HOME DEPOT, INC. 10-K

Item 8. Financial Statements and Supplementary Data. TABLE OF CONTENTS Report of Independent Registered Public Accounting Firm 34 Consolidated Balance Sheets 36 Consolidated Statements of Earnings 37 Consolidated Statements of Comprehensive Income 38 Consolidated Statements of Stockholders' Equity 39 Consolidated Statements of Cash Flows 40 Notes to Consolidated Financial Statements 41 Note 1. Summary of Significant Accounting Policies 41 Note 2. Segment Reporting and Net Sales 48 Note 3. Property and Leases 49 Note 4. Debt and Derivative Instruments 51 Note 5. Income Taxes 55 Note 6. Stockholders' Equity 57 Note 7. Fair Value Measurements 58 Note 8. Stock-Based Compensation 59 Note 9. Employee Benefit Plans 61 Note 10. Weighted Average Common Shares 62 Note 11. Commitments and Contingencies 62 Note 12. HD Supply Acquisition 62 Fiscal 2022 Form 10-K 33 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the 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 (the Company) as of January 29, 2023 and January 30, 2022, 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 January 29, 2023, 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 Company as of January 29, 2023 and January 30, 2022, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended January 29, 2023, 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 Company’s internal control over financial reporting as of January 29, 2023, 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 15, 2023 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. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Estimation of store shrink As discussed in Note 1 to the consolidated financial statements, the majority of the Company’s U.S. merchandise inventories are stated at the lower of cost (first-in, first out) or market as determined by the retail inventory method, which is based on a number of factors such as markups, markdowns, and inventory losses (or shrink). Shrink is the difference between the recorded amount of inventory and the physical inventory count. The Company calculates shrink based on actual inventory losses identified as a result of physical inventory counts during each fiscal period and estimated inventory losses between physical inventory counts. The estimate for shrink occurring in the interim period between physical inventory counts is calculated on a store-specific basis and is primarily based on recent shrink results. We identified the evaluation of the estimation of store shrink occurring in the period between physical inventory counts and fiscal year-end as a critical audit matter. Evaluating the Company’s estimation of shrink at the end of the fiscal year using interim inventory loss experience in U.S. retail stores involved auditor judgment. Fiscal 2022 Form 10-K 34 Table of Contents The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the process of developing the estimate of store shrink. We evaluated the appropriateness of the Company using interim physical inventory counts to estimate inventory losses in U.S. retail stores at the end of the fiscal year by: • Evaluating the method and certain assumptions used; • Testing the application of the method and certain assumptions used; • Performing a current year trend analysis; and • Performing a sensitivity analysis over the shrink reserve estimate. /s/ KPMG LLP We have served as the Company’s auditor since 1979. Atlanta, Georgia March 15, 2023 Fiscal 2022 Form 10-K 35 Table of Contents THE HOME DEPOT, INC. CONSOLIDATED BALANCE SHEETS in millions, except per share data January 29, 2023 January 30, 2022 Assets Current assets: Cash and cash equivalents $ 2,757 $ 2,343 Receivables, net 3,317 3,426 Merchandise inventories 24,886 22,068 Other current assets 1,511 1,218 Total current assets 32,471 29,055 Net property and equipment 25,631 25,199 Operating lease right-of-use assets 6,941 5,968 Goodwill 7,444 7,449 Other assets 3,958 4,205 Total assets $ 76,445 $ 71,876 Liabilities and Stockholders’ Equity Current liabilities: Short-term debt $ — $ 1,035 Accounts payable 11,443 13,462 Accrued salaries and related expenses 1,991 2,426 Sales taxes payable 528 848 Deferred revenue 3,064 3,596 Income taxes payable 50 158 Current installments of long-term debt 1,231 2,447 Current operating lease liabilities 945 830 Other accrued expenses 3,858 3,891 Total current liabilities 23,110 28,693 Long-term debt, excluding current installments 41,962 36,604 Long-term operating lease liabilities 6,226 5,353 Deferred income taxes 1,019 909 Other long-term liabilities 2,566 2,013 Total liabilities 74,883 73,572 Commitments and contingencies (Note 11) Common stock, par value $ 0.05 ; authorized: 10,000 shares; issued: 1,794 shares at January 29, 2023 and 1,792 shares at January 30, 2022; outstanding: 1,016 shares at January 29, 2023 and 1,035 shares at January 30, 2022 90 90 Paid-in capital 12,592 12,132 Retained earnings 76,896 67,580 Accumulated other comprehensive loss ( 718 ) ( 704 ) Treasury stock, at cost, 778 shares at January 29, 2023 and 757 shares at January 30, 2022 ( 87,298 ) ( 80,794 ) Total stockholders’ equity (deficit) 1,562 ( 1,696 ) Total liabilities and stockholders’ equity $ 76,445 $ 71,876 ————— See accompanying notes to consolidated financial statements. Fiscal 2022 Form 10-K 36 Table of Contents THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF EARNINGS in millions, except per share data Fiscal Fiscal Fiscal 2022 2021 2020 Net sales $ 157,403 $ 151,157 $ 132,110 Cost of sales 104,625 100,325 87,257 Gross profit 52,778 50,832 44,853 Operating expenses: Selling, general and administrative 26,284 25,406 24,447 Depreciation and amortization 2,455 2,386 2,128 Total operating expenses 28,739 27,792 26,575 Operating income 24,039 23,040 18,278 Interest and other (income) expense: Interest income and other, net ( 55 ) ( 44 ) ( 47 ) Interest expense 1,617 1,347 1,347 Interest and other, net 1,562 1,303 1,300 Earnings before provision for income taxes 22,477 21,737 16,978 Provision for income taxes 5,372 5,304 4,112 Net earnings $ 17,105 $ 16,433 $ 12,866 Basic weighted average common shares 1,022 1,054 1,074 Basic earnings per share $ 16.74 $ 15.59 $ 11.98 Diluted weighted average common shares 1,025 1,058 1,078 Diluted earnings per share $ 16.69 $ 15.53 $ 11.94 ————— See accompanying notes to consolidated financial statements. Fiscal 2022 Form 10-K 37 Table of Contents THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Fiscal Fiscal in millions 2022 2021 2020 Net earnings $ 17,105 $ 16,433 $ 12,866 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments ( 22 ) ( 77 ) 60 Cash flow hedges 9 9 8 Other ( 1 ) 35 — Total other comprehensive (loss) income, net of tax ( 14 ) ( 33 ) 68 Comprehensive income $ 17,091 $ 16,400 $ 12,934 ————— See accompanying notes to consolidated financial statements. Fiscal 2022 Form 10-K 38 Table of Contents THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY in millions Fiscal Fiscal Fiscal 2022 2021 2020 Common Stock: Balance at beginning of year $ 90 $ 89 $ 89 Shares issued under employee stock plans, net — 1 — Balance at end of year 90 90 89 Paid-in Capital: Balance at beginning of year 12,132 11,540 11,001 Shares issued under employee stock plans, net 94 194 229 Stock-based compensation expense 366 398 310 Balance at end of year 12,592 12,132 11,540 Retained Earnings: Balance at beginning of year 67,580 58,134 51,729 Net earnings 17,105 16,433 12,866 Cash dividends ( 7,789 ) ( 6,985 ) ( 6,451 ) Other — ( 2 ) ( 10 ) Balance at end of year 76,896 67,580 58,134 Accumulated Other Comprehensive Loss: Balance at beginning of year ( 704 ) ( 671 ) ( 739 ) Foreign currency translation adjustments, net of tax ( 22 ) ( 77 ) 60 Cash flow hedges, net of tax 9 9 8 Other, net of tax ( 1 ) 35 — Balance at end of year ( 718 ) ( 704 ) ( 671 ) Treasury Stock: Balance at beginning of year ( 80,794 ) ( 65,793 ) ( 65,196 ) Repurchases of common stock ( 6,504 ) ( 15,001 ) ( 597 ) Balance at end of year ( 87,298 ) ( 80,794 ) ( 65,793 ) Total stockholders’ equity (deficit) $ 1,562 $ ( 1,696 ) $ 3,299 ————— See accompanying notes to consolidated financial statements. Fiscal 2022 Form 10-K 39 Table of Contents THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Fiscal Fiscal in millions 2022 2021 2020 Cash Flows from Operating Activities: Net earnings $ 17,105 $ 16,433 $ 12,866 Reconciliation of net earnings to net cash provided by operating activities: Depreciation and amortization 2,975 2,862 2,519 Stock-based compensation expense 366 399 310 Changes in receivables, net 111 ( 435 ) ( 465 ) Changes in merchandise inventories ( 2,830 ) ( 5,403 ) ( 1,657 ) Changes in other current assets ( 311 ) ( 330 ) 43 Changes in accounts payable and accrued expenses ( 2,577 ) 2,401 5,118 Changes in deferred revenue ( 526 ) 775 702 Changes in income taxes payable ( 107 ) ( 51 ) ( 149 ) Changes in deferred income taxes 138 ( 276 ) ( 569 ) Other operating activities 271 196 121 Net cash provided by operating activities 14,615 16,571 18,839 Cash Flows from Investing Activities: Capital expenditures ( 3,119 ) ( 2,566 ) ( 2,463 ) Payments for businesses acquired, net — ( 421 ) ( 7,780 ) Other investing activities ( 21 ) 18 73 Net cash used in investing activities ( 3,140 ) ( 2,969 ) ( 10,170 ) Cash Flows from Financing Activities: (Repayments of) proceeds from short-term debt, net ( 1,035 ) 1,035 ( 974 ) Proceeds from long-term debt, net of discounts 6,942 2,979 7,933 Repayments of long-term debt ( 2,491 ) ( 1,532 ) ( 2,872 ) Repurchases of common stock ( 6,696 ) ( 14,809 ) ( 791 ) Proceeds from sales of common stock 264 337 326 Cash dividends ( 7,789 ) ( 6,985 ) ( 6,451 ) Other financing activities ( 188 ) ( 145 ) ( 154 ) Net cash used in financing activities ( 10,993 ) ( 19,120 ) ( 2,983 ) Change in cash and cash equivalents 482 ( 5,518 ) 5,686 Effect of exchange rate changes on cash and cash equivalents ( 68 ) ( 34 ) 76 Cash and cash equivalents at beginning of year 2,343 7,895 2,133 Cash and cash equivalents at end of year $ 2,757 $ 2,343 $ 7,895 Supplemental Disclosures: Cash paid for income taxes $ 5,435 $ 5,504 $ 4,654 Cash paid for interest, net of interest capitalized 1,449 1,269 1,241 Non-cash capital expenditures 351 421 274 ————— See accompanying notes to consolidated financial statements. Fiscal 2022 Form 10-K 40 Table of Contents 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, décor items, and facilities maintenance, repair and operations products, in stores and online. We also provide a number of services, including home improvement installation services and tool and equipment rental. 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. Intercompany balances and transactions are eliminated in consolidation. Our fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31 st . All periods presented 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. While we believe these estimates and assumptions are reasonable, actual results could differ from these estimates. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and highly liquid investments purchased with original maturities of three months or less. Receivables, net The following table presents components of receivables, net: in millions January 29, 2023 January 30, 2022 Card receivables $ 1,003 $ 1,028 Rebate receivables 948 1,170 Customer receivables 871 703 Other receivables 495 525 Receivables, net $ 3,317 $ 3,426 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. Customer receivables relate to credit extended directly to certain customers in the ordinary course of business. The valuation allowance related to these receivables was not material to our consolidated financial statements at the end of fiscal 2022 or fiscal 2021. Merchandise Inventories Inventory cost includes the amount we pay to acquire inventory, including freight and import costs, as well as operating costs and depreciation associated with our sourcing and distribution network, and is net of certain vendor allowances. 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, which is based on a number of factors such as markups, markdowns, and inventory losses (or shrink). As the inventory retail value is adjusted regularly to reflect market conditions, 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 42 % 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, and the adjustments recorded to merchandise inventories valued under a cost method were not material to our consolidated financial statements at the end of fiscal 2022 or fiscal 2021. Fiscal 2022 Form 10-K 41 Table of Contents 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 count. We calculate shrink based on actual inventory losses identified as a result of physical inventory counts during each fiscal period and estimated inventory losses between physical inventory counts. The estimate for shrink occurring in the interim period between physical inventory counts is calculated on a store-specific basis and is primarily based on recent shrink results. Historically, the difference between estimated shrink and actual inventory losses has not been material to our annual financial results. Property and Equipment Buildings and related improvements, furniture, fixtures, and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives. Leasehold improvements and assets held under finance leases are amortized using the straight-line method over the original term of the lease or the useful life of the asset, whichever is shorter. The following table presents the estimated useful lives of our property and equipment: Life Buildings and improvements 5 – 45 years Furniture, fixtures and equipment 2 – 20 years Leasehold improvements 5 – 45 years We capitalize certain costs, including interest, related to construction in progress and the acquisition and development of software. Costs associated with the acquisition and development of software are amortized using the straight-line method over the estimated useful life of the software, which ranges from three to seven 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 their undiscounted future cash flows with their carrying value. If the carrying value is greater than the undiscounted future cash flows, we then measure the asset group’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. Impairment charges for long-lived assets were not material to our consolidated financial statements in fiscal 2022, fiscal 2021, or fiscal 2020. Leases We enter into contractual arrangements for the utilization of certain non-owned assets which are evaluated as finance or operating leases upon commencement, and are accounted for accordingly. Specifically, a contract is or contains a lease when (1) the contract contains an explicitly or implicitly identified asset and (2) we obtain substantially all of the economic benefits from the use of that underlying asset and direct how and for what purpose the asset is used during the term of the contract in exchange for consideration. We assess whether an arrangement is or contains a lease at inception of the contract. Our leases include certain retail locations, warehouse and distribution space, office space, equipment, and vehicles. A substantial majority of our leases have remaining lease terms of one to 20 years. Our real estate leases typically provide the option to extend the lease for five-year terms, and some of our leases may include the option to terminate in less than five years . The lease term used to calculate the right-of-use asset and lease liability at commencement includes the impacts of options to extend or terminate the lease when it is reasonably certain that we will exercise that option. When determining whether it is reasonably certain that we will exercise an option at commencement, we consider various existing economic factors, including market conditions, real estate strategies, the nature, length, and terms of the agreement, as well as the uncertainty of the condition of leased equipment at the end of the lease term. Based on these determinations, we generally conclude that the exercise of renewal options would not be reasonably certain in determining the lease term at commencement. Fiscal 2022 Form 10-K 42 Table of Contents The discount rate used to calculate the present value of lease payments is the rate implicit in the lease, when readily determinable. As the rate implicit in the lease is rarely readily determinable, we use a secured incremental borrowing rate, which is updated on a quarterly basis, as the discount rate for the present value of lease payments. Real estate taxes, insurance, maintenance, and operating expenses applicable to the leased asset are generally our obligations under our lease agreements. In instances where these payments are fixed, they are included in the measurement of our lease liabilities, and when variable, are excluded and recognized in the period in which the obligation for those payments is incurred. Certain of our lease agreements also include rental payments based on an index or rate and others include rental payments based on a percentage of sales. For variable payments dependent upon an index or rate, we apply the active index or rate as of the lease commencement date. Variable lease payments not based on an index or rate are not included in the measurement of our lease liabilities as they cannot be reasonably estimated, and are recognized in the period in which the obligation for those payments is incurred. Leases that have a term of twelve months or less upon commencement are considered short-term in nature. Short-term leases are not included on the consolidated balance sheets and are expensed on a straight-line basis over the lease term. We have also elected to not separate lease and non-lease components for certain classes of assets including real estate and certain equipment. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Business Combinations The assets and liabilities of acquired businesses are recorded at their fair values at the date of acquisition. The excess of the purchase price over the fair values of the identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon conclusion of the measurement period, any subsequent adjustments are recorded to earnings. 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 as facts and circumstances warrant. We completed our last quantitative assessment in fiscal 2019 and concluded that the fair value of our reporting units substantially exceeded their respective carrying values, including goodwill. During the third quarter of fiscal 2022, we completed our annual assessment of the recoverability of goodwill for our U.S., Canada, and Mexico reporting units based on qualitative factors. We performed a qualitative assessment to determine if there were any indicators of impairment and concluded that while there have been events and circumstances in the macro-environment that have impacted us, we have not experienced any entity-specific indicators that would indicate that it is more likely than not that the fair value of any of our reporting units were less than their carrying amounts. There were no impairment charges related to goodwill for fiscal 2022, fiscal 2021, or fiscal 2020. The following table presents the changes in the carrying amount of our goodwill: in millions Fiscal Fiscal 2022 2021 Goodwill, balance at beginning of year $ 7,449 $ 7,126 Acquisitions (1) — 323 Other (2) ( 5 ) — Goodwill, balance at end of year $ 7,444 $ 7,449 ————— (1) Represents goodwill from a small acquisition completed during the second quarter of Fiscal 2021. (2) Reflects the net impact of foreign currency translation. Fiscal 2022 Form 10-K 43 Table of Contents Other Intangible Assets Intangible assets other than goodwill are included in other assets on the consolidated balance sheets. We amortize the cost of definite-lived intangible assets on a straight-line basis over their estimated useful lives, which range up to 20 years, as this approximates the pattern of expected economic benefit. Intangible assets with indefinite lives are tested in the third quarter of each fiscal year for impairment, or more often if indicators warrant. During the third quarter of fiscal 2022, we completed our annual assessment of the recoverability of our indefinite-lived intangible assets based on quantitative factors and concluded no impairment losses should be recognized. There were no impairment losses related to intangible assets for fiscal 2022, fiscal 2021, and fiscal 2020. The following table presents information regarding our intangible assets: January 29, 2023 January 30, 2022 in millions Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Definite-Lived Intangible Assets: Customer relationships $ 3,034 $ ( 495 ) $ 2,539 $ 3,034 $ ( 326 ) $ 2,708 Trade names 151 ( 16 ) 135 151 ( 8 ) 143 Other 12 ( 12 ) — 12 ( 9 ) 3 Indefinite-Lived Intangible Assets: Trade names 649 649 649 649 Total Intangible Assets $ 3,846 $ ( 523 ) $ 3,323 $ 3,846 $ ( 343 ) $ 3,503 Our intangible asset amortization expense was immaterial for fiscal 2022, fiscal 2021, and fiscal 2020. The following table presents the estimated future amortization expense related to definite-lived intangible assets as of January 29, 2023: in millions Amortization Expense Fiscal 2023 $ 178 Fiscal 2024 178 Fiscal 2025 178 Fiscal 2026 178 Fiscal 2027 167 Thereafter 1,795 Total $ 2,674 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. Derivative Instruments and Hedging Activities We use derivative instruments in the management of our interest rate exposure on long-term debt and our exposure to foreign currency fluctuations. We enter into derivative instruments for risk management purposes only; we do not enter into derivative instruments for trading or speculative purposes. All derivative instruments are recognized at their fair values in either assets or liabilities at the balance sheet date and are classified as either current or non-current based on each contract’s respective maturity. While we enter into master netting arrangements, our policy is to present the fair value of derivative instruments on a gross basis in our consolidated balance sheets. Changes in the fair values for derivative instruments designated as cash flow or net investment hedges are recognized in accumulated other comprehensive income (loss) until the hedged item is recognized in earnings, which for net investment hedges is upon sale or substantial liquidation of the underlying net investment. Changes in fair value of outstanding fair value hedges and the offsetting changes in fair values of the hedged item are Fiscal 2022 Form 10-K 44 Table of Contents recognized in earnings. We record realized gains and losses from derivative instruments in the same financial statement line item as the hedged item. Derivative instruments that are not designated as hedges, if any, are recorded at fair value with unrealized gains or losses reported in earnings each period in the same financial statement line item as the hedged item. Cash flows from the settlement of derivative instruments appear in the consolidated statements of cash flows in the same categories as the cash flows of the hedged item. Self-Insurance Reserves 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. Our self-insurance liabilities, which are included in accrued salaries and related expenses, other accrued expenses and other long-term liabilities in the consolidated balance sheets, were $ 1.3 billion at both January 29, 2023 and January 30, 2022. 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. 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 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. Our liability for sales returns is estimated based on historical return levels and our expectation of future returns. 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. Adjustments related to changes in return estimates were immaterial in fiscal 2022, fiscal 2021, and fiscal 2020. Services revenue is 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, online, 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 services 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 products and services sold in stores or online, payment is typically due at the point of sale. 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 typically three months or less. As of January 29, 2023 and January 30, 2022, deferred revenue for products and services was $ 2.0 billion and $ 2.6 billion, respectively. We further record deferred revenue for the sale of gift cards and recognize the associated revenue upon the redemption of those gift cards, which generally occurs within six months of gift card issuance. As of January 29, 2023 and January 30, 2022, our performance obligations for unredeemed gift cards were $ 1.1 billion and $ 1.0 billion, respectively. Gift card breakage income, which is our estimate of the portion of our gift card balance not expected to be redeemed, is recognized in net sales and was immaterial in fiscal 2022, fiscal 2021, and fiscal 2020. We also 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 existing receivables at the end of the agreement. 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 2022 Form 10-K 45 Table of Contents 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. Vendor allowances that are not reimbursements of specific, incremental, and identifiable costs are also included within cost of sales. 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 reduce the carrying cost of inventory and are recognized in cost of sales when the related inventory is sold. Selling, General and Administrative Selling, general and administrative expenses include compensation and benefits for retail and store support center associates, occupancy and operating costs of retail locations and store support centers, insurance-related expenses, advertising costs, credit and debit card processing fees, and other administrative costs. Advertising Expense Advertising costs, including digital, television, radio and print, are expensed when the advertisement first appears. Certain 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. The following table presents net advertising expense included in SG&A: in millions Fiscal Fiscal Fiscal 2022 2021 2020 Net advertising expense $ 1,085 $ 1,044 $ 909 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 and non-employee directors under certain stock incentive plans. We measure and recognize compensation expense for all stock-based payment awards made to associates and non-employee 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, on a straight-line basis, over the requisite service period or as restrictions lapse. We include estimated forfeitures expected to occur when calculating stock-based compensation expense. 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 routinely evaluate the likelihood of realizing the benefit of our deferred tax assets and may record a valuation allowance if, based on all available evidence, we determine that it is more likely than not that some portion of the tax benefit will not be realized. 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. Fiscal 2022 Form 10-K 46 Table of Contents 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. We recognize interest and penalties related to income tax matters in interest expense and SG&A, respectively, on our consolidated statements of earnings. Accrued interest and penalties related to income tax matters are recognized in other accrued expenses and other long-term liabilities on our consolidated balance sheets. We are subject to global intangible low-taxed income (“GILTI”) tax, an incremental tax on foreign income. We have made an accounting election to record this tax in the period the tax arises. Comprehensive Income Comprehensive income includes net earnings adjusted for certain gains and losses that are excluded from net earnings and recognized within accumulated other comprehensive loss as a component of equity, which consist primarily of foreign currency translation adjustments. Accumulated other comprehensive loss also includes net losses on cash flow hedges that were immaterial as of January 29, 2023 and January 30, 2022. Reclassifications from accumulated other comprehensive loss into earnings were immaterial in fiscal 2022, fiscal 2021, and fiscal 2020. 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. Cumulative foreign currency translation adjustments recorded in accumulated other comprehensive loss as of January 29, 2023 and January 30, 2022 were losses of $ 597 million and $ 575 million, respectively. Recently Adopted Accounting Pronouncements ASU No. 2021-10. In November 2021, the FASB issued ASU No. 2021-10, “Government Assistance (Topic 832),” to improve the transparency of government assistance received by business entities that are accounted for by applying either the International Accounting Standards 20 grant model or Accounting Standards Codification 958-605 contribution model by analogy. Topic 832 requires disclosure of the nature of the transactions and the related accounting policy used, the line items on the balance sheet and income statement that are affected and the amounts applicable to each financial statement line item, and significant terms of the transactions. On January 31, 2022, we adopted ASU No. 2021-10 with no impact to our financial statements or related disclosures as the transactions in scope of this guidance were immaterial. Recently Issued Accounting Pronouncements ASU No. 2022-04. In September 2022, the FASB issued ASU No. 2022-04, “Liabilities—Supplier Finance Programs (Topic 405-50) - Disclosure of Supplier Finance Program Obligations,” to enhance the transparency of supplier finance programs used by an entity in connection with the purchase of goods and services. The standard requires entities that use supplier finance programs to disclose the key terms, including a description of payment terms, the confirmed amount outstanding under the program at the end of each reporting period, a description of where those obligations are presented on the balance sheet, and an annual rollforward, including the amount of obligations confirmed and the amount paid during the period. The guidance does not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs. ASU No. 2022-04 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the requirement on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. We are currently evaluating the impact of the standard on our consolidated financial statement disclosures. ASU No. 2020-04. In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform. ASU No. 2020-04 is effective as of March 12, Fiscal 2022 Form 10-K 47 Table of Contents 2020 and may be applied to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020. This guidance was subsequently amended by ASU No. 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848,” which was effective upon issuance in December 2022 and extended the temporary relief provided by Topic 848 through December 31, 2024. While the discontinuance of LIBOR will impact our interest rate swap agreements, we do not anticipate the transition to a new reference rate and adoption of this standard will have a material impact on our consolidated financial condition, results of operations, or cash flows. Recent accounting pronouncements adopted or pending adoption not discussed above are either not applicable or are not expected to have a material impact on our consolidated financial condition, results of operations, or cash flows. 2. SEGMENT REPORTING AND NET SALES 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 regularly reviewed by our chief operating decision maker to analyze performance, make decisions and allocate resources. For disclosure purposes, we aggregate these three operating segments into one reportable segment due to the similar nature of their operations and economic characteristics. The following table presents net property and equipment, classified by geography: in millions January 29, 2023 January 30, 2022 January 31, 2021 Net property and equipment – in the U.S. $ 23,057 $ 22,696 $ 22,205 Net property and equipment – outside the U.S. 2,574 2,503 2,500 Net property and equipment $ 25,631 $ 25,199 $ 24,705 No sales to an individual customer accounted for more than 10% of revenue during any of the last three fiscal years. The following table presents net sales, classified by geography: Fiscal Fiscal Fiscal in millions 2022 2021 2020 Net sales – in the U.S. $ 144,840 $ 138,920 $ 122,158 Net sales – outside the U.S. 12,563 12,237 9,952 Net sales $ 157,403 $ 151,157 $ 132,110 The following table presents net sales by products and services: Fiscal Fiscal Fiscal in millions 2022 2021 2020 Net sales – products $ 151,804 $ 145,745 $ 127,671 Net sales – services 5,599 5,412 4,439 Net sales $ 157,403 $ 151,157 $ 132,110 The following table presents major product lines and the related merchandising departments (and related services): Major Product Line Merchandising Departments Building Materials Building Materials, Electrical/Lighting, Lumber, Millwork, and Plumbing Décor Appliances, Décor/Storage, Flooring, Kitchen and Bath, and Paint Hardlines Hardware, Indoor Garden, Outdoor Garden, and Tools Fiscal 2022 Form 10-K 48 Table of Contents The following table presents net sales by major product line (and related services): Fiscal Fiscal Fiscal in millions 2022 2021 2020 Building Materials $ 59,533 $ 54,990 $ 46,521 Décor 52,322 50,437 43,415 Hardlines 45,548 45,730 42,174 Net sales $ 157,403 $ 151,157 $ 132,110 The following table presents net sales by merchandising department (and related services): Fiscal Fiscal Fiscal 2022 2021 2020 dollars in millions Net Sales % of Net Sales Net Sales % of Net Sales Net Sales % of Net Sales Appliances $ 14,461 9.2 % $ 14,232 9.4 % $ 11,865 9.0 % Building Materials 11,298 7.2 9,823 6.5 8,656 6.6 Décor/Storage 6,357 4.0 6,095 4.0 4,959 3.8 Electrical/Lighting 13,746 8.7 13,473 8.9 11,178 8.5 Flooring 9,222 5.9 9,225 6.1 8,156 6.2 Hardware 8,104 5.1 7,873 5.2 7,312 5.5 Indoor Garden 14,990 9.5 15,546 10.3 14,649 11.1 Kitchen and Bath 11,102 7.1 10,432 6.9 8,383 6.3 Lumber 13,460 8.6 13,344 8.8 11,309 8.6 Millwork 8,423 5.4 7,412 4.9 6,460 4.9 Outdoor Garden 10,078 6.4 10,317 6.8 9,602 7.3 Paint 11,180 7.1 10,453 6.9 10,052 7.6 Plumbing 12,606 8.0 10,938 7.2 8,918 6.8 Tools 12,376 7.9 11,994 7.9 10,611 8.0 Total $ 157,403 100.0 % $ 151,157 100.0 % $ 132,110 100.0 % ————— Note: Certain percentages may not sum to totals due to rounding. 3. PROPERTY AND LEASES Net Property and Equipment The following table presents components of net property and equipment: in millions January 29, 2023 January 30, 2022 Land $ 8,719 $ 8,617 Buildings and improvements 19,430 19,173 Furniture, fixtures, and equipment 16,564 16,441 Leasehold improvements 2,130 2,016 Construction in progress 1,297 1,139 Finance leases 4,135 3,943 Property and equipment, at cost 52,275 51,329 Less accumulated depreciation and finance lease amortization 26,644 26,130 Net property and equipment $ 25,631 $ 25,199 Fiscal 2022 Form 10-K 49 Table of Contents The following table presents depreciation and finance lease amortization expense, including depreciation and finance lease amortization expense included in cost of sales: in millions Fiscal Fiscal Fiscal 2022 2021 2020 Depreciation and finance lease amortization expense $ 2,756 $ 2,650 $ 2,425 Leases The following table presents the consolidated balance sheet location of assets and liabilities related to operating and finance leases: in millions Consolidated Balance Sheet Classification January 29, 2023 January 30, 2022 Assets: Operating lease assets Operating lease right-of-use assets $ 6,941 $ 5,968 Finance lease assets (1) Net property and equipment 2,899 2,896 Total lease assets $ 9,840 $ 8,864 Liabilities: Current: Operating lease liabilities Current operating lease liabilities $ 945 $ 830 Finance lease liabilities Current installments of long-term debt 231 198 Long-term: Operating lease liabilities Long-term operating lease liabilities 6,226 5,353 Finance lease liabilities Long-term debt, excluding current installments 3,054 3,038 Total lease liabilities $ 10,456 $ 9,419 ————— (1) Finance lease assets are recorded net of accumulated amortization of $ 1.2 billion as of January 29, 2023 and $ 1.0 billion as of January 30, 2022. The following table presents components of lease cost, excluding short-term lease cost and sublease income which are immaterial: Consolidated Statement of Earnings Classification (1) Fiscal Fiscal Fiscal in millions 2022 2021 2020 Operating lease cost Selling, general and administrative $ 1,169 $ 1,084 $ 782 Finance lease cost: Amortization of leased assets Depreciation and amortization 282 250 167 Interest on lease liabilities Interest expense 125 127 112 Variable lease cost Selling, general and administrative 470 425 277 Total lease cost $ 2,046 $ 1,886 $ 1,338 ————— (1) Costs associated with our sourcing and distribution network are recorded in cost of sales, with the exception of interest on finance lease liabilities. The following table presents weighted average remaining lease terms and discount rates: January 29, 2023 January 30, 2022 Weighted Average Remaining Lease Term (Years): Operating leases 9 9 Finance leases 14 15 Weighted Average Discount Rate: Operating leases 3.2 % 2.7 % Finance leases 4.3 % 4.7 % Fiscal 2022 Form 10-K 50 Table of Contents The following table presents approximate future minimum payments under operating and finance leases at January 29, 2023: in millions Operating Leases Finance Leases Fiscal 2023 $ 1,152 $ 347 Fiscal 2024 1,186 364 Fiscal 2025 1,032 406 Fiscal 2026 900 297 Fiscal 2027 769 278 Thereafter 3,446 2,449 Total lease payments 8,485 4,141 Less: imputed interest 1,314 856 Present value of lease liabilities $ 7,171 $ 3,285 ————— Note: We have excluded approximately $ 2.1 billion of leases (undiscounted basis) that have not yet commenced. These leases are expected to commence primarily in fiscal 2023 with lease terms of up to 30 years. The following table presents supplemental cash flow information related to leases: Fiscal Fiscal Fiscal in millions 2022 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows – operating leases $ 1,157 $ 1,090 $ 1,022 Operating cash flows – finance leases 125 127 112 Financing cash flows – finance leases 241 182 122 Supplemental non-cash information: Lease assets obtained in exchange for new operating lease liabilities 1,991 964 969 Lease assets obtained in exchange for new finance lease liabilities 322 672 1,730 4. DEBT AND DERIVATIVE INSTRUMENTS Short-Term Debt In July 2022, we expanded our commercial paper program from $ 3.0 billion to $ 5.0 billion to further enhance our financial flexibility. All of our short-term borrowings in fiscal 2022 and fiscal 2021 were under our commercial paper program. In connection with our program, we had back-up credit facilities with a consortium of banks for borrowings up to $ 5.0 billion at January 29, 2023, which consisted of a five-year $ 3.5 billion credit facility scheduled to expire in July 2027 and a 364 -day $ 1.5 billion credit facility scheduled to expire in July 2023. These facilities replaced our previously existing five-year $ 2.0 billion credit facility, which was scheduled to expire in December 2023, and our 364 -day $ 1.0 billion credit facility, which was scheduled to expire in December 2022. At January 29, 2023, we had no borrowings outstanding under our commercial paper program, and at January 30, 2022, we had $ 1.0 billion of borrowings outstanding under our commercial paper program with a weighted-average interest rate of 0.1 %. The following table presents additional information on borrowings under our commercial paper program during fiscal 2022 and fiscal 2021: Fiscal Fiscal in millions 2022 2021 Maximum amount outstanding during the period $ 2,745 $ 1,368 Average daily short-term borrowings 269 45 Fiscal 2022 Form 10-K 51 Table of Contents Long-Term Debt The following table presents details of the components of our long-term debt: Carrying Amount (1) in millions Interest Payable Principal Amount January 29, 2023 January 30, 2022 Floating rate senior notes due March 2022 Quarterly $ — $ — $ 300 3.25 % Senior notes due March 2022 Semi-annually — — 700 2.625 % Senior notes due June 2022 Semi-annually — — 1,249 2.70 % Senior notes due April 2023 Semi-annually 1,000 1,000 999 3.75 % Senior notes due February 2024 Semi-annually 1,100 1,099 1,098 2.70 % Senior notes due April 2025 Semi-annually 500 498 — 3.35 % Senior notes due September 2025 Semi-annually 1,000 998 998 4.00 % Senior notes due September 2025 Semi-annually 750 748 — 3.00 % Senior notes due April 2026 Semi-annually 1,300 1,295 1,293 2.125 % Senior notes due September 2026 Semi-annually 1,000 994 992 2.875 % Senior notes due April 2027 Semi-annually 750 744 — 2.50 % Senior notes due April 2027 Semi-annually 750 745 744 2.80 % Senior notes due September 2027 Semi-annually 1,000 979 1,001 0.90 % Senior notes due March 2028 Semi-annually 500 496 495 1.50 % Senior notes due September 2028 Semi-annually 1,000 993 992 3.90 % Senior notes due December 2028 Semi-annually 1,000 977 1,035 2.95 % Senior notes due June 2029 Semi-annually 1,750 1,675 1,768 2.70 % Senior notes due April 2030 Semi-annually 1,500 1,347 1,422 1.375 % Senior notes due March 2031 Semi-annually 1,250 1,170 1,210 1.875 % Senior notes due September 2031 Semi-annually 1,000 942 981 3.25 % Senior notes due April 2032 Semi-annually 1,250 1,237 — 4.50 % Senior notes due September 2032 Semi-annually 1,250 1,242 — 5.875 % Senior notes due December 2036 Semi-annually 3,000 2,874 2,916 3.30 % Senior notes due April 2040 Semi-annually 1,250 1,075 1,164 5.40 % Senior notes due September 2040 Semi-annually 500 496 496 5.95 % Senior notes due April 2041 Semi-annually 1,000 990 990 4.20 % Senior notes due April 2043 Semi-annually 1,000 939 977 4.875 % Senior notes due February 2044 Semi-annually 1,000 981 981 4.40 % Senior notes due March 2045 Semi-annually 1,000 980 979 4.25 % Senior notes due April 2046 Semi-annually 1,600 1,586 1,586 3.90 % Senior notes due June 2047 Semi-annually 1,150 1,144 1,144 4.50 % Senior notes due December 2048 Semi-annually 1,500 1,464 1,464 3.125 % Senior notes due December 2049 Semi-annually 1,250 1,178 1,214 3.35 % Senior notes due April 2050 Semi-annually 1,500 1,472 1,471 2.375 % Senior notes due March 2051 Semi-annually 1,250 1,156 1,201 2.75 % Senior notes due September 2051 Semi-annually 1,000 983 982 3.625 % Senior notes due April 2052 Semi-annually 1,500 1,458 — 4.95 % Senior notes due September 2052 Semi-annually 1,000 980 — 3.50 % Senior notes due September 2056 Semi-annually 1,000 973 973 Total senior notes $ 41,150 $ 39,908 $ 35,815 Finance lease obligations; payable in varying installments through April 30, 2076 $ 3,285 $ 3,236 Total long-term debt 43,193 39,051 Less current installments of long-term debt 1,231 2,447 Long-term debt, excluding current installments $ 41,962 $ 36,604 ————— (1) Includes unamortized discounts, premiums, debt issuance costs, and the effects of fair value hedges. Fiscal 2022 Form 10-K 52 Table of Contents September 2022 Issuance. In September 2022, we issued three tranches of senior notes. • The first tranche consisted of $ 750 million of 4.00 % senior notes due September 15, 2025 at a discount of $ 0.3 million. Interest on these notes is due semi-annually on March 15 and September 15 of each year, beginning March 15, 2023. • The second tranche consisted of $ 1.25 billion of 4.50 % senior notes due September 15, 2032 at a discount of $ 1 million. Interest on these notes is due semi-annually on March 15 and September 15 of each year, beginning March 15, 2023. • The third tranche consisted of $ 1.0 billion of 4.95 % senior notes due September 15, 2052 at a discount of $ 14 million. Interest on these notes is due semi-annually on March 15 and September 15 of each year, beginning March 15, 2023. • Issuance costs totaled $ 15 million. March 2022 Issuance. In March 2022, we issued four tranches of senior notes. • The first tranche consisted of $ 500 million of 2.70 % senior notes due April 15, 2025 at a discount of $ 1 million. Interest on these notes is due semi-annually on April 15 and October 15 of each year, beginning October 15, 2022. • The second tranche consisted of $ 750 million of 2.875 % senior notes due April 15, 2027 at a discount of $ 4 million. Interest on these notes is due semi-annually on April 15 and October 15 of each year, beginning October 15, 2022. • The third tranche consisted of $ 1.25 billion of 3.25 % senior notes due April 15, 2032 at a discount of $ 6 million. Interest on these notes is due semi-annually on April 15 and October 15 of each year, beginning October 15, 2022. • The fourth tranche consisted of $ 1.5 billion of 3.625 % senior notes due April 15, 2052 at a discount of $ 32 million. Interest on these notes is due semi-annually on April 15 and October 15 of each year, beginning October 15, 2022. • Issuance costs totaled $ 22 million. Repayments . In March 2022, we repaid our $ 700 million 3.25 % senior notes and $ 300 million floating rate senior notes at maturity. In May 2022, we repaid our $ 1.25 billion 2.625 % senior notes, which had a maturity date of June 2022, at the Par Call Date for the notes. Redemption. All of our senior 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 5.875 % 2036 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, prior to the Par Call Date, as defined in the respective 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. On or after the Par Call Date, the redemption price is equal to 100 % of the principal amount of the notes. Additionally, if a Change in Control Triggering Event occurs, as defined in the notes, holders of all such 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. The indentures governing the notes do not generally limit our ability to incur additional indebtedness or require us 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. Fiscal 2022 Form 10-K 53 Table of Contents Maturities of Long-Term Debt. The following table presents our long-term debt maturities, excluding finance leases, as of January 29, 2023: in millions Principal Fiscal 2023 $ 1,000 Fiscal 2024 1,100 Fiscal 2025 2,250 Fiscal 2026 2,300 Fiscal 2027 2,500 Thereafter 32,000 Total $ 41,150 Derivative Instruments and Hedging Activities We use derivative instruments as part of our normal business operations in the management of our exposure to fluctuations in foreign currency exchange rates and interest rates on certain debt. Our objective in managing these exposures is to decrease the volatility of cash flows affected by changes in the underlying rates and minimize the risk of changes in the fair value of our senior notes. Fair Value Hedges. We had outstanding interest rate swap agreements with combined notional amounts of $ 5.4 billion at January 29, 2023 and January 30, 2022. 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. At January 29, 2023, the fair values of these agreements totaled $ 778 million, all of which is recognized in other long-term liabilities on the consolidated balance sheet. At January 30, 2022, the fair values of these agreements totaled $ 191 million, with $ 58 million recognized in other assets and $ 249 million recognized in other long-term liabilities on the consolidated balance sheet. All of our interest rate swap agreements designated as fair value hedges meet the shortcut method requirements under GAAP. Accordingly, the changes in the fair values of these agreements offset the changes in the fair value of the hedged long-term debt. Cash Flow Hedges. At January 29, 2023 and January 30, 2022, we had outstanding foreign currency forward contracts accounted for as cash flow hedges, which hedge the variability of forecasted cash flows associated with certain payments made in our foreign operations. At January 29, 2023 and January 30, 2022, the notional amounts and the fair values of these contracts were not material. Additionally, the realized and unrealized gains and losses on these instruments were not material during fiscal 2022, fiscal 2021, and fiscal 2020. We also settled forward-starting interest rate swap agreements in prior years, which were used to hedge the variability in future interest payments attributable to changing interest rates on forecasted debt issuances. Unamortized losses on these forward-starting swaps, which were designated as cash flow hedges, are being amortized to interest expense over the life of the respective notes. Unamortized losses recognized on these swaps remaining in accumulated other comprehensive loss were immaterial as of January 29, 2023 and January 30, 2022, as were the losses recognized within interest expense for fiscal 2022, fiscal 2021, and fiscal 2020. We expect an immaterial amount recorded in accumulated other comprehensive loss as of January 29, 2023 to be reclassified into earnings within the next 12 months. Net Investment Hedges. During fiscal 2022, we issued foreign currency forward contracts accounted for as net investment hedges, which hedged against foreign currency exposure on our net investment in certain subsidiaries. These foreign currency forward contracts were immaterial and were settled in fiscal 2022. The related foreign currency translation adjustment amounts recorded in accumulated other comprehensive loss upon settlement were also immaterial. There were no arrangements accounted for as net investment hedges outstanding as of January 29, 2023 or January 30, 2022. Collateral. We generally enter into master netting arrangements, which are designed to reduce credit risk by permitting net settlement of transactions with the same counterparty. To further limit our credit risk, we enter into collateral security arrangements that provide for collateral to be received or posted when the net fair value of certain derivative instruments exceeds or falls below contractually established thresholds. The cash collateral posted by the Company related to derivative instruments under our collateral security arrangements was $ 634 million as of January 29, 2023, which was recorded in other current assets on the consolidated balance sheet. We did not hold any cash collateral as of January 29, 2023, and cash collateral both held and posted was immaterial as of January 30, 2022. Fiscal 2022 Form 10-K 54 Table of Contents 5. INCOME TAXES Provision for Income Taxes The following table presents our earnings before the provision for income taxes: in millions Fiscal Fiscal Fiscal 2022 2021 2020 United States $ 20,990 $ 20,320 $ 16,013 Foreign 1,487 1,417 965 Total $ 22,477 $ 21,737 $ 16,978 The following table presents our provision for income taxes: in millions Fiscal Fiscal Fiscal 2022 2021 2020 Current: Federal $ 3,918 $ 4,066 $ 3,462 State 880 981 928 Foreign 436 511 329 Total current 5,234 5,558 4,719 Deferred: Federal 102 ( 155 ) ( 404 ) State 61 ( 11 ) ( 209 ) Foreign ( 25 ) ( 88 ) 6 Total deferred 138 ( 254 ) ( 607 ) Provision for income taxes $ 5,372 $ 5,304 $ 4,112 The following table presents our combined federal, state, and foreign effective tax rates: Fiscal Fiscal Fiscal 2022 2021 2020 Combined federal, state, and foreign effective tax rates 23.9 % 24.4 % 24.2 % The following table presents the reconciliation of our provision for income taxes at the federal statutory rate of 21 % to the actual tax expense: in millions Fiscal Fiscal Fiscal 2022 2021 2020 Income taxes at federal statutory rate $ 4,720 $ 4,565 $ 3,565 State income taxes, net of federal income tax benefit 743 766 568 Other, net ( 91 ) ( 27 ) ( 21 ) Total $ 5,372 $ 5,304 $ 4,112 On August 16, 2022, the Inflation Reduction Act of 2022 (“2022 Tax Act”) was enacted into law. The key tax provisions include a 15% minimum tax on adjusted financial statement income. We do not expect any impact to the Company’s effective tax rate as a result of the new 15% minimum tax under the 2022 Tax Act. Fiscal 2022 Form 10-K 55 Table of Contents Deferred Taxes The following table presents the tax effects of temporary differences that give rise to significant portions of our deferred tax assets and deferred tax liabilities: in millions January 29, 2023 January 30, 2022 Assets: Deferred compensation $ 236 $ 471 Accrued self-insurance liabilities 276 272 State income taxes 149 138 Merchandise inventories 30 — Non-deductible reserves 318 250 Net operating losses 115 150 Lease liabilities 1,879 1,528 Deferred revenue 148 121 Other 56 67 Total deferred tax assets 3,207 2,997 Valuation allowance ( 5 ) ( 10 ) Total deferred tax assets, net of valuation allowance 3,202 2,987 Liabilities: Merchandise inventories — ( 14 ) Property and equipment ( 992 ) ( 902 ) Goodwill and other intangibles ( 953 ) ( 985 ) Lease right-of-use assets ( 1,799 ) ( 1,473 ) Tax on unremitted earnings ( 63 ) ( 74 ) Other ( 95 ) ( 104 ) Total deferred tax liabilities ( 3,902 ) ( 3,552 ) Net deferred tax liabilities $ ( 700 ) $ ( 565 ) The following table presents our noncurrent deferred tax assets and noncurrent deferred tax liabilities, netted by tax jurisdiction, as presented on the consolidated balance sheets: in millions Consolidated Balance Sheet Classification January 29, 2023 January 30, 2022 Deferred tax assets Other assets $ 319 $ 344 Deferred tax liabilities Deferred income taxes ( 1,019 ) ( 909 ) Net deferred tax liabilities $ ( 700 ) $ ( 565 ) As of January 29, 2023, we recorded deferred tax assets of $ 115 million for net operating losses, primarily related to state jurisdictions. These losses expire at various dates beginning in 2023. We have concluded that it is more likely than not that tax benefits related to substantially all net operating losses will be realized based upon the expectation that we will generate the necessary taxable income in future periods. Reinvestment of Unremitted Earnings Substantially all of our current year foreign cash earnings 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 for applicable state taxes and foreign withholding taxes of such cash earnings have been provided for in the accompanying consolidated statements of earnings. We have the intent and ability to reinvest substantially all of the $ 4.1 billion of non -cash unremitted earnings of our non-U.S. subsidiaries indefinitely. Accordingly, no provision for state 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. Fiscal 2022 Form 10-K 56 Table of Contents Tax Return Examination Status Our income tax returns are routinely examined by U.S. federal, state and local, and foreign tax authorities. As of January 29, 2023, the Company is no longer subject to U.S. federal examinations by tax authorities for years before fiscal 2010. Our U.S. federal tax returns for fiscal years 2010 through 2021, with the exception of 2015, are currently under examination by the IRS. With respect to the fiscal years 2010 to 2014, the IRS has issued a proposed adjustment relating to transfer pricing between our entities in the U.S. and China. We are defending our position using all available remedies. There are also ongoing U.S. state and local audits and other foreign audits covering fiscal years 2013 through 2020. 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, as well as the expiration of statutes of limitations, could reduce our unrecognized tax benefits by an immaterial amount. 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 The following table reconciles the beginning and ending amount of our gross unrecognized tax benefits: in millions Fiscal Fiscal Fiscal 2022 2021 2020 Unrecognized tax benefits balance at beginning of fiscal year $ 570 $ 540 $ 473 Additions based on tax positions related to the current year 75 80 75 Additions for tax positions of prior years 22 24 72 Reductions for tax positions of prior years ( 7 ) ( 40 ) ( 53 ) Reductions due to settlements ( 1 ) ( 29 ) ( 22 ) Reductions due to lapse of statute of limitations ( 16 ) ( 5 ) ( 5 ) Unrecognized tax benefits balance at end of fiscal year $ 643 $ 570 $ 540 Unrecognized tax benefits that if recognized would affect our annual effective income tax rate on net earnings were $ 537 million, $ 479 million, and $ 458 million at January 29, 2023, January 30, 2022, and January 31, 2021, respectively. Interest and Penalties Net adjustments to accruals for interest and penalties a ssociated with uncertain tax positions were immaterial in fiscal 2022, fiscal 2021, and fiscal 2020. Our total accrued interest and penalties associated with uncertain tax positions were immaterial as of January 29, 2023 and January 30, 2022. 6. STOCKHOLDERS’ EQUITY Stock Rollforward The following table presents a reconciliation of the number of shares of our common stock outstanding and cash dividends per share: shares in millions Fiscal Fiscal Fiscal 2022 2021 2020 Common stock: Balance at beginning of year 1,792 1,789 1,786 Shares issued under employee stock plans, net 2 3 3 Balance at end of year 1,794 1,792 1,789 Treasury stock: Balance at beginning of year ( 757 ) ( 712 ) ( 709 ) Repurchases of common stock ( 21 ) ( 45 ) ( 3 ) Balance at end of year ( 778 ) ( 757 ) ( 712 ) Shares outstanding at end of year 1,016 1,035 1,077 Cash dividends per share $ 7.60 $ 6.60 $ 6.00 Fiscal 2022 Form 10-K 57 Table of Contents Share Repurchases In August 2022, our Board of Directors approved a $ 15.0 billion share repurchase authorization that replaced the previous authorization of $ 20.0 billion, which was approved in May 2021. This new authorization does not have a prescribed expiration date. As of January 29, 2023, approximately $ 12.5 billion of the $ 15.0 billion share repurchase authorization remained available. In March 2020, we suspended our share repurchases to enhance our liquidity position as a result of the COVID-19 pandemic. We resumed share repurchases in the first quarter of fiscal 2021. The following table presents information about our repurchases of common stock, all of which were completed through open market purchases: Fiscal Fiscal Fiscal in millions 2022 2021 2020 Total number of shares repurchased 21 45 3 Total cost of shares repurchased $ 6,504 $ 15,001 $ 597 These amounts may differ from the repurchases of common stock amounts in the consolidated statements of cash flows due to unsettled share repurchases at the end of a period. 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. The levels of the fair value hierarchy are: • Level 1: observable inputs such as quoted prices in active markets for identical assets or liabilities; • Level 2: inputs other than quoted prices in active markets in Level 1 that are either directly or indirectly observable; and • Level 3: unobservable inputs for which little or no market data exists, therefore requiring management judgment to develop the Company’s own models with estimates and assumptions. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents the assets and liabilities that are measured at fair value on a recurring basis: January 29, 2023 January 30, 2022 in millions Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Derivative agreements – assets $ — $ — $ — $ — $ 58 $ — Derivative agreements – liabilities — ( 778 ) — — ( 249 ) — Total $ — $ ( 778 ) $ — $ — $ ( 191 ) $ — The fair values of our derivative instruments are determined using an income approach and Level 2 inputs, which include the respective interest rate or foreign currency forward curves and discount rates. Our derivative instruments are discussed further in Note 4 . Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Long-lived assets, goodwill, and other intangible assets are subject to nonrecurring fair value measurement for the assessment of impairment. We did not have any material assets or liabilities that were measured at fair value on a nonrecurring basis during fiscal 2022, fiscal 2021, or fiscal 2020. Other Fair Value Disclosures The carrying amounts of cash and cash equivalents, receivables, short-term debt, and accounts payable approximate fair value due to their short-term nature. Fiscal 2022 Form 10-K 58 Table of Contents The following table presents the aggregate fair values and carrying values of our senior notes: January 29, 2023 January 30, 2022 in millions Fair Value (Level 1) Carrying Value Fair Value (Level 1) Carrying Value Senior notes $ 38,537 $ 39,908 $ 39,397 $ 35,815 8. STOCK-BASED COMPENSATION Omnibus Stock Incentive Plans The Home Depot, Inc. Omnibus Stock Incentive Plan, as Amended and Restated May 19, 2022 (the “Omnibus Plan”) and The Home Depot, Inc. 1997 Omnibus Stock Incentive Plan (the “1997 Plan” and collectively with the Omnibus 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 and non-employee directors. Under th e Omnibus Plan, the maximum number of shares of our common stock authorized for issuance is 80 million shares plus a number of shares (not to exceed 10 million) related to underlying awards outstanding as of May 19, 2022, which can be returned to the share pool if those awards are subsequently terminated or expire unexercised, or are cancelled, forfeited or lapse for any reason, 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 January 29, 2023, there were approximately 80 million shares available for future grants under the Omnibus Plan. No additional equity awards could be issued from the 1997 Plan after May 26, 2005. The following table presents total stock-based compensation expense, net of estimated forfeitures, including expense related to our ESPPs, and related income tax benefit: in millions Fiscal Fiscal Fiscal 2022 2021 2020 Pre-tax stock-based compensation expense $ 367 $ 403 $ 310 Income tax benefit ( 73 ) ( 86 ) ( 58 ) After-tax stock-based compensation expense $ 294 $ 317 $ 252 At January 29, 2023, there was $ 424 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted average period of two years . The award types issued under the Plans are as follows: 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 second anniversary date of the grant and expire on the tenth anniversary date of the grant. Additionally, a majority of our 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 Omnibus Plan. We estimate the fair value of stock option awards on the date of grant using the Black-Scholes option-pricing model. 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 variables. The following table presents 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: Fiscal Fiscal Fiscal 2022 2021 2020 Per share weighted average fair value $ 70.21 $ 57.71 $ 36.77 Risk-free interest rate 2.5 % 1.0 % 0.6 % Assumed volatility 27.0 % 26.5 % 29.9 % Assumed dividend yield 2.4 % 2.2 % 3.1 % Assumed lives of options 6 years 6 years 6 years Fiscal 2022 Form 10-K 59 Table of Contents The following table presents a summary of stock option activity by number of shares and weighted average exercise price during fiscal 2022: shares in thousands Number of Shares Weighted Average Exercise Price Outstanding at beginning of year 3,641 $ 150.30 Granted 302 316.09 Exercised ( 292 ) 98.66 Forfeited ( 25 ) 238.56 Outstanding at end of year 3,626 167.66 The following table presents the total intrinsic value of stock options exercised: in millions Fiscal Fiscal Fiscal 2022 2021 2020 Total intrinsic value of stock options exercised $ 61 $ 237 $ 217 The following table presents details regarding outstanding and exercisable stock options at January 29, 2023: 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 3,626 $ 541 4.6 years $ 167.66 Exercisable 2,448 457 3.2 years 130.00 Shares of common stock issued from stock option exercises may be issued from authorized and unissued common stock or treasury stock. Restricted Stock and Performance Share Awards. Restrictions on the restricted stock issued under the Plans generally lapse over various periods up to five years . 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. Dividends paid on unvested shares were immaterial for fiscal 2022, fiscal 2021, and fiscal 2020. Additionally, the majority of our 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 share awards under the Plans. These awards provide for the issuance of shares of our common stock at the end of the three-year performance cycle based upon our performance against target average ROIC and operating profit over that performance cycle. Additionally, the awards 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 share awards have no voting rights until the shares are issued following completion of the performance period. 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. 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, the majority of these 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. Fiscal 2022 Form 10-K 60 Table of Contents The following table presents a summary of restricted stock, performance shares, and restricted stock unit activity during fiscal 2022: shares in thousands Number of Shares Weighted Average Grant Date Fair Value Nonvested at beginning of year 3,709 $ 218.60 Granted 1,441 304.57 Vested ( 1,516 ) 191.82 Forfeited ( 275 ) 260.13 Nonvested at end of year 3,359 261.66 The following table presents the total fair value of restricted stock, performance shares, and restricted stock units vested: in millions Fiscal Fiscal Fiscal 2022 2021 2020 Total fair value vested $ 479 $ 405 $ 271 Deferred Shares. 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. The following table presents deferred shares granted to non-employee directors: Fiscal Fiscal Fiscal 2022 2021 2020 Deferred shares granted to non-employee directors 19,000 15,000 18,000 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 January 29, 2023, there were approximately 16 million shares available under the U.S. plan and approximately 18 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 2022, there were approximately 1 million shares purchased under the ESPPs at an average price of $ 247.86 . Under the outstanding ESPPs at January 29, 2023, associates 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, 2023. 9. EMPLOYEE BENEFIT PLANS We maintain active defined contribution retirement plans for our associates (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 Plans 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 Plans through contributions made to grantor trusts, which are then used to purchase shares of our common stock in the open market. The following table presents our contributions to the Benefit Plans and the Restoration Plans: in millions Fiscal Fiscal Fiscal 2022 2021 2020 Contributions to the Benefit Plans and the Restoration Plans $ 280 $ 278 $ 267 At January 29, 2023, the Benefit Plans and the Restoration Plans held a total of 5.3 million shares of our common stock in trusts for plan participants. Fiscal 2022 Form 10-K 61 Table of Contents 10. WEIGHTED AVERAGE COMMON SHARES The following table presents the reconciliation of our basic to diluted weighted average common shares: in millions Fiscal Fiscal Fiscal 2022 2021 2020 Basic weighted average common shares 1,022 1,054 1,074 Effect of potentially dilutive securities (1) 3 4 4 Diluted weighted average common shares 1,025 1,058 1,078 Anti-dilutive securities excluded from diluted weighted average common shares 1 — — ————— (1) Represents the dilutive impact of stock-based awards. 11. COMMITMENTS AND CONTINGENCIES At January 29, 2023, we had outstanding letters of credit totaling $ 486 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. HD SUPPLY ACQUISITION On November 16, 2020, we announced that we entered into a definitive agreement to acquire HD Supply, a leading national distributor of MRO products to multifamily, hospitality, healthcare, and government housing facilities, among others. Under the terms of the merger agreement, a subsidiary of Home Depot made a cash tender offer to purchase all outstanding shares of the common stock of HD Supply Holdings, Inc., the ultimate parent entity of HD Supply, for $ 56 per share, and the acquisition was completed on December 24, 2020. The acquisition was funded through cash on hand, a portion of which was replaced with the proceeds from our issuance of $ 3.0 billion of senior notes in January 2021. The following table summarizes total purchase consideration: in millions Total cash consideration for outstanding shares $ 8,637 Value of stock-based awards attributed to services already rendered (1) 55 Total purchase consideration $ 8,692 ————— (1) In connection with the completion of the acquisition, all HD Supply stock-based awards were cash settled for an aggregate value of $ 111 million. As the settlement of the awards was at the discretion of the Company, the portion of the fair value of the awards attributed to services previously provided of $ 55 million was included as part of purchase consideration, with the remaining $ 56 million recognized as post-combination expense within SG&A in our consolidated statement of earnings for fiscal 2020. The total purchase consideration of $ 8.7 billion, less cash acquired of $ 912 million, resulted in a net cash outflow of $ 7.8 billion on the consolidated statement of cash flows in fiscal 2020. Net sales and net earnings for fiscal 2020 attributable to HD Supply after the completion of the acquisition were immaterial. Pro forma results of operations would not be materially different as a result of the acquisition and therefore are not presented. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. Not applicable. Fiscal 2022 Form 10-K 62 Table of Contents