Anir. Thank you. Good morning, everyone. Welcome to the 2016 Annual Shareholders Meeting. I thank you all for joining us here today.
Before I start, I'd like to make a couple of introductions. And first of all, it is a great honor to have one of our founders, Arthur Blank here today. Arthur, welcome. Arthur, You created an amazing company that we have the privilege and the honor to continue to drive and to live and breathe the culture that you and Bernie created. So we can't thank you enough for what you've done.
Appreciate it. Thank you so much. It's also my pleasure to introduce our Board of Directors, and I you had a chance to meet them when we were out in the entry room prior to, 1st, Gerard Arpi, Ari Boosby, Frank Brown, Al Carey, Armando Cardina, Linda Goodin, Wayne Hewitt, Karen Caton and our Lead Director, Greg Brennaman. We also have Mark Vadon on the line listening in today to our meeting. Mark is recovering from some minor surgery and was unable to travel and be here in person today.
And unfortunately, one of our other directors, Helena Faulks, She couldn't join us today because she's actually attending her shareholder meeting of CVS Healthcare, where she is an Executive Officer of that company. Next, I'd like to introduce 2 of my senior leadership team Members who are here with me today. First of all, Carol Thome, our Chief Financial Officer and Executive Vice President of Corporate Services and Teresa Wynne Roseborough. She is our Executive Vice President, General Counsel and Corporate Secretary. And also with us today, we have other members of our senior leadership team, and I'd ask them to stand.
Finally, I'd like to recognize Hector Mohaina and Milford McGirt of KPMG, the company's independent auditors. Thank you for being here. So today, we're going to begin our meeting with a formal business portion. This consists of the election of our directors named in the proxy, the ratification of our auditors and the consideration of the companies and our shareholder proposals. After that, Carol and I will provide a brief business overview, and then we'll open up the floor for questions.
So I now officially call the 2016 Home Depot Annual Meeting of Shareholders to order. Theresa is serving as the Secretary of the meeting, and Broadridge Investment Communication Solutions is our Inspectors of Elections. As of March 21, 2016, which is the record date for this meeting, there were approximately 1,300,000,000 shares of company's common stock entitled Devote. A majority of these shares are needed for a quorum. Over 87 percent of these shares are represented today, and therefore, we do have a quorum.
Now if you have not voted yet and would like to vote today, I'd ask that you please raise your hand and we can give you a ballot, and we will collect your ballots after all the proposals have been presented. And if you've already voted, there is no need to vote again here today. And so now I do declare the polls open for voting to make sure we have Okay. I believe that we're all set. The first item of business is the election of the directors, which is Item number 1 on your ballot.
The Board has nominated the individuals named in the proxy statement to serve for a 1 year term through the 2017 Annual meeting. Your Board recommends that you vote for each of these directors. We'll now move on to the next proposal. The next item is the ratification of the appointment KPMG as the independent auditors of the company for fiscal 2016, item number 2 on your ballot. Your Board recommends that you vote for this proposal.
Mr. Chairman, may I be recognized, please? Yes, sir. My name is James Gibbs. I'm representing the Carpenters Union Pension Fund that holds shares in the Home Depot.
The Carpenters Union Pension Fund collectively have assets of $45,000,000,000 and we hold 1,400,000 shares Mr. Chairman, our pension funds believe that the issue of audit firm independence is tremendously important to the integrity of corporate finance and reporting. We have engaged with 100 other companies to expand the basic disclosure of these addresses and the audit firm independent issue. To that end, we appreciate The exceptional auditing independence disclosure regarding in the tenure of the company's relationship with KPMG and the practices undertaking and protecting the auditors' independence. Thank you, Mr.
Chairman.
Thank you. Appreciate your comments. We'll now move on to the next proposal. The next item is the advisory note on executive compensation, also known as say on pay, which is item number 3 on your ballot. Specifically, you are being asked to approve the compensation of the company's named executive officers As disclosed in the proxy statement for this meeting, your board recommends that you vote for this proposal.
We move on to the next proposal. The next item for consideration is the shareholders' proposal regarding the preparation of an Employment and Diversity Report, which is item number 4 on your ballot. And will Ms. Lynn Connolly, A representative of the Benedictine Sisters and other proponents, please step to the microphone and present the proposal.
Good morning, Mr. Chair, members of Board and shareholders who are gathered today. I am Lynn Conley here today representing the Benedictine Sisters from Boerne, Texas. I also represent several members of the Interfaith Center on Corporate Responsibility who are shareholders and co filers to proposal. These groups are long term shareholders of the Home Depot.
Proposal number 4 on the ballot seeks a Board review of our company's policies regarding closure of equal employment opportunity data known as EEO-one data and public reporting of diversity issues to the shareholders. Equal Employment Opportunity is an investment concern. When allegations of discrimination in the place burden shareholders with costly litigation and added risk to a company's brand, there is an impact to shareholder value. We contend descriptions don't go far enough to mitigate potential risks. We mentioned in the resolution that Home Depot has paid out more than $100,000,000 to settle discrimination lawsuits over the past 16 years.
Last year, we did not file a resolution and had several meetings. We felt that our meetings did not accomplish getting statistics, just more stories and photos. Your reports do not give a chart identifying employees by gender and race in each of the EEOC categories defined categories. This resolution, which has been filed over the past several years, focuses on the importance of measurement and disclosure of diversity issues to its shareholders. To manage diversity, companies have to be able to measure it.
That is why we asked for the EEO-one data, which offers investors a measurement tool. An EEO report is submitted annually by Home Depot to the Equal Employment Opportunity Commission. Providing data to shareholders would not pose an added financial burden. The company actually did provide the information for 1 year and then stopped. In the absence of meaningful disclosure, investors cannot fully assess potential risk Home Depot faces nor for that matter fully identify successful diversity efforts.
In 2013, the U. S. Equal Employment Opportunity Commission reported that racial minorities We feel this is a bottom line issue affecting competitiveness and market share. We asked Home Depot to report diversity disclosure to all stock stakeholders. We met with the corporate secretary and others to offer a way forward and made concrete suggestions.
We continue to hope management will take us up on the ideas we presented. Thank you for your time, and we ask you to vote in favor of stockholder proposal number 4.
Your Board recommends that you vote against this proposal. And now we'll move on to the next proposal. The next item for consideration is the shareholder proposal to reduce the threshold to call a special shareholder meeting to 10% of outstanding shares. This is Item number 5 on your ballot. And again, we'll welcome back Ms.
Lynn Conley as a representative of Mr. John Chevedden. If you would please present your proposal.
Resolve that share owners ask our Board to take the steps necessary unilaterally if possible to amend our bylaws and each appropriate governing document to give holders in the aggregate of 10% of our outstanding common stock The power to call a special share owner meeting. This proposal does not impact our Board's current power to call a special meeting. Delaware law allows 10% of shareholders to call a special meeting and many companies have adopted the 10% threshold. Special meetings allow shareowners to vote on important matters such as electing new directors that can arise between annual meetings. Shareowners input on the timing of shareowner meetings is especially important when events unfold quickly and issues may become moot by the next annual Please vote to enhance shareholder proposal, special shareholders meeting proposal 5.
Thank you. Your Board recommends that you vote against us.
And we recognize, please, to speak on the proposal. As stated earlier, I represent the Carpenters Pension Fund, And we are large institutional investors, and I raise to voice my opposition to this proposal to lower the ownership threshold to call a special shareholder meeting. The current right of shareholders of 25% of outstanding stock is positive and measured position. As long term investors, we believe that lowering the ownership threshold to call a special shareholder meeting can only be counterproductive to the Board's task in growing long term corporate value. Thanks, Mr.
Chairman.
Thank you Great comments. Now we'll move on to the preliminary voting. So if you have requested a ballot, Please at this time mark your vote and sign where indicated on the ballot. When you have finished, if you would please raise your hand, one of our volunteers will I believe all ballots are collected at this point. 1 Okay.
Thank you, Craig. The preliminary voting results for the company proposals are as follows. All of the Director nominees named in the proxy statement have been elected by a majority of the votes cast. Approximately 99% of the votes have voted in favor of the ratification of the appointment of KPMG, and approximately 97% of the votes cast have voted in favor of the compensation of the company's named executive officers. For the shareholder proposals, Approximately 30% of the votes cast have voted in favor of the shareholder proposal regarding the preparation of an Employment Diversity Report.
And approximately 40% 42% of the votes cast have voted in favor of the shareholder proposal to reduce the threshold to call special shareholder meetings. Based on the preliminary vote count, all of the nominees for the Board of Directors have been elected, The appointment of KPMG as the company's independent auditors for fiscal 2016 has been ratified and a majority of the votes cast approved our executive compensation. Neither of the shareholder proposals has been approved. Please note that the ballots collected at this meeting will be verified and tabulated by our Inspector of Elections, and final results of the vote will be available in a Form 8 which we'll file next week.
So this concludes our formal business portion, and I
Thank you, Craig, and good morning, everyone. I'd like to add my welcome to our shareholders who are participating in today's meeting. We are glad that you joined us. Now to begin, I'm not going to read this chart, but I'd like to remind you that some of our comments may be forward looking or non GAAP. So with that, 2015 was a great year for The Home Depot.
We reported the highest sales and earnings in our company's history. Looking at this chart, you can see that our sales grew by over $5,000,000,000 to 88 $5,000,000,000 Our net earnings grew almost $1,000,000,000 to $7,000,000,000 And our diluted earnings per share grew by 15.9 percent to $5.46 Our company continues to generate strong cash flow. We have a disciplined and balanced approach when allocating our cash. In fiscal 2015, we generated approximately $9,600,000,000 of cash from the business and used that cash as well as proceeds from $4,100,000,000 of new long term debt issuances To invest $3,200,000,000 back into the business, including the acquisition of Interline Brands, We paid $3,000,000,000 for dividends to our shareholders, and we repurchased $7,000,000,000 of our outstanding shares. Now let's take a look at our outlook for fiscal 2016.
We continue to believe that the U. S. Home improvement market is healthy. That coupled with modest GDP growth in the U. S.
Provides continued tailwinds for our business. You may have seen that we just reported our Q1 results, where our sales and our earnings exceeded our expectations. We experienced strength across all categories and all geographies. For fiscal 2016, we expect our sales to grow by approximately 6 point 3%, which includes positive comp sales growth, the impact of the Interline acquisition and 5 new stores. For earnings per share, we now expect fiscal 2016 diluted earnings per share to grow approximately 14.8% to $6.27 As Craig will detail, our strategy has not changed.
In 20 team, we will continue to invest in the business to support our strategic efforts, while at the same time remain focused on creating value for you, our shareholders. Part of creating value for our shareholders is paying a dividend. We target a 50% dividend payout ratio, which means as our earnings grow, so will our dividend. In February, our board announced a 17% increase in our quarterly dividend to $0.69 per share, which is an annual dividend of $2.76 per share. This is our 7th increase in as many years, And we believe there's more to come.
So with that, let me turn it back to Craig.
Okay. So thank you, Carol. Before I share with you the strategy that really helped us deliver these strong results in 2015. I want to begin with highlighting, what these strong results have meant from a shareholder standpoint as it relates to the stock performance. In fiscal 2015, Home Depot stock appreciated 20%, outperforming the Dow Jones Industrial Average for the 8th consecutive year.
So the strength of our stock performance in many ways is a direct result of our culture, A culture that comes from our founders, Bernie Marcus and Arthur Blank. Our culture begins with a unique management construct, the inverted pyramid, where we put our customers and our associates at the top. Our culture comes to life through our core values, values that serve us as the foundation of our business and the guiding principle behind the decisions that we make every single day. We believe that the culture helps set us apart and truly is a competitive advantage for The Home Depot. Our customers have always been and will always continue to be the heart of our business, which is why they're positioned at the very top of the inverted pyramid.
Excellent customer service is also the first value as you work your way around the values wheel. Customer service extends beyond taking care of our customers in the aisles of our store, it extends into the communities that we serve as well. We focus on building relationships and being great neighbors in the communities that we do business in. We believe this is an essential part of our job. In 2015, Team Depot, our associate led volunteer force, completed 1100 projects to improve veterans homes and housing facilities across all 50 states with over 20 their time.
Over the past 5 years, we have invested more than $138,000,000 through the Home Depot Foundation to support the housing needs of veterans. As you can see, giving back is one of our core values. Our founder, Bernie, often said that if you take care of your associates, they'll take care of the customers and everything else will take care of itself. That statement continues to hold true today. Today, we have over 400,000 associates living our values.
Our associates are the key to meeting our customers' needs, and we must continue to invest in those who wear the orange We recognize our Ollie associates through our success sharing bonus program. For fiscal 2015, we had success sharing payout of more than $200,000,000 In addition, we have the Homer This is our nonprofit charity support for our associates. Through both our associates and the company match opportunities, The Homer Fund has donated more than $132,000,000 to our associates in times of crisis. So now let me shift to discuss our strategy and how it's evolving to the changing needs of our customers and our business. Our strategy continues to be driven by what our customers and our shareholders expect from The Home Depot.
We use this 3 legged stool as our strategic framework, which focuses on creating value by connecting the business end to end. We're focused on improving the customer experience no matter how they choose to engage with us, be that in the digital world, in our stores, at home or on their job site. We're investing to give our customers a seamless experience. Now we've made a lot of progress in this area, but there's much more work to be done. We are the leader in product authority, balancing the art and science of retail by consistently delivering the best value and the most innovative products.
We will continue to invest in capabilities to sort our stores to the local needs of the customers that we serve. We also have an enormous opportunity to focus on the full value chain from the suppliers all the way through customer, including aftercare. The 3rd leg of our stool, Capital allocation, driven by productivity and efficiency, is the economic driver of our business. We to invest to maintain and to grow our business going forward. Finally, We refer to the seat of the stool as interconnected retail.
This is our strategy of collaborating more closely, both internally as well as externally to create the one Home Depot experience. This gives us the ability to drive growth to drive value for our customers and for our shareholders. So let me talk a little bit growth. Looking ahead, we see significant growth opportunities in 2 key areas, our pro and in our interconnected retail. 1 of our key initiatives to grow the Pro is MRO or maintenance, repair and operations.
That market includes hospitality, institutional and multifamily property managers. So we expect over the next 5 years that multifamily is going to grow faster than single family housing. And so it has for the past several years, and we want to make sure that we're well positioned to take advantage of the MRO demand. So to position ourselves to capitalize on that growing demand, in 2015, we purchased Interline Brands, a leading national distributor and direct marketer of MRO products. Now collectively, Home Depot and Interline own less than 5% of an approximate $50,000,000,000 market.
So we believe there is a lot of room to grow. Turning to interconnected retail. The retail environment is evolving, and the blending of the digital and the physical world remains a common theme. Our goal is to be one Home Depot to our customers, no matter how they choose to engage with us. And so for many, their shopping experience actually starts in the digital world, but it finishes in the physical world.
We are responding to these trends. We're building out our interconnected capabilities and investing in content, site improvements, improved mobile experiences and investing in the overall frictionless customer experience. The traction that we're gaining with our interconnected initiatives can be seen in the healthy sales from our digital business and improving customer satisfaction scores. In fiscal 2015, our digital business grew by approximately $1,000,000,000 a growth rate of over 25%. Now a significant portion of this online growth actually leverages our physical stores assets with over 40% of all the orders that take place in the digital world are picked up in one of our stores.
Our digital presence is actually driving business to our stores, and our stores are driving business to our digital site as today's customers want to shop across multiple including Buy Online Pickup in Store, Buy Online Ship to Store, Buy Online Return in Store. And in 2016, we are rolling out buy online, deliver from store. So interconnected retail has been and will continue to be a significant growth driver for our business, and we're continuing to support this growth initiative with the appropriate level of investment. We are excited about the opportunities ahead in this space. Our international businesses performed well in 2015 and in the first quarter of 2016.
The Home Depot is the number one home improvement retailer in both Mexico and in Canada with 100 16 182 stores, respectively. As in the first quarter, We had our 50th consecutive quarter of positive comp growth in Mexico and our 18th consecutive quarter of growth in Canada. Our Mexican and Canadian businesses are great resources for ideas for the United States. We collaborate with teams on several areas to drive productivity and efficiency. We're working together on merchandising projects, including undertaking a research study on our private label brands.
We work together on product line reviews and leverage the buying power of the entire Home Depot entity. And so we're excited about the prospects for continued growth in our international market as So where are all these initiatives going to take us? So we believe that the growth opportunity and the strategic framework that we've outlined will help us target $101,000,000,000 in sales by 2018. That is approximately $12,000,000,000 worth of growth from 2015 through 2018. This target is challenging, but we believe it is achievable.
One way of looking at this is that number is the equivalent to us adding 357 new Home Depot stores, which we're not going to do. We're going to really stay focused on becoming much more productive and drive the opportunities that we continue to see. The key to attaining the $101,000,000,000 in sales is executing our plan within the framework of the culture that our founders We truly believe that if we put our customers and our associates first, everything else will take care of itself. And with that, I'd like to thank you very much for attending today's meeting. And at this time, we'll now
Mr. Chairman, my name is John Evans and I represent the CAB NAACP. Number 1, I want to congratulate you and Home Depot for its robust first quarter.
Thank you.
We think it helps Not only you all, it helps the shareowners, it helps the community and helps the country in terms of its economic viability. The question I want to ask is whether or not we have Any African Americans that work with the team of accountants Americans who own that team that come here to work on the accounting concerns.
I'm not Sure, I understand the accounting. No further questions. Yes. From KPMG, our auditors. That what you mean, Mr.
Evans?
Yes.
You all work here on this account?
Yes.
Great. No further questions.
Thank you, sir.
Hi, it's good to see you Mr. Evans. Thank you.
Yes, sir. Hi, good morning. My name is Justin Danhof. I'm General counsel with the National Center For Public Policy Research. We're a DC based think tank and a company shareholder.
I actually have a very simple question. Does Home Depot oppose religious freedom? As Georgia politicians debated whether to adopt a religious freedom bill known as the Free Exercise Protection Act, Perhaps the biggest opponent of the bill was a group called Georgia Prosper, a business coalition that the media reported Home Depot is one of the most prominent members. Georgia Prosper lobbied hard against the bill and boasted when Governor Deel vetoed it. But I'm sorry to say much of its work was extremely dishonest And I have to doubt that it aligns with Home Depot's values that you just detailed at length.
In its lobbying campaign, Georgia Prosper's claimed that the bill legalized religious freedom laws. Georgia's bill copied these laws exactly. This is all they do. 1st, They say that the government should not interfere with an individual's religious freedom unless doing so is necessary to reach an important government goal. 2nd, they say if that government can reach this important goal in a way that doesn't abridge religious freedom, it should simply choose the other method.
That's all these laws do. That's all the Georgia law did. The federal religious freedom law was co authored by none other than liberal icon Ted Kennedy and signed into law by President Clinton. It was unanimously passed in the Senate. Its purpose is to protect religious rights, which are of course civil rights.
Religious freedom has been part of the American jurisprudence since our nation was founded. The modern religious freedom laws have been on the books for decades. So it's fair to ask why are Home Depot and others voicing objection to this basic civil right now? Corporations in the mainstream media have expressed concern religious freedom laws will lead to discrimination in part against homosexuals. There's literally zero evidence for this concern.
These laws only require the government to avoid interfering with the religious freedom if it can do so while achieving important government goals, one of which in every state, including Georgia, is outlawing discrimination. So if Georgia Prosperous does not in fact represent Home Depot and your values, I urge you to reconsider your association with this organization. Until you either withdraw from them or denounce Georgia Prosper's on this issue, Home Depot will just be another bigoted American company that has jumped on the anti religious bandwagon. I know you're better than that.
Thank you, sir, for your comments. We go back to our core values. We are against anything that discriminates, period. Thank you.
So you support religious freedom?
Sir, we as core value of this company, we are against anything that discriminates. And with that, if there are no further questions oh, sir, yes. Can you step to the microphone, sir, so everybody can hear you? Butch Broomann. And I Shop online with Home Depot.
We've been doing it for a long time. My kids only shop on Amazon. And I just recently saw where Gap is putting some of their products on Amazon. So I don't know if there's any thought in terms of putting some Home Depot's Selected items on a site like Amazon. So in the past, we actually have done that.
But quite candidly, we're becoming more and more of competitors, so we probably won't do that in the future. Okay. I didn't know if you had selected items that the millennials and These people would be interested in that. Well, we're continuing to grow our digital space itself. We had over 1,300,000,000 visits to our Home Depot site last year and grew our business almost $1,000,000,000 So our focus is to try to attract them to the Home Depot through the Home Depot digital app.
Have you analyzed how many young people are shopping Home Depot as opposed to and this might be difficult, but Yes, I don't have the exact numbers off the top of my head. What I will share with you is we did our strategic planning this summer. We We brought in a group of millennials. We broke them up into 4 groups, and we actually asked them to help us determine what would Home Depot look like 10 years down the road and very interesting takes from that group that we'll incorporate into our thinking. Very good.
Thank you. Thank you, sir, very much. And with that, I'll thank you all very much for attending the shareholders meeting, and we look forward to seeing you in 2017. Thank you all very