Item 8. Financial Statements and Supplementary Data.

Table of Contents

Report of Independent Registered Public Accounting Firm		30
Consolidated Balance Sheets		31
Consolidated Statements of Earnings		32
Consolidated Statements of Comprehensive Income		33
Consolidated Statements of Stockholders' Equity		34
Consolidated Statements of Cash Flows		35
Notes to Consolidated Financial Statements		36
Note 1. Summary of Significant Accounting Policies		36
Note 2. Net Sales and Segment Reporting		43
Note 3. Property and Leases		45
Note 4. Debt and Derivative Instruments		46
Note 5. Income Taxes		49
Note 6. Stockholders' Equity		53
Note 7. Fair Value Measurements		53
Note 8. Stock-Based Compensation		54
Note 9. Employee Benefit Plans		57
Note 10. Weighted Average Common Shares		57
Note 11. Commitments and Contingencies		57
Note 12. Quarterly Financial Data (Unaudited)		58

Report of Independent Registered Public Accounting Firm

The Stockholders and Board of Directors

The Home Depot, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying Consolidated Balance Sheets of The Home Depot, Inc. and Subsidiaries as of February 3, 2019 and January 28, 2018, and the related Consolidated Statements of Earnings, Comprehensive Income, Stockholders’ Equity, and Cash Flows for each of the fiscal years in the three‑year period ended February 3, 2019, and the related notes (collectively, the “Consolidated Financial Statements”). In our opinion, the Consolidated Financial Statements present fairly, in all material respects, the financial position of The Home Depot, Inc. and Subsidiaries as of February 3, 2019 and January 28, 2018, and the results of their operations and their cash flows for each of the fiscal years in the three‑year period ended February 3, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), The Home Depot, Inc.’s internal control over financial reporting as of February 3, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 28, 2019 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These Consolidated Financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Consolidated Financial Statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the Consolidated Financial Statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the Consolidated Financial Statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Consolidated Financial Statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company's auditor since 1979.

Atlanta, Georgia

March 28, 2019

THE HOME DEPOT, INC.

CONSOLIDATED BALANCE SHEETS

in millions, except per share data	February 3, 2019				January 28, 2018
Assets
Current assets:
Cash and cash equivalents	$	1,778			$	3,595
Receivables, net	1,936				1,952
Merchandise inventories	13,925				12,748
Other current assets	890				638
Total current assets	18,529				18,933
Net property and equipment	22,375				22,075
Goodwill	2,252				2,275
Other assets	847				1,246
Total assets	$	44,003			$	44,529
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt	$	1,339			$	1,559
Accounts payable	7,755				7,244
Accrued salaries and related expenses	1,506				1,640
Sales taxes payable	656				520
Deferred revenue	1,782				1,805
Income taxes payable	11				54
Current installments of long-term debt	1,056				1,202
Other accrued expenses	2,611				2,170
Total current liabilities	16,716				16,194
Long-term debt, excluding current installments	26,807				24,267
Deferred income taxes	491				440
Other long-term liabilities	1,867				2,174
Total liabilities	45,881				43,075
Common stock, par value $0.05; authorized: 10,000 shares; issued: 1,782 at February 3, 2019 and 1,780 shares at January 28, 2018; outstanding: 1,105 shares at February 3, 2019 and 1,158 shares at January 28, 2018	89				89
Paid-in capital	10,578				10,192
Retained earnings	46,423				39,935
Accumulated other comprehensive loss	(772		)		(566		)
Treasury stock, at cost, 677 shares at February 3, 2019 and 622 shares at January 28, 2018	(58,196		)		(48,196		)
Total stockholders’ (deficit) equity	(1,878		)		1,454
Total liabilities and stockholders’ equity	$	44,003			$	44,529

—————

See accompanying notes to consolidated financial statements.

THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

in millions, except per share data	Fiscal				Fiscal				Fiscal
2018				2017				2016
Net sales	$	108,203			$	100,904			$	94,595
Cost of sales	71,043				66,548				62,282
Gross profit	37,160				34,356				32,313
Operating expenses:
Selling, general and administrative	19,513				17,864				17,132
Depreciation and amortization	1,870				1,811				1,754
Impairment loss	247				—				—
Total operating expenses	21,630				19,675				18,886
Operating income	15,530				14,681				13,427
Interest and other (income) expense:
Interest and investment income	(93		)		(74		)		(36		)
Interest expense	1,051				1,057				972
Other	16				—				—
Interest and other, net	974				983				936
Earnings before provision for income taxes	14,556				13,698				12,491
Provision for income taxes	3,435				5,068				4,534
Net earnings	$	11,121			$	8,630			$	7,957
Basic weighted average common shares	1,137				1,178				1,229
Basic earnings per share	$	9.78			$	7.33			$	6.47
Diluted weighted average common shares	1,143				1,184				1,234
Diluted earnings per share	$	9.73			$	7.29			$	6.45

—————

Fiscal 2018 includes 53 weeks. Fiscal 2017 and fiscal 2016 include 52 weeks.

See accompanying notes to consolidated financial statements.

THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Fiscal				Fiscal				Fiscal
in millions	2018				2017				2016
Net earnings	$	11,121			$	8,630			$	7,957
Other comprehensive (loss) income:
Foreign currency translation adjustments	(267		)		311				(3		)
Cash flow hedges, net of tax	53				(1		)		34
Other	8				(9		)		—
Total other comprehensive (loss) income	(206		)		301				31
Comprehensive income	$	10,915			$	8,931			$	7,988

—————

Fiscal 2018 includes 53 weeks. Fiscal 2017 and fiscal 2016 include 52 weeks.

See accompanying notes to consolidated financial statements.

THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

in millions	Fiscal				Fiscal				Fiscal
2018				2017				2016
Common Stock:
Balance at beginning of year	$	89			$	88			$	88
Shares issued under employee stock plans	—				1				—
Balance at end of year	89				89				88
Paid-in Capital:
Balance at beginning of year	10,192				9,787				9,347
Shares issued under employee stock plans	104				132				76
Tax effect of stock-based compensation	—				—				97
Stock-based compensation expense	282				273				267
Balance at end of year	10,578				10,192				9,787
Retained Earnings:
Balance at beginning of year	39,935				35,519				30,973
Cumulative effect of accounting change	75				—				—
Net earnings	11,121				8,630				7,957
Cash dividends	(4,704		)		(4,212		)		(3,404		)
Other	(4		)		(2		)		(7		)
Balance at end of year	46,423				39,935				35,519
Accumulated Other Comprehensive Income (Loss):
Balance at beginning of year	(566		)		(867		)		(898		)
Foreign currency translation adjustments	(267		)		311				(3		)
Cash flow hedges, net of tax	53				(1		)		34
Other	8				(9		)		—
Balance at end of year	(772		)		(566		)		(867		)
Treasury Stock:
Balance at beginning of year	(48,196		)		(40,194		)		(33,194		)
Repurchases of common stock	(10,000		)		(8,002		)		(7,000		)
Balance at end of year	(58,196		)		(48,196		)		(40,194		)
Total stockholders' (deficit) equity	$	(1,878	)		$	1,454			$	4,333

—————

Fiscal 2018 includes 53 weeks. Fiscal 2017 and fiscal 2016 include 52 weeks.

See accompanying notes to consolidated financial statements.

THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Fiscal				Fiscal				Fiscal
in millions	2018				2017				2016
Cash Flows from Operating Activities:
Net earnings	$	11,121			$	8,630			$	7,957
Reconciliation of net earnings to net cash provided by operating activities:
Depreciation and amortization	2,152				2,062				1,973
Stock-based compensation expense	282				273				267
Impairment loss	247				—				—
Changes in receivables, net	33				139				(138		)
Changes in merchandise inventories	(1,244		)		(84		)		(769		)
Changes in other current assets	(257		)		(10		)		(48		)
Changes in accounts payable and accrued expenses	743				352				446
Changes in deferred revenue	80				128				99
Changes in income taxes payable	(42		)		29				109
Changes in deferred income taxes	26				92				(117		)
Other operating activities	(103		)		420				4
Net cash provided by operating activities	13,038				12,031				9,783
Cash Flows from Investing Activities:
Capital expenditures, net of non-cash capital expenditures	(2,442		)		(1,897		)		(1,621		)
Payments for businesses acquired, net	(21		)		(374		)		—
Proceeds from sales of property and equipment	33				47				38
Other investing activities	14				(4		)		—
Net cash used in investing activities	(2,416		)		(2,228		)		(1,583		)
Cash Flows from Financing Activities:
(Repayments of) proceeds from short-term debt, net	(220		)		850				360
Proceeds from long-term debt, net of discounts	3,466				2,991				4,959
Repayments of long-term debt	(1,209		)		(543		)		(3,045		)
Repurchases of common stock	(9,963		)		(8,000		)		(6,880		)
Proceeds from sales of common stock	236				255				218
Cash dividends	(4,704		)		(4,212		)		(3,404		)
Other financing activities	(26		)		(211		)		(78		)
Net cash used in financing activities	(12,420		)		(8,870		)		(7,870		)
Change in cash and cash equivalents	(1,798		)		933				330
Effect of exchange rate changes on cash and cash equivalents	(19		)		124				(8		)
Cash and cash equivalents at beginning of year	3,595				2,538				2,216
Cash and cash equivalents at end of year	$	1,778			$	3,595			$	2,538
Supplemental Disclosures:
Cash paid for income taxes	$	3,774			$	4,732			$	4,623
Cash paid for interest, net of interest capitalized	1,035				991				924
Non-cash capital expenditures	248				150				179

—————

Fiscal 2018 includes 53 weeks. Fiscal 2017 and fiscal 2016 include 52 weeks.

See accompanying notes to consolidated financial statements.

THE HOME DEPOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

The Home Depot, Inc., together with its subsidiaries (the "Company," "Home Depot," "we," "our" or "us"), is a home improvement retailer that sells a wide assortment of building materials, home improvement products, lawn and garden products, and décor items and provides a number of services, in stores and online. We operate in the U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam), Canada, and Mexico.

Consolidation and Presentation

Our consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. Certain amounts in prior fiscal years have been reclassified to conform with the presentation adopted in the current fiscal year. Our fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31. Fiscal 2018 includes 53 weeks compared to fiscal 2017 and fiscal 2016, both of which include 52 weeks.

Use of Estimates

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses in preparing these financial statements in conformity with GAAP. Actual results could differ from these estimates.

Cash Equivalents

We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Our cash equivalents are carried at fair market value and consist primarily of money market funds.

Receivables

The components of receivables, net, follow.

in millions	February 3, 2019				January 28, 2018
Card receivables	$	696			$	734
Rebate receivables	660				609
Customer receivables	284				261
Other receivables	296				348
Receivables, net	$	1,936			$	1,952

Card receivables consist of payments due from financial institutions for the settlement of credit card and debit card transactions. Rebate receivables represent amounts due from vendors for volume and co-op advertising rebates. Receivables due from customers relate to credit extended directly to certain customers in the ordinary course of business. The valuation reserve related to accounts receivable was not material to our consolidated financial statements at the end of fiscal 2018 or fiscal 2017.

Merchandise Inventories

The majority of our merchandise inventories are stated at the lower of cost (first-in, first-out) or market, as determined by the retail inventory method. As the inventory retail value is adjusted regularly to reflect market conditions, the inventory valued using the retail method approximates the lower of cost or market. Certain subsidiaries, including retail operations in Canada and Mexico, and distribution centers, record merchandise inventories at the lower of cost or net realizable value, as determined by a cost method. These merchandise inventories represent approximately 29% of the total merchandise inventories balance. We evaluate the inventory valued using a cost method at the end of each quarter to ensure that it is carried at the lower of cost or net realizable value. The valuation allowance for merchandise inventories valued under a cost method was not material to our consolidated financial statements at the end of fiscal 2018 or fiscal 2017.

Independent physical inventory counts or cycle counts are taken on a regular basis in each store and distribution center to ensure that amounts reflected in merchandise inventories are properly stated. Shrink (or in the case of

excess inventory, "swell") is the difference between the recorded amount of inventory and the physical inventory. We calculate shrink based on actual inventory losses occurring as a result of physical inventory counts during each fiscal period and estimated inventory losses occurring between physical inventory counts. The estimate for shrink occurring in the interim period between physical inventory counts is calculated on a store-specific basis based on recent shrink results and current trends in the business.

Property and Equipment, including Capitalized Lease Assets

Buildings, furniture, fixtures, and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives. Leasehold improvements are amortized using the straight-line method over the original term of the lease or the useful life of the improvement, whichever is shorter. The estimated useful lives of our property and equipment follow.

	Life
Buildings	5 – 45 years
Furniture, fixtures and equipment	2 – 20 years
Leasehold improvements	5 – 45 years

We capitalize certain costs related to the acquisition and development of software and amortize these costs using the straight-line method over the estimated useful life of the software, which is three to six years. Certain development costs not meeting the criteria for capitalization are expensed as incurred.

We evaluate our long-lived assets each quarter for indicators of potential impairment. Indicators of impairment include current period losses combined with a history of losses, our decision to relocate or close a store or other location before the end of its previously estimated useful life, or when changes in other circumstances indicate the carrying amount of an asset may not be recoverable. The evaluation for long-lived assets is performed at the lowest level of identifiable cash flows, which is generally the individual store level. The assets of a store with indicators of impairment are evaluated for recoverability by comparing its undiscounted future cash flows with its carrying value. If the carrying value is greater than the undiscounted future cash flows, we then measure the asset’s fair value to determine whether an impairment loss should be recognized. If the resulting fair value is less than the carrying value, an impairment loss is recognized for the difference between the carrying value and the estimated fair value. Impairment losses on property and equipment are recorded as a component of SG&A. When a leased location closes, we also recognize, in SG&A, the net present value of future lease obligations less estimated sublease income. Impairments and lease obligation costs on closings and relocations were not material to our consolidated financial statements in fiscal 2018, fiscal 2017, or fiscal 2016.

Leases

We categorize leases at their inception as either operating or capital leases. Lease agreements include certain retail locations, office space, warehouse and distribution space, equipment, and vehicles. Most of these leases are operating leases. However, certain retail locations and equipment are leased under capital leases. Short-term and long-term obligations for capital leases are included in the applicable long-term debt category based on maturity. We expense rent related to operating leases on a straight-line basis over the lease term, which commences on the date we have the right to control the property. The cumulative expense recognized on a straight-line basis in excess of the cumulative payments is included in other accrued expenses and other long-term liabilities. Total rent expense for fiscal 2018, fiscal 2017, and fiscal 2016 is net of an immaterial amount of sublease income.

Goodwill

Goodwill represents the excess of purchase price over the fair value of net assets acquired. We do not amortize goodwill, but assess the recoverability of goodwill in the third quarter of each fiscal year, or more often if indicators warrant, by determining whether the fair value of each reporting unit supports its carrying value. Each fiscal year, we may assess qualitative factors to determine whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining whether it is necessary to complete quantitative impairment assessments, with a quantitative assessment completed at least once every three years. We completed our last quantitative assessment in fiscal 2016.

In fiscal 2018, we completed our annual assessment of the recoverability of goodwill for the U.S., Canada, and Mexico reporting units. We performed qualitative assessments, concluding that the fair value of the reporting units substantially exceeded the respective reporting unit's carrying value, including goodwill. As a result, there were no impairment charges related to goodwill for fiscal 2018, fiscal 2017, or fiscal 2016.

Changes in the carrying amount of our goodwill follow.

in millions	Fiscal				Fiscal				Fiscal
2018				2017				2016
Goodwill, balance at beginning of year	$	2,275			$	2,093			$	2,102
Acquisitions (1)	4				164				—
Disposition	(15		)		—				—
Other (2)	(12		)		18				(9		)
Goodwill, balance at end of year	$	2,252			$	2,275			$	2,093

—————

(1) Includes purchase price allocation adjustments.

(2) Primarily reflects the impact of foreign currency translation.

Other Intangible Assets

We amortize the cost of other finite-lived intangible assets over their estimated useful lives, which range up to 12 years. Intangible assets with indefinite lives are tested in the third quarter of each fiscal year for impairment, or more often if indicators warrant. Intangible assets other than goodwill are included in other assets.

In January 2019, we recognized a pretax impairment loss of $247 million for certain trade names as a result of a shift in strategy for our MRO business. Our remaining finite-lived and indefinite-lived intangibles were not material at February 3, 2019.

Debt

We record any premiums or discounts associated with an issuance of long-term debt as a direct addition or deduction to the carrying value of the related senior notes. We also record debt issuance costs associated with an issuance of long-term debt as a direct deduction to the carrying value of the related senior notes. Premium, discount, and debt issuance costs are amortized over the term of the respective notes using the effective interest rate method.

Derivatives

We use derivative financial instruments in the management of our interest rate exposure on long-term debt and our exposure to foreign currency fluctuations. For derivatives that are designated as hedges, changes in their fair values that are considered effective are either accounted for in earnings or recognized in other comprehensive income or loss until the hedged item is recognized in earnings, depending on the nature of the hedge. Any ineffective portion of a derivative’s change in fair value is immediately recognized in earnings. Financial instruments that do not qualify for hedge accounting are recorded at fair value with unrealized gains or losses reported in earnings. All qualifying derivative financial instruments are recognized at their fair values in either assets or liabilities at the balance sheet date and are reported on a gross basis. The fair values of our derivative financial instruments are discussed in Note 4 and Note 7.

Insurance

We are self-insured for certain losses related to general liability (including product liability), workers’ compensation, employee group medical, and automobile claims. We recognize the expected ultimate cost for claims incurred (undiscounted) at the balance sheet date as a liability. The expected ultimate cost for claims incurred is estimated based upon analysis of historical data and actuarial estimates. We also maintain network security and privacy liability insurance coverage to limit our exposure to losses such as those that may be caused by a significant compromise or breach of our data security. Insurance-related expenses are included in SG&A.

Treasury Stock

Treasury stock is reflected as a reduction of stockholders' equity at cost. We use the weighted-average purchase cost to determine the cost of treasury stock that is reissued, if any.

Net Sales

On January 29, 2018, we adopted ASU No. 2014-09 using the modified retrospective transition method which requires that we recognize revenue differently pre- and post-adoption. See "—Recently Adopted Accounting Pronouncements—ASU No. 2014-09" below for more information.

Fiscal 2018 and Subsequent Periods. We recognize revenue, net of expected returns and sales tax, at the time the customer takes possession of merchandise or when a service is performed. The liability for sales returns, including the impact to gross profit, is estimated based on historical return levels and recognized at the transaction price. We also recognize a return asset, and corresponding adjustment to cost of sales, for our right to recover the goods returned by the customer, measured at the former carrying amount of the goods, less any expected recovery cost. At each financial reporting date, we assess our estimates of expected returns, refund liabilities, and return assets.

Net sales include services revenue generated through a variety of installation, home maintenance, and professional service programs. In these programs, the customer selects and purchases material for a project, and we provide or arrange for professional installation. These programs are offered through our stores and in-home sales programs. Under certain programs, when we provide or arrange for the installation of a project and the subcontractor provides material as part of the installation, both the material and labor are included in services revenue. We recognize this revenue when the service for the customer is complete, which is not materially different from recognizing the revenue over the service period as the substantial majority of our services are completed within one week.

For product sold in stores or online, payment is typically due at the point of sale. For services, payment in full is due upon completion of the job. 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 three months or less. 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. Gift card breakage income, which is our estimate of the non-redeemed gift card balance, was immaterial in fiscal 2018.

We also have agreements with third-party service providers who directly extend credit to customers and manage our PLCC program. Deferred interest charges incurred for our deferred financing programs offered to these customers, interchange fees charged to us for their use of the cards, and any profit sharing with the third-party service providers are included in net sales.

Fiscal 2017 and Fiscal 2016. We recognize revenue, net of estimated returns and sales tax, at the time the customer takes possession of merchandise or when a service is performed. The liability for sales returns, including the impact to gross profit, is estimated based on historical return levels.

Net sales include services revenue generated through a variety of installation, home maintenance, and professional service programs. In these programs, the customer selects and purchases material for a project, and we provide or arrange professional installation. These programs are offered through our stores and in-home sales programs. Under certain programs, when we provide or arrange the installation of a project and the subcontractor provides material as part of the installation, both the material and labor are included in services revenue. We recognize this revenue when the service for the customer is complete.

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. We also record deferred revenue for the sale of gift cards and recognize this revenue upon the redemption of gift cards in net sales. Gift card breakage income, which is our estimate of the non-redeemed gift card balance, was immaterial in fiscal 2017 and fiscal 2016.

Cost of Sales

Cost of sales includes the actual cost of merchandise sold and services performed; the cost of transportation of merchandise from vendors to our distribution network, stores, or customers; shipping and handling costs from our stores or distribution network to customers; and the operating cost and depreciation of our sourcing and distribution network and online fulfillment centers. In fiscal 2017 and fiscal 2016, cost of sales also included cost of deferred interest programs offered through our PLCC programs.

Cost of Credit

We have agreements with third-party service providers who directly extend credit to customers, manage our PLCC program, and own the related receivables. We have evaluated the third-party entities holding the receivables under the program and concluded that they should not be consolidated. The agreement with the primary third-party service provider for our PLCC program expires in 2028, with us having the option, but no obligation, to purchase the receivables at the end of the agreement. The deferred interest charges we incur for our deferred financing programs offered to our customers are included in net sales in fiscal 2018 and subsequent periods and in cost of sales in fiscal 2017 and fiscal 2016. The interchange fees charged to us for our customers’ use of the cards and any profit

sharing with the third-party service providers are included in net sales in fiscal 2018 and subsequent periods and in SG&A in fiscal 2017 and fiscal 2016. The sum of the deferred interest charges, interchange fees, and any profit sharing is referred to as the cost of credit of the PLCC program.

Vendor Allowances

Vendor allowances primarily consist of volume rebates that are earned as a result of attaining certain purchase levels and co-op advertising allowances for the promotion of vendors’ products that are typically based on guaranteed minimum amounts with additional amounts being earned for attaining certain purchase levels. These vendor allowances are accrued as earned, with those allowances received as a result of attaining certain purchase levels accrued over the incentive period based on estimates of purchases. Volume rebates and certain co-op advertising allowances earned are initially recorded as a reduction in merchandise inventories and a subsequent reduction in cost of sales when the related product is sold.

Certain other co-op advertising allowances that are reimbursements of specific, incremental, and identifiable costs incurred to promote vendors’ products are recorded as an offset against advertising expense in SG&A. The co-op advertising allowances recorded as an offset to advertising expense follow.

in millions	Fiscal				Fiscal				Fiscal
2018				2017				2016
Specific, incremental, and identifiable co-op advertising allowances	$	235			$	198			$	166

Advertising Expense

Television and radio advertising production costs, along with media placement costs, are expensed when the advertisement first appears. Certain co-op advertising allowances are recorded as an offset against advertising expense. Gross advertising expense included in SG&A follows.

in millions	Fiscal				Fiscal				Fiscal
2018				2017				2016
Gross advertising expense	$	1,156			$	995			$	955

Stock-Based Compensation

We are currently authorized to issue incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and deferred shares to certain of our associates, officers, and directors under certain stock incentive plans. We measure and recognize compensation expense for all share-based payment awards made to associates and directors based on estimated fair values. The value of the portion of the award that is ultimately expected to vest is recognized as stock-based compensation expense over the requisite service period or as restrictions lapse. Additional information on our stock-based payment awards is included in Note 8.

Income Taxes

Income taxes are accounted for under the asset and liability method. We provide for federal, state, and foreign income taxes currently payable, as well as for those deferred due to timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates is recognized as income or expense in the period that includes the enactment date.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

We file a consolidated U.S. federal income tax return which includes certain eligible subsidiaries. Non-U.S. subsidiaries and certain U.S. subsidiaries, which are consolidated for financial reporting purposes, are not eligible to be included in our consolidated U.S. federal income tax return. Separate provisions for income taxes have been determined for these entities. For unremitted earnings of our non-U.S. subsidiaries, we are required to make an assertion regarding reinvestment or repatriation for tax purposes. For any earnings that we do not make a

permanent reinvestment assertion, we recognize a provision for deferred income taxes. For earnings where we have made a permanent reinvestment assertion, no provision is recognized. See Note 5 for further discussion.

Comprehensive Income

Comprehensive income includes net earnings adjusted for certain gains and losses that are excluded from net earnings under GAAP, which consists primarily of foreign currency translation adjustments.

Foreign Currency Translation

Assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current rate of exchange on the last day of the reporting period. Revenues and expenses are translated using average exchange rates for the period and equity transactions are translated using the actual rate on the day of the transaction.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period’s financial statement presentation. See "Recently Adopted Accounting Pronouncements" below for a discussion of our adoption of new accounting standards.

Recently Adopted Accounting Pronouncements

ASU No. 2016-16. In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory," which requires an entity to recognize the income tax consequences of an intercompany transfer of assets other than inventory when the transfer occurs. An entity will continue to recognize the income tax consequences of an intercompany transfer of inventory when the inventory is sold to a third party.

On January 29, 2018, we adopted ASU No. 2016-16 using the modified retrospective transition method with no impact on our consolidated financial statements. We expect the impact of the adoption to be immaterial to our financial position, results of operations, and cash flows on an ongoing basis.

ASU No. 2014-09. In May 2014, the FASB issued a new standard related to revenue recognition. Under ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. On January 29, 2018, we adopted ASU No. 2014-09 using the modified retrospective transition method.

In preparation for implementation of the standard, we finalized key accounting assessments and then implemented internal controls and updated processes to appropriately recognize and present the associated financial information. Based on these efforts, we determined that the adoption of ASU No. 2014-09 changes the presentation of (i) certain expenses and cost reimbursements associated with our PLCC program (now recognized in net sales), (ii) certain expenses related to the sale of gift cards to customers (now recognized in operating expense), and (iii) gift card breakage income (now recognized in net sales). We also have changed our recognition of gift card breakage income to be recognized proportionately as redemption occurs, rather than based on historical redemption patterns.

In addition, the adoption of ASU No. 2014-09 requires that we recognize our sales return allowance on a gross basis rather than as a net liability. As such, we now recognize (i) a return asset for the right to recover the goods returned by the customer, measured at the former carrying amount of the goods, less any expected recovery costs (recorded as an increase to other current assets) and (ii) a return liability for the amount of expected returns (recorded as an increase to other accrued expenses and a decrease to receivables, net).

We applied ASU No. 2014-09 only to contracts that were not completed prior to fiscal 2018. The cumulative effect of initially applying ASU No. 2014-09 was a $99 million reduction to deferred revenue, a $24 million increase to deferred income taxes (included in other long-term liabilities), and a $75 million increase to the opening balance of retained earnings as of January 29, 2018. The comparative prior period information continues to be reported under the accounting standards in effect during those periods. We expect the impact of the adoption to be immaterial to our financial position, results of operations, and cash flows on an ongoing basis.

Excluding the effect of the opening balance sheet adjustment noted above, the impact of the adoption of ASU No. 2014-09 on our consolidated balance sheet as of February 3, 2019 follows.

in millions	As Reported				ASU No. 2014-09 Impact				Excluding ASU No. 2014-09 Impact
Receivables, net	$	1,936			$	(40	)		$	1,976
Other current assets	890				256				634
Other accrued expenses	2,611				216				2,395

The impact of the adoption of ASU No. 2014-09 on our consolidated statements of earnings for fiscal 2018 follows.

in millions	As Reported				ASU No. 2014-09 Impact				Excluding ASU No. 2014-09 Impact
Net sales	$	108,203			$	216			$	107,987
Cost of sales	71,043				(382		)		71,425
Gross profit	37,160				598				36,562
Selling, general and administrative	19,513				598				18,915

Recently Issued Accounting Pronouncements

ASU No. 2018-15. In August 2018, the FASB issued ASU No. 2018-15, "Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract," which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU No. 2018-15 is effective for us in the first quarter of fiscal 2020 and early adoption is permitted. We are evaluating the effect that ASU No. 2018-15 will have on our consolidated financial statements and related disclosures.

ASU No. 2018-02. In February 2018, the FASB issued ASU No. 2018-02, "Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which allows for an optional reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects as a result of the Tax Act. ASU No. 2018-02 is effective for us in the first quarter of fiscal 2019 and early adoption is permitted. Two transition methods are available: at the beginning of the period of adoption, or retrospective to each period in which the income tax effects of the Tax Act related to items remaining in accumulated other comprehensive income are recognized. We will adopt this standard in the first quarter of 2019, applying the adjustment at the beginning of the period of adoption. We have evaluated the effect that ASU No. 2018-02 will have on our consolidated financial statements and related disclosures and noted no material impact.

ASU No. 2017-12. In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which amends the hedge accounting recognition and presentation requirements. ASU No. 2017-12 eliminates the concept of recognizing periodic hedge ineffectiveness for cash flow and net investment hedges and allows an entity to apply the shortcut method to partial-term fair value hedges of interest rate risk. ASU No. 2017-12 is effective for us in the first quarter of fiscal 2019. Early adoption is permitted in any interim period after issuance of this update. We have evaluated the effect that ASU No. 2017-12 will have on our consolidated financial statements and related disclosures and noted no material impact.

ASU No. 2017-04. In January 2017, the FASB issued ASU No. 2017-04, "Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which simplifies how an entity is required to test goodwill for impairment. The amendments in ASU No. 2017-04 require goodwill impairment to be measured using the difference between the carrying amount and the fair value of the reporting unit and require the loss recognized to not exceed the total amount of goodwill allocated to that reporting unit. ASU No. 2017-04 should be applied on a prospective basis and is effective for our annual goodwill impairment tests beginning in the first quarter of fiscal 2020. Early adoption is permitted. We have evaluated the effect that ASU No. 2017-04 will have on our consolidated financial statements and related disclosures and noted no material impact.

ASU No. 2016-02. In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)," which establishes a right-of-use model and requires an entity that is a lessee to recognize the right-of-use assets and liabilities arising from leases on its balance sheet. ASU No. 2016-02 also requires disclosures about the amount, timing, and

uncertainty of cash flows arising from leases. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. This new standard is effective for us on February 4, 2019 (the “effective date”).

ASU No. 2016-02 was subsequently amended by ASU No. 2018-01, "Land Easement Practical Expedient for Transition to Topic 842"; ASU No. 2018-10, "Codification Improvements to Topic 842"; and ASU No. 2018-11, "Targeted Improvements". ASU 2016-02 and relevant updates require a modified retrospective transition, with the cumulative effect of transition, including initial recognition of lease assets and liabilities for existing operating leases as of (i) the effective date or (ii) the beginning of the earliest comparative period presented. These updates also provide a number of practical expedients for transition and implementation that will be elected.

We will adopt this standard using the modified retrospective method with a cumulative-effect adjustment to the opening balance of retained earnings as of the effective date. We plan to elect the package of practical expedients in transition, which permits us to not reassess our prior conclusions pertaining to lease identification, lease classification, and initial direct costs on leases that commenced prior to our adoption of the new standard. We do not expect to elect the use-of-hindsight or land easements transition practical expedients. Additionally, we will elect ongoing practical expedients including the option to not recognize right-of-use assets and lease liabilities related to leases with an original term of twelve months or less.

We believe that ASU 2016-02 will have a material impact on our consolidated balance sheet as a result of the requirement to recognize right-of-use assets and lease liabilities for our operating leases upon adoption. We estimate total assets and liabilities will increase approximately $6 billion upon adoption. This estimate may change as the implementation is finalized as a result of changes to our lease portfolio prior to adoption. We do not believe that there will be a material impact to our results of operations, stockholders’ equity, or cash flows upon adoption of ASU No. 2016-02.

We reviewed and selected a new lease accounting system and are currently accumulating and processing lease data into the system. We are continuing to evaluate our internal control framework, including implementing changes to our processes, controls, and systems in connection therewith, to determine any necessary changes upon adoption of ASU 2016-02.

Recent accounting pronouncements pending adoption not discussed above are either not applicable or are not expected to have a material impact on us.

2.	NET SALES AND SEGMENT REPORTING

We currently conduct our retail operations in the U.S., Canada, and Mexico, each of which represents one of our three operating segments. Our operating segments reflect the way in which internally-reported financial information is used to make decisions and allocate resources. For disclosure purposes, we aggregate these three operating segments into one reportable segment due to their similar operating and financial characteristics and how the business is managed.

The assets of each of our operating segments primarily consist of net property and equipment and merchandise inventories. Long-lived assets, classified by geography, follow.

in millions	February 3, 2019				January 28, 2018				January 29, 2017
Long-lived assets – in the U.S.	$	19,930			$	19,526			$	19,519
Long-lived assets – outside the U.S.	2,445				2,549				2,395
Total long-lived assets	$	22,375			$	22,075			$	21,914

No sales to an individual customer accounted for more than 10% of revenue during any of the last three fiscal years. Net sales, classified by geography, follow.

	Fiscal				Fiscal				Fiscal
in millions	2018				2017				2016
Net sales – in the U.S.	$	99,386			$	92,413			$	86,615
Net sales – outside the U.S.	8,817				8,491				7,980
Net sales	$	108,203			$	100,904			$	94,595

Net sales by products and services follow.

	Fiscal				Fiscal				Fiscal
in millions	2018				2017				2016
Net sales – products	$	102,933			$	95,956			$	90,028
Net sales – services	5,270				4,948				4,567
Net sales	$	108,203			$	100,904			$	94,595

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

	Fiscal				Fiscal				Fiscal
in millions	2018				2017				2016
Building Materials	$	39,967			$	37,331			$	34,768
Décor	36,238				33,583				31,599
Hardlines	31,998				29,990				28,228
Net sales	$	108,203			$	100,904			$	94,595

Major product lines and the related merchandising departments (and related services) follow.

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

Net sales by merchandising department (and related services) follow.

	Fiscal							Fiscal							Fiscal
	2018							2017							2016
dollars in millions	Net Sales				% of Net Sales			Net Sales				% of Net Sales			Net Sales				% of Net Sales
Appliances	$	9,001			8.3			$	8,146			8.1			$	7,366			7.8
Building Materials	7,772				7.2			7,272				7.2			6,785				7.2
Décor	3,580				3.3			3,174				3.1			3,011				3.2
Electrical	5,576				5.2			4,994				4.9			4,524				4.8
Flooring	7,475				6.9			6,980				6.9			6,410				6.8
Hardware	6,194				5.7			5,874				5.8			5,617				5.9
Indoor Garden	10,438				9.6			9,777				9.7			9,190				9.7
Kitchen and Bath	7,721				7.1			7,276				7.2			7,103				7.5
Lighting	4,436				4.1			4,448				4.4			4,468				4.7
Lumber	8,388				7.8			7,790				7.7			6,828				7.2
Millwork	5,743				5.3			5,383				5.3			5,139				5.4
Outdoor Garden	7,257				6.7			6,988				6.9			6,762				7.1
Paint	8,461				7.8			8,007				7.9			7,709				8.1
Plumbing	8,052				7.4			7,444				7.4			7,024				7.4
Tools	8,109				7.5			7,351				7.3			6,659				7.0
Total	$	108,203			100.0	%		$	100,904			100.0	%		$	94,595			100.0	%

—————

Note: Certain percentages may not sum to totals due to rounding. Net sales for certain merchandising departments were reclassified in fiscal 2018. As a result, prior year net sales have been reclassified to conform with the current year presentation. Prior year percent of net sales data also reflect the new classifications.

3.	PROPERTY AND LEASES

Net Property and Equipment

The components of net property and equipment follow.

in millions	February 3, 2019				January 28, 2018
Land	$	8,363			$	8,352
Buildings	18,199				18,073
Furniture, fixtures, and equipment	12,460				11,506
Leasehold improvements	1,705				1,637
Construction in progress	820				538
Capital leases	1,392				1,308
Property and equipment, at cost	42,939				41,414
Less accumulated depreciation and capital lease amortization	20,564				19,339
Net property and equipment	$	22,375			$	22,075

Depreciation and capital lease amortization expense, including depreciation expense included in cost of sales, follows.

in millions	Fiscal				Fiscal				Fiscal
2018				2017				2016
Depreciation and capital lease amortization expense	$	2,076			$	1,983			$	1,899

Leases

We lease certain retail locations, office space, warehouse and distribution space, equipment, and vehicles. While most of the leases are operating leases, certain locations and equipment are leased under capital leases. As leases approach maturity, we consider various factors such as market conditions and the terms of any renewal options that may exist to determine whether we will renew or replace the lease. Short-term and long-term obligations for capital leases are included in the applicable long-term debt category based on maturity.

Assets under capital leases (net of accumulated amortization) recorded in net property and equipment follow.

in millions	February 3, 2019				January 28, 2018
Capital leases, net	$	856			$	821

Certain lease agreements include escalating rents over the lease terms. Real estate taxes, insurance, maintenance, and operating expenses applicable to the leased property are our obligations under the lease agreements.

Our total rent expense related to operating leases follows.

in millions	Fiscal				Fiscal				Fiscal
2018				2017				2016
Total rent expense	$	1,091			$	1,053			$	984

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

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

4.	DEBT AND DERIVATIVE INSTRUMENTS

Short-Term Debt

We have commercial paper programs with an aggregate borrowing capacity of $3.0 billion. All of our short-term borrowings in fiscal 2018 and fiscal 2017 were under these commercial paper programs. 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 364-day $1.0 billion credit facility and a five-year $2.0 billion credit facility. In December 2018, we completed the renewal of our 364-day $1.0 billion credit facility, extending the maturity from December 2018 to December 2019. In December 2017, we replaced our five-year $2.0 billion credit facility that was scheduled to expire in December 2019, with a new, substantially identical five-year $2.0 billion credit facility that expires in December 2022.

Certain information on our commercial paper programs follows.

dollars in millions	February 3, 2019				January 28, 2018
Weighted average interest rate	2.41		%		1.45		%
Balance outstanding at fiscal year-end	$	1,339			$	1,559
Maximum amount outstanding at any month-end	$	2,264			$	1,559
Average daily short-term borrowings	$	621			$	173

Long-Term Debt

Details of the components of our long-term debt follow.

							Carrying Amount
in millions	Interest Payable		Principal Amount				February 3, 2019				January 28, 2018
2.25% Senior notes due September 2018	Semi-annually		$	—			$	—			$	1,150
2.00% Senior notes due June 2019	Semi-annually		1,000				999				998
Floating rate senior notes due June 2020	Quarterly		500				499				499
1.80% Senior notes due June 2020	Semi-annually		750				749				748
3.95% Senior notes due September 2020	Semi-annually		500				499				501
4.40% Senior notes due April 2021	Semi-annually		1,000				999				998
2.00% Senior notes due April 2021	Semi-annually		1,350				1,345				1,343
Floating rate senior notes due March 2022	Quarterly		300				299				—
3.25% Senior notes due March 2022	Semi-annually		700				696				—
2.625% Senior notes due June 2022	Semi-annually		1,250				1,245				1,243
2.70% Senior notes due April 2023	Semi-annually		1,000				997				996
3.75% Senior notes due February 2024	Semi-annually		1,100				1,094				1,093
3.35% Senior notes due September 2025	Semi-annually		1,000				995				995
3.00% Senior notes due April 2026	Semi-annually		1,300				1,288				1,287
2.125% Senior notes due September 2026	Semi-annually		1,000				987				986
2.80% Senior notes due September 2027	Semi-annually		1,000				981				980
3.90% Senior notes due December 2028	Semi-annually		1,000				1,005				—
5.875% Senior notes due December 2036	Semi-annually		3,000				2,951				2,949
5.40% Senior notes due September 2040	Semi-annually		500				495				495
5.95% Senior notes due April 2041	Semi-annually		1,000				989				988
4.20% Senior notes due April 2043	Semi-annually		1,000				989				988
4.875% Senior notes due February 2044	Semi-annually		1,000				979				978
4.40% Senior notes due March 2045	Semi-annually		1,000				977				977
4.25% Senior notes due April 2046	Semi-annually		1,600				1,585				1,584
3.90% Senior notes due June 2047	Semi-annually		750				738				738
4.50% Senior notes due December 2048	Semi-annually		1,500				1,462				—
3.50% Senior notes due September 2056	Semi-annually		1,000				972				971
Total senior notes			$	27,100			26,814				24,485
Capital lease obligations; payable in varying installments through January 31, 2055							1,049				984
Total long-term debt							27,863				25,469
Less current installments of long-term debt							1,056				1,202
Long-term debt, excluding current installments							$	26,807			$	24,267

December 2018 Issuance. In December 2018, we issued four tranches of senior notes.

•

The first tranche consisted of $300 million of floating rate senior notes due March 1, 2022 (the "2022 floating rate notes"). The 2022 floating rate notes bear interest at a variable rate determined quarterly equal to the three-month LIBOR plus 31 basis points. Interest on the 2022 floating rate notes is due quarterly on March 1, June 1, September 1, and December 1 of each year, beginning March 1, 2019.

•	The second tranche consisted of $700 million of 3.25% senior notes due March 1, 2022 (the "2022 notes") at a discount of $2 million. Interest on the 2022 notes is due semi-annually on March 1 and September 1 of each year, beginning March 1, 2019.

•	The third tranche consisted of $1.0 billion of 3.90% senior notes due December 6, 2028 (the"2028 notes") at a discount of $7 million. Interest on the 2028 notes is due semi-annually on June 6 and December 6 of each year, beginning June 6, 2019.

•	The fourth tranche consisted of $1.5 billion of 4.50% senior notes due December 6, 2048 (the "2048 notes") at a discount of $25 million (together with the 2022 floating rate notes, the 2022 notes and the 2028 notes, the "December 2018 issuance"). Interest on the 2048 notes is due semi-annually on June 6 and December 6 of each year, beginning June 6, 2019.

•	Issuance costs totaled $22 million. The net proceeds of the December 2018 issuance will be used for general corporate purposes, including repurchases of common stock.

September 2017 Issuance. In September 2017, we issued a single tranche of senior notes.

•	The tranche consisted of $1.0 billion of 2.80% senior notes due September 14, 2027 (the "2027 notes" and the "September 2017 issuance") at a discount of $3 million. Interest on the 2027 notes is due semi-annually on March 14 and September 14 of each year, beginning March 14, 2018.

•	Issuance costs totaled $6 million. The net proceeds of the September 2017 issuance were used to repay our floating rate notes due September 15, 2017, and for general corporate purposes, including repurchases of our common stock.

June 2017 Issuance. In June 2017, we issued three tranches of senior notes.

•

The first tranche consisted of $500 million of floating rate senior notes due June 5, 2020 (the "2020 floating rate notes"). The 2020 floating rate notes bear interest at a variable rate determined quarterly equal to the three-month LIBOR plus 15 basis points. Interest on the 2020 floating rate notes is due quarterly on March 5, June 5, September 5, and December 5 of each year, beginning September 5, 2017.

•	The second tranche consisted of $750 million of 1.80% senior notes due June 5, 2020 (the "2020 notes") at a discount of $1 million. Interest on the 2020 notes is due semi-annually on June 5 and December 5 of each year, beginning December 5, 2017.

•	The third tranche consisted of $750 million of 3.90% senior notes due June 15, 2047 (the "2047 notes") at a discount of $5 million (together with the 2020 floating rate notes and the 2020 notes, the "June 2017 issuance"). Interest on the 2047 notes is due semi-annually on June 15 and December 15 of each year, beginning December 15, 2017.

•	Issuance costs totaled $12 million. The net proceeds of the June 2017 issuance were used for general corporate purposes, including repurchases of our common stock.

Redemption. All of our senior notes, other than our outstanding floating rate 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. With respect to the 2020 notes and the 2022 notes, 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 on the notes to be redeemed that would be due after the related redemption date. With respect to all other notes, the redemption price is equal to the greater of (1) 100% of the principal amount of the notes to be redeemed, or (2) the sum of the present values of the remaining scheduled payments of principal and interest to the Par Call Date, as defined in the respective notes. Additionally, if a Change in Control Triggering Event occurs, as defined in the notes, holders of all notes have the right to require us to redeem those notes at 101% of the aggregate principal amount of the notes plus accrued interest up to the redemption date. We are generally not limited under the indentures governing the notes in our ability to incur additional indebtedness or required to maintain financial ratios or specified levels of net worth or liquidity. The indentures governing the notes contain various customary covenants; however, none are expected to impact our liquidity or capital resources.

Maturities of Long-Term Debt. Our long-term debt maturities, excluding capital leases, follow.

in millions	Principal
Fiscal 2019	$	1,000
Fiscal 2020	1,750
Fiscal 2021	2,350
Fiscal 2022	2,250
Fiscal 2023	1,000
Thereafter	18,750

Derivative Instruments

We had outstanding cross currency swap agreements with a combined notional amount of $326 million at February 3, 2019 and $626 million at January 28, 2018, accounted for as cash flow hedges, to hedge foreign currency fluctuations on certain intercompany debt. The approximate fair values of these agreements were assets of $121 million at February 3, 2019 and $233 million at January 28, 2018, which were the estimated amounts we would have received to settle the agreements and were included in other assets.

We had outstanding interest rate swap agreements with combined notional amounts of $1.3 billion at both February 3, 2019 and January 28, 2018. These agreements were accounted for as fair value hedges that swap fixed for variable rate interest to hedge changes in the fair values of certain senior notes. The fair values of these agreements were not material at February 3, 2019 and January 28, 2018.

We had outstanding foreign currency forward contracts with a combined notional amount of $16 million at February 3, 2019. These agreements were accounted for as cash flow hedges that hedge the variability of forecasted cash flow associated with certain payments made in our foreign operations. At January 28, 2018, we had outstanding foreign currency forward contracts with a combined notional amount of $300 million. These agreements were accounted for as net investment hedges that hedge against foreign currency exposure on our net investment in certain subsidiaries and were all settled during fiscal 2018. At February 3, 2019 and January 28, 2018, the fair values of these agreements were not material.

5.	INCOME TAXES

Tax Reform

On December 22, 2017, the U.S. enacted comprehensive tax legislation with the Tax Act, making broad and complex changes to U.S. tax law, including lowering the U.S. corporate income tax rate to 21%, transitioning to a modified territorial system, and providing for current expensing of certain qualifying capital expenditures. Also in December 2017, the SEC issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As disclosed in our 2017 Form 10-K, we were able to reasonably estimate certain effects and, therefore, recorded a total provisional charge of $127 million. The provisional charge included (i) a charge for the deemed repatriation of historical earnings of foreign subsidiaries, (ii) a provisional benefit for the remeasurement of deferred tax assets and liabilities, and (iii) an estimated benefit due to a lower U.S. statutory tax rate. As of February 3, 2019, we have completed our accounting for all of the enactment-date income tax effects of the Tax Act. During fiscal 2018, we adjusted the provisional charge by a net benefit of $85 million, for a final tax charge of $42 million. These adjustments were made upon our further analysis of certain aspects of the Tax Act, refinement of our calculations, and the issuance of guidance by the U.S. Department of the Treasury. The components of the provisional charge recognized in fiscal 2017 and the adjustments made during fiscal 2018 follow.

in millions	Deemed Repatriation				Deferred Tax Remeasure-ment				Statutory Tax Rate Impact				Total
Provisional tax charge (benefit) - recognized in fiscal 2017	$	400			$	(147	)		$	(126	)		$	127
Tax charge (benefit) adjustment - finalized in fiscal 2018	(62		)		(22		)		(1		)		(85		)
Total tax charge (benefit)	$	338			$	(169	)		$	(127	)		$	42

We have elected to pay our transition tax over the eight-year period provided in the Tax Act. As of February 3, 2019, the remaining balance of our transition tax obligation was $14 million, after required application of overpayments.

The Tax Act also created a new requirement that certain income (referred to as global intangible low-taxed income or “GILTI”) earned by controlled foreign corporations, or CFCs, must be included currently in the gross income of the CFCs’ U.S. shareholder. Due to the complexity of the new GILTI tax rules, we recorded no GILTI related deferred taxes as of January 28, 2018. After further considerations in fiscal 2018, we have elected to account for GILTI in the period the tax is incurred.

We expect additional regulatory guidance and technical clarifications from the U.S. Department of the Treasury and IRS within the next 12 months. Any subsequent adjustment to these amounts will be recorded to the provision for income taxes in the period in which the guidance is issued or finalized.

Provision for Income Taxes

Our earnings before the provision for income taxes follow.

in millions	Fiscal				Fiscal				Fiscal
2018				2017				2016
U.S.	$	13,456			$	12,682			$	11,568
Foreign	1,100				1,016				923
Total	$	14,556			$	13,698			$	12,491

Our provision for income taxes follows.

in millions	Fiscal				Fiscal				Fiscal
2018				2017				2016
Current:
Federal	$	2,495			$	4,128			$	3,870
State	544				499				462
Foreign	372				331				315
Total current	3,411				4,958				4,647
Deferred:
Federal	67				(67		)		(102		)
State	1				89				13
Foreign	(44		)		88				(24		)
Total deferred	24				110				(113		)
Provision for income taxes	$	3,435			$	5,068			$	4,534

Our combined federal, state, and foreign effective tax rates follow.

	Fiscal			Fiscal			Fiscal
	2018			2017			2016
Combined federal, state, and foreign effective tax rates	23.6	%		37.0	%		36.3	%

The reconciliation of our provision for income taxes at the federal statutory rates of 21% for fiscal 2018, approximately 34% for fiscal 2017, and 35% for fiscal 2016 to the actual tax expense follows.

in millions	Fiscal				Fiscal				Fiscal
2018				2017				2016
Income taxes at federal statutory rate	$	3,057			$	4,648			$	4,372
State income taxes, net of federal income tax benefit	443				369				309
Tax on mandatory deemed repatriation	(62		)		400				—
Other, net	(3		)		(349		)		(147		)
Total	$	3,435			$	5,068			$	4,534

Deferred Taxes

The tax effects of temporary differences that give rise to significant portions of our deferred tax assets and deferred tax liabilities follow.

in millions	February 3, 2019				January 28, 2018
Assets:
Deferred compensation	$	183			$	185
Accrued self-insurance liabilities	298				295
State income taxes	96				109
Non-deductible reserves	231				220
Net operating losses	17				19
Other	116				124
Total deferred tax assets	941				952
Valuation allowance	—				—
Total deferred tax assets after valuation allowance	941				952
Liabilities:
Merchandise inventories	(9		)		(9		)
Property and equipment	(893		)		(770		)
Goodwill and other intangibles	(179		)		(243		)
Other	(230		)		(251		)
Total deferred tax liabilities	(1,311		)		(1,273		)
Net deferred tax liabilities	$	(370	)		$	(321	)

Our noncurrent deferred tax assets and noncurrent deferred tax liabilities, netted by tax jurisdiction, follow.

in millions	February 3, 2019				January 28, 2018
Other assets	$	121			$	119
Deferred income taxes	(491		)		(440		)
Net deferred tax liabilities	$	(370	)		$	(321	)

We believe that the realization of the deferred tax assets is more likely than not, based upon the expectation that we will generate the necessary taxable income in future periods.

At February 3, 2019, we had federal, state, and foreign net operating loss carryforwards available to reduce future taxable income, expiring at various dates beginning in 2019 to 2038. We have concluded that it is more likely than not that the tax benefits related to the federal, state, and foreign net operating losses will be realized.

Reinvestment of Unremitted Earnings

Substantially all of our current year foreign cash flows in excess of working capital and cash needed for strategic investments are not intended to be indefinitely reinvested offshore. Therefore, the tax effects of repatriation (including applicable state and local taxes and foreign withholding taxes) of such cash flows have been provided for in the accompanying consolidated statements of earnings. We intend to reinvest substantially all of the approximately $3 billion of non-cash unremitted earnings of our non-U.S. subsidiaries indefinitely. Accordingly, no provision for state and local taxes or foreign withholding taxes was recorded on these unremitted earnings in the accompanying consolidated statements of earnings. It is impracticable for us to determine the amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings due to the complexities associated with the hypothetical calculation.

Tax Return Examination Status

Our income tax returns are routinely examined by U.S. federal, state and local, and foreign tax authorities. With few exceptions, as of February 3, 2019, the Company is no longer subject to U.S. federal examinations by tax

authorities for years before fiscal 2010. During fiscal 2018, the Company settled a transfer pricing issue between the U.S. and Mexican tax authorities. The resolution of this issue reduced our unrecognized tax benefits by $89 million. The net impact of the settlement resulted in an immaterial tax charge in fiscal 2018. Our U.S. federal tax returns for fiscal years 2010 through 2014 are currently under examination by the IRS. With respect to these years, the IRS has issued a proposed adjustment relating to transfer pricing between our entities in the U.S. and China. We intend to defend our position using all available remedies including bi-lateral relief. There are also ongoing U.S. state and local audits and other foreign audits covering fiscal years 2005 through 2017. We do not expect the results from any ongoing income tax audit to have a material impact on our consolidated financial condition, results of operations, or cash flows.

Over the next twelve months, it is reasonably possible that the resolution of federal and state tax examinations could reduce our unrecognized tax benefits by $65 million. Final settlement of these audit issues may result in payments that are more or less than this amount, but we do not anticipate the resolution of these matters will result in a material change to our consolidated financial condition or results of operations.

Unrecognized Tax Benefits

Reconciliations of the beginning and ending amount of our gross unrecognized tax benefits follow.

in millions	Fiscal				Fiscal				Fiscal
2018				2017				2016
Unrecognized tax benefits balance at beginning of fiscal year	$	637			$	659			$	689
Additions based on tax positions related to the current year	91				74				147
Additions for tax positions of prior years	100				15				14
Reductions for tax positions of prior years	(245		)		(93		)		(161		)
Reductions due to settlements	(66		)		(1		)		(16		)
Reductions due to lapse of statute of limitations	(23		)		(17		)		(14		)
Unrecognized tax benefits balance at end of fiscal year	$	494			$	637			$	659

Unrecognized tax benefits that if recognized would affect our annual effective income tax rate on net earnings were $398 million at February 3, 2019; $483 million at January 28, 2018; and $382 million at January 29, 2017.

Interest and Penalties

Net adjustments to accruals for interest and penalties associated with uncertain tax positions resulted in a benefit of $33 million in fiscal 2018, and expenses of $24 million in fiscal 2017 and $20 million in fiscal 2016. Interest and penalties are included in interest expense and SG&A, respectively.

Our total accrued interest and penalties follow.

in millions	February 3, 2019				January 28, 2018
Total accrued interest and penalties	$	101			$	134

6.	STOCKHOLDERS' EQUITY

Stock Rollforward

A reconciliation of the number of shares of our common stock follows.

in millions	Fiscal			Fiscal			Fiscal
2018			2017			2016
Common stock:
Balance at beginning of year	1,780			1,776			1,772
Shares issued under employee stock plans	2			4			4
Balance at end of year	1,782			1,780			1,776
Treasury stock:
Balance at beginning of year	(622	)		(573	)		(520	)
Repurchases of common stock	(55	)		(49	)		(53	)
Balance at end of year	(677	)		(622	)		(573	)
Shares outstanding at end of year	1,105			1,158			1,203

Annual per share cash dividends follow.

	Fiscal				Fiscal				Fiscal
2018				2017				2016
Cash dividends per share	$	4.12			$	3.56			$	2.76

Accelerated Share Repurchase Agreements. We enter into ASR agreements from time to time with third-party financial institutions to repurchase shares of our common stock. Under an ASR agreement, we pay a specified amount to the financial institution and receive an initial delivery of shares. This initial delivery of shares represents the minimum number of shares that we may receive under the agreement. Upon settlement of the ASR agreement, the financial institution delivers additional shares, with the final number of shares delivered determined with reference to the volume weighted average price per share of our common stock over the term of the agreement, less a negotiated discount. The transactions are accounted for as equity transactions and are included in treasury stock when the shares are received, at which time there is an immediate reduction in the weighted average common shares calculation for basic and diluted earnings per share.

The terms of each ASR agreement entered into during the last three fiscal years, structured as outlined above, follow (in millions).

Agreement Date		Settlement Date		Agreement Amount				Initial Shares Delivered			Additional Shares Delivered			Total Shares Delivered
Q2 2017		Q2 2017		$	1,650			9.7			1.1			10.8
Q3 2017		Q4 2017		1,200				6.7			0.7			7.4
Q1 2018		Q2 2018		750				3.4			0.8			4.2
Q2 2018		Q3 2018		1,600				7.1			1.0			8.1

7.	FAIR VALUE MEASUREMENTS

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

	Fair Value at February 3, 2019 Using												Fair Value at January 28, 2018 Using
in millions	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Derivative agreements – assets	$	—			$	138			$	—			$	—			$	235			$	—
Derivative agreements – liabilities	—				(11		)		—				—				(12		)		—
Total	$	—			$	127			$	—			$	—			$	223			$	—

We use derivative financial instruments from time to time in the management of our interest rate exposure on long-term debt and our exposure on foreign currency fluctuations. The fair value of our derivative financial instruments was measured using observable market information (level 2). Our derivative agreements are discussed further in Note 4.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

Long-lived assets, goodwill, and other intangible assets were analyzed for impairment on a nonrecurring basis using fair value measurements with unobservable inputs (level 3).

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

	February 3, 2019								January 28, 2018
in millions	Fair Value (Level 1)				Carrying Value				Fair Value (Level 1)				Carrying Value
Senior notes	$	28,348			$	26,814			$	26,617			$	24,485

8.	STOCK-BASED COMPENSATION

Omnibus Stock Incentive Plans

The Home Depot, Inc. Amended and Restated 2005 Omnibus Stock Incentive Plan (the "2005 Plan") and The Home Depot, Inc. 1997 Omnibus Stock Incentive Plan (the "1997 Plan" and collectively with the 2005 Plan, the "Plans") provide that incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, deferred shares, and other stock-based awards may be issued to certain of our associates, officers, and non-employee directors. Under the 2005 Plan, the maximum number of shares of our common stock authorized for issuance is 255 million shares, with any award other than a stock option or stock appreciation right reducing the number of shares available for issuance by 2.11 shares. At February 3, 2019, there were 127 million shares available for future grants under the 2005 Plan. No additional equity awards could be issued from the 1997 Plan after the adoption of the 2005 Plan on May 26, 2005.

Stock Options. Under the terms of the Plans, incentive stock options and nonqualified stock options must have an exercise price at or above the fair market value of our stock on the date of the grant. Typically, nonqualified stock options vest at the rate of 25% per year commencing on the first or second anniversary date of the grant and expire on the tenth anniversary date of the grant. Additionally, certain stock options may become non-forfeitable upon the associate reaching age 60, provided the associate has had five years of continuous service. No incentive stock options have been issued under the 2005 Plan.

We estimate the fair value of stock option awards on the date of grant using an option-pricing model. We use the Black-Scholes option pricing model for purposes of valuing stock option awards. Our determination of fair value of stock option awards on the date of grant using the Black-Scholes option pricing model is affected by our stock price as well as assumptions regarding a number of subjective variables.

The per share weighted average fair value of stock options granted and the assumptions used in determining fair value at the date of grant using the Black-Scholes option-pricing model follow.

	Fiscal				Fiscal				Fiscal
	2018				2017				2016
Per share weighted average fair value	$	32.28			$	21.85			$	20.26
Risk-free interest rate	2.7		%		1.9		%		1.4		%
Assumed volatility	21.3		%		19.4		%		20.7		%
Assumed dividend yield	2.3		%		2.4		%		2.1		%
Assumed lives of options	5 years				5 years				5 years

The total intrinsic value of stock options exercised follow.

in millions	Fiscal			Fiscal			Fiscal
2018			2017			2016
Total intrinsic value of stock options exercised	138			223			140

A summary of stock option activity by number of shares and weighted average exercise price follows.

shares in thousands	Number of Shares			Weighted Average Exercise Price
Outstanding at January 28, 2018	7,196			$	82.85
Granted	412			178.67
Exercised	(1,072	)		59.54
Forfeited	(156	)		130.78
Outstanding at February 3, 2019	6,380			91.78

Shares of common stock issued from stock option exercises are made available from authorized and unissued common stock or treasury stock.

Details regarding outstanding and exercisable stock options at the end of fiscal 2018 follow.

shares in thousands, dollars in millions, except for per share amounts	Number of Shares			Intrinsic Value				Weighted Average Remaining Life		Weighted Average Exercise Price
Outstanding	6,380			$	591			5 years		$	91.78
Exercisable	3,910			463				4 years		66.04

At February 3, 2019, there were approximately 6 million stock options vested or expected to ultimately vest.

Restricted Stock and Performance Shares. Restrictions on the restricted stock issued under the Plans generally lapse according to one of the following schedules:

•	the restrictions on the restricted stock lapse over various periods up to five years;

•	the restrictions on 25% of the restricted stock lapse upon the third and sixth anniversaries of the date of issuance with the remaining 50% of the restricted stock lapsing upon the associate’s attainment of age 62; or

•	the restrictions on 25% of the restricted stock lapse upon the third and sixth anniversaries of the date of issuance with the remaining 50% of the restricted stock lapsing upon the earlier of the associate’s attainment of age 60 or the tenth anniversary of the grant date.

At the grant date of the award, recipients of restricted stock are granted voting rights and generally receive dividends on unvested shares, paid in the form of cash on each dividend payment date. Additionally, certain restricted stock awards may become non-forfeitable upon the associate's attainment of age 60, provided the associate has had five years of continuous service.

We have also granted performance shares under the Plans, the payout of which is dependent on our performance against target average ROIC and operating profit over a three-year performance cycle. Additionally, certain awards may become non-forfeitable upon the associate's attainment of age 60, provided the associate has had five years of

continuous service and minimum performance targets are achieved. Recipients of performance shares have no voting rights until payout of the awards. Dividend equivalents accrue on the performance shares (as reinvested shares) and are paid upon the payout of the award based upon the actual number of shares earned.

The fair value of the restricted stock and performance shares is based on the closing stock price on the date of grant and is expensed over the period during which the restrictions lapse.

Restricted Stock Units and Deferred Shares. Each restricted stock unit entitles the associate to one share of common stock to be received upon vesting up to five years after the grant date. Additionally, certain awards may become non-forfeitable upon the associate reaching age 60, provided the associate has had five years of continuous service. Recipients of restricted stock units have no voting rights until the vesting of the award. Recipients receive dividend equivalents that accrue on unvested units and are paid out in the form of additional shares of stock on the vesting date. The fair value of the restricted stock units is based on the closing stock price on the date of grant and is expensed over the period during which the units vest.

We grant awards of deferred shares to non-employee directors under the Plans. Each deferred share entitles the non-employee director to one share of common stock to be received following termination of Board service. Recipients of deferred shares have no voting rights and receive dividend equivalents that accrue and are paid out in the form of additional shares of stock upon payout of the underlying shares following termination of service. The fair value of the deferred shares is based on the closing stock price on the date of grant and is expensed immediately upon grant.

Deferred shares granted to non-employee directors follow.

	Fiscal			Fiscal			Fiscal
2018			2017			2016
Deferred shares granted	26,000			27,000			29,000

Stock-Based Compensation Activity. A summary of restricted stock, performance shares, and restricted stock unit activity follows.

shares in thousands	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested at January 28, 2018	4,729			$	123.03
Granted	1,930			167.20
Vested	(2,068	)		104.61
Forfeited	(349	)		142.58
Nonvested at February 3, 2019	4,242			150.51

Stock-based compensation expense, net of estimated forfeitures follows.

in millions	Fiscal				Fiscal				Fiscal
2018				2017				2016
Stock-based compensation expense, net	$	282			$	273			$	267

At February 3, 2019, there was $379 million of unamortized stock-based compensation expense, which is expected to be recognized over a weighted average period of two years.

The total fair value of restricted stock, performance shares, and restricted stock units that vested during the fiscal year follow.

in millions	Fiscal				Fiscal				Fiscal
2018				2017				2016
Total fair value vested	$	367			$	309			$	354

Employee Stock Purchase Plans

We maintain two ESPPs (a U.S. and a non-U.S. plan). The plan for U.S. associates is a tax-qualified plan under Section 423 of the Internal Revenue Code. The non-U.S. plan is not a Section 423 plan. At February 3, 2019, there were 19 million shares available under the U.S. plan and 19 million shares available under the non-U.S. plan. The purchase price of shares under the ESPPs is equal to 85% of the stock’s fair market value on the last day of the

purchase period, which is a six-month period ending on December 31 and June 30 of each year. During fiscal 2018, there were 1 million shares purchased under the ESPPs at an average price of $155.79. Under the outstanding ESPPs at February 3, 2019, employees have contributed $22 million to purchase shares at 85% of the stock’s fair market value on the last day of the current purchase period (June 30, 2019).

9.	EMPLOYEE BENEFIT PLANS

We maintain active defined contribution retirement plans for our employees (the "Benefit Plans"). All associates satisfying certain service requirements are eligible to participate in the Benefit Plans. We make cash contributions each payroll period up to specified percentages of associates’ contributions as approved by our Board of Directors.

We also maintain the Restoration Plan to provide certain associates deferred compensation that they would have received under the Benefit Plans as a matching contribution if not for the maximum compensation limits under the Internal Revenue Code. We fund the Restoration Plan through contributions made to a grantor trust, which are then used to purchase shares of our common stock in the open market.

Our contributions to the Benefit Plans and the Restoration Plan follow.

in millions	Fiscal				Fiscal				Fiscal
2018				2017				2016
Contributions to the Benefit Plans and the Restoration Plan	$	211			$	202			$	195

At February 3, 2019, the Benefit Plans and the Restoration Plan held a total of 7 million shares of our common stock in trust for plan participants.

10.	WEIGHTED AVERAGE COMMON SHARES

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

in millions	Fiscal			Fiscal			Fiscal
2018			2017			2016
Basic weighted average common shares	1,137			1,178			1,229
Effect of potentially dilutive securities	6			6			5
Diluted weighted average common shares	1,143			1,184			1,234

Anti-dilutive securities excluded from diluted weighted average common shares	—			1			1

11.	COMMITMENTS AND CONTINGENCIES

At February 3, 2019, we had outstanding letters of credit totaling $421 million, primarily related to certain business transactions, including insurance programs, trade contracts, and construction contracts.

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.

12.	QUARTERLY FINANCIAL DATA (UNAUDITED)

A summary of our quarterly consolidated results of operations follows.

in millions, except per share data	First Fiscal Quarter				Second Fiscal Quarter				Third Fiscal Quarter				Fourth Fiscal Quarter
Fiscal 2018:
Net sales	$	24,947			$	30,463			$	26,302			$	26,491
Gross profit	8,617				10,365				9,151				9,027
Net earnings	2,404				3,506				2,867				2,344
Basic earnings per share	2.09				3.06				2.53				2.10
Diluted earnings per share	2.08				3.05				2.51				2.09
Fiscal 2017:
Net sales	$	23,887			$	28,108			$	25,026			$	23,883
Gross profit	8,154				9,461				8,648				8,093
Net earnings	2,014				2,672				2,165				1,779
Basic earnings per share	1.68				2.26				1.85				1.53
Diluted earnings per share	1.67				2.25				1.84				1.52

—————

The fourth fiscal quarter of fiscal 2018 includes 14 weeks. The comparable prior-year period included 13 weeks.