Ladies and gentlemen, please welcome Craig Meneer, Carol Tomey, and Teresa Wynne Roseboro. Good morning, and welcome to the 2015 Annual Shareholders Meeting. We thank you for taking the time to be here with us today. Before we get started, I'd like to take a moment and thank my predecessor, Frank Blake. Through Frank's leadership as Chairman and CEO, he positioned our company to achieve the kind of success that we saw in 2014 and established a strong future for us going forward.
Now I'd like to take a few moments to do some introductions. And first, it's my pleasure to introduce our Board of Directors. I hope you all had a chance to meet them in the lobby earlier before the session First, Mr. Duane Ackerman, Ari Boosman, Frank Brown, Al Carey, Armando Cardina, Selena Fox Wayne Hewitt Karen Caton and our Lead Director, Greg Brennaman. Unfortunately, today, one of our directors, Mark Badan, could not be with us due to illness.
I'd also, at this moment, like to recognize Duane Ackerman, who is retiring from our Board today. And Duane has been a member of our Board since 2007. He has chaired our audit committee for the past 4 years. And Duane, again, I would personally like to thank you for all you've done for The Home Depot shareholders, The Home Depot Associates and personally for me during this transition the guidance and counsel that you have given. Thank you so very much.
Next, I'd like to introduce 2 members of our senior team with me on stage here today. First, Carol Thome, our Chief Financial Officer and Executive Vice President of Corporate Services and Teresa Wynne Roseboro, our Executive Vice President, General Counsel and Corporate Secretary. With us today, we also have our members of our senior leadership team, and I'd ask that they stand now, please. And finally, I would like to recognize Hector Mohina and Mr. Milford McCourt of KPMG, the company's independent auditors.
Thank you for being here. Today, we'll begin the meeting with our formal business session. This consists of the election of our directors named in the proxy statement, ratification of our auditors and consideration of the company's and shareholders' After that, Carol and I will provide a brief business overview and then we will open the floor for questions. So now I officially call the 2015 Home Depot Annual Meeting of Shareholders to order. Teresa is serving as our Secretary of the Meeting and Broadridge Investor Communications Solutions is our Inspector of Elections.
As of March 23, 2015, which is the record date for this meeting, there will be approximately 1,300,000,000 shares of Company's common stock entitled to vote. The majority of these shares is needed for a quorum and over 86 percent of these shares are represented today. Therefore, we have a quorum. Now if you haven't voted yet and would like to vote today, please raise your hand so that we can give you a ballot and then we will collect And so, now I declare the polls open for voting. Right.
I think we still have this element over here that needs I believe everybody has their ballots. The first item of business Is the election of our directors, which is item number 1 on your ballot. The Board has nominated the individuals named in the proxy statement to Now we'll move to the next proposal. The next item is the ratification of the appointment of KPMG as the independent auditors of the company for fiscal 1015 item number 2 on your ballot. Your board recommends that you vote for this The next item is the advisory vote on executive compensation also known as pay 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. The next item for consideration is the shareholder proposal regarding the independent Chairman of the Board, Don Treveden, please step to the microphone and present the call.
Good morning and thank you for having us.
Good morning.
The shareholders request the Chairman of Board of Directors shall be an independent director who is not a current or former employee of the company whose only nontrivial professional or Our financial connection to the company or its CEO is the directorship. This policy should be implemented so as not to violate existing agreements and should allow for departure under extraordinary circumstances such as the unexpected resignation of the Chair. The proponent of this proposal has been a continuous company shareholder since 1998. When our CEO is the Board Chairman, this arrangement can hinder our Board's ability to monitor our CEO's performance. Many companies have an independent Chairman.
An independent Chairman is the prevailing practice in the United Kingdom and many international markets. This proposal topic won over 50% of support at Five major companies in 2013, including 73% support at Netflix. The policy for Council of Institutional Investors whose members invest over $3,000,000,000,000 states the Board should be chaired by an independent A 2012 report called The Cost of a Combined Share CEO found companies with an independent share provide investors With a 5 year shareholder return nearly 28% higher than those headed by a combined Chair CEO. Study also found corporations with a combined Chair CEO are 86% more likely to register as negatively aggressive in their accounting and government risk models. Please vote to enhance shareholder value and vote yes on proposal 4.
Thank you. And your Board does recommend that you vote against the vote.
Mr. Chairman, my name is John Evans. I want to do is just ask a question. Has there been any situation where we've ever supported Stockholders' Resolution.
Yes, sir. There are actually matter of fact, there were a number of proposals That came in for the proxy season this year and working with those groups, we actually made changes prior to and then they removed
In other words, if they submit the resolutions to you all, you Which ones that need to go on the program that you all are against?
Actually, the only ones that go on the program are those that we have a final disagreement on.
So in In other words, we there are resolutions that never come here that you support that That's correct, Put forth by the shareholders.
Yes, sir. That is correct.
Thank you.
Thank you. And now we'll move on to the next proposal. The next item is a consideration of the shareholders proposal requiring a special shareholders meeting. Item number 5, I'd like to ask Mr. Brady, Court McGarvin, representative of Ms.
Myra Young to please step forward to the microphone and present the proposal.
Good morning and thank you again. The shareholders ask our Board to take the necessary steps to amend our bylaws and each appropriate governing document to give shareholders in the aggregate of 10% of our outstanding common stock the Power to call a special shareholder 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 already adopted this 10% threshold. Special meetings allow shareholders to vote on important matters such as electing new directors that can arise between Annual meetings.
Shareowner input on the timing of a shareowner meeting is especially important when events unfold quickly and issues may become moved by the next annual This proposal topic won more than 70% of support at Edwards Life Sciences and SunEdison in 2013. Vanguard has sent letters to 350 of its portfolio companies asking them to consider providing the right for shareholders to call a special meeting. This proposal is more important to Home Depot shareholders due to the restrictions on Home Depot shareholder rights to act by written consent. Shareholders acting by written consent could save Home Depot the cost of a meeting and still bring important matters to the attention of management and Once again, I ask you to please vote to enhance shareholder value and vote yes on Proposal 5.
Thank you, sir. Your Board recommends that you vote against this proposal. And now we'll move on to the preliminary voting results.
If you've requested a ballot, please mark your vote and sign it where indicated. And when you finish, raise your hand and one of our volunteers will collect your ballot.
Okay. I
believe all the ballots have now been collected and the polls are now closed. And now I'd ask Theresa if she would please review the preliminary
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 cast have voted in favor of the ratification of the appointment of KPMG And approximately 98% of the votes cast have voted in favor of the compensation of the company's named executive officers. With regard to the shareholder proposal, approximately 18% of the votes cast have voted in favor of the shareholder proposal regarding an independent Chairman of the Board and approximately 41% of the votes cast have voted in favor of the shareholder proposal regarding special shareholder election meeting.
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 2015 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 ks, which we'll file next week.
Thank you, This does conclude our formal business session and I declare the meeting adjourned. And now we'll move on to an overview of our business, after which we will take questions that you may have. And now I'd ask to like Carol to come up and please do a financial overview.
Thank you, Craig, and good morning, everyone. This is my 20th Home Depot Shareholders' Meeting and I'm honored to be I'm not going to read this, but please be advised that there will be forward Looking statements in this presentation. Fiscal 2014 was a great year for The Home Depot. Our company, your company, grew by 5 5% or $4,400,000,000 and we reported sales of $83,200,000,000 The highest retail sales in our company history. We also achieved the highest net earnings in our company history with an increase of 17.8 percent over last year, taking our net earnings to $6,300,000,000 And finally, our diluted earnings per share increased 25.3 percent to 4 point $0.71 Your company continues to generate strong cash flow.
We generated approximately $8,600,000,000 in cash in fiscal 2014 and we issued $2,300,000,000 of incremental debt taking advantage of the low interest rate environment. We spent $1,600,000,000 on capital improvements and acquisitions. We returned $2,500,000,000 to shareholders through dividends and we repurchased $7,000,000,000 of our outstanding shares. Now let's take a look at fiscal 2015 and our outlook for the year. We continue to believe That the growth in the U.
S. Home improvement market will rest on 2 drivers, GDP growth and housing. The good news that we continue to see moderate GDP growth in the United States and most housing data points to continued recovery in the housing market. We just reported our Q1 results. Our sales grew by 6.1% and our earnings per share grew by 21%.
So we're off to a good start. Now for fiscal 2015, we expect our total sales to grow by approximately 4.8% on a currency neutral basis. 10% of our sales are outside of the United States. So with a stronger U. S.
Dollar, we do face some currency pressure. If the U. S. Dollar remains at current foreign exchange rates, we would expect our fiscal 2015 sales growth to be 4.2%. Now for the year, we're planning to open 6 stores, 5 of those stores in Mexico and 1 store in Canada.
Fiscal 2015 diluted earnings per In 2015 and as we go forward, we will continue to invest in customer service, product authority and interconnected retail Under an umbrella of disciplined capital allocation, creating value for you, our shareholders. Part of creating value is paying a dividend. We target a 50%, which means as our earnings grow, so will our dividend. In February, our Board announced a 26% increase in the quarterly dividend to $0.59 for an annual dividend of $2.36 This is our 6th increase in the dividend in as many years and we believe There will be more to come. So with that, let me turn it back over to Greg.
Thank you, Carol. I'd like to take a moment and share with you the strategy that we've been operating under to help deliver these type of And it starts with what I believe is the greatest gift that Bernie and Arthur gave us as a company and that is our culture and our values. These are 2 very important foundational symbols of our culture, the inverted pyramid and our values wheel. We strive as an organization To live up to the inverted pyramid every single day where our customers are at the top and our associates who are helping our customers are the most important part of our business. The values are our guiding principles and they're behind the decisions that we make every single day.
We do believe that the culture and the value of Home Depot truly is what sets us apart as a company and we believe that it gives us a competitive advantage in the marketplace. Bernie once said, if you take They will take care of the customer and everything else will take care of itself. And those words ring true today. We have over 370,000 associates living our values Every day, our associates are key to meeting the needs of our customers and we will continue to invest and our associates. A core philosophy of ours is to pay above market wage rates and we'll We continue to employ this strategy going forward.
We constantly look at the wage rates on a market by market basis and make adjustments as we see necessary. We are also the only major retailer in the country to have grant stock to our assistant and through our success sharing program, which is our profit sharing program for our hourly associates, and Building Strong Relations. And the Homer Fund, our nonprofit charity supporting our contributions, the Homer Fund has donated more than $110,000,000 to over 90,000 associates in times of crisis. Excellent customer service is the first value on our value wheel as you work your way around it. And so customer service extends beyond taking care of our customers in the aisle And it actually extends into the communities that we operate in.
We're focused on building relationships and being great neighbors In the lives and the communities of our customers, we believe that's part of our job every single day. In 2014, Team Depot, our associate led volunteer force, completed more than 1200 projects To improve veteran homes and housing facilities across all 50 states with over 26,000 associates volunteering their time. And over the past 4 years,
of Veterans. So as
you can see, giving back is one of the core values at Home and Feed. Let me shift to our strategy for a moment and talk a little bit about what changes going forward. Now you all have seen this chart before. It represents our strategic framework and our vision of our 3 legged And what we do here is try to address the 3 core questions. What are we most passionate about?
It is customer service. What do we absolutely want to be best in the world at? It's product authority for home improvement. And what drives Our economic engine is a disciplined capital allocation
process.
Now, the core strategy of our company doesn't change and the reason it doesn't change is that it's rooted in what our customers and our shareholders expect from us. However, as the retail landscape is continuing to evolve and The requirements for excellent customer service in an interconnected retail environment is changing. And so we will need to change how we actually staff our stores and how we allocate our labor to be able to address customer orders that are now picked up in our stores, but are ordered on our website. Within product authority, we have been and will continue to invest in capabilities to Looking from supplier all the way through customer, including aftercare for the customer when they purchase. And we think there is enormous value to be driven by looking at this as an end to end value chain process.
Under Frank's leadership, we made a hard pivot in terms of moving from square footage growth Being our economic engine to a disciplined capital allocation as the driver of our business and we will continue to invest to maintain the growth in our business. We're investing to connect our digital properties to our stores and vice versa. And this is important to allow our customers to choose how they want to engage with The Home Depot. We're also investing to drive efficiency within our business through technology and automation so that we can ensure great value for our customers. And after meeting the needs of the business, we will return cash to our shareholders in the form of dividends and share repurchase.
We intend to increase our dividends each year and we target a 50% payout ratio. And as you heard from Carol, In the past February, we actually increased our dividend for the 6th time in as many years. And after we pay out dividends and we then intend to use our excess cash to repurchase shares. Now let me dive just a little bit deeper into interconnected retail. If you asked me 3 years ago what keeps Today, while pace of change is still very much top of mind, I'm actually more Excited about the opportunities it presents for our company more so than the risks that it presents.
Change isn't natural. Today, customers want to shop across multiple channels and so they want to shop via buy online, pickup in store, buy online, ship to store and buy online, deliver from store. 1,200,000,000 visits to our website. Our sales online grew over 36% in 2014. And interestingly enough, almost 40% of all the orders that were created online were actually picked up in one of our stores.
Many of these items were big and bulky items where we can actually leverage our assets in our supply chain capabilities to deliver great value for our customers. At the same time, Approximately 10% of our online orders originated within one of our stores. And so our show associates are exposing the extended aisle that we have in our digital asset to our customers when they are in store. And so we will continue to invest to create a seamless customer experience across all channels, And I'm excited about the opportunities that that presents going forward. On our international business, we performed well in 2014.
In Canada, The Home Depot is the number one home improvement retailer Employment Center and broke ground on a second planned facility during 2014. These distribution facilities will help flow to our stores in Canada. In Mexico, Home Depot is also the number one home improvement Our Mexican team has recorded 46 quarters in a row of positive comp growth. We have 111 stores in Mexico. And in 2014, we also launched our Mexican e commerce site to complement our store experience there as well.
And lastly, in fiscal 2014, The Home Depot stock price appreciated 39% and we outperformed the Dow Jones Industrial We're now happy to take questions that you may have. And if you have a question, if you would please step to 1 of the 2 microphones.
Mr. Chairman, I represent to the Cab And I've certainly been well pleased with the diversity of programs that they have. As you all have, we hope that it will continue in the future. And what we find that people who are sensitive to our needs Are the ones that do the best job in this company. So I'm really saying to you As we move forward, let's make sure that we keep this in mind, the Board elections And the employees who work in the area because if they're not sensitive, we lose.
And we certainly can't afford to lose. Our plight is tough as it is And we appreciate companies like Home Depot who have supported us and we do our share of supporting A Home Depot out in the community. In fact, every opportunity that we have, This is a book where we send out to our members and distribute in our community for every function that we have Saying thanks to those who support us and we want you to support them. Home Depot is a great company. I've been in this area about 50 years, so I know about it.
And we really appreciate The attention that you give to the diversity program and we will work with you in any way we can To keep that program viable and useful and beneficial to us and others. Thank you.
Thank you. Thank you very much for your comments and we appreciate the support and it's something that is very important to our business
I was wondering if you
could tell us what the
company's strategy is Concerning the hiring of veterans?
Yes. Do you mind sharing your name with us, sir? Gene Wallace. Mr. Wallace, thank you.
As a matter of fact, Mr. Wallace, we actually have a very strong program in place to hire veterans. It's an area that we look for to be able to fill out our employment needs. And the company in total is very committed to veteran
Good morning, Mr. Chairman and congratulations on your first meeting. My name is Charles Miller And I've been a long time shareholder in terms of detail. And I've seen the growth of this company over these years And the satisfaction that most rational shareholders should feel about the positivity of this experience. However, I think I would like to draw the attention of the shareholders and to the Board and yourself regarding the part time workers that are employed at Home Depot.
For the last number of years, one of the exemplars In the retail industry and that is Costco is rated the number one employer in the country. I would like to see Home Depot rise above Costco in this particular effort. And one of the metrics that one measures Costco by is what they pay their employees on a part time basis. And as represented by you this morning. In your presentation, treating your employees is a core value after your customers.
With that in mind, I would like particular attention paid then to the hourly rate paid to part time Workers, I know you mentioned this morning that you pay in excess of what is required. I would like Home Depot to pay a minimum Of $15 per hour to their part time employees. I think that with that In mine, you would expect greater productivity from those employees and it would result in greater profitability to The shareholders, it's a positive and mutually beneficial relationship between part time employee satisfaction And shareholder satisfaction, I would like the Board to seriously consider this request. Thank you.
Thank you very much for your comments. Appreciate it. We are very focused on making sure that we do take care of our associates And I appreciate your input very much. Thanks. Yes, sir.
My name is Bernie Goldstein, and I'm a long time shareholder. And my question is, what are your and the Board's thoughts on splitting the stock?
That's a question that we actually get Quite frequently. I wouldn't look for us to split the stock. As a matter of fact, Over the past 10 or 12 years, we have actually spent about $54,000,000,000 buying our stock back have done that at an average price of about $44 a share, which means a great way to return back To the shareholders, the interesting thing is how the markets have evolved and the way that you can purchase stock today. You can buy fractions today versus having to buy in 100 lot shares the way it used to be when I first started buying stock. And so we don't really see the economic value of splitting the stock because you'd also be splitting dividend and so on.
But thank you very much.
My name is Celeste Wallace. We live in Lawrence Hall. Do you ever consider starting this at 11 o'clock instead of 9.
Appreciate the input. We will take that into consideration.
Coca Cola made that change. Okay.
Thank you very much. Okay. And