Use the Financial Statements in Appendix A of the Williams et al. text to complete the comprehensive problem. This is an individual assignment.
Grading Criteria:
- Provides accurate information relating to Part I for Operating Activities, Investing Activities, and Financing Activities (10 points)
- Provides a justified recommendation regarding Part II regarding the decision to extend credit (10 points)
- Provides accurate information relating to Part III regarding percentage change in net sales, net earnings, gross profit, return on average total assets, and return on average total equity (10 points)
accopaiy g 2015 and February 2, 2014 We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), The Home Depot, Inc.'s internal control over financial reporting as of January 31, 2016, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 24, 2016 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting /s/ KPMG LLP Atlanta, Georgia March 24, 2016 THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS page A-4 Fiscal Year Ended (1) amounts in millions, except per share data January February February 2, 2014 31 2016 1, 2015 S 78,812 NET SALES 88,519 83,176 Cost of Sales 58,254 54,787 51,897 26,915 GROSS PROFIT 30,265 28,389 Operating Expenses: Selling, General and Administrative Depreciation and Amortization 16,801 16,280 16,122 1,690 1640 L,627 Total Operating Expenses 18,491 17,749 17,920 OPERATING INCOME 11,774 10,469 9,166 Interest and Other (Income) Expense: Interest and Investment Income (166) (337) (12) Interest Expense 919 830 711 Interest and Other, net 753 493 699 EARNINGS BEFORE PROVISION 11,021 9,976 8,467 FOR INCOME TAXES 4,012 Provision for Income Taxes 3,631 3,082 $ NET EARNINGS S 7.009 6.345 5.385 Weighted Average Common Shares BASIC EARNINGS PER SHARE 1,277 1,338 1,425 S S 5.49 3.78 4.74 Diluted Weighted Average Common Shares 1,283 1,346 1,434 DILUTED EARNINGS PER SHARE $ $ 5.46 4.71 3.76 (1) Fiscal years ended January 31, 2016, February 1, 2015 and February 2, 2014 include 52 weeks. See accompanying Notes to Consolidated Financial Statements. THE HOME DEPOT, INC. AND SUBSIDIARIES page A-5 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Year Ended(1) amounts in millions February February 1, January 31, 2, 2016 2015 2014 Net Earnings Other Comprehensive Loss: Foreign Currency Translation Adjustments Cash Flow Hedges, net of tax $ $ 7,009 $ 6,345 5,385 (510) (412) (329) (12) (34) 11 Other (10) Total Other Comprehensive Loss (498) (446) 6,563 $ (351) 5,847 $ COMPREHENSIVE INCOME 5,034 (1) Fiscal years ended January 31, 2016, February 1, 2015 and February 2, 2014 include 52 weeks. See accompanying Notes to Consolidated Financial Statements 28% I T-Mobile 10:00 PM 22 of 44 Done THE HOME DE POT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS page A-6 amounts in millions, except share and per share data January February 31. 1, 2016 2015 ASSETS Current Assets: Cash and Cash Equivalents Receivables, net Merchandise Inventories $ 2,216 S 1,723 1,890 1,484 11,809 11,079 Other Current Assets 1,078 _1,016 Total Current Assets 16,993 15,302 38,513 Property and Equipment, at cost Less Accumulated Depreciation and Amortization Net Property and Equipment 39,266 17,075 15.793 22.191 22.720 Goodwill 2,102 1,353 Other Assets 1,263 571 $ 42,549 S 39,946 Total Assets LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-Term Debt Accounts Payable Accrued Salaries and Related Expenses 350 $ S 290 5,807 6,565 1,515 1,391 Sales Taxes Payable 476 434 1,468 Deferred Revenue 1,566 Income Taxes Payable Current Installments of Long-Term Debt Other Accrued Expenses 34 35 77 38 1.943 1.806 Total Current Liabilities 12.526 11.269 20,888 16,869 Long-Term Debt, excluding current installments Other Long-Term Liabilities 1,965 1,844 Deferred Income Taxes 854 642 Total Liabilities 36,233 30,624 STOCKHOLDERS' EQUITY Common Stock, par value S0.05; authorized: 10 billion shares; issued: 1.772 billion shares at January 31, 2016 and 1.768 billion shares at February 1, 2015; outstanding: 1.252 billion shares at January 31, 2016 and 1.307 billion shares at February 1, 2015 Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock, at cost, 520 million shares at January 31, 2016 and 461 million shares at February 1, 2015 Total Stockholders' Equity Total Liabilities and Stockholders' Equity 42.549 S 39.946 88 88 9,347 8,885 30,973 26,995 (898) (452) (33.194) (26.194) 6,316 9,322 l T-Mobile O 28% O 10:00 PM 22 of 44 Done Total LidUmues a U StOCKnUIuers Euuty See accompanying Notes to Consolidated Financial Statements. THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY _page A-7 Accuaulated er Commen Stoch Irsurs ch Paid-In Retained Comprehesive shares Aot Capital Earng Income ssShres 88 7,948S 26038 S Stockholdets S i mis, c Equty 17,177 per shure da Amont (270 10,694) $ Balance, February 3, 2013 1754 Ne:Eaings 5is 518 Shares Issued Under Employee Sock Plans 103 103 - IN E Stev'is Bised Comps Forcign Currency Translation Adustments Csh Fow Hodces, net of tax (329) (329) 12 12) Stock Options, Awards and Amortization of Restricted Stock 228 228 - _ (S300 Keourases at Common Sock (8.200 Cash Dividends (S1.56 per share)) 2.243 (2.243) Ccher (I0 Balance, February 2. 2014 NeLng sS 8.4 s 23.J80 1761 46 (381) 19.194) S 12,522 14 Sres Isued Unler Employee Sick Plans Tax EfeetStocs-Bsed Compctson 122 122 136 136 Foreign Currency Translation Adjusiments Csh Fow Holes, ne of (510) (510) 11 Stock Options, Awards and Amartization of Resricied Stock 225 225 - - Resses f omm Sk 2.530 Cash Dividends ($1.88 per share) (2,530) - Oher (461 (26.194) 9322 Balance, February 1, 2015 1768 S 8.885 S 26.995 (452 Ne: Eaings DE Shares Issued Under Employee Stock Plans T Sts BdCamp Foreign Currency Translation Adjustments 73 73 145 145 (412) (412) ChFow Holges, net of tx 34 34 Stock Opcioas, Awards and Amortization of Restricted Stock 244 244 Reurcases of Common Sck 59 (7.000) 700 Cash Dividends (52.36 per share) (3,031) (3,031) Balance Jaars 31. 20 2 33.194 316 .47 91 S8 See accompanying Notes to Consolidated Financial Statements THE HOME DEPOT, INC. AND SUBSIDIARIES _page A-8 CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended (1) January February February 31, 2016 amounts in millions 2. 1, 2015 2014 CASH FLOWS FROM OPERATING ACTIVITIES: Net Earnings Reconciliation of Net Earnings to Net Cash Provided by Operating Activities: $ 7,009 6,345 S 5,385 T-Mobile 10:01 PM 27% 22 of 44 Done THE HOME DEPOT, INC. AND SUBSIDIARIES page A-8 CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended (1) amounts in millions January February February 1, 31 2, 2016 2015 2014 CASH FLOWS FROM OPERATING ACTIVITIES: Net Earnings Reconciliation of Net Earnings to Net Cash Provided by Operating Activities: 7,009 S 6,345 S 5,385 1,757 1,863 1,786 Depreciation and Amortization Stock-Based Compensation Expense Gain on Sales of Investments 244 225 228 (144) (323) Changes in Assets and Liabilities, net of the effects of acquisitions: Receivables, net (181) (81 (15) Merchandise Inventories (546) (124) (455) Other Current Assets (5) (199) (5) Accounts Payable and Accrued Expenses Deferred Revenue 888 244 605 75 109 146 Income Taxes Payable 168 119 154 Deferred Income Taxes 15 159 (31) Other Net Cash Provided by Operating (33) (104) (35) 9.373 8,242 7,628 Activities CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures, net of $165, S217 and $46 of non-cash capital expenditures in fiscal 2015, 2014 and 2013, respectively Proceeds from Sales of Investments (1,503) (1,442) (1,389) 323 144 (1,666) Payments for Businesses Acquired, net Proceeds from Sales of Property and Equipment Net Cash Used in Investing Activities (200) (206) 43 48 88 (1,271) (1.507) (2,982) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Short-Term Borrowings 60 290 net Proceeds from Long-Term Borrowings, net 3,991 1,981 5,222 of discounts Repayments of Long-Term Debt Repurchases of Common Stock (39) (39) (1,289) (8,546) (7,000) (7,000) Proceeds from Sales of Common Stock 228 252 241 (2,530) (2,243) Cash Dividends Paid to Stockholders (3,031) Other Financing Activities 4 (25) (37 Net Cash Used in Financing (5,787) (7,071) (6,652) !! T-Mobile 10:01 PM 27% 22 of 44 Done Qher rilmancing Acuviues Net Cash Used in Financing Activities (7,071)( (5,787) (6,652) Change in Cash and Cash Equivalents Effect of Exchange Rate Changes on Cash and Cash Equivalents Cash and Cash Equivalents at Beginning 604 (100) (531) (106) (111) (34) 1,723 1,929 2,494 of Year 2,216 S 1,723 1,929 Cash and Cash Equivalents at End of Year SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS MADE FOR: Interest, net of interest capitalized $ 874 $ 782 S 639 $ 3,853 S 3,435 S 2,839 Income Taxes (1) Fiscal years ended January 31, 2016, February 1, 2015 and February 2, 2014 include 52 weeks. See accompanying Notes to Consolidated Financial Statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS page A-9 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business, Consolidation and Presentation The Home Depot, Inc., together with its subsidiaries (the "Company"), is a home improvement retailer that sells a wide assortment of building materials, home improvement products and lawn and garden products and provides a number of services. The Home Depot stores, which are full-service, warehouse-style stores averaging approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area, stock approximately 30,000 to 40,000 different kinds of products that are sold to do-it-yourself customers, do-it-for-me customers and professional customers. The Company also offers a significantly broader product assortment through its Home Depot, Home Decorators Collection and Blinds.com websites. At the end of fiscal 2015, the Company was operating 2,274 The Home Depot stores, which included 1,977 stores in the United States, including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam ("U.S."), 182 stores in Canada and 115 stores in Mexico. The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation Fiscal Year The Company's fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31. Fiscal years ended January 31, 2016 ("fiscal 2015"), February 1, 2015 ("fiscal 2014") and February 2, 2014 ("fiscal 2013") include 52 weeks. Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the renorting of assets and liabilities. the disclosure of contingent assets and accopaiy g 2015 and February 2, 2014 We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), The Home Depot, Inc.'s internal control over financial reporting as of January 31, 2016, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 24, 2016 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting /s/ KPMG LLP Atlanta, Georgia March 24, 2016 THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS page A-4 Fiscal Year Ended (1) amounts in millions, except per share data January February February 2, 2014 31 2016 1, 2015 S 78,812 NET SALES 88,519 83,176 Cost of Sales 58,254 54,787 51,897 26,915 GROSS PROFIT 30,265 28,389 Operating Expenses: Selling, General and Administrative Depreciation and Amortization 16,801 16,280 16,122 1,690 1640 L,627 Total Operating Expenses 18,491 17,749 17,920 OPERATING INCOME 11,774 10,469 9,166 Interest and Other (Income) Expense: Interest and Investment Income (166) (337) (12) Interest Expense 919 830 711 Interest and Other, net 753 493 699 EARNINGS BEFORE PROVISION 11,021 9,976 8,467 FOR INCOME TAXES 4,012 Provision for Income Taxes 3,631 3,082 $ NET EARNINGS S 7.009 6.345 5.385 Weighted Average Common Shares BASIC EARNINGS PER SHARE 1,277 1,338 1,425 S S 5.49 3.78 4.74 Diluted Weighted Average Common Shares 1,283 1,346 1,434 DILUTED EARNINGS PER SHARE $ $ 5.46 4.71 3.76 (1) Fiscal years ended January 31, 2016, February 1, 2015 and February 2, 2014 include 52 weeks. See accompanying Notes to Consolidated Financial Statements. THE HOME DEPOT, INC. AND SUBSIDIARIES page A-5 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Year Ended(1) amounts in millions February February 1, January 31, 2, 2016 2015 2014 Net Earnings Other Comprehensive Loss: Foreign Currency Translation Adjustments Cash Flow Hedges, net of tax $ $ 7,009 $ 6,345 5,385 (510) (412) (329) (12) (34) 11 Other (10) Total Other Comprehensive Loss (498) (446) 6,563 $ (351) 5,847 $ COMPREHENSIVE INCOME 5,034 (1) Fiscal years ended January 31, 2016, February 1, 2015 and February 2, 2014 include 52 weeks. See accompanying Notes to Consolidated Financial Statements 28% I T-Mobile 10:00 PM 22 of 44 Done THE HOME DE POT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS page A-6 amounts in millions, except share and per share data January February 31. 1, 2016 2015 ASSETS Current Assets: Cash and Cash Equivalents Receivables, net Merchandise Inventories $ 2,216 S 1,723 1,890 1,484 11,809 11,079 Other Current Assets 1,078 _1,016 Total Current Assets 16,993 15,302 38,513 Property and Equipment, at cost Less Accumulated Depreciation and Amortization Net Property and Equipment 39,266 17,075 15.793 22.191 22.720 Goodwill 2,102 1,353 Other Assets 1,263 571 $ 42,549 S 39,946 Total Assets LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-Term Debt Accounts Payable Accrued Salaries and Related Expenses 350 $ S 290 5,807 6,565 1,515 1,391 Sales Taxes Payable 476 434 1,468 Deferred Revenue 1,566 Income Taxes Payable Current Installments of Long-Term Debt Other Accrued Expenses 34 35 77 38 1.943 1.806 Total Current Liabilities 12.526 11.269 20,888 16,869 Long-Term Debt, excluding current installments Other Long-Term Liabilities 1,965 1,844 Deferred Income Taxes 854 642 Total Liabilities 36,233 30,624 STOCKHOLDERS' EQUITY Common Stock, par value S0.05; authorized: 10 billion shares; issued: 1.772 billion shares at January 31, 2016 and 1.768 billion shares at February 1, 2015; outstanding: 1.252 billion shares at January 31, 2016 and 1.307 billion shares at February 1, 2015 Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock, at cost, 520 million shares at January 31, 2016 and 461 million shares at February 1, 2015 Total Stockholders' Equity Total Liabilities and Stockholders' Equity 42.549 S 39.946 88 88 9,347 8,885 30,973 26,995 (898) (452) (33.194) (26.194) 6,316 9,322 l T-Mobile O 28% O 10:00 PM 22 of 44 Done Total LidUmues a U StOCKnUIuers Euuty See accompanying Notes to Consolidated Financial Statements. THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY _page A-7 Accuaulated er Commen Stoch Irsurs ch Paid-In Retained Comprehesive shares Aot Capital Earng Income ssShres 88 7,948S 26038 S Stockholdets S i mis, c Equty 17,177 per shure da Amont (270 10,694) $ Balance, February 3, 2013 1754 Ne:Eaings 5is 518 Shares Issued Under Employee Sock Plans 103 103 - IN E Stev'is Bised Comps Forcign Currency Translation Adustments Csh Fow Hodces, net of tax (329) (329) 12 12) Stock Options, Awards and Amortization of Restricted Stock 228 228 - _ (S300 Keourases at Common Sock (8.200 Cash Dividends (S1.56 per share)) 2.243 (2.243) Ccher (I0 Balance, February 2. 2014 NeLng sS 8.4 s 23.J80 1761 46 (381) 19.194) S 12,522 14 Sres Isued Unler Employee Sick Plans Tax EfeetStocs-Bsed Compctson 122 122 136 136 Foreign Currency Translation Adjusiments Csh Fow Holes, ne of (510) (510) 11 Stock Options, Awards and Amartization of Resricied Stock 225 225 - - Resses f omm Sk 2.530 Cash Dividends ($1.88 per share) (2,530) - Oher (461 (26.194) 9322 Balance, February 1, 2015 1768 S 8.885 S 26.995 (452 Ne: Eaings DE Shares Issued Under Employee Stock Plans T Sts BdCamp Foreign Currency Translation Adjustments 73 73 145 145 (412) (412) ChFow Holges, net of tx 34 34 Stock Opcioas, Awards and Amortization of Restricted Stock 244 244 Reurcases of Common Sck 59 (7.000) 700 Cash Dividends (52.36 per share) (3,031) (3,031) Balance Jaars 31. 20 2 33.194 316 .47 91 S8 See accompanying Notes to Consolidated Financial Statements THE HOME DEPOT, INC. AND SUBSIDIARIES _page A-8 CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended (1) January February February 31, 2016 amounts in millions 2. 1, 2015 2014 CASH FLOWS FROM OPERATING ACTIVITIES: Net Earnings Reconciliation of Net Earnings to Net Cash Provided by Operating Activities: $ 7,009 6,345 S 5,385 T-Mobile 10:01 PM 27% 22 of 44 Done THE HOME DEPOT, INC. AND SUBSIDIARIES page A-8 CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended (1) amounts in millions January February February 1, 31 2, 2016 2015 2014 CASH FLOWS FROM OPERATING ACTIVITIES: Net Earnings Reconciliation of Net Earnings to Net Cash Provided by Operating Activities: 7,009 S 6,345 S 5,385 1,757 1,863 1,786 Depreciation and Amortization Stock-Based Compensation Expense Gain on Sales of Investments 244 225 228 (144) (323) Changes in Assets and Liabilities, net of the effects of acquisitions: Receivables, net (181) (81 (15) Merchandise Inventories (546) (124) (455) Other Current Assets (5) (199) (5) Accounts Payable and Accrued Expenses Deferred Revenue 888 244 605 75 109 146 Income Taxes Payable 168 119 154 Deferred Income Taxes 15 159 (31) Other Net Cash Provided by Operating (33) (104) (35) 9.373 8,242 7,628 Activities CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures, net of $165, S217 and $46 of non-cash capital expenditures in fiscal 2015, 2014 and 2013, respectively Proceeds from Sales of Investments (1,503) (1,442) (1,389) 323 144 (1,666) Payments for Businesses Acquired, net Proceeds from Sales of Property and Equipment Net Cash Used in Investing Activities (200) (206) 43 48 88 (1,271) (1.507) (2,982) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Short-Term Borrowings 60 290 net Proceeds from Long-Term Borrowings, net 3,991 1,981 5,222 of discounts Repayments of Long-Term Debt Repurchases of Common Stock (39) (39) (1,289) (8,546) (7,000) (7,000) Proceeds from Sales of Common Stock 228 252 241 (2,530) (2,243) Cash Dividends Paid to Stockholders (3,031) Other Financing Activities 4 (25) (37 Net Cash Used in Financing (5,787) (7,071) (6,652) !! T-Mobile 10:01 PM 27% 22 of 44 Done Qher rilmancing Acuviues Net Cash Used in Financing Activities (7,071)( (5,787) (6,652) Change in Cash and Cash Equivalents Effect of Exchange Rate Changes on Cash and Cash Equivalents Cash and Cash Equivalents at Beginning 604 (100) (531) (106) (111) (34) 1,723 1,929 2,494 of Year 2,216 S 1,723 1,929 Cash and Cash Equivalents at End of Year SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS MADE FOR: Interest, net of interest capitalized $ 874 $ 782 S 639 $ 3,853 S 3,435 S 2,839 Income Taxes (1) Fiscal years ended January 31, 2016, February 1, 2015 and February 2, 2014 include 52 weeks. See accompanying Notes to Consolidated Financial Statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS page A-9 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business, Consolidation and Presentation The Home Depot, Inc., together with its subsidiaries (the "Company"), is a home improvement retailer that sells a wide assortment of building materials, home improvement products and lawn and garden products and provides a number of services. The Home Depot stores, which are full-service, warehouse-style stores averaging approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area, stock approximately 30,000 to 40,000 different kinds of products that are sold to do-it-yourself customers, do-it-for-me customers and professional customers. The Company also offers a significantly broader product assortment through its Home Depot, Home Decorators Collection and Blinds.com websites. At the end of fiscal 2015, the Company was operating 2,274 The Home Depot stores, which included 1,977 stores in the United States, including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam ("U.S."), 182 stores in Canada and 115 stores in Mexico. The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation Fiscal Year The Company's fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31. Fiscal years ended January 31, 2016 ("fiscal 2015"), February 1, 2015 ("fiscal 2014") and February 2, 2014 ("fiscal 2013") include 52 weeks. Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the renorting of assets and liabilities. the disclosure of contingent assets and
