UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~August 1,~~October 31, 2021

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

For the transition period from to

Commission File Number: 1-8207

THE HOME DEPOT, INC.

(Exact name of registrant as specified in its charter)

Delaware

95-3261426

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

2455 Paces Ferry Road

Atlanta,

Georgia

30339

(Address of principal executive offices)

(Zip Code)

(770) 433-8211

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

New York Stock Exchange

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

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

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

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

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

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

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

~~1,055,358,696~~1,044,239,177 shares of common stock, $0.05 par value, outstanding as of ~~August 17,~~November 16, 2021

TABLE OF CONTENTS


Commonly Used or Defined Terms		ii
Forward-Looking Statements		iii

PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements.	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Earnings	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Stockholders' Equity	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
	Note 1. Summary of Significant Accounting Policies	6
	Note 2. Net Sales	6
	Note 3. Property and Leases	7
	~~Note~~ N 4 ~~. Stockholders' Equity~~ote 4. Debt	8
	Note 5 ~~. Fair Value Measurements~~5. Stockholders' Equity	9
	Note 6 ~~. Weighted Average Common Shares~~6. Fair Value Measurements	10
	Note 7. Weighted Average Common Shares	711
	.Note 8. Commitments and Contingencies	1011
	Note 8 . 9. HD S ~~upp~~l ySupply Acquisition	1011
	Report of Independent Registered Public Accounting Firm	1112
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	1213
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	1920
Item 4.	Controls and Procedures.	1920

PART II – OTHER INFORMATION		1920

Item 1A.	Risk Factors.	1920
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	20
Item 6.	Exhibits.	21

SIGNATURES		22

Table of Contents

COMMONLY USED OR DEFINED TERMS


Term						Definition

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 2020						Fiscal year ended January 31, 2021
fiscal 2021						Fiscal year ending January 30, 2022
GAAP						U.S. generally accepted accounting principles
HD Supply						HD Supply Holdings, Inc.
MD&A						Management's Discussion and Analysis of Financial Condition and Results of Operations
MRO						Maintenance, repair and operations
NOPAT						Net operating profit after tax
Restoration Plan						Home Depot FutureBuilder Restoration Plan
ROIC						Return on invested capital
SEC						Securities and Exchange Commission
Securities Act						Securities Act of 1933, as amended
SG&A						Selling, general and administrative
2020 Form 10-K						Annual Report on Form 10-K for fiscal 2020 as filed with the SEC on March 24, 2021

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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 impact of the COVID-19 pandemic and the related recovery on our business, results of operations, cash flows and financial condition (which, among other things, may affect many of the items listed below); the demand for our products and services; net sales growth; comparable sales; effects of competition; our brand and reputation; 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, potential associates, suppliers and service providers; international trade disputes, natural disasters, public health issues (including pandemics and quarantines, related shut-downs and other governmental orders, and similar restrictions, as well as subsequent re-openings), and other business interruptions that could disrupt supply or delivery of, or demand for, the Company’s products or services; continuation or suspension of share repurchases; net earnings performance; earnings per share; dividend targets; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; stock-based compensation expense; commodity or other 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, including compliance with related settlements; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of regulatory changes, including changes to tax laws and regulations; store openings and closures; financial outlook; and the impact of acquired companies, including HD Supply, on our organization and the ability to recognize the anticipated 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,~~herein, 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 and in our other public statements.

iii

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

THE HOME DEPOT, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


in millions, except per share data	in millions, except per share data	August 1, 2021		January 31, 2021		in millions, except per share data	October 31, 2021		January 31, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	4,566	$	7,895	Cash and cash equivalents	$	5,067	$	7,895
Receivables, net	Receivables, net	3,322		2,992		Receivables, net	3,533		2,992
Merchandise inventories	Merchandise inventories	18,909		16,627		Merchandise inventories	20,582		16,627
Other current assets	Other current assets	1,465		963		Other current assets	1,284		963
Total current assets	Total current assets	28,262		28,477		Total current assets	30,466		28,477
Net property and equipment	Net property and equipment	24,750		24,705		Net property and equipment	24,935		24,705
Operating lease right-of-use assets	Operating lease right-of-use assets	5,960		5,962		Operating lease right-of-use assets	5,903		5,962
Goodwill	Goodwill	7,454		7,126		Goodwill	7,445		7,126
Other assets	Other assets	4,343		4,311		Other assets	4,282		4,311
Total assets	Total assets	$	70,769	$	70,581	Total assets	$	73,031	$	70,581

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current liabilities:	Current liabilities:					Current liabilities:

Accounts payable	Accounts payable	$	12,817	$	11,606	Accounts payable	$	13,375	$	11,606
Accrued salaries and related expenses	Accrued salaries and related expenses	2,329		2,463		Accrued salaries and related expenses	2,028		2,463
Sales taxes payable	Sales taxes payable	1,014		774		Sales taxes payable	968		774
Deferred revenue	Deferred revenue	3,498		2,823		Deferred revenue	3,499		2,823
Current installments of long-term debt	Current installments of long-term debt	2,428		1,416		Current installments of long-term debt	2,436		1,416
Current operating lease liabilities	Current operating lease liabilities	814		828		Current operating lease liabilities	827		828
Other accrued expenses	Other accrued expenses	3,766		3,256		Other accrued expenses	3,770		3,256
Total current liabilities	Total current liabilities	26,666		23,166		Total current liabilities	26,903		23,166
Long-term debt, excluding current installments	Long-term debt, excluding current installments	33,746		35,822		Long-term debt, excluding current installments	36,712		35,822
Long-term operating lease liabilities	Long-term operating lease liabilities	5,360		5,356		Long-term operating lease liabilities	5,290		5,356
Other long-term liabilities	Other long-term liabilities	2,928		2,938		Other long-term liabilities	3,091		2,938
Total liabilities	Total liabilities	68,700		67,282		Total liabilities	71,996		67,282

Common stock, par value $0.05; authorized: 10,000 shares; issued: 1,791 shares at August 1, 2021 and 1,789 shares at January 31, 2021; outstanding: 1,056 shares at August 1, 2021 and 1,077 shares at January 31, 2021		90		89
Common stock, par value $0.05; authorized: 10,000 shares; issued: 1,791 shares at October 31, 2021 and 1,789 shares at January 31, 2021; outstanding: 1,046 shares at October 31, 2021 and 1,077 shares at January 31, 2021						Common stock, par value $0.05; authorized: 10,000 shares; issued: 1,791 shares at October 31, 2021 and 1,789 shares at January 31, 2021; outstanding: 1,046 shares at October 31, 2021 and 1,077 shares at January 31, 2021	90		89
Paid-in capital	Paid-in capital	11,797		11,540		Paid-in capital	11,889		11,540
Retained earnings	Retained earnings	63,560		58,134		Retained earnings	65,951		58,134
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(585)		(671)		Accumulated other comprehensive loss	(602)		(671)
Treasury stock, at cost, 735 shares at August 1, 2021 and 712 shares at January 31, 2021		(72,793)		(65,793)
Treasury stock, at cost, 745 shares at October 31, 2021 and 712 shares at January 31, 2021						Treasury stock, at cost, 745 shares at October 31, 2021 and 712 shares at January 31, 2021	(76,293)		(65,793)
Total stockholders’ equity	Total stockholders’ equity	2,069		3,299		Total stockholders’ equity	1,035		3,299
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	70,769	$	70,581	Total liabilities and stockholders’ equity	$	73,031	$	70,581

See accompanying notes to consolidated financial statements.

Table of Contents

THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
in millions, except per share data	in millions, except per share data	August 1, 2021		August 2, 2020		August 1, 2021		August 2, 2020		in millions, except per share data	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
Net sales	Net sales	$	41,118	$	38,053	$	78,618	$	66,313	Net sales	$	36,820	$	33,536	$	115,438	$	99,849
Cost of sales	Cost of sales	27,453		25,112		52,211		43,747		Cost of sales	24,257		22,080		76,468		65,827
Gross profit	Gross profit	13,665		12,941		26,407		22,566		Gross profit	12,563		11,456		38,970		34,022
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative	Selling, general and administrative	6,433		6,355		12,807		12,184		Selling, general and administrative	6,168		6,076		18,975		18,260
Depreciation and amortization	Depreciation and amortization	593		519		1,180		1,039		Depreciation and amortization	600		528		1,780		1,567
Total operating expenses	Total operating expenses	7,026		6,874		13,987		13,223		Total operating expenses	6,768		6,604		20,755		19,827
Operating income	Operating income	6,639		6,067		12,420		9,343		Operating income	5,795		4,852		18,215		14,195
Interest and other (income) expense:	Interest and other (income) expense:									Interest and other (income) expense:
Interest and investment income	Interest and investment income	(5)		(9)		(11)		(26)		Interest and investment income	(15)		(11)		(26)		(37)
Interest expense	Interest expense	326		346		665		670		Interest expense	341		340		1,006		1,010

Interest and other, net	Interest and other, net	321		337		654		644		Interest and other, net	326		329		980		973
Earnings before provision for income taxes	Earnings before provision for income taxes	6,318		5,730		11,766		8,699		Earnings before provision for income taxes	5,469		4,523		17,235		13,222
Provision for income taxes	Provision for income taxes	1,511		1,398		2,814		2,122		Provision for income taxes	1,340		1,091		4,154		3,213
Net earnings	Net earnings	$	4,807	$	4,332	$	8,952	$	6,577	Net earnings	$	4,129	$	3,432	$	13,081	$	10,009

Basic weighted average common shares	Basic weighted average common shares	1,058		1,073		1,064		1,073		Basic weighted average common shares	1,049		1,073		1,059		1,074
Basic earnings per share	Basic earnings per share	$	4.54	$	4.04	$	8.41	$	6.13	Basic earnings per share	$	3.94	$	3.20	$	12.35	$	9.32

Diluted weighted average common shares	Diluted weighted average common shares	1,062		1,077		1,068		1,077		Diluted weighted average common shares	1,053		1,078		1,063		1,078
Diluted earnings per share	Diluted earnings per share	$	4.53	$	4.02	$	8.38	$	6.11	Diluted earnings per share	$	3.92	$	3.18	$	12.31	$	9.28

See accompanying notes to consolidated financial statements.

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THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
in millions	in millions	August 1, 2021		August 2, 2020		August 1, 2021		August 2, 2020		in millions	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
Net earnings	Net earnings	$	4,807	$	4,332	$	8,952	$	6,577	Net earnings	$	4,129	$	3,432	$	13,081	$	10,009
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	21		141		55		(278)		Foreign currency translation adjustments	(20)		46		35		(232)
Cash flow hedges	Cash flow hedges	2		5		4		5		Cash flow hedges	3		1		7		6
Other	Other	—		(10)		27		—		Other	—		—		27		—
Total other comprehensive income (loss)		23		136		86		(273)
Total other comprehensive income (loss), net of tax										Total other comprehensive income (loss), net of tax	(17)		47		69		(226)
Comprehensive income	Comprehensive income	$	4,830	$	4,468	$	9,038	$	6,304	Comprehensive income	$	4,112	$	3,479	$	13,150	$	9,783

See accompanying notes to consolidated financial statements.

Table of Contents

THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
in millions	in millions	August 1, 2021		August 2, 2020		August 1, 2021		August 2, 2020		in millions	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
Common Stock:	Common Stock:									Common Stock:
Balance at beginning of period	Balance at beginning of period	$	90	$	89	$	89	$	89	Balance at beginning of period	$	90	$	89	$	89	$	89
Shares issued under employee stock plans	Shares issued under employee stock plans	—		—		1		—		Shares issued under employee stock plans	—		—		1		—
Balance at end of period	Balance at end of period	90		89		90		89		Balance at end of period	90		89		90		89

Paid-in Capital:	Paid-in Capital:									Paid-in Capital:
Balance at beginning of period	Balance at beginning of period	11,555		11,008		11,540		11,001		Balance at beginning of period	11,797		11,228		11,540		11,001
Shares issued under employee stock plans	Shares issued under employee stock plans	149		144		32		73		Shares issued under employee stock plans	18		16		50		89

Stock-based compensation expense	Stock-based compensation expense	93		76		225		154		Stock-based compensation expense	74		68		299		222

Balance at end of period	Balance at end of period	11,797		11,228		11,797		11,228		Balance at end of period	11,889		11,312		11,889		11,312

Retained Earnings:	Retained Earnings:									Retained Earnings:
Balance at beginning of period	Balance at beginning of period	60,504		52,354		58,134		51,729		Balance at beginning of period	63,560		55,074		58,134		51,729

Net earnings	Net earnings	4,807		4,332		8,952		6,577		Net earnings	4,129		3,432		13,081		10,009
Cash dividends	Cash dividends	(1,751)		(1,612)		(3,526)		(3,223)		Cash dividends	(1,738)		(1,614)		(5,264)		(4,837)
Other	Other	—		—		—		(9)		Other	—		—		—		(9)
Balance at end of period	Balance at end of period	63,560		55,074		63,560		55,074		Balance at end of period	65,951		56,892		65,951		56,892

Accumulated Other Comprehensive Income (Loss):	Accumulated Other Comprehensive Income (Loss):									Accumulated Other Comprehensive Income (Loss):
Balance at beginning of period	Balance at beginning of period	(608)		(1,148)		(671)		(739)		Balance at beginning of period	(585)		(1,012)		(671)		(739)

Foreign currency translation adjustments, net of tax	Foreign currency translation adjustments, net of tax	21		141		55		(278)		Foreign currency translation adjustments, net of tax	(20)		46		35		(232)
Cash flow hedges, net of tax	Cash flow hedges, net of tax	2		5		4		5		Cash flow hedges, net of tax	3		1		7		6
Other, net of tax	Other, net of tax	—		(10)		27		—		Other, net of tax	—		—		27		—
Balance at end of period	Balance at end of period	(585)		(1,012)		(585)		(1,012)		Balance at end of period	(602)		(965)		(602)		(965)

Treasury Stock:	Treasury Stock:									Treasury Stock:
Balance at beginning of period	Balance at beginning of period	(69,793)		(65,793)		(65,793)		(65,196)		Balance at beginning of period	(72,793)		(65,793)		(65,793)		(65,196)
Repurchases of common stock	Repurchases of common stock	(3,000)		—		(7,000)		(597)		Repurchases of common stock	(3,500)		—		(10,500)		(597)
Balance at end of period	Balance at end of period	(72,793)		(65,793)		(72,793)		(65,793)		Balance at end of period	(76,293)		(65,793)		(76,293)		(65,793)
Total stockholders' equity (deficit)		$	2,069	$	(414)	$	2,069	$	(414)
Total stockholders' equity										Total stockholders' equity	$	1,035	$	1,535	$	1,035	$	1,535

See accompanying notes to consolidated financial statements.

Table of Contents

THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Six Months Ended					Nine Months Ended
in millions	in millions	August 1, 2021		August 2, 2020		in millions	October 31, 2021		November 1, 2020
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:					Cash Flows from Operating Activities:
Net earnings	Net earnings	$	8,952	$	6,577	Net earnings	$	13,081	$	10,009
Reconciliation of net earnings to net cash provided by operating activities:	Reconciliation of net earnings to net cash provided by operating activities:					Reconciliation of net earnings to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	1,414		1,222		Depreciation and amortization	2,128		1,853
Stock-based compensation expense	Stock-based compensation expense	226		155		Stock-based compensation expense	312		234
Changes in receivables, net	Changes in receivables, net	(321)		(477)		Changes in receivables, net	(533)		(580)
Changes in merchandise inventories	Changes in merchandise inventories	(2,191)		920		Changes in merchandise inventories	(3,871)		(1,718)
Changes in other current assets	Changes in other current assets	(574)		(126)		Changes in other current assets	(375)		12
Changes in accounts payable and accrued expenses	Changes in accounts payable and accrued expenses	1,658		5,673		Changes in accounts payable and accrued expenses	1,918		6,555
Changes in deferred revenue	Changes in deferred revenue	671		397		Changes in deferred revenue	672		549
Changes in income taxes payable	Changes in income taxes payable	154		447		Changes in income taxes payable	(10)		530
Changes in deferred income taxes	Changes in deferred income taxes	(116)		13		Changes in deferred income taxes	(73)		(86)
Other operating activities	Other operating activities	74		28		Other operating activities	137		57
Net cash provided by operating activities	Net cash provided by operating activities	9,947		14,829		Net cash provided by operating activities	13,386		17,415

Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Capital expenditures	Capital expenditures	(1,042)		(1,032)		Capital expenditures	(1,737)		(1,503)
Payments for businesses acquired, net	Payments for businesses acquired, net	(416)		—		Payments for businesses acquired, net	(416)		—

Other investing activities	Other investing activities	—		12		Other investing activities	21		52
Net cash used in investing activities	Net cash used in investing activities	(1,458)		(1,020)		Net cash used in investing activities	(2,132)		(1,451)

Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:
Repayments of short-term debt, net	Repayments of short-term debt, net	—		(974)		Repayments of short-term debt, net	—		(974)
Proceeds from long-term debt, net of discounts and premiums	Proceeds from long-term debt, net of discounts and premiums	—		4,960		Proceeds from long-term debt, net of discounts and premiums	2,979		4,960
Repayments of long-term debt	Repayments of long-term debt	(1,434)		(1,806)		Repayments of long-term debt	(1,480)		(1,836)
Repurchases of common stock	Repurchases of common stock	(6,905)		(791)		Repurchases of common stock	(10,374)		(791)
Proceeds from sales of common stock	Proceeds from sales of common stock	167		164		Proceeds from sales of common stock	190		185
Cash dividends	Cash dividends	(3,526)		(3,223)		Cash dividends	(5,264)		(4,837)
Other financing activities	Other financing activities	(136)		(127)		Other financing activities	(160)		(132)
Net cash used in financing activities	Net cash used in financing activities	(11,834)		(1,797)		Net cash used in financing activities	(14,109)		(3,425)
Change in cash and cash equivalents	Change in cash and cash equivalents	(3,345)		12,012		Change in cash and cash equivalents	(2,855)		12,539
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	16		(6)		Effect of exchange rate changes on cash and cash equivalents	27		(20)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	7,895		2,133		Cash and cash equivalents at beginning of period	7,895		2,133
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	4,566	$	14,139	Cash and cash equivalents at end of period	$	5,067	$	14,652

Supplemental Disclosures:	Supplemental Disclosures:					Supplemental Disclosures:
Cash paid for interest, net of interest capitalized	Cash paid for interest, net of interest capitalized	$	626	$	587	Cash paid for interest, net of interest capitalized	$	1,021	$	986
Cash paid for income taxes	Cash paid for income taxes	2,913		1,611		Cash paid for income taxes	4,170		2,681

See accompanying notes to consolidated financial statements.

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THE HOME DEPOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements of The Home Depot, Inc. and its subsidiaries (the "Company," "Home Depot," "we," "our" or "us") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for interim periods are not necessarily indicative of results for the entire year. As a result, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2020 Form 10-K.

There were no significant changes to our significant accounting policies as disclosed in the 2020 Form 10-K.

Recently Adopted Accounting Pronouncements

ASU No. 2019-12. In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Amendments include removal of certain exceptions to the general principles of Topic 740, “Income Taxes,” and simplification in several other areas. On February 1, 2021, we adopted ASU No. 2019-12 with no material impact to our consolidated financial condition, results of operations or cash flows.

Recently Issued Accounting Pronouncements

Recent accounting pronouncements pending adoption not discussed above or in the 2020 Form 10-K are either not applicable or will not have or are not expected to have a material impact on our consolidated financial condition, results of operations or cash flows.

2.NET SALES

Net Sales

No sales to an individual customer accounted for more than 10% of our net sales during the three and ~~six~~nine months ended ~~August 1,~~October 31, 2021 or ~~August 2,~~November 1, 2020. The following table presents net sales, classified by geography:


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
in millions	in millions	August 1, 2021		August 2, 2020		August 1, 2021		August 2, 2020		in millions	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
Net sales – in the U.S.	Net sales – in the U.S.	$	37,642	$	35,205	$	72,359	$	61,623	Net sales – in the U.S.	$	33,736	$	30,845	$	106,095	$	92,468
Net sales – outside the U.S.	Net sales – outside the U.S.	3,476		2,848		6,259		4,690		Net sales – outside the U.S.	3,084		2,691		9,343		7,381
Net sales	Net sales	$	41,118	$	38,053	$	78,618	$	66,313	Net sales	$	36,820	$	33,536	$	115,438	$	99,849

The following table presents net sales by products and services:


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
in millions	in millions	August 1, 2021		August 2, 2020		August 1, 2021		August 2, 2020		in millions	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
Net sales – products	Net sales – products	$	39,717	$	36,990	$	75,988	$	64,295	Net sales – products	$	35,383	$	32,312	$	111,371	$	96,607
Net sales – services	Net sales – services	1,401		1,063		2,630		2,018		Net sales – services	1,437		1,224		4,067		3,242
Net sales	Net sales	$	41,118	$	38,053	$	78,618	$	66,313	Net sales	$	36,820	$	33,536	$	115,438	$	99,849

The following table presents major product lines and the related merchandising departments (and related services):


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

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The following table presents net sales by major product lines (and related services):


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
in millions	in millions	August 1, 2021		August 2, 2020		August 1, 2021		August 2, 2020		in millions	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
Building Materials	Building Materials	$	14,411	$	12,556	$	28,071	$	22,372	Building Materials	$	13,809	$	12,594	$	41,880	$	34,966
Décor	Décor	13,395		11,790		25,277		21,096		Décor	12,783		11,213		38,060		32,309
Hardlines	Hardlines	13,312		13,707		25,270		22,845		Hardlines	10,228		9,729		35,498		32,574
Net sales	Net sales	$	41,118	$	38,053	$	78,618	$	66,313	Net sales	$	36,820	$	33,536	$	115,438	$	99,849

Deferred Revenue

For products and services sold in stores or online, payment is typically due at the point of sale. When we receive payment from customers before the customer has taken possession of the merchandise or the service has been performed, the amount received is recorded as deferred revenue until the sale or service is complete. Such performance obligations are part of contracts with expected original durations of typically three months or less. As of ~~August 1,~~October 31, 2021 and January 31, 2021, deferred revenue for products and services was ~~$2.6~~$2.5 billion and $1.9 billion, respectively.

We further record deferred revenue for the sale of gift cards and recognize the associated revenue upon the redemption of those gift cards, ~~in net sales,~~ which generally occurs within six months of gift card issuance. As of ~~August 1,~~October 31, 2021 and January 31, 2021, our performance obligations for unredeemed gift cards were ~~$801~~$827 million and $839 million, respectively. Gift card breakage income, which is our estimate of the portion of our gift card balance not expected to be redeemed, was immaterial during the three and ~~six~~nine months ended ~~August 1,~~October 31, 2021 and ~~August 2,~~November 1, 2020.

3.PROPERTY AND LEASES

Net Property and Equipment

Net property and equipment includes accumulated depreciation and amortization of ~~$25.3~~$25.8 billion as of ~~August 1,~~October 31, 2021 and $24.1 billion as of January 31, 2021.

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Leases

The following table presents the consolidated balance sheet location of assets and liabilities related to operating and finance leases:


in millions	in millions	Consolidated Balance Sheet Caption	August 1, 2021		January 31, 2021		in millions	Consolidated Balance Sheet Caption	October 31, 2021		January 31, 2021
Assets:	Assets:						Assets:
Operating lease assets	Operating lease assets	Operating lease right-of-use assets	$	5,960	$	5,962	Operating lease assets	Operating lease right-of-use assets	$	5,903	$	5,962
Finance lease assets (1)	Finance lease assets (1)	Net property and equipment	2,790		2,493		Finance lease assets (1)	Net property and equipment	2,894		2,493
Total lease assets	Total lease assets		$	8,750	$	8,455	Total lease assets		$	8,797	$	8,455

Liabilities:	Liabilities:						Liabilities:
Current:	Current:						Current:
Operating lease liabilities	Operating lease liabilities	Current operating lease liabilities	$	814	$	828	Operating lease liabilities	Current operating lease liabilities	$	827	$	828
Finance lease liabilities	Finance lease liabilities	Current installments of long-term debt	180		66		Finance lease liabilities	Current installments of long-term debt	188		66
Long-term:	Long-term:						Long-term:
Operating lease liabilities	Operating lease liabilities	Long-term operating lease liabilities	5,360		5,356		Operating lease liabilities	Long-term operating lease liabilities	5,290		5,356
Finance lease liabilities	Finance lease liabilities	Long-term debt, excluding current installments	2,905		2,700		Finance lease liabilities	Long-term debt, excluding current installments	3,033		2,700
Total lease liabilities	Total lease liabilities		$	9,259	$	8,950	Total lease liabilities		$	9,338	$	8,950

—————

(1) Finance lease assets are recorded net of accumulated amortization of ~~$930~~$987 million as of ~~August 1,~~October 31, 2021 and $815 million as of January 31, 2021.

The following table presents supplemental non-cash information related to leases:


		Six Months Ended					Nine Months Ended
in millions	in millions	August 1, 2021		August 2, 2020		in millions	October 31, 2021		November 1, 2020
Lease assets obtained in exchange for new operating lease liabilities	Lease assets obtained in exchange for new operating lease liabilities	$	429	$	296	Lease assets obtained in exchange for new operating lease liabilities	$	637	$	500
Lease assets obtained in exchange for new finance lease liabilities	Lease assets obtained in exchange for new finance lease liabilities	417		1,085		Lease assets obtained in exchange for new finance lease liabilities	581		1,662

4.DEBT

Short-Term Debt

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 2021 were under these commercial paper programs, and the maximum amount outstanding at any time was $11 million. In connection with these programs, we have back-up credit facilities with a consortium of banks for borrowings of up to $3.0 billion, which consist of a five-year $2.0 billion credit facility scheduled to expire in December 2023, and a 364-day $1.0 billion credit facility scheduled to expire in December 2021. At October 31, 2021 and January 31, 2021, there were no outstanding borrowings under our commercial paper programs.

Long-Term Debt

September 2021 Issuance. In September 2021, we issued 3 tranches of senior notes.

•The first tranche consisted of $1.0 billion of 1.50% senior notes due September 15, 2028 (the “2028 notes”) at a discount of $4 million. Interest on the 2028 notes is due semi-annually on March 15 and September 15 of each year, beginning March 15, 2022.

•The second tranche consisted of $1.0 billion of 1.875% senior notes due September 15, 2031 (the “2031 notes”) at a discount of $6 million. Interest on the 2031 notes is due semi-annually on March 15 and September 15 of each year, beginning March 15, 2022.

•The third tranche consisted of $1.0 billion of 2.75% senior notes due September 15, 2051 (the "2051 notes") at a discount of $11 million (together with the 2028 notes and the 2031 notes, the “September 2021 issuance”). Interest on the 2051 notes is due semi-annually on March 15 and September 15 of each year, beginning March 15, 2022.

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•Issuance costs for the September 2021 issuance totaled $17 million. The net proceeds of the September 2021 issuance are being used for general corporate purposes, including repurchases of shares of our common stock, subject to market conditions and other business considerations.

Redemption. The 2028 notes, 2031 notes, and 2051 notes may be redeemed by us at any time, in whole or in part, at the redemption price plus accrued interest up to the redemption date. The redemption price is equal to the greater of (1) 100% of the principal amount of the notes to be redeemed, or (2) the sum of the present values of the remaining scheduled payments of principal and interest to the Par Call Date, as defined in the respective notes. Additionally, if a Change in Control Triggering Event, as defined in the notes, occurs, holders of all notes have the right to require us to redeem those notes at 101% of the aggregate principal amount of the notes plus accrued interest up to the redemption date. The indentures governing the notes do not generally limit our ability to incur additional indebtedness or require us to maintain financial ratios or specified levels of net worth or liquidity. The indentures governing the notes contain various customary covenants; however, none are expected to impact our liquidity or capital resources.

In March 2021, we repaid our $1.35 billion 2.00% senior notes that had a maturity date of April 2021.

5. STOCKHOLDERS' EQUITY

Stock Rollforward

The following table presents a reconciliation of the number of shares of our common stock and cash dividends per share:

shares in millions Three Months Ended Six Months Ended
August 1,
2021 August 2,
2020 August 1,
2021 August 2,
2020
Common stock:
Balance at beginning of period 1,790 1,788 1,789 1,786
Shares issued under employee stock plans 1 — 2 2
Balance at end of period 1,791 1,788 1,791 1,788
Treasury stock:
Balance at beginning of period (725) (712) (712) (709)
Repurchases of common stock (10) — (23) (3)
Balance at end of period (735) (712) (735) (712)
Shares outstanding at end of period 1,056 1,076 1,056 1,076
Cash dividends per share $ 1.65 $ 1.50 $ 3.30 $ 3.00

~~Table of~~ ~~Contents~~


shares in millions	Three Months Ended				Nine Months Ended
	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
Common stock:
Balance at beginning of period	1,791		1,788		1,789		1,786
Shares issued under employee stock plans	—		—		2		2
Balance at end of period	1,791		1,788		1,791		1,788
Treasury stock:
Balance at beginning of period	(735)		(712)		(712)		(709)
Repurchases of common stock	(10)		—		(33)		(3)
Balance at end of period	(745)		(712)		(745)		(712)
Shares outstanding at end of period	1,046		1,076		1,046		1,076

Cash dividends per share	$	1.65	$	1.50	$	4.95	$	4.50

Share Repurchases

In May 2021, our Board of Directors approved a $20.0 billion share repurchase authorization that replaced the previous authorization. This new authorization does not have a prescribed expiration date. As of ~~August 1,~~October 31, 2021, approximately ~~$17.6~~$14.1 billion of the $20.0 billion share repurchase authorization remained available.

In March 2020, we suspended our share repurchases to enhance our liquidity position during the COVID-19 pandemic. We resumed share repurchases in the first quarter of fiscal 2021.

The following table presents information about our repurchases of common stock, all of which were completed through open market purchases:


in millions	in millions	Three Months Ended				Six Months Ended				in millions	Three Months Ended				Nine Months Ended
		August 1, 2021		August 2, 2020		August 1, 2021		August 2, 2020			October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
Total number of shares repurchased	Total number of shares repurchased	10		—		23		3		Total number of shares repurchased	10		—		33		3
Total amount paid for shares repurchased	Total amount paid for shares repurchased	$	3,000	$	—	$	7,000	$	597	Total amount paid for shares repurchased	$	3,500	$	—	$	10,500	$	597

These amounts may differ from the repurchases of common stock amounts in the consolidated statements of cash flows due to unsettled share repurchases at the end of a period.

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5.6.FAIR VALUE MEASUREMENTS

The fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, rather than the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the assets and liabilities that are measured at fair value on a recurring basis:


		Fair Value at August 1, 2021 Using						Fair Value at January 31, 2021 Using							Fair Value at October 31, 2021 Using						Fair Value at January 31, 2021 Using
in millions	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)		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	Derivative agreements – assets	$	—	$	144	$	—	$	—	$	172	$	—	Derivative agreements – assets	$	—	$	106	$	—	$	—	$	172	$	—
Derivative agreements – liabilities	Derivative agreements – liabilities	—		(87)		—		—		(71)		—		Derivative agreements – liabilities	—		(178)		—		—		(71)		—
Total	Total	$	—	$	57	$	—	$	—	$	101	$	—	Total	$	—	$	(72)	$	—	$	—	$	101	$	—

The fair values of our derivative instruments are determined using an income approach and Level 2 inputs, which include the respective interest rate ~~and~~or foreign currency forward curves and discount rates.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Long-lived assets, goodwill, and other intangible assets are subject to nonrecurring fair value measurement for the assessment of impairment.

During the third quarter of fiscal 2021, we completed our annual assessment of the recoverability of goodwill for our U.S., Canada and Mexico reporting units based on qualitative factors. We performed a qualitative assessment to determine if there were any indicators of impairment and concluded that while there have been events and circumstances in the macro-environment that have impacted us, we have not experienced any entity-specific indicators that would indicate that it is more likely than not that the fair value of any of our reporting units were less than their carrying amounts. Additionally, during the third quarter of fiscal 2021, we completed our annual assessment of the recoverability of our indefinite-lived intangibles based on quantitative factors and concluded no impairment losses should be recognized.

We did not have any material assets or liabilities that were measured at fair value on a nonrecurring basis during the three and ~~six~~nine months ended ~~August 1,~~October 31, 2021 or ~~August 2,~~November 1, 2020.

Other Fair Value Disclosures

The carrying amounts of cash and cash equivalents, receivables and accounts payable approximate fair value due to their short-term nature.

The following table presents the aggregate fair values and carrying values of our senior notes:


		August 1, 2021				January 31, 2021					October 31, 2021				January 31, 2021
in millions	in millions	Fair Value (Level 1)		Carrying Value		Fair Value (Level 1)		Carrying Value		in millions	Fair Value (Level 1)		Carrying Value		Fair Value (Level 1)		Carrying Value
Senior notes	Senior notes	$	39,472	$	33,089	$	41,289	$	34,472	Senior notes	$	41,411	$	35,927	$	41,289	$	34,472

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6.7.WEIGHTED AVERAGE COMMON SHARES

The following table presents the reconciliation of our basic to diluted weighted average common shares:


		Three Months Ended		Six Months Ended			Three Months Ended		Nine Months Ended
in millions	in millions	August 1, 2021	August 2, 2020	August 1, 2021	August 2, 2020	in millions	October 31, 2021	November 1, 2020	October 31, 2021	November 1, 2020
Basic weighted average common shares	Basic weighted average common shares	1,058	1,073	1,064	1,073	Basic weighted average common shares	1,049	1,073	1,059	1,074
Effect of potentially dilutive securities	Effect of potentially dilutive securities	4	4	4	4	Effect of potentially dilutive securities	4	5	4	4
Diluted weighted average common shares	Diluted weighted average common shares	1,062	1,077	1,068	1,077	Diluted weighted average common shares	1,053	1,078	1,063	1,078

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

7.8.COMMITMENTS AND CONTINGENCIES

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

8.9.HD SUPPLY ACQUISITION

On December 24, 2020, we completed the acquisition of HD Supply for total purchase consideration of $8.7 billion. HD Supply is a leading national distributor of MRO products in the multifamily and hospitality end markets. The acquisition was funded through cash on hand, a portion of which was replaced with the proceeds from our issuance of $3.0 billion of senior notes in January 2021.

The acquisition was accounted for in accordance with Topic 805 "Business Combinations" and, accordingly, HD Supply’s results of operations have been consolidated in the Company’s financial statements since December 24, 2020, the date of acquisition. We recorded a preliminary allocation of the purchase price to assets acquired and liabilities assumed based on their estimated fair values as of December 24, 2020. There were no material adjustments to our preliminary purchase price allocation recognized during the first ~~six~~nine months of fiscal 2021. The final determination of the fair values and related income tax impacts will be completed as soon as practicable, and within the measurement period of up to one year from the acquisition date as permitted under GAAP.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

The Home Depot, Inc.:

Results of Review of Interim Financial Information

We have reviewed the consolidated balance sheet of The Home Depot, Inc. and its subsidiaries (the “Company”) as of ~~August 1,~~October 31, 2021, the related consolidated statements of earnings, comprehensive income, and stockholders’ equity for the three-month and ~~six-month~~nine-month periods ended ~~August 1,~~October 31, 2021 and ~~August 2,~~November 1, 2020, the related consolidated statements of cash flows for the ~~six-month~~nine-month periods ended ~~August 1,~~October 31, 2021 and ~~August 2,~~November 1, 2020, and the related notes (collectively, the “consolidated interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of January 31, 2021, and the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for the fiscal year then ended (not presented herein); and in our report dated March 24, 2021, we expressed an unqualified opinion on those consolidated financial statements. Our report referred to a change in the Company’s method of accounting for leases. In our opinion, the information set forth in the accompanying consolidated balance sheet as of January 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

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

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

/s/ KPMG LLP

Atlanta, Georgia

~~August 23,~~November 22, 2021

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

Our MD&A includes the following sections:

•Executive Summary

•Results of Operations and Non-GAAP Financial Measures

•Liquidity and Capital Resources

•Critical Accounting Policies

Executive Summary

The following table presents quarter to date and year to date highlights of our financial performance:


dollars in millions, except per share data	dollars in millions, except per share data	Three Months Ended				Six Months Ended				dollars in millions, except per share data	Three Months Ended				Nine Months Ended
		August 1, 2021		August 2, 2020		August 1, 2021		August 2, 2020			October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
Net sales	Net sales	$	41,118	$	38,053	$	78,618	$	66,313	Net sales	$	36,820	$	33,536	$	115,438	$	99,849
Net earnings	Net earnings	4,807		4,332		8,952		6,577		Net earnings	4,129		3,432		13,081		10,009

Diluted earnings per share	Diluted earnings per share	$	4.53	$	4.02	$	8.38	$	6.11	Diluted earnings per share	$	3.92	$	3.18	$	12.31	$	9.28

Net cash provided by operating activities	Net cash provided by operating activities					$	9,947	$	14,829	Net cash provided by operating activities					$	13,386	$	17,415
Proceeds from long-term debt, net of discounts and premiums	Proceeds from long-term debt, net of discounts and premiums					—		4,960		Proceeds from long-term debt, net of discounts and premiums					2,979		4,960
Repayments of long-term debt	Repayments of long-term debt					1,434		1,806		Repayments of long-term debt					1,480		1,836
Repurchases of common stock	Repurchases of common stock					6,905		791		Repurchases of common stock					10,374		791

We reported net sales of ~~$41.1~~$36.8 billion in the ~~second~~third quarter of fiscal 2021. Net earnings were ~~$4.8~~$4.1 billion, or ~~$4.53~~$3.92 per diluted share. For the first ~~six~~nine months of fiscal 2021, net sales were ~~$78.6~~$115.4 billion and net earnings were ~~$9.0~~$13.1 billion, or ~~$8.38~~$12.31 per diluted share.

We ~~had 2,298 Home Depot retail~~opened four stores in the U.S. and one store in Mexico during the third quarter of fiscal 2021, resulting in a total store count of 2,317 at the end of the third quarter of fiscal 2021, which includes 14 stores in the U.S. from a small acquisition completed during the second quarter of fiscal 2021. As of ~~August 1,~~October 31, 2021, a total of ~~310~~311 stores, or ~~13.5%~~13.4%, were located in Canada and Mexico. For the ~~second~~third quarter of fiscal 2021, sales per retail square foot were ~~$663.05.~~$587.28. Our inventory turnover ratio was ~~5.7~~5.4 times at the end of the third quarter of fiscal 2021, compared to ~~6.1~~5.9 times ~~for~~at the ~~second~~end of the third quarter of fiscal 2020.

We generated ~~$9.9~~$13.4 billion of cash flow from operations and issued $3 billion of long-term debt during the first ~~six~~nine months of fiscal 2021. This cash flow, together with cash on hand, was used to fund cash payments of ~~$6.9~~$10.4 billion for share repurchases, pay ~~$3.5~~$5.3 billion of dividends, fund $1.7 billion in capital expenditures, and repay an aggregate of ~~$1.4~~$1.5 billion of long-term ~~debt and fund $1.0 billion in capital expenditures.~~debt. In February 2021, we announced a 10% increase in our quarterly cash dividend to $1.65 per share.

Our ROIC for the trailing twelve-month period was ~~44.7%~~43.9% at the end of the ~~second~~third quarter of fiscal 2021 and ~~41.1%~~41.6% at the end of the ~~second~~third quarter of fiscal 2020. See the "Non-GAAP Financial Measures" section below for our definition and calculation of ROIC, as well as a reconciliation of NOPAT, a non-GAAP financial measure, to net earnings (the most comparable GAAP financial measure).

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Results of Operations and Non-GAAP Financial Measures

The tables and discussion below should be read in conjunction with our consolidated financial statements and related notes included in this report and in the 2020 Form 10-K and with our MD&A included in the 2020 Form 10-K. The following table presents the percentage relationship between net sales and major categories in our consolidated statements of earnings.

Fiscal 2021 and Fiscal 2020 Three Month Comparisons


		Three Months Ended									Three Months Ended
		August 1, 2021				August 2, 2020					October 31, 2021				November 1, 2020
dollars in millions	dollars in millions	$		% of Net Sales		$		% of Net Sales		dollars in millions	$		% of Net Sales		$		% of Net Sales
Net sales	Net sales	$	41,118			$	38,053			Net sales	$	36,820			$	33,536
Gross profit	Gross profit	13,665		33.2	%	12,941		34.0	%	Gross profit	12,563		34.1	%	11,456		34.2	%
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative	Selling, general and administrative	6,433		15.6		6,355		16.7		Selling, general and administrative	6,168		16.8		6,076		18.1
Depreciation and amortization	Depreciation and amortization	593		1.4		519		1.4		Depreciation and amortization	600		1.6		528		1.6
Total operating expenses	Total operating expenses	7,026		17.1		6,874		18.1		Total operating expenses	6,768		18.4		6,604		19.7
Operating income	Operating income	6,639		16.1		6,067		15.9		Operating income	5,795		15.7		4,852		14.5
Interest and other (income) expense:	Interest and other (income) expense:									Interest and other (income) expense:
Interest and investment income	Interest and investment income	(5)		—		(9)		—		Interest and investment income	(15)		—		(11)		—
Interest expense	Interest expense	326		0.8		346		0.9		Interest expense	341		0.9		340		1.0
Interest and other, net	Interest and other, net	321		0.8		337		0.9		Interest and other, net	326		0.9		329		1.0
Earnings before provision for income taxes	Earnings before provision for income taxes	6,318		15.4		5,730		15.1		Earnings before provision for income taxes	5,469		14.9		4,523		13.5
Provision for income taxes	Provision for income taxes	1,511		3.7		1,398		3.7		Provision for income taxes	1,340		3.6		1,091		3.3
Net earnings	Net earnings	$	4,807	11.7	%	$	4,332	11.4	%	Net earnings	$	4,129	11.2	%	$	3,432	10.2	%

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


		Three Months Ended									Three Months Ended
Selected financial and sales data:	Selected financial and sales data:	August 1, 2021			August 2, 2020			% Change		Selected financial and sales data:	October 31, 2021			November 1, 2020			% Change
Comparable sales (% change) (1)	Comparable sales (% change) (1)	4.5		%	23.4		%	N/A		Comparable sales (% change) (1)	6.1		%	24.1		%	N/A
Comparable customer transactions (% change) (1) (2)	Comparable customer transactions (% change) (1) (2)	(6.0)		%	12.3		%	N/A		Comparable customer transactions (% change) (1) (2)	(5.8)		%	13.0		%	N/A
Comparable average ticket (% change) (1) (2)	Comparable average ticket (% change) (1) (2)	11.3		%	10.1		%	N/A		Comparable average ticket (% change) (1) (2)	12.7		%	10.0		%	N/A
Customer transactions (in millions) (1) (2)	Customer transactions (in millions) (1) (2)	481.7			511.5			(5.8)	%	Customer transactions (in millions) (1) (2)	428.2			453.2			(5.5)	%
Average ticket (1) (2) (3)	Average ticket (1) (2) (3)	$	82.48		$	74.12		11.3	%	Average ticket (1) (2) (3)	$	82.38		$	72.98		12.9	%
Sales per retail square foot (1) (2) (4)	Sales per retail square foot (1) (2) (4)	$	663.05		$	629.38		5.3	%	Sales per retail square foot (1) (2) (4)	$	587.28		$	552.85		6.2	%
Diluted earnings per share	Diluted earnings per share	$	4.53		$	4.02		12.7	%	Diluted earnings per share	$	3.92		$	3.18		23.3	%

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(1)Does not include results for HD Supply, which was acquired in December 2020.

(2)Does not include results for the legacy Interline Brands business.

(3)Average ticket represents the average price paid per transaction and is used by management to monitor the performance of the Company, as it represents a primary driver in measuring sales performance.

(4)Sales per retail square foot represents annualized sales divided by ~~Home Depot~~ retail store square footage. Sales per retail square foot is a measure of the efficiency of sales based on the total square footage of our ~~Home Depot~~ stores and is used by management to monitor the performance of the Company’s ~~core~~ retail operations as an indicator of the productivity of owned and leased square footage for these retail operations.

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

Net Sales. Net sales for the ~~second~~third quarter of fiscal 2021 increased ~~8.1%~~9.8% to ~~$41.1~~$36.8 billion from ~~$38.1~~$33.5 billion for the ~~second~~third quarter of fiscal 2020. The increase in net sales for the ~~second~~third quarter of fiscal 2021 primarily reflected the impact of positive comparable sales driven by an increase in comparable average ticket, offset by a decrease in comparable

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~~comparable~~ customer ~~transactions.~~transactions, as well as sales from HD Supply, which was acquired in the fourth quarter of fiscal 2020. Online sales, which consist of sales generated online through our websites for products picked up at our stores or delivered to customer locations, represented ~~13.3%~~12.8% of net sales and ~~were approximately flat~~grew by 8.4% during the ~~second~~third quarter of fiscal 2021 compared to the ~~second~~third quarter of fiscal 2020. ~~Online~~The increase in online sales ~~grew approximately 100% during~~for the ~~second~~third quarter of fiscal ~~2020 compared~~2021 was driven by customers continuing to ~~the second quarter of fiscal 2019, as customers leveraged~~leverage our digital platforms for their shopping ~~needs during the COVID-19 pandemic.~~needs. A weaker U.S. dollar positively impacted sales growth by ~~$385~~$193 million in the ~~second~~third quarter of fiscal 2021.

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 excludes permanently closed stores. Retail stores become comparable on the Monday following their 52nd week of operation. Acquisitions are typically included in comparable sales after they have been owned for more than 52 weeks. 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 ~~4.5%~~6.1% for the ~~second~~third quarter of fiscal 2021, reflecting ~~an 11.3%~~a 12.7% increase in comparable average ticket, ~~and~~partially offset by a ~~6.0%~~5.8% decrease in comparable customer transactions compared to the ~~second~~third quarter of fiscal 2020. The increase in comparable average ticket was primarily driven by inflation across several product categories, including core commodity price inflation largely from copper and building materials, which was partially offset by deflation in lumber. Comparable average ticket also increased due to an increase in big-ticket transactions and strong demand for new and innovative products. The decrease in comparable customer transactions was primarily due to lapping comparable transactions of 13.0% that we experienced in the third quarter of fiscal 2020. Total comparable sales ~~reflected a number of factors, including increased consumer demand and~~for the ~~execution of our strategic efforts to drive an enhanced interconnected shopping experience in both the physical and digital worlds. The second~~third quarter of fiscal 2020 included a significant acceleration in sales growth and strong performance across our departments, driven in part by the increase in demand ~~from~~during the COVID-19 pandemic, resulting in comparable sales performance of ~~23.4%~~24.1% for the ~~second~~third quarter of fiscal 2020. The decrease in comparable customer transactions was primarily due to lapping comparable transactions of 12.3% that we experienced in the second quarter of fiscal 2020. The increase in comparable average ticket was partially driven by commodity price inflation largely from lumber and an increase in big-ticket transactions.

During the ~~second~~third quarter of fiscal 2021, 1012 of our 14 merchandising departments posted positive comparable sales. Comparable sales ~~led by~~for our Appliances, Plumbing, Electrical/Lighting, Building Materials, Tools, Kitchen and Bath, Décor/Storage, Millwork, and ~~Lumber. Our Paint, Hardware,~~Flooring merchandising departments were above the company average in the third quarter of fiscal 2021. Comparable sales for our Indoor Garden merchandising department were essentially flat, and ~~Outdoor Garden departments~~our Lumber department had high single-digit negative comparable sales in the ~~second~~third quarter of fiscal ~~2021.~~2021, as a result of lumber price deflation. Comparable sales for our Lumber department grew by more than 50% in the third quarter of fiscal 2020.

Gross Profit. Gross profit for the ~~second~~third quarter of fiscal 2021 increased ~~5.6%~~9.7% to ~~$13.7~~$12.6 billion from ~~$12.9~~$11.5 billion for the ~~second~~third quarter of fiscal 2020. Gross profit as a percentage of net sales, or gross profit margin, was ~~33.2%~~34.1% for the ~~second~~third quarter of fiscal 2021 compared to ~~34.0%~~34.2% for the ~~second~~third quarter of fiscal 2020. The decrease in gross profit margin during the third quarter of fiscal 2021 was primarily driven by higher transportation costs and pressure from product mix, largely driven by both rate and mix pressure from lumber, as well as rising transportation costs, One Supply Chain investments, and lapping a benefit from cancelled events in the second quarter of fiscal 2020. This pressure was partially offset by the benefit from ~~lower markdowns as a result of the strong demand environment during the second quarter of fiscal 2021.~~higher retail prices.

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

Selling, General & Administrative. SG&A for the ~~second~~third quarter of fiscal 2021 increased ~~$78~~$92 million or ~~1.2%~~1.5% to ~~$6.4~~$6.2 billion from the ~~second~~third quarter of fiscal 2020. As a percentage of net sales, SG&A was ~~15.6%~~16.8% for the ~~second~~third quarter of fiscal 2021 compared to ~~16.7%~~18.1% for the ~~second~~third quarter of fiscal 2020. The decrease in SG&A as a percentage of net sales was primarily driven by leverage resulting from a positive comparable sales environment, including payroll leverage, and cycling ~~several~~ COVID-19-related expenses that we incurred during the ~~second~~third quarter of fiscal 2020, including ~~$479~~$354 million of additional expenses related to expanded benefits to support our associates and an additional ~~$108~~$59 million of operational expenses. Total COVID-19-related expenses were ~~$24~~$35 million for the ~~second~~third quarter of fiscal 2021. ~~This operating expense leverage was~~These benefits were partially offset by an increase in hourly payroll-related costs ~~resulting from~~in the ~~increased demand environment throughout the second~~third quarter of fiscal 2021 ~~as well as additional expenses from~~driven by the wage investments we made in the latter part of fiscal 2020.

Depreciation and Amortization. Depreciation and amortization increased ~~14.3%~~13.6% to ~~$593~~$600 million for the ~~second~~third quarter of fiscal 2021 from ~~$519~~$528 million for the ~~second~~third quarter of fiscal 2020. As a percentage of net sales, depreciation and amortization was ~~1.4%~~1.6% for the ~~second~~third quarter of both fiscal 2021 and fiscal 2020, primarily reflecting increased depreciation expense from our strategic investments in the business as well as higher intangible asset amortization expense, offset by leverage resulting from a positive comparable sales environment.

Interest and Other, net. Interest and other, net, was ~~$321~~$326 million for the ~~second~~third quarter of fiscal 2021 compared to ~~$337~~$329 million for the ~~second~~third quarter of fiscal 2020. Interest and other, net, as a percentage of net sales was ~~0.8%~~0.9% for the ~~second~~third quarter of fiscal 2021 compared to ~~0.9%~~1.0% for the ~~second~~third quarter of fiscal 2020. The decrease in interest and

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~~and~~ other, net, as a percentage of net sales primarily reflected leverage resulting from a positive comparable sales ~~environment as well as lower interest expense resulting from lower interest rates on outstanding debt balances.~~environment.

Provision for Income Taxes. Our combined effective income tax rate was ~~23.9%~~24.5% for the ~~second~~third quarter of fiscal 2021 compared to ~~24.4%~~24.1% for the ~~second~~third quarter of fiscal 2020.

Diluted Earnings per Share. Diluted earnings per share were ~~$4.53~~$3.92 for the ~~second~~third quarter of fiscal 2021 compared to ~~$4.02~~$3.18 for the ~~second~~third quarter of fiscal 2020. The increase in diluted earnings per share was primarily driven by the factors discussed above.

Fiscal 2021 and Fiscal 2020 ~~Six~~Nine Month Comparisons


		Six Months Ended									Nine Months Ended
		August 1, 2021				August 2, 2020					October 31, 2021				November 1, 2020
dollars in millions	dollars in millions	$		% of Net Sales		$		% of Net Sales		dollars in millions	$		% of Net Sales		$		% of Net Sales
Net sales	Net sales	$	78,618			$	66,313			Net sales	$	115,438			$	99,849
Gross profit	Gross profit	26,407		33.6	%	22,566		34.0	%	Gross profit	38,970		33.8	%	34,022		34.1	%
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative	Selling, general and administrative	12,807		16.3		12,184		18.4		Selling, general and administrative	18,975		16.4		18,260		18.3
Depreciation and amortization	Depreciation and amortization	1,180		1.5		1,039		1.6		Depreciation and amortization	1,780		1.5		1,567		1.6
Total operating expenses	Total operating expenses	13,987		17.8		13,223		19.9		Total operating expenses	20,755		18.0		19,827		19.9
Operating income	Operating income	12,420		15.8		9,343		14.1		Operating income	18,215		15.8		14,195		14.2
Interest and other (income) expense:	Interest and other (income) expense:									Interest and other (income) expense:
Interest and investment income	Interest and investment income	(11)		—		(26)		—		Interest and investment income	(26)		—		(37)		—
Interest expense	Interest expense	665		0.8		670		1.0		Interest expense	1,006		0.9		1,010		1.0
Interest and other, net	Interest and other, net	654		0.8		644		1.0		Interest and other, net	980		0.8		973		1.0
Earnings before provision for income taxes	Earnings before provision for income taxes	11,766		15.0		8,699		13.1		Earnings before provision for income taxes	17,235		14.9		13,222		13.2
Provision for income taxes	Provision for income taxes	2,814		3.6		2,122		3.2		Provision for income taxes	4,154		3.6		3,213		3.2
Net earnings	Net earnings	$	8,952	11.4	%	$	6,577	9.9	%	Net earnings	$	13,081	11.3	%	$	10,009	10.0	%

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


		Six Months Ended									Nine Months Ended
Selected financial and sales data:	Selected financial and sales data:	August 1, 2021			August 2, 2020			% Change		Selected financial and sales data:	October 31, 2021			November 1, 2020			% Change
Comparable sales (% change) (1)	Comparable sales (% change) (1)	15.8		%	15.6		%	N/A		Comparable sales (% change) (1)	12.5		%	18.3		%	N/A
Comparable customer transactions (% change) (1) (2)	Comparable customer transactions (% change) (1) (2)	4.6		%	4.7		%	N/A		Comparable customer transactions (% change) (1) (2)	1.1		%	7.4		%	N/A
Comparable average ticket (% change) (1) (2)	Comparable average ticket (% change) (1) (2)	10.9		%	10.5		%	N/A		Comparable average ticket (% change) (1) (2)	11.5		%	10.3		%	N/A
Customer transactions (in millions) (1) (2)	Customer transactions (in millions) (1) (2)	928.9			886.3			4.8	%	Customer transactions (in millions) (1) (2)	1,357.2			1,339.5			1.3	%
Average ticket (1) (2) (3)	Average ticket (1) (2) (3)	$	82.43		$	74.37		10.8	%	Average ticket (1) (2) (3)	$	82.43		$	73.90		11.5	%
Sales per retail square foot (1) (2) (4)	Sales per retail square foot (1) (2) (4)	$	634.30		$	547.94		15.8	%	Sales per retail square foot (1) (2) (4)	$	615.98		$	549.26		12.1	%
Diluted earnings per share	Diluted earnings per share	$	8.38		$	6.11		37.2	%	Diluted earnings per share	$	12.31		$	9.28		32.7	%

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(1)Does not include results for HD Supply, which was acquired in December 2020.

(2)Does not include results for the legacy Interline Brands business.

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

Net Sales. For the first ~~six~~nine months of fiscal 2021, net sales increased ~~18.6%~~15.6% to ~~$78.6~~$115.4 billion from ~~$66.3~~$99.8 billion for the first ~~six~~nine months of fiscal 2020. The increase in net sales for the first ~~six~~nine months of fiscal 2021 primarily reflected the impact of positive comparable sales driven by an increase in comparable average ticket and comparable customer ~~transactions.~~transactions, as well as sales from HD Supply, which was acquired in the fourth quarter of fiscal 2020. The impact of the COVID-19 pandemic and the actions we took in response to it had varying effects on our sales throughout the first ~~six~~nine months of fiscal 2020. InAt the ~~first quarter~~beginning of ~~fiscal 2020,~~the pandemic, we reduced store hours, limited customer traffic in stores, and canceled or modified certain ~~spring~~annual merchandising events, ~~and restricted sales and installation of in-home services deemed non-essential,~~ all of which negatively impacted our sales during the first quarter of fiscal 2020. In the second quarter of fiscal 2020, we adopted a more localized approach on limits to the number of customers in stores and expanded store hours while still focusing on promoting a safe shopping environment. During the last three weeks of the first quarter of fiscal 2020 and continuing throughout fiscal 2020, we saw ~~significant acceleration in sales~~elevated home improvement demand with strong performance across ~~most of~~ our departments ~~which continued through the second quarter of fiscal 2020,~~ as customers ~~maintained their focus~~focused on home improvement projects and repairs.

Online sales, which consist of sales generated online through our websites for products picked up in our stores or delivered to customer locations, represented ~~13.7%~~13.4% of net sales and grew by approximately ~~12%~~11% during the first ~~six~~nine months of fiscal 2021 compared to the first ~~six~~nine months of fiscal 2020. The increase in online sales for the first ~~six~~nine months of fiscal 2021 was driven by customers continuing to leverage our digital platforms for their shopping needs. Online sales grew by approximately 90% in the first six months of fiscal 2020 compared to the first six months of fiscal 2019 as we limited customer traffic in our stores and as customers leveraged our digital platforms for their shopping needs during the COVID-19 pandemic. A weaker U.S. dollar positively impacted sales growth by ~~$542~~$735 million for the first ~~six~~nine months of fiscal 2021.

Comparable Sales. For the first ~~six~~nine months of fiscal 2021, total comparable sales increased ~~15.8%~~12.5%, reflecting ~~a 10.9%~~an 11.5% increase in comparable average ticket and a ~~4.6%~~1.1% increase in comparable customer transactions compared to the first ~~six~~nine months of fiscal 2020. The increase in comparable sales reflected a number of factors, including increased consumer demand and ~~the execution of~~benefits from our strategic efforts to drive an enhanced interconnected experience in both the physical and digital worlds. The increase in comparable average ticket was primarily driven byinflation, including commodity price inflation largely from lumber, ~~and~~ an increase in big-ticket transactions, ~~as well as~~ elevated project demand and ~~stronger~~strong demand for new and innovative products. ~~The increase in comparable customer transactions for~~

During the first ~~six~~nine months of fiscal 2021, ~~was primarily driven by strong customer traffic both physically~~all of our merchandising departments posted positive comparable sales and ~~digitally.~~

~~During the first six months of fiscal 2021,~~ 10 of our 14 merchandising departments posted double-digit positive comparable sales, led by ~~Lumber and~~ Kitchen and ~~Bath.~~Bath and Lumber, when compared to the first nine months of fiscal 2020. Our ~~Hardware,~~Outdoor Garden, Indoor Garden, Hardware and ~~Outdoor Garden~~Paint departments had single-digit positive comparable sales ~~and our Paint department was approximately flat~~ when compared to the first ~~six~~nine months of fiscal 2020.

Gross Profit. For the first ~~six~~nine months of fiscal 2021, gross profit increased ~~17.0%~~14.5% to ~~$26.4~~$39.0 billion from ~~$22.6~~$34.0 billion for the first ~~six~~nine months of fiscal 2020. Gross profit as a percentage of net sales, or gross profit margin, was ~~33.6%~~33.8% for the first ~~six~~nine months of fiscal 2021 compared to ~~34.0%~~34.1% for the first ~~six~~nine months of fiscal ~~2020, reflecting~~2020. The decrease in gross profit margin during the first nine months of fiscal 2021 reflected pressure from product mix, including rate and mix pressure from lumber, higher transportation costs, and investments in ~~One Supply Chain,~~our supply chain, partially offset by the benefit from ~~lower markdowns as a result of the strong demand environment during the first six months of fiscal 2021.~~higher retail prices.

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

Selling, General & Administrative. SG&A increased ~~5.1%~~3.9% to ~~$12.8~~$19.0 billion for the first ~~six~~nine months of fiscal 2021 from ~~$12.2~~$18.3 billion for the first ~~six~~nine months of fiscal 2020. As a percentage of net sales, SG&A was ~~16.3%~~16.4% for the first ~~six~~nine months of fiscal 2021 compared to ~~18.4%~~18.3% for the first ~~six~~nine months of fiscal 2020. The decrease in SG&A as a percentage of net sales for the first ~~six~~nine months of fiscal 2021 was primarily driven by leverage resulting from a positive comparable sales environment and cycling ~~several~~ COVID-19-related expenses that we incurred during the first ~~six~~nine months of fiscal 2020, including ~~$1.3~~$1.7 billion of additional expenses related to expanded benefits to support our associates and an additional ~~$124~~$183 million of operational expenses. Total COVID-19-related expenses incurred in the first ~~six~~nine months of fiscal 2021 were ~~$102~~$137 million. ~~This operating expense leverage was~~These benefits were partially offset by an increase in hourly payroll-related costs ~~resulting from the increased demand environment throughout~~in the first ~~six~~nine months of fiscal 2021 ~~as well as additional expenses from~~driven by the wage investments we made in the latter part of fiscal 2020.

Depreciation and Amortization. Depreciation and amortization increased 13.6% to ~~$1.2~~$1.8 billion for the first ~~six~~nine months of fiscal 2021 from ~~$1.0~~$1.6 billion for the first ~~six~~nine months of fiscal 2020. As a percentage of net sales, depreciation and amortization was 1.5% for the first ~~six~~nine months of fiscal 2021 compared to 1.6% for the first ~~six~~nine months of fiscal 2020.

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The decrease in depreciation and amortization as a percentage of net sales primarily reflected leverage resulting from a positive comparable sales environment, partially offset by increased depreciation expense from our strategic investments in the business as well as higher intangible asset amortization expense.

Interest and Other, net. Interest and other, net was ~~$654~~$980 million for the first ~~six~~nine months of fiscal 2021 compared to ~~$644~~$973 million for the first ~~six~~nine months of fiscal 2020. As a percentage of net sales, interest and other, net was

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0.8% for the first ~~six~~nine months of fiscal 2021 and 1.0% for the first ~~six~~nine months of fiscal 2020, primarily reflecting leverage resulting from a positive comparable sales ~~environment as well as lower interest expense resulting from lower interest rates on outstanding debt balances, partially offset by lower interest income during the first six months of fiscal 2021.~~environment.

Provision for Income Taxes. Our combined effective income tax rate was ~~23.9%~~24.1% for the first ~~six~~nine months of fiscal 2021 compared to ~~24.4%~~24.3% for the first ~~six~~nine months of fiscal 2020.

Diluted Earnings per Share. Diluted earnings per share were ~~$8.38~~$12.31 for the first ~~six~~nine months of fiscal 2021, compared to ~~$6.11~~$9.28 for the first ~~six~~nine months of fiscal 2020. The increase in diluted earnings per share was primarily driven by the factors discussed above.

~~Non-GAAP��~~Non-GAAP Financial Measures

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

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

The following table presents the calculation of ROIC, together with a reconciliation of NOPAT to net earnings (the most comparable GAAP measure):


		Twelve Months Ended							Twelve Months Ended
dollars in millions	dollars in millions	August 1, 2021			August 2, 2020			dollars in millions	October 31, 2021			November 1, 2020
Net earnings	Net earnings	$	15,241		$	11,827		Net earnings	$	15,938		$	12,490
Interest and other, net	Interest and other, net	1,310			1,216			Interest and other, net	1,307			1,265
Provision for income taxes	Provision for income taxes	4,804			3,650			Provision for income taxes	5,053			3,843
Operating income	Operating income	21,355			16,693			Operating income	22,298			17,598
Income tax adjustment (1)	Income tax adjustment (1)	(5,130)			(4,013)			Income tax adjustment (1)	(5,378)			(4,252)
NOPAT	NOPAT	$	16,225		$	12,680		NOPAT	$	16,920		$	13,346

Average debt and equity	Average debt and equity	$	36,338		$	30,826		Average debt and equity	$	38,519		$	32,095

ROIC	ROIC	44.7		%	41.1		%	ROIC	43.9		%	41.6		%

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

Additional Information

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

Liquidity and Capital Resources

Cash and Cash Equivalents

At ~~August 1,~~October 31, 2021, we had ~~$4.6~~$5.1 billion in cash and cash equivalents, of which ~~$1.1~~$1.4 billion was held by our foreign subsidiaries. We believe that our current cash position, cash flow generated from operations, funds available from our commercial paper programs, and access to the long-term debt capital markets should be sufficient not only for

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our operating requirements but also to enable us to complete our capital expenditure programs, fund dividend payments, fund any share repurchases, and make any required ~~long-term~~ debt payments through the next several fiscal years. In addition, we believe that we have the ability to obtain alternative sources of financing, if necessary. ~~We may maintain an elevated cash position during fiscal 2021 as circumstances warrant.~~

For fiscal 2021, we will continue to follow our disciplined approach to capital ~~allocation, and we currently estimate~~allocation. We anticipate capital expenditures of approximately two percent of net sales on an annual basis. However, we may adjust our capital expenditures to support the operations of the business, to enhance long-term strategic positioning, or in response to the economic environment, as necessary or appropriate.

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Debt and Derivative Instruments

We have commercial paper programs that allow for borrowings of up to $3.0 billion. All of our short-term borrowings in the first ~~six~~nine months of fiscal 2021 were under these commercial paper programs, and the maximum amount outstanding at any time was $11 million. In connection with these programs, we have back-up credit facilities with a consortium of banks for borrowings up to $3.0 billion, which consist of a five-year $2.0 billion credit facility scheduled to expire in December 2023 and a 364-day $1.0 billion credit facility scheduled to expire in December ~~2021.~~2021 that we plan to renew. At ~~August 1,~~October 31, 2021, we were in compliance with all of the covenants contained in the credit facilities, none of which are expected to impact our liquidity or capital resources. At ~~August 1,~~October 31, 2021 and January 31, 2021, there were no outstanding borrowings under our commercial paper programs. ~~We may enter into additional credit facilities or other debt financing.~~

We also issue senior notes from time to time as part of our capital management strategy. In September 2021, we issued $3.0 billion of senior notes. The net proceeds from this issuance are being used for general corporate purposes, including repurchases of shares of our common stock, subject to market conditions and other business considerations. In March 2021, we ~~fully~~also repaid our $1.35 billion 2.00% senior notes that had a maturity date of April 2021. See Note 4 to our consolidated financial statements for further discussion of our senior notes.

We use derivative and nonderivative instruments as part of our normal business operations in the management of our exposure to fluctuations in foreign currency exchange rates and interest rates on certain long-term debt.

Share Repurchases

In March 2020, we suspended our share repurchases to enhance our liquidity position during the COVID-19 pandemic. We resumed share repurchases in the first quarter of fiscal 2021, the amount and continuation of which will be influenced by the evolving economic environment as well as business conditions. In the first ~~six~~nine months of fiscal 2021, we had cash payments of ~~$6.9~~$10.4 billion for repurchases of our common stock through open market purchases.

Cash Flows Summary

Operating Activities. Cash flow generated from operations provides us with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and services, associate 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 decreased by ~~$4.9~~$4.0 billion in the first ~~six~~nine months of fiscal 2021 compared to the first ~~six~~nine months of fiscal 2020 and was primarily driven by changes in working capital, partially offset by an increase in net earnings. Working capital was impacted by timing of vendor payments, along with higher merchandise inventories to continue to support increased ~~demand, along with timing of vendor payments.~~demand.

Investing Activities. Cash used in investing activities increased by ~~$438~~$681 million in the first ~~six~~nine months of fiscal 2021 compared to the first ~~six~~nine months of fiscal 2020, primarily as a result of cash paid for an acquired business during fiscal ~~2021.~~2021 and increased capital expenditures.

Financing Activities. Cash used in financing activities in the first ~~six~~nine months of fiscal 2021 primarily reflected ~~$6.9~~$10.4 billion of share repurchases, ~~$3.5~~$5.3 billion of cash dividends paid, and ~~$1.4~~$1.5 billion of repayments of long-term debt, partially offset by $3.0 billion of net proceeds from long-term debt.

Cash used in financing activities in the first ~~six~~nine months of fiscal 2020 primarily reflected ~~$3.2~~$4.8 billion of cash dividends paid, $1.8 billion of repayments of long-term debt, $974 million of net repayments of short-term debt, and $791 million of share repurchases prior to our suspension of share repurchases in March 2020, partially offset by $5.0 billion of net proceeds from long-term debt.

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Critical Accounting Policies

During the first ~~six~~nine months of fiscal 2021, there were no changes to our critical accounting policies as disclosed in the 2020 Form 10-K. Our significant accounting policies are disclosed in Note 1 to our consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Our exposure to market risk results primarily from fluctuations in interest rates in connection with our long-term debt portfolio. 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 may experience inflation and deflation related to our purchase of certain commodity products. There have been no material changes to our exposure to market risks, including the instruments we use to manage our exposure to such risks, from those disclosed in the 2020 Form 10-K.

Item 4. Controls and Procedures.

Under the direction and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) and concluded that our disclosure controls and procedures were effective as of ~~August 1,~~October 31, 2021.

We are in the process of an ongoing business transformation initiative, which began in fiscal 2020 and includes upgrading and migrating certain accounting and finance systems in the U.S. We plan to continue to migrate additional business processes over the course of the next few years and have modified and will continue to modify the design and implementation of certain internal control processes as the integration continues.

Except as described above, there were no other changes in our internal control over financial reporting during the fiscal quarter ended ~~August 1,~~October 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed under Item 1A, "Risk Factors" and elsewhere in the 2020 Form 10-K. These risks and uncertainties could materially and adversely affect our business, consolidated financial condition, results of operations, or cash flows. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently do not consider material to our business. There have been no material changes in the risk factors discussed in the 2020 Form 10-K.

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

Issuer Purchases of Equity Securities

The following table presents the number and average price of shares purchased in each fiscal month of the ~~second~~third quarter of fiscal 2021:

Period
Total Number of Shares Purchased (1)
Average Price Paid Per Share (1)
Total Number of Shares Purchased as Part of Publicly Announced Program (2)
Dollar Value of Shares that May Yet Be Purchased Under the Program (2)
May 3, 2021 – May 30, 2021 2,944,443 $ 324.07 2,938,655 $ 19,666,667,554
May 31, 2021 – June 27, 2021 2,925,762 309.39 2,924,295 18,761,906,690
June 28, 2021 – August 1, 2021 3,545,153 322.70 3,541,572 17,619,049,601
Total 9,415,358 318.99 9,404,522


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 2, 2021 – August 29, 2021	2,264,326	$	327.58	2,261,545	$	16,878,217,517
August 30, 2021 – September 26, 2021	3,591,056	332.00		3,588,690	15,686,752,964
September 27, 2021 – October 31, 2021	4,526,163	347.20		4,514,020	14,119,412,405
Total	10,381,545	337.66		10,364,255

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(1)These amounts include repurchases pursuant to our Amended and Restated 2005 Omnibus Stock Incentive Plan and our 1997 Omnibus Stock Incentive Plan (collectively, the "Plans"). Under the Plans, participants may surrender shares as payment of applicable tax withholding on the vesting of restricted stock. 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 May 2021, our Board of Directors approved a $20.0 billion share repurchase authorization that replaced the previous authorization. This new authorization does not have a prescribed expiration date.

Sales of Unregistered Securities

During the ~~second~~third quarter of fiscal 2021, we issued ~~2,394~~405 deferred stock units under ~~the~~The Home Depot, Inc. Nonemployee Directors’ Deferred Stock Compensation Plan pursuant to the exemption from registration provided

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by Section 4(a)(2) of the Securities Act and Rule 506 of the SEC’s Regulation D thereunder. The deferred stock units were credited to the accounts of those non-employee directors who elected to receive all or a portion of board retainers in the form of deferred stock units instead of cash during the ~~second~~third quarter of fiscal 2021. The deferred stock units convert to shares of common stock on a one-for-one basis following a termination of service as described in this plan.

During the ~~second~~third quarter of fiscal 2021, we credited ~~920~~834 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.

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Item 6. Exhibits.

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


Exhibit		Description
3.1	*	Amended and Restated Certificate of Incorporation of The Home Depot, Inc.
		[Form 10-Q filed on September 1, 2011, Exhibit 3.1]
3.2	*	By-Laws of The Home Depot, Inc. (Amended and Restated Effective February 28, 2019)
		[Form 8-K filed on March 4, 2019, Exhibit 3.2]
4.1	*	Form 1.500% Note due September 15, 2028 [Form 8-K filed on September 21, 2021, Exhibit 4.2]
4.2	*	Form 1.875% Note due September 15, 2031[Form 8-K filed on September 21, 2021, Exhibit 4.3]
4.3	*	Form 2.750% Note due September 15, 2051 [Form 8-K filed on September 21, 2021, Exhibit 4.4]
15.1		Acknowledgement of Independent Registered Public Accounting Firm
31.1		Certification of the Cha irm an and Chief Executive Officer pursuant to Rule 13a-14(a)
31.2		Certification of the Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a)
32.1		Certification of the Cha irman and Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of the Executive Vice President and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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SIGNATURES

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


THE HOME DEPOT, INC. (Registrant)

By:			/s/ CRAIG A. MENEAR
			Craig A. Menear, Chairman and Chief Executive Officer (Principal Executive Officer)

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

			/s/ STEPHEN L. GIBBS
			Stephen L. Gibbs, Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer)

Date:			~~August 23,~~November 22, 2021