales generated online through our websites for products picked up in our stores or delivered to customer locations, represented 8.9% of net sales and grew 21.6% during the first nine months of fiscal 2019. A stronger U.S. dollar negatively impacted sales growth by $146 million in the first nine months of fiscal 2019.

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

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

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

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

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

Selling, General & Administrative. SG&A increased $335 million to $14.9 billion for the first nine months of fiscal ~~2016. The increase~~2019 from $14.6 billion in Net Sales for the third quarter and first nine months of fiscal 2017 primarily reflects the impact of positive comparable store sales driven by increased customer transactions and average ticket growth. Hurricane-related sales positively impacted total sales growth by approximately $282 million in the third quarter of fiscal 2017. We expect continued hurricane recovery-related sales in the fourth quarter of fiscal 2017.

Total comparable store sales increased 7.9% and 6.6% for the third quarter and first nine months of fiscal 2017, respectively, which reflects a number of factors, including the execution of our strategy and broad-based growth across our stores. All of our departments except one posted positive comparable store sales for the third quarter of fiscal 2017. During the first nine months of fiscal ~~2017, all~~2018. As a percent of ~~our departments posted positive comparable store~~net sales, ~~except for one, which~~SG&A was flat. Comparable store sales for our Lumber, Appliances, Electrical, Indoor Garden, Tools, Building Materials and Flooring product categories were above the Company average for the third quarter of fiscal 2017. Further, our comparable store average ticket increased 5.1% and 4.2% for the third quarter and first nine months of fiscal 2017, respectively, due17.7% in part to strong sales in big ticket purchases such as appliances and flooring. Our comparable store customer transactions increased 2.7% and 2.3% for the third quarter and first nine months of fiscal 2017, respectively.

~~Gross Profit increased 7.5% to $8.6 billion for the third quarter of fiscal 2017 from $8.0 billion for the third quarter of fiscal 2016. For~~ the first nine months of fiscal 2017, Gross Profit increased 6.1% to $26.3 billion from $24.8 billion for the first nine months of fiscal 2016. Gross Profit as a percent of Net Sales, or gross profit margin, was 34.6% for the third quarter of fiscal 2017 compared to 34.7% for the third quarter of fiscal 2016. For the first nine months of fiscal 2017, gross profit margin was 34.1% compared to 34.2% for the first nine months of fiscal 2016. Gross profit margin for the third quarter of fiscal 2017 reflects pressure from product mix changes and higher supply chain expense driven by hurricane-related sales. Gross profit margin for the first nine months of fiscal 2017 reflects the impact of product mix changes and higher shrink, partially offset by benefits from our supply chain.

Selling, General and Administrative ("SG&A") increased 5.5% to $4.5 billion for the third quarter of fiscal 2017 from $4.3 billion for the third quarter of fiscal 2016. For the first nine months of fiscal 2017, SG&A increased 3.7% to $13.4 billion from $12.9 billion for the first nine months of fiscal 2016. SG&A includes approximately $104 million of hurricane-related expenses in the third quarter and first nine months of fiscal 2017. As a percent of Net Sales, SG&A was 18.0% for the third quarter of fiscal 2017 compared to 18.5% for the third quarter of fiscal 2016. For the first nine months of fiscal 2017, SG&A as a percent of Net Sales was 17.4%2019 compared to 17.9% for the first nine months of fiscal ~~2016.~~2018. The decrease in SG&A as a percent of ~~Net Sales~~net sales for the ~~third quarter and~~ first nine months of fiscal ~~2017 reflects~~2019 was primarily driven by expense leverage resulting from ~~the~~ positive comparable ~~store~~ sales ~~environment~~ and continued expense ~~control.~~control, partially offset by expenses related to strategic investments in the business.

Depreciation and Amortization. Depreciation and amortization increased ~~2.7%~~$80 million to ~~$454 million for~~$1.5 billion in the ~~third quarter~~first nine months of fiscal ~~2017~~2019 from ~~$442 million for~~$1.4 billion in the ~~third quarter~~first nine months of fiscal ~~2016. Depreciation~~2018. As a percent of net sales, depreciation and ~~Amortization~~amortization was ~~$1.3 billion~~unchanged at 1.7% for the first nine months of both fiscal ~~2017~~2019 and ~~2016. Depreciation~~fiscal 2018, reflecting strategic investments in the business, leverage resulting from positive comparable sales, and ~~Amortization as a percent~~timing of ~~Net Sales~~asset additions.

Interest and Other, net. Interest and other, net was ~~1.8% for the third quarter of fiscal 2017 compared to 1.9% for the third quarter of fiscal 2016. For~~$836 million in the first nine months of fiscal ~~2017, Depreciation and Amortization as a percent of Net Sales was 1.7%~~2019, compared to 1.8% for the first nine months of fiscal 2016. Depreciation and Amortization as a percent of Net Sales for the third quarter and first nine months of fiscal 2017 reflects expense leverage resulting from the positive comparable store sales environment.

Operating Income increased 10.8% to $3.7 billion for the third quarter of fiscal 2017 from $3.3 billion for the third quarter of fiscal 2016. For the first nine months of fiscal 2017, Operating Income increased 9.4% to $11.5 billion from $10.5 billion for the first nine months of fiscal 2016. As a result of the hurricanes, Operating Income was negatively impacted by approximately $51 million in the third quarter and first nine months of fiscal 2017. Operating Income as a percent of Net Sales was 14.7% for the third quarter of fiscal 2017 compared to 14.3% for the third quarter of fiscal 2016. For the first nine months of fiscal 2017, Operating Income as a percent of Net Sales was 14.9% compared to 14.5% for the first nine months of fiscal 2016.

Interest and Other, net, was $247 million for the third quarter of fiscal 2017 compared to $236 million for the third quarter of fiscal 2016. For the first nine months of fiscal 2017, Interest and Other, net, was $737 million compared to $701$709 million for the first nine months of fiscal ~~2016. Interest~~2018. As a percent of net sales, it was 1.0% for the first nine months of fiscal 2019 compared to 0.9% for the first nine months of fiscal 2018. The increase in interest and ~~Other,~~other, net as a percent of ~~Net Sales~~sales was ~~1.0%~~due primarily to higher interest expense resulting from higher debt balances.

Provision for ~~the third quarter and first nine months of both fiscal 2017 and 2016.~~

Income Taxes.Our combined effective income tax rate was ~~36.3%~~24.5% for the first nine months of fiscal ~~2017~~2019 compared to ~~36.6%~~23.3% for the first nine months of fiscal ~~2016.~~2018. The ~~effective~~increase in the provision for income taxes in the first nine months of fiscal 2019 was primarily due to nonrecurring tax ~~rate~~benefits relating to the Tax Act and the settlement of uncertain tax positions in the prior year.

Diluted Earnings per Share. Diluted earnings per share were $7.96 for the first nine months of fiscal ~~2017 reflects a $92 million benefit to our Provision for Income Taxes for share-based payment awards as a result of the adoption of ASU No. 2016-09.~~

~~Diluted Earnings per Share were $1.84 for the third quarter of fiscal 2017~~2019, compared to ~~$1.60 for the third quarter of fiscal 2016. For the first nine months of fiscal 2017, Diluted Earnings per Share were $5.76 compared to $5.00~~$7.63 for the first nine months of fiscal ~~2016. Diluted Earnings per Share for the third quarter and first nine months of fiscal 2017 included benefits of $0.01 and $0.08, respectively, as a result of the adoption of ASU No. 2016-09.~~

2018.

Non-GAAP Financial Measures

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

Return on Invested ~~Capital~~

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

The ~~following table provides our~~calculation of ROIC, ~~calculation and reconciles~~together with a reconciliation of NOPAT to ~~Net Earnings:~~net earnings (the most comparable GAAP measure), follows.



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

Average debt and equity	$	26,520		$	26,857

ROIC	45.1		%	42.2		%

For the Twelve Months Ended
dollar amounts in millions October 29,
2017 October 30,
2016
Net Earnings $ 8,595
$ 7,684
Add:
Interest and Other, net 972
937
Provision for Income Taxes 4,852
4,428
Operating Income 14,419
13,049
Subtract:
Income Tax Adjustment ⁽¹⁾
5,234
4,771
Net Operating Profit After Tax $ 9,185
$ 8,278

Average Debt and Equity ⁽²⁾
$ 28,255
$ 28,441

Return on Invested Capital ⁽³⁾
32.5 % 29.1 %

—————


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


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


~~(3)~~	~~ROIC is calculated as NOPAT divided by Average Debt and Equity.~~trailing twelve months.

Additional Information

~~LIQUIDITY AND CAPITAL RESOURCES~~

~~Cash flow generated from operations provides us with a significant source of liquidity.~~ For ~~the first nine months of fiscal~~ ~~2017, Net Cash Provided by Operating Activities was~~ ~~$9.7 billion~~ ~~compared to~~ ~~$7.9 billion~~ ~~for the same period of fiscal~~ ~~2016~~. This increase primarily reflects a $677 million increase in operating cash flows from the effective management and procurement of Merchandise Inventories and a $638 million increase in Net Earnings resulting from higher sales and expense leverage.

~~Net Cash Used in Investing Activities for the first nine months of fiscal 2017 was $1.6 billion compared to~~ ~~$1.1 billion~~ ~~for the same period of fiscal~~ ~~2016. This change was primarily due to $260 million in Payments for Business Acquired, net, related to the acquisition of Compact Power Equipment, Inc. and a $209 million increase in Capital Expenditures.~~

Net Cash Used in Financing Activities for the first nine months of fiscal 2017 was $7.3 billion compared to $5.4 billion for the same period of fiscal 2016. This change was primarily due to $1.5 billion more in Repurchases of Common Stock, $607 million more in Cash Dividends Paid to Stockholders and $235 million more in Repayments of Short-Term Debt, partially offset by $532 million more in net incremental long-term debt issued in the first nine months of fiscal 2017 compared to the same period of fiscal 2016.

In September 2017, we issued the 2027 notes at a discount of $3 million. The net proceeds of the 2027 notes were used to repay our floating rate notes due September 15, 2017 and for general corporate purposes, including repurchases of shares of our common stock. See Note 3 to the Consolidated Financial Statements included in this report.

Also in September 2017, we entered into an interest rate swap agreement with a notional amount of $250 million, accounted for as a fair value hedge, to hedge against changes in the fair value of the 2027 notes attributable to changes in the designated benchmark interest rate.

In June 2017, we issued the 2020 floating rate notes; the 2020 notes at a discount of $1 million; and the 2047 notes at a discount of $5 million. The net proceeds of the June 2017 issuance were used for general corporate purposes, including repurchases of shares of our common stock. See Note 3 to the Consolidated Financial Statements included in this report.

In the second quarter of fiscal 2017, we entered into an ASR agreement under which we paid $1.65 billion to a third party financial institution and received a total of 10.8 million shares. In the third quarter of fiscal 2017, we entered into an ASR agreement under which we paid $1.2 billion to a third party financial institution and received an initial delivery of 6.7 million shares. The ASR agreement terminatedinformation on November 17, 2017, at which time the Company became contractually entitled to receive an additional 0.7 million shares upon settlement. See Note 4 to the Consolidated Financial Statements included in this report.

Weaccounting pronouncements that 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 customary covenants. At October 29, 2017, we were in compliance with all of the covenants, and none~~impacted or are expected to materially impact our ~~liquidity~~consolidated financial condition, results of operations, or ~~capital resources. During the first nine months of fiscal 2017, all of~~cash flows, see Note 1 to our ~~short-term borrowings were under these commercial paper programs,~~consolidated financial statements.

Liquidity and the maximum amount outstanding at any time during the first nine months of fiscal 2017 was $1.0 billion. As of October 29, 2017, there were $125 million of borrowings outstanding under the commercial paper programs.Capital Resources

~~As of October 29, 2017, we had $3.5 billion in~~ Cash and Cash ~~Equivalents.~~Equivalents

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

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

~~For~~Debt and Derivatives

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

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

Share Repurchases

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

Cash Flows Summary

Operating Activities. Cash flow generated from operations provides us ~~see Note 1~~with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and services, employee compensation, operations, and occupancy costs.

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

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

~~For a summary~~Investing Activities. Cash used in investing activities primarily reflected capital expenditures from the continuation of ~~recently adopted accounting pronouncements, see Note 2~~our strategic investments in our business of $1.9 billion during the first nine months of fiscal 2019 compared to $1.7 billion of capital expenditures in the ~~Consolidated Financial Statements included~~first nine months of fiscal 2018.

Financing Activities. Cash used in ~~this report.~~financing activities primarily reflected:

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

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

Critical Accounting Policies

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


~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk.~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Our exposure to market risks results primarily from fluctuations in interest rates. We are also exposed to risks from foreign currency exchange rate fluctuations on the translation of our foreign operations into U.S. dollars and on the purchase of goods by these foreign operations that are not denominated in their local currencies. Additionally, we experience inflation and deflation related to our purchase of certain commodity products. There have been no material changes to our exposure to market risks from those disclosed in ~~our 2016~~the 2018 Form 10-K.


~~Item 4.~~	~~Controls and Procedures.~~

Item 4. Controls and Procedures.

Under the direction and with the participation of ~~the Company's~~our Chief Executive Officer and Chief Financial Officer, ~~the Company~~we evaluated ~~its~~our disclosure controls and procedures (as defined in Rule 13a-15(e) under the ~~Securities~~ Exchange ~~Act of 1934, as amended)~~Act) and concluded that ~~its~~our disclosure controls and procedures were effective as of ~~October 29, 2017.~~November 3, 2019. There has been no change in ~~the Company's~~our internal control over financial reporting during the fiscal quarter ended ~~October 29, 2017,~~November 3, 2019 that has materially affected, or is reasonably likely to materially affect, ~~the Company's~~our internal control over financial reporting.

PART ~~II.~~II – OTHER INFORMATION


~~Item 1.~~	~~Legal Proceedings.~~

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

For a description of the matters related to the Data Breach, see Note 7 to the Consolidated Financial Statements included in Part I, Item 1, "Financial Statements", which description is incorporated herein by reference.


~~Item 1A.~~	~~Risk Factors.~~

Item 1A. Risk Factors.

In addition to the other information set forth in this ~~Form 10-Q,~~report, you should carefully consider the factors discussed under Item 1A, "Risk Factors" and elsewhere in ~~our 2016~~the 2018 Form 10-K. These risks and uncertainties could materially and adversely affect our business, consolidated financial condition, results of operations, or cash flows. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently do not consider ~~immaterial~~material to our business. There have been no material changes in the risk factors discussed in ~~our 2016~~the 2018 Form 10-K.


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

~~(a)~~ Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~During the~~ ~~third~~ ~~quarter of fiscal~~ ~~2017~~, the Company issued 535 deferred stock units under The Home Depot, Inc. Non-Employee Directors' Deferred Stock Compensation Plan pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act") and Rule 506 of the SEC's Regulation D thereunder. The deferred stock units were credited to the accounts of those non-employee directors who elected to receive all or a portion of board retainers in the form of deferred stock units instead of cash during the ~~third~~ ~~quarter of fiscal~~ ~~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~~ ~~third~~ ~~quarter of fiscal~~ ~~2017~~, the Company credited 1,188 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)~~ Issuer Purchases of Equity Securities

~~In the first quarter of fiscal 2017, the Board of Directors authorized a $15.0 billion share repurchase program. Through the end of the~~ ~~third~~ ~~quarter of fiscal~~ ~~2017, the Company has repurchased shares of its common stock having a value of approximately~~ ~~$5.9 billion~~ ~~under this program.~~ The number and average price of shares purchased in each fiscal month of the third quarter of fiscal ~~2017~~ ~~are set forth in the table below:~~2019 follow.



Period		Total Number of Shares Purchased⁽¹⁾	Average Price Paid Per Share⁽¹⁾		Total Number of Shares Purchased as Part of Publicly Announced Program⁽²⁾	Dollar Value of Shares that May Yet Be Purchased Under the Program⁽²⁾
August 5, 2019 – September 1, 2019		1,846,988	$	212.68	1,842,151	$	12,385,451,643
September 2, 2019 – September 29, 2019	⁽³⁾	3,336,987	227.92		3,324,530	11,527,253,300
September 30, 2019 – November 3, 2019		1,347	232.23		—	11,527,253,300
Total		5,185,322	222.49		5,166,681

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⁾
July 31, 2017 – August 27, 2017 4,007,643
$ 151.26
3,975,984
$ 10,507,805,292
August 28, 2017 – September 24, 2017⁽³⁾
8,368,921
$ 156.65
8,349,174
$ 9,052,805,480
September 25, 2017 – October 29, 2017 3,214
$ 163.99
—
$ 9,052,805,480
12,379,778
$ 154.91
12,325,158

—————

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

(2) In ~~the first quarter of fiscal 2017, the~~February 2019, our Board of Directors authorized a $15.0 billion share repurchase program that replaced the previous authorization. The program does not have a prescribed expiration date.

(3) In the third quarter of fiscal ~~2017, the Company~~2019, we paid ~~$1.2 billion~~$820 million under an ASR agreement and received an initial delivery of ~~6.7~~3.2 million shares. See Note 5 to our consolidated financial statements for further discussion.

Sales of Unregistered Securities

During the third quarter of fiscal 2019, we issued 446 deferred stock units under the Home Depot, Inc. Nonemployee Directors’ Deferred Stock Compensation Plan pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506 of the SEC’s Regulation D thereunder. The ~~ASR agreement terminated~~deferred stock units were credited to the accounts of those non-employee directors who elected to receive all or a portion of board retainers in the form of deferred stock units instead of cash during the third quarter of fiscal 2019. The deferred stock units convert to shares of common stock on ~~November 17, 2017, at which time~~a one-for-one basis following a termination of service as described in this plan.

During the ~~Company became~~third quarter of fiscal 2019, we credited 1,143 deferred stock units to participant accounts under the Restoration Plan pursuant to an exemption from the registration requirements of the Securities Act for involuntary, non-contributory plans. The deferred stock units convert to shares of common stock on a one-for-one basis following a termination of service as described in this plan.

~~contractually entitled~~Item 6. Exhibits.

Exhibits marked with an asterisk (*) are incorporated by reference to ~~receive an additional 0.7 million shares upon settlement. See Note 4 to~~exhibits or appendices previously filed with the ~~Consolidated Financial Statements included~~SEC, as indicated by the references in ~~this report.~~brackets. All other exhibits are filed or furnished herewith.


~~Item 6.~~	~~Exhibits~~



Exhibits marked with an asterisk (*) are incorporated by reference to exhibits or appendices previously filed with the SEC, as indicated by the references in brackets. All other exhibits are filed or furnished herewith.Exhibit		Description
3.1
3.1		*~~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
3.2		*~~3.2~~	By-Laws of The Home Depot, Inc. (Amended and Restated Effective ~~March 3, 2016). [Form~~February 28, 2019)
[Form 8-K filed on March ~~8, 2016,~~4, 2019, Exhibit 3.2]
10.1	†	Employment Arrangement between Richard McPhail and The Home Depot, Inc., dated August 13, 2019
15.1
~~12.1~~		~~Statement of Computation of Ratio of Earnings to Fixed Charges.~~

~~15.1~~		Acknowledgement of Independent Registered Public Accounting Firm ~~dated November 20, 2017.~~
31.1
~~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
~~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
~~32.1~~		Certification of the 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.~~2002
32.2
~~32.2~~		Certification of the 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.~~2002
101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document
~~101~~101.SCH		~~The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 2017, formatted~~Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in 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.Exhibit 101)

—————


†	Management contract or compensatory plan or arrangement

SIGNATURES

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




	THE HOME DEPOT, INC.	(Registrant)
	~~(Registrant)~~

By:	/s/ ~~CRAIG~~CRAIG A. ~~MENEAR~~	MENEAR
	Craig A. Menear,
	Chairman, Chief Executive Officer and President

	~~President~~/s/ RICHARD V. MCPHAIL
	Richard V. McPhail, Executive Vice President and Chief Financial Officer

Date:	~~/s/ CAROL B. TOMÉ~~
	~~Carol B. Tomé~~
	~~Chief Financial Officer and~~
	~~Executive Vice President – Corporate Services~~	November 25, 2019

~~November 20, 2017~~

~~(Date)~~



amounts in millions, except per share data	October 29, 2017			January 29, 2017
ASSETS
Current Assets:
Cash and Cash Equivalents	$	3,549		$	2,538
Receivables, net	2,166			2,029
Merchandise Inventories	13,419			12,549
Other Current Assets	548			608
Total Current Assets	19,682			17,724
Property and Equipment, at cost	41,614			40,426
Less Accumulated Depreciation and Amortization	19,654			18,512
Net Property and Equipment	21,960			21,914
Goodwill	2,217			2,093
Other Assets	1,164			1,235
Total Assets	$	45,023		$	42,966
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-Term Debt	$	125		$	710
Accounts Payable	8,570			7,000
Accrued Salaries and Related Expenses	1,488			1,484
Sales Taxes Payable	629			508
Deferred Revenue	1,788			1,669
Income Taxes Payable	139			25
Current Installments of Long-Term Debt	1,198			542
Other Accrued Expenses	2,065			2,195
Total Current Liabilities	16,002			14,133
Long-Term Debt, excluding current installments	24,266			22,349
Other Long-Term Liabilities	1,968			1,855
Deferred Income Taxes	244			296
Total Liabilities	42,480			38,633

Common Stock, par value $0.05; authorized: 10,000 shares; issued: 1,779 shares at October 29, 2017 and 1,776 shares at January 29, 2017; outstanding: 1,168 shares at October 29, 2017 and 1,203 shares at January 29, 2017	89			88
Paid-In Capital	9,883			9,787
Retained Earnings	39,193			35,519
Accumulated Other Comprehensive Loss	(629		)	(867		)
Treasury Stock, at cost, 611 shares at October 29, 2017 and 573 shares at January 29, 2017	(45,993		)	(40,194		)
Total Stockholders’ Equity	2,543			4,333
Total Liabilities and Stockholders’ Equity	$	45,023		$	42,966



	Three Months Ended						Nine Months Ended
amounts in millions	October 29, 2017			October 30, 2016			October 29, 2017			October 30, 2016
NET EARNINGS	$	2,165		$	1,969		$	6,851		$	6,213
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments	(145		)	(125		)	244			(8		)
Cash Flow Hedges, net of tax	(2		)	21			(5		)	23
Other	—			(1		)	(1		)	—
Total Other Comprehensive Income (Loss)	(147		)	(105		)	238			15
COMPREHENSIVE INCOME	$	2,018		$	1,864		$	7,089		$	6,228



Agreement Date	Settlement Date	Agreement Amount		Initial Shares Delivered	Additional Shares Delivered	Total Shares Delivered
Q2 2017	Q2 2017	$	1,650	9.7	1.1	10.8
Q3 2017⁽¹⁾	Q4 2017	$	1,200	6.7	0.7	7.4



	Fair Value at October 29, 2017 Using							Fair Value at January 29, 2017 Using
amounts in millions	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative agreements - assets	$	—	$	189		$	—	$	—	$	271	$	—
Derivative agreements - liabilities	—		(9		)	—		—		—		—
Total	$	—	$	180		$	—	$	—	$	271	$	—



	October 29, 2017				January 29, 2017
amounts in millions	Fair Value (Level 1)		Carrying Value		Fair Value (Level 1)		Carrying Value
Senior notes	$	26,650	$	24,482	$	23,620	$	22,013



	% of Net Sales												% Increase (Decrease) in Dollar Amounts
	Three Months Ended						Nine Months Ended						% Increase (Decrease) in Dollar Amounts
	October 29, 2017			October 30, 2016			October 29, 2017			October 30, 2016			Three Months		Nine Months
NET SALES	100.0		%	100.0		%	100.0		%	100.0		%	8.1	%	6.4	%
GROSS PROFIT	34.6			34.7			34.1			34.2			7.5		6.1
Operating Expenses:
Selling, General and Administrative	18.0			18.5			17.4			17.9			5.5		3.7
Depreciation and Amortization	1.8			1.9			1.7			1.8			2.7		2.7
Total Operating Expenses	19.9			20.4			19.2			19.7			5.2		3.6

OPERATING INCOME	14.7			14.3			14.9			14.5			10.8		9.4
Interest and Other (Income) Expense:
Interest and Investment Income	(0.1		)	—			(0.1		)	—			N/M		N/M
Interest Expense	1.1			1.1			1.0			1.0			9.3		8.5
Interest and Other, net	1.0			1.0			1.0			1.0			4.7		5.1

EARNINGS BEFORE PROVISION FOR INCOME TAXES	13.7			13.3			14.0			13.5			11.3		9.8
Provision for Income Taxes	5.1			4.8			5.1			5.0			13.7		8.9
NET EARNINGS	8.7		%	8.5		%	8.9		%	8.6		%	10.0	%	10.3	%

SELECTED SALES DATA ⁽¹⁾
Number of Customer Transactions (millions)	389.5			380.0			1,212.0			1,184.8			2.5	%	2.3	%
Average Ticket (actual)	$	62.84		$	59.78		$	62.78		$	60.26		5.1	%	4.2	%
Sales per Square Foot (actual)	$	412.49		$	382.18		$	423.60		$	399.12		7.9	%	6.1	%
Comparable Store Sales Increase (%) ⁽²⁾	7.9		%	5.5		%	6.6		%	5.5		%	N/A		N/A
Online Sales (% of Net Sales) ⁽³⁾	6.2		%	5.6		%	6.4		%	5.6		%	18.6	%	21.6	%



	For the Twelve Months Ended
dollar amounts in millions	October 29, 2017			October 30, 2016
Net Earnings	$	8,595		$	7,684
Add:
Interest and Other, net	972			937
Provision for Income Taxes	4,852			4,428
Operating Income	14,419			13,049
Subtract:
Income Tax Adjustment ⁽¹⁾	5,234			4,771
Net Operating Profit After Tax	$	9,185		$	8,278

Average Debt and Equity ⁽²⁾	$	28,255		$	28,441

Return on Invested Capital ⁽³⁾	32.5		%	29.1		%

~~Large accelerated filer~~ x

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~~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. ¨