Home Depot : Non-GAAP Reconciliation Q4

Non-GAAP Measures

The Company's presentations may include certain non-GAAP financial measures, such as its return on invested capital ("ROIC") calculation and its adjusted debt/EBITDAR ratio. This supplemental information should not be considered in isolation or as a substitute for the related GAAP measures.

Return on Invested Capital

We believe that ROIC is meaningful for management and investors because it measures how effectively we deploy our capital base. We define ROIC as follows:

Net Operating Profit After Tax (Page 2)

We define net operating profit after tax as operating income for the trailing twelve months less income taxes calculated using the effective tax rate for that period.

Average Debt and Equity (Page 2)

We define average debt and equity as the average of beginning and ending long-term debt (including current installments of long-term debt) and equity for the trailing twelve months. Beginning debt and equity may be adjusted for changes in accounting principles which require historical restatement or an opening balance sheet adjustment to the amount previously reported.

Return on Invested Capital (Page 2)

We define ROIC as net operating profit after tax divided by average debt and equity.

Adjusted Debt/EBITDAR

We believe that our adjusted debt/EBITDAR ratio better enables management and investors to understand and analyze our level of indebtedness in relation to our capital structure. We define adjusted debt/EBITDAR as follows:

Adjusted Debt (Page 3)

We define adjusted debt as long-term debt (including current installments of long-term debt), plus short-term debt, plus eight times operating rents (excluding the impact of stores no longer operated by us) for the trailing twelve months. We continue to use the eight times operating rents methodology to calculate adjusted debt post implementation of Accounting Standards Codification 842, Leases, ("ASC 842") as it results in a more conservative estimate and is still used by a primary U.S. rating agency.

EBITDAR (Page 4)

We define EBITDAR as net earnings before interest and other, net, income taxes, depreciation and amortization, and operating rents; calculated on a trailing twelve month basis.

Adjusted Debt/EBITDAR (Page 5)

We define adjusted debt/EBITDAR as adjusted debt divided by EBITDAR.

1

Return on Invested Capital Calculation

	Twelve Months Ended (1)
(USD millions)	February 2,	February 3,
2020	2019
Net earnings	$11,242	$11,121
Interest and other, net	1,128	974
Income taxes	3,473	3,435
Operating income	$15,843	$15,530
Income tax adjustment (2)	(3,739)	(3,665)
Net operating profit after tax	$12,104	$11,865
Average debt and equity (3)	$26,686	$26,492
Return on invested capital	45.4%	44.8%

1. The fourth quarter of fiscal 2018 includes 14 weeks. All other quarters include 13 weeks.
2. Definedas operating income multiplied by our effective tax rate for the trailing twelve months.
3. Beginning equity for the trailing twelve month period endingFebruary 2, 2020has been adjusted to reflect an immaterial opening balance sheet adjustment due to the adoption of ASU 842, in fiscal 2019.

2

Adjusted Debt Calculation

	Period Ended
(USD millions)	February 2,	February 3,
2020	2019
Long-termdebt(including current installments of long-term debt)	$30,509	$27,863
Short-term debt	974	1,339
Total debt	$31,483	$29,202
Eight times operating rents (1) (2)	7,703	7,254
Adjusted debt (3)	$39,186	$36,456

1. Excludes certain rent payments to remove the impact of stores no longer operated by us. We continue to use the eight times operating rents methodology to calculate adjusted debt post ASC 842 implementation as it results in a more conservative estimate and is still used by a primary U.S. rating agency. As of February 2, 2020 the operating lease liabilities included on our consolidated balance sheet were $5,894 million.
2. The fourth quarter of fiscal 2018 includes 14 weeks. All other quarters include 13 weeks.
3. Adjusted debt does not include the provisional tax liabilities recognized in conjunction with aone-time tax on deemed repatriation of historical earnings of foreign subsidiaries as imposed by the Tax Cuts and Jobs Act of 2017. See Note 5 in the Form 10-K for fiscal 2018 for further discussion.

3

EBITDAR Calculation

	Twelve Months Ended (1)
(USD millions)	February 2,	February 3,
2020	2019
Net earnings	$11,242	$11,121
Interest and other, net	1,128	974
Income taxes	3,473	3,435
Depreciation and amortization (2)	2,296	2,152
Operating rents	976	921
EBITDAR	$19,115	$18,603

1. The fourth quarter of fiscal 2018 includes 14 weeks. All other quarters include 13 weeks.
2. Includes depreciation of distribution centers and tool rental equipment included in cost of sales and amortization of deferred financing costs included in interest expense.

4

Adjusted Debt/EBITDAR Calculation

	Twelve Months Ended
(USD millions)	February 2,	February 3,
2020	2019
Adjusted debt	$39,186	$36,456
EBITDAR (1)	$19,115	$18,603
Adjusted debt/EBITDAR (2)	2.1x	2.0x

1. The fourth quarter of fiscal 2018 includes 14 weeks. All other quarters include 13 weeks.
2. Adjusted debt/EBITDAR for the twelve months endedFebruary 2, 2020would have been 2.0x had it been calculated using the operating lease liabilities recorded on the balance sheet. We continue to use the eight times operating rents methodology to calculate adjusted debt post ASC 842 implementation as it results in a more conservative estimate and is still used by a primary U.S. rating agency.

5