What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-21 compared with 2021-03-22 · 284 added, 279 removed, 912 unchanged (38% of the section changed)

1 unchanged sentence

Management’s Report on Internal Control over Financial Reporting

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Statements of Earnings

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Consolidated Balance Sheets

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Shareholders’ (Deficit)/ Equity

Consolidated Statements of Cash Flows

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Property and Accumulated Depreciation

Goodwill and Intangible Assets

Exit Activities

Short-Term Borrowings

Long-Term Debt

Derivative Instruments

Shareholders’ Equity

Accounting for Share-Based Payments

Shareholders’ (Deficit)/ Equity

Share-Based Payments

Employee Retirement Plans

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We have audited the accompanying consolidated balance sheets of Lowe’s Companies, Inc.

and subsidiaries (the “Company”) as of January 29, 2021 and January 31, 2020, the related consolidated statements of earnings, comprehensive income, shareholders’ equity, and cash flows, for each of the three fiscal years in the period ended January 29, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

and subsidiaries (the “Company”) as of January 28, 2022 and January 29, 2021, the related consolidated statements of earnings, comprehensive income, shareholders’ (deficit)/equity, and cash flows, for each of the three fiscal years in the period ended January 28, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 28, 2022 and January 29, 2021, and the results of its operations and its cash flows for each of the three fiscal years in the period ended January 28, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also 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 28, 2022, 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 21, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Accounting Pronouncement Recently Adopted

As discussed in Note 5 to the financial statements, the Company changed its method of accounting for leases in the fiscal year ended January 31, 2020 due to the adoption of Financial Accounting Standards Board Accounting Standards Update 2016-02, Leases (Topic 842) .

Basis for Opinion

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Fiscal Years Ended

January 29, 2021 January 31, 2020 February 1, 2019

January 28, 2022 January 29, 2021 January 31, 2020

Current Earnings Amount % Sales Amount % Sales Amount % Sales

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Fiscal Years Ended

January 29, 2021 January 31, 2020 February 1, 2019

January 28, 2022 January 29, 2021 January 31, 2020

Amount % Sales Amount % Sales Amount % Sales

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Other ( 5 ) ( 0.01 ) 1 — 1 —

Other comprehensive income/(loss) — — 73 0.10 ( 220 ) ( 0.30 )

Other comprehensive income 100 0.10 — — 73 0.10

Comprehensive income $ 8,542 8.87 % $ 5,835 6.51 % $ 4,354 6.03 %

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Total assets $ 44,640 $ 46,735

Liabilities and shareholders’ equity

Liabilities and shareholders’ (deficit)/equity

Current liabilities:

Short-term borrowings $ — $ 1,941

Current maturities of long-term debt $ 868 $ 1,112

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Noncurrent operating lease liabilities 4,021 3,890

Deferred revenue – extended protection plans 1,019 894

Deferred revenue – Lowe’s protection plans 1,127 1,019

Other liabilities 781 991

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Commitments and contingencies

Shareholders’ equity:

Shareholders’ (deficit)/equity:

Preferred stock – $ 5 par value:

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Capital in excess of par value — 90

Retained earnings 1,117 1,727

(Accumulated deficit)/retained earnings ( 5,115 ) 1,117

Accumulated other comprehensive loss ( 36 ) ( 136 )

Total shareholders’ equity 1,437 1,972

Total liabilities and shareholders’ equity $ 46,735 $ 39,471

Total shareholders’ (deficit)/equity ( 4,816 ) 1,437

Total liabilities and shareholders’ (deficit)/equity $ 44,640 $ 46,735

See accompanying notes to consolidated financial statements.

Lowe’s Companies, Inc.

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Shareholders’ (Deficit)/Equity

(In millions, except per share data)

Common Stock Capital in Excess

of Par Value Retained Earnings Accumulated Other Comprehensive

Income/(Loss) Total Shareholders’

of Par Value Retained Earnings/(Accumulated Deficit) Accumulated Other Comprehensive

Shares Amount

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Net earnings — — — 4,281 — 4,281

Other comprehensive loss — — — — ( 220 ) ( 220 )

Other comprehensive income — — — — 73 73

Cash dividends declared, $ 2.13 per share

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Issuance of common stock under share-based payment plans 3 1 116 — — 117

3 2 113 — — 115

Balance February 1, 2019 801 $ 401 $ — $ 3,452 $ ( 209 ) $ 3,644

Cumulative effect of accounting change — — — ( 263 ) — ( 263 )

Balance January 31, 2020 763 $ 381 $ — $ 1,727 $ ( 136 ) $ 1,972

Net earnings — — — 5,835 — 5,835

Other comprehensive income — — — — 73 73

Cash dividends declared, $ 2.30 per share

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Issuance of common stock under share-based payment plans 2 1 149 — — 150

3 1 116 — — 117

Balance January 29, 2021 731 $ 366 $ 90 $ 1,117 $ ( 136 ) $ 1,437

Net earnings — — — 8,442 — 8,442

Other comprehensive income — — — — 100 100

Cash dividends declared, $ 3.00 per share

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Issuance of common stock under share-based payment plans 2 1 131 — — 132

2 1 149 — — 150

Balance January 28, 2022 670 $ 335 $ — $ ( 5,115 ) $ ( 36 ) $ ( 4,816 )

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Fiscal Years Ended

January 29, 2021 January 31, 2020 February 1, 2019

January 28, 2022 January 29, 2021 January 31, 2020

Cash flows from operating activities:

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Loss on property and other assets – net 34 139 117

Impairment of goodwill — — 952

Loss on extinguishment of debt — 1,060 —

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Effect of exchange rate changes on cash ( 8 ) 10 1

Net increase/(decrease) in cash and cash equivalents, including cash classified within current assets held for sale 3,974 193 ( 23 )

Net decrease/(increase) in cash classified within current assets held for sale — 12 ( 54 )

Net increase/(decrease) in cash and cash equivalents 3,974 205 ( 77 )

Net (decrease)/increase in cash and cash equivalents, including cash classified within current assets held for sale ( 3,557 ) 3,974 193

Net decrease in cash classified within current assets held for sale — — 12

Net (decrease)/increase in cash and cash equivalents ( 3,557 ) 3,974 205

Cash and cash equivalents, beginning of year 4,690 716 511

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED JANUARY 29, 2021, JANUARY 31, 2020 AND FEBRUARY 1, 2019

YEARS ENDED JANUARY 28, 2022, JANUARY 29, 2021, AND JANUARY 31, 2020

Summary of Significant Accounting Policies

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Each of the fiscal years presented contained 52 weeks.

All references herein for the years 2020, 2019, and 2018 represent the fiscal years ended January 29, 2021, January 31, 2020, and February 1, 2019, respectively.

All references herein for the years 2021, 2020, and 2019 represent the fiscal years ended January 28, 2022, January 29, 2021, and January 31, 2020, respectively.

Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries.

All intercompany accounts and transactions have been eliminated.

Impacts of COVID-19 - On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide.

In response to the COVID-19 pandemic, federal, state and local governments put in place travel restrictions, quarantines, “shelter-in-place” orders, and various other restrictive measures in an attempt to control the spread of the disease.

Such restrictions or orders have resulted in, and continue to result in, business closures, work stoppages, slowdowns and delays, among other effects that impact the Company’s operations, as well as customer demand and the operations of our suppliers.

Impacts of COVID-19 - On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a pandemic and recommended containment and mitigation measures worldwide.

In response to the COVID-19 pandemic, restrictions were put in place in an attempt to control the spread of the disease.

At the onset of the pandemic, the Company implemented a number of measures to facilitate a safer store environment and to provide support for its associates, customers and community.

During the first quarter, the Company expanded associate benefits in response to COVID-19 to provide additional paid time off, special payments to hourly associates, temporary wage increases and other benefits.

During the remainder of fiscal 2020, the Company provided additional bonus payments to hourly associates, in addition to continued enhanced cleaning protocols and charitable contributions.

These actions resulted in $ 1.2 billion of expense included in selling, general and administrative (SG&A) expense in the consolidated statements of earnings for the fiscal year ended January 29, 2021.

Also, in response to the uncertainties surrounding COVID-19, during the first quarter of 2020, the Company took proactive steps to further enhance its liquidity position by temporarily suspending its share repurchase program, increasing the capacity of its revolving credit facilities and the associated commercial paper program, as well as issuing senior notes in March 2020.

During the third quarter, the Company reinstated its previously authorized share repurchase program.

The Company continues to evaluate the carrying amounts of its long-lived assets whenever certain events or changes in circumstances indicate that the carrying amounts may not be recoverable, including potential market impacts from the COVID-19 pandemic.

The Company performed its quarterly assessments of long-lived assets and did not record any material long-lived asset impairments.

In addition, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which was enacted on March 27, 2020, includes measures to assist companies in response to the COVID-19 pandemic.

In accordance with the CARES Act, the Company has deferred the payment of qualifying employer payroll taxes which are required to be paid over two years , with half due by December 31, 2021, and the other half due by December 31, 2022.

As of January 29, 2021, the Company deferred $ 481 million of qualifying employer payroll taxes, of which $ 241 million is included in accrued compensation and employee benefits, and $ 240 million is included in other liabilities in the consolidated balance sheet and included in cash flows from other operating liabilities in the consolidated statement of cash flows.

Beginning in fiscal 2020, the Company expanded associate benefits in response to COVID-19 to provide additional paid time off, special payments to hourly associates, temporary wage increases and other benefits, which continued through 2021.

The Company also continued enhanced cleaning protocols.

These actions resulted in $ 162 million and $ 1.2 billion of expense included in selling, general and administrative (SG&A) expense in the consolidated statements of earnings for the fiscal years ended January 28, 2022 and January 29, 2021, respectively.

In addition, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which was enacted on March 27, 2020, included measures to assist companies in response to the COVID-19 pandemic.

In accordance with the CARES Act, the Company deferred the payments of qualifying employer payroll taxes which were required to be paid over two years , with half due by December 31, 2021, and the other half due by December 31, 2022.

These amounts are included in cash flows from other operating liabilities in the accompanying consolidated statements of cash flows.

The following table presents the qualifying employer payroll taxes deferred in accordance with the CARES Act along with the location in the consolidated balance sheets:

(In millions) January 28, 2022 January 29, 2021

Accrued compensation and employee benefits $ 240 $ 241

Other liabilities — 240

Total deferred qualified employer payroll taxes $ 240 $ 481

Foreign Currency - The functional currencies of the Company’s international subsidiaries are generally the local currencies of the countries in which the subsidiaries are located.

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Results of operations and cash flows are translated using the average exchange rates throughout the period.

The effect of exchange rate fluctuations on translation of assets and liabilities is included as a component of shareholders’ equity in accumulated other comprehensive loss.

The effect of exchange rate fluctuations on translation of assets and liabilities is included as a component of shareholders’ (deficit)/equity in accumulated other comprehensive loss.

Gains and losses from foreign currency transactions are included in SG&A expense.

Use of Estimates - The preparation of the Company’s financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosures of contingent assets and liabilities.

The Company bases these estimates

on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources.

The Company bases these estimates on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources.

Actual results may differ from these estimates.

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The majority of payments due from financial institutions for the settlement of credit card and debit card transactions process within two business days and are, therefore, classified as cash and cash equivalents.

Investments - Investments generally consist of agency securities, corporate debt securities, governmental securities, and money market funds, which are classified as available-for-sale.

Investments - Investments generally consist of agency securities, commercial paper, corporate debt securities, governmental securities, and money market funds, which are classified as available-for-sale.

Available-for-sale debt securities are recorded at fair value, and unrealized gains and losses are recorded, net of tax, as a component of accumulated other comprehensive loss.

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All other investments are classified as long-term.

Investments classified as long-term at January 29, 2021, will mature in one to four years , based on stated maturity dates.

Investments classified as long-term at January 28, 2022, will mature in one to three years , based on stated maturity dates.

The Company classifies as investments restricted balances primarily pledged as collateral for the Company’s extended protection plan program.

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Merchandise Inventory - The majority of the Company’s inventory is stated at the lower of cost and net realizable value using the first-in, first-out method of inventory accounting.

Inventory for certain subsidiaries representing approximately 7 % and 6 % of the consolidated inventory balances as of January 29, 2021 and January 31, 2020, respectively, are stated at lower of cost and net realizable value using the weighted average cost method.

Inventory for certain subsidiaries representing approximately 7 % of the consolidated inventory balances as of January 28, 2022 and January 29, 2021, are stated at lower of cost and net realizable value using the weighted average cost method.

The cost of inventory includes certain costs associated with the preparation of inventory for resale, including distribution center costs, and is net of vendor funds.

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This reserve is based on management’s current knowledge with respect to inventory levels, sales trends, and historical experience.

Management does not believe the Company’s merchandise inventories are subject to significant risk of obsolescence in the near term, and management has the ability to adjust purchasing practices based on anticipated sales trends and general economic conditions.

Management does not believe the Company’s merchandise inventories are subject to significant risk of obsolescence in the near term, and management has the ability to adjust purchasing patterns based on anticipated sales trends and general economic conditions.

However, changes in consumer purchasing patterns could result in the need for additional reserves.

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The Company develops accrual rates for vendor funds based on the provisions of the agreements in place.

Due to the complexity and diversity of the individual vendor agreements, the Company performs analyses and reviews historical trends throughout the year and confirms actual amounts with select vendors to ensure the amounts earned are appropriately recorded.

Due to the diversity of the individual vendor agreements, the Company performs analyses and reviews historical trends throughout the year and confirms actual amounts with select vendors to ensure the amounts earned are appropriately recorded.

Amounts accrued throughout the year could be impacted if actual purchase volumes differ from projected annual purchase volumes, especially in the case of programs that provide for increased funding when graduated purchase volumes are met.

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The cash flows related to forward interest rate swap agreements are included within operating activities in the consolidated statements of cash flows.

The Company accounts for these contracts as cash flow hedges, thus the effective portion of gains and losses resulting from changes in fair value are recognized in other comprehensive income/(loss), net of tax effects, in the consolidated statements of comprehensive income and is recognized in earnings when the underlying hedged transaction impacts the consolidated statements of earnings.

The Company accounts for these contracts as cash flow hedges, thus the effective portion of gains and losses resulting from changes in fair value are recognized in other comprehensive income, net of tax effects, in the consolidated statements of comprehensive income and are recognized in earnings when the underlying hedged transaction impacts the consolidated statements of earnings.

The Company held fixed-to-floating interest rate swap agreements as fair value hedges on certain debt as of January 28, 2022.

The Company evaluates the effectiveness of the fair value hedges using the shortcut method of accounting under which the hedges are assumed to be perfectly effective.

Thus, the change in fair value of the derivative instruments offsets the change in

fair value on the hedged debt, and there is no net impact in the consolidated statements of earnings from the fair value of the derivatives.

To hedge the economic risk of changes in value of the October 2020 cash tender offers prior to its pricing date, the Company entered into reverse treasury lock derivative contracts which were not designated as hedging instruments.

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An impairment loss is recorded for long-lived assets held-for-use when the carrying amount of the asset is not recoverable and exceeds its fair value.

Excess properties that are expected to be sold within the next 12 months and meet the other relevant held-for-sale criteria are classified as long-lived assets held-for-sale.

Impairment losses are included in SG&A expense in the consolidated statements of earnings.

Excess properties that are expected to be sold within the next twelve months and meet the other relevant held-for-sale criteria are classified as long-lived assets held-for-sale.

Excess properties consist primarily of retail outparcels and property associated with relocated or closed locations.

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If the Company commits to a plan to abandon a long-lived asset before the end of its previously estimated useful life, its depreciable life is evaluated.

Impairment losses are included in SG&A expense in the consolidated statements of earnings.

Fair value measurements associated with long-lived asset impairments are further described in Note 3 to the consolidated financial statements.

Goodwill - Goodwill is the excess of the purchase price over the fair value of identifiable assets acquired, less liabilities assumed, in a business combination.

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Home Improvement reporting unit.

In fiscal 2021, we completed our annual qualitative assessment of the recoverability of goodwill for the U.S.

Home Improvement reporting unit and concluded that the fair value of the reporting unit significantly exceeded its carrying value.

The changes in the carrying amount of goodwill for 2021, 2020, and 2019 were as follows:

(In millions) January 29, 2021 January 31, 2020 February 1, 2019

(In millions) January 28, 2022 January 29, 2021 January 31, 2020

Goodwill, balance at beginning of year $ 311 $ 303 $ 303

Acquisitions — 8 —

Impairment — — ( 952 )

Other adjustments 1

Goodwill, balance at end of year $ 311 $ 311 $ 303

1 Other adjustments primarily consist of changes in the goodwill balance as a result of foreign currency translation.

The Company’s annual goodwill impairment analysis performed during the fourth quarter of fiscal 2018 included a quantitative analysis of the Canada-Retail and Canada-Distribution reporting units.

The Company classified these fair value measurements as Level 3.

The Company performed a discounted cash flow analysis and market multiple analysis for the Canada-Retail and Canada-Distribution reporting units.

These discounted cash flow models included management assumptions for expected sales growth, margin expansion, operational leverage, capital expenditures, and overall operational forecasts.

The market multiple analysis included historical and projected performance, market capitalization, volatility, and multiples for industry peers.

These analyses led to the conclusion that the fair value of these reporting units was less than their carrying values by an amount that exceeded the carrying value of goodwill, primarily driven by a softening outlook for the Canadian housing market.

Accordingly, the full carrying value of $ 952 million relating to the Canadian reporting units’ goodwill was impaired during the fourth quarter of 2018.

Gross carrying amounts and cumulative goodwill impairment losses are as follows:

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Goodwill $ 1,310 $ ( 999 ) $ 1,310 $ ( 999 )

Other Intangible Assets - Intangible assets with indefinite lives are evaluated for impairment on the first day of the fourth quarter or whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable.

The cost of definite-lived intangible assets is amortized over their estimated useful lives, which range up to 20 years.

Intangible assets are recorded within other assets on the consolidated balance sheets.

Leases - The Company leases certain retail stores, warehouses, distribution centers, office space, land and equipment under finance and operating leases.

Lease commencement occurs on the date the Company takes possession or control of the property or equipment.

Original terms for facility-related leases are generally between five and twenty years .

Original terms for facility-related leases are generally between five and 20 years.

These leases generally contain provisions for four to six renewal options of five years each.

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Some of the Company’s leases also include rental escalation clauses and/or termination provisions.

Renewal options and termination options are included in the determination of lease payments when management determines the options are reasonably certain of exercise, considering financial performance, strategic importance and/or invested capital.

Leases with an original term of 12 months or less are not recognized on the Company’s balance sheet, and the lease expense related to those short-term leases is recognized over the lease term.

Renewal options and termination options are included in the determination of lease payments when management determines the options are reasonably certain of exercise, considering

financial performance, strategic importance and/or invested capital.

Leases with an original term of twelve months or less are not recognized on the Company’s balance sheet, and the lease expense related to those short-term leases is recognized over the lease term.

The Company does not account for lease and non-lease (e.g.

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Self-insurance liabilities 440 435

Sales tax liabilities 256 153

Sales return reserve 252 194

Accrued interest 275 250

Sales return reserve 245 252

Sales tax liabilities 228 256

Income taxes payable 128 168

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Self-Insurance - The Company is self-insured for certain losses relating to workers’ compensation, automobile, property, and general and product liability claims.

The Company has insurance coverage to limit the exposure arising from these claims.

The Company has excess insurance coverage above certain retention amounts to limit exposure from these claims.

The Company is also self-insured for certain losses relating to extended protection plans, as well as medical and dental claims.

Self-insurance claims filed and claims incurred but not reported are accrued based upon management’s estimates of the discounted ultimate cost for self-insured claims incurred using actuarial assumptions followed in the insurance industry and historical experience.

Although management believes it has the ability to reasonably estimate losses related to claims, it is possible that actual results could differ from recorded self-insurance liabilities.

Total self-insurance liability, including the current and non-current portions, was $ 1.1 billion and $ 1.1 billion at January 29, 2021 and January 31, 2020, respectively.

Although management believes it has the ability to reasonably estimate losses

related to claims, it is possible that actual results could differ from recorded self-insurance liabilities.

Total self-insurance liabilities, including the current and non-current portions, were $ 1.1 billion at January 28, 2022 and January 29, 2021.

The Company provides surety bonds issued by insurance companies to secure payment of workers’ compensation liabilities as required in certain states where the Company is self-insured.

Outstanding surety bonds relating to self-insurance were $ 270 million and $ 262 million at January 29, 2021 and January 31, 2020, respectively.

Outstanding surety bonds relating to self-insurance were $ 270 million at January 28, 2022 and January 29, 2021.

Income Taxes - The Company establishes deferred income tax assets and liabilities for temporary differences between the tax and financial accounting bases of assets and liabilities.

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The Company establishes a liability for tax positions for which there is uncertainty as to whether or not the position will be ultimately sustained.

The Company includes interest related to tax issues as part of net interest on the consolidated financial statements.

The Company includes interest related to tax issues as part of net interest on the consolidated statements of earnings.

The Company records any applicable penalties related to tax issues within the income tax provision.

Shareholders’ Equity - The Company has a share repurchase program that is executed through purchases made from time to time either in the open market or through private market transactions.

Shares purchased under the repurchase program are retired and returned to authorized and unissued status.

Shareholders’ (Deficit)/Equity - The Company has a share repurchase program that is executed through purchases made from time to time either in the open market or through private market transactions.

Shares purchased under the repurchase program are returned to authorized and unissued status.

Any excess of cost over par value is charged to additional paid-in capital to the extent that a balance is present.

Once additional paid-in capital is fully depleted, remaining excess of cost over par value is charged to retained earnings.

Once additional paid-in capital is fully depleted, remaining excess of cost over par value is charged to (accumulated deficit)/retained earnings.

Revenue Recognition - The Company recognizes revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

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In certain instances, installation services include materials provided by the subcontractor, and both product and installation are included in service revenue.

Company recognizes revenue associated with services as they are rendered, and the majority of services are completed within one week from initiation.

Deferred revenue is presented for merchandise that has not yet transferred control to the customer and for services that have not yet been provided, but for which tender has been accepted.

The Company recognizes revenue associated with services as they are rendered, and the majority of services are completed within one week from initiation.

Retail deferred revenue consists of amounts received for which customers have not yet taken possession of the merchandise or for which installation has not yet been completed.

Deferred revenue is recognized in sales either at a point in time when the customer obtains control of merchandise through pickup or delivery, or over time as services are provided to the customer.

The majority of revenue for goods and services is recognized in the quarter following revenue deferral.

In addition, the Company defers revenues from stored-value cards, which include gift cards and returned merchandise credits, and recognizes revenue into sales when the cards are redeemed.

The Company also defers revenues for its separately-priced extended protection plan contracts, which is a Lowe’s-branded program for which the Company is ultimately self-insured.

The Company recognizes revenue from extended protection plan sales on a straight-line basis over the respective contract term.

Extended protection plan contract terms primarily range from one to five years from the date of purchase or the end of the manufacturer’s warranty, as applicable.

The Company also defers revenues for its separately-priced long-term protection plan contracts (Lowe’s protection plans), which is a Lowe’s-branded program for which the Company is ultimately self-insured.

The Company recognizes revenue from Lowe’s protection plan sales on a straight-line basis over the respective contract term.

Expenses for claims are recognized in cost of sales when incurred.

Incremental direct acquisition costs associated with the sale of Lowe’s protection plans for contracts greater than one year are also deferred and recognized as expense on a straight-line basis over the respective contract term.

Lowe’s protection plan contract terms primarily range from one to five years from the date of purchase or the end of the manufacturer’s warranty, as applicable.

Cost of Sales and Selling, General and Administrative Expenses - The following lists the primary costs classified in each major expense category:

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Advertising expenses were $ 877 million, $ 798 million, and $ 871 million in 2021, 2020, and 2019, respectively.

Comprehensive Income - The Company reports comprehensive income in its consolidated statements of comprehensive income and consolidated statements of shareholders’ equity.

Comprehensive income represents changes in shareholders’ equity from non-owner sources and is comprised of net earnings adjusted primarily for foreign currency translation adjustments and cash flow hedge derivative contracts.

Net foreign currency translation losses, net of tax, classified in accumulated other comprehensive loss were $ 37 million, $ 115 million, and $ 209 million at January 29, 2021, January 31, 2020, and February 1, 2019, respectively.

Net cash flow hedge losses, net of tax, classified in accumulated other comprehensive loss were $ 103 million, $ 24 million, and $ 1 million at January 29, 2021, January 31, 2020, and February 1, 2019, respectively.

Comprehensive Income - The Company reports comprehensive income in its consolidated statements of comprehensive income and consolidated statements of shareholders’ (deficit)/equity.

Comprehensive income represents changes in shareholders’ (deficit)/equity from non-owner sources and is comprised of net earnings adjusted primarily for foreign currency translation adjustments and cash flow hedge derivative contracts.

Net foreign currency translation losses, net of tax, classified in accumulated other comprehensive loss were $ 41 million, $ 37 million, and $ 115 million at January 28, 2022, January 29, 2021, and January 31, 2020, respectively.

Net cash flow hedge (gains)/losses, net of tax, classified in accumulated other comprehensive loss were ($ 6 ) million, $ 103 million, and $ 24 million at January 28, 2022, January 29, 2021, and January 31, 2020, respectively.

Segment Information - The Company’s home improvement retail operations represent a single reportable segment.

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The amounts of long-lived assets and net sales outside of the U.S.

were approximately 9.1 % and 7.6 %, respectively, at February 1, 2019.

Reclassifications - Certain prior period amounts have been reclassified to conform to current period presentation, including the separate disclosure of cash flow hedges – net of tax on the consolidated statements of comprehensive income, the inclusion of goodwill within other assets on the consolidated balance sheets, the reclassification of excess property from other assets to property, less accumulated depreciation on the consolidated balance sheets, and the separate disclosure of changes in deferred revenue within operating activities on the consolidated statements of cash flows.

Accounting Pronouncements Recently Adopted - Effective February 2, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) , and all related amendments, using the optional transition election to not restate comparative periods for the impact of adopting the standard and recognized the cumulative impact of adoption in the opening balance of retained earnings.

The Company elected the package of transition expedients available for expired or existing contracts, which allowed the carry-forward of historical assessments of (1) whether contracts are or contain leases, (2) lease classification, and (3) initial direct costs.

Adoption of the standard resulted in the recording of additional net lease-related assets and lease-related liabilities of approximately $ 3.6 billion and $ 3.9 billion, respectively, as of February 2, 2019.

The difference between the additional lease assets and lease liabilities, net of the $ 87 million deferred tax impact, was $ 263 million and was recorded as an adjustment to retained earnings.

This adjustment to retained earnings primarily represents the write-off of right-of-use assets associated with closed locations, net of previously established store closing lease obligations as well as the derecognition of build-to-suit leases.

The adoption of this standard by the Company did not have a material impact on its consolidated statements of earnings, comprehensive income or cash flows and had no impact on the Company’s debt covenant compliance under its current agreements.

See Note 5 for additional details of the Company’s leases.

Accounting Pronouncements Not Yet Adopted - In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848):

Facilitation of Effects of Reference Rate Reform on Financial Reporting .

The ASU, and subsequent clarifications, provide practical expedients for contract modification accounting related to the transition away from the London Interbank Offered Rate (LIBOR) and other interbank offering rates to alternative reference rates.

The expedients are applicable to contract modifications made and hedging relationships entered into on or before December 31, 2022.

The Company intends to use the expedients where needed for reference rate transition.

The Company continues to evaluate this standard update and does not currently expect a material impact to the Company’s financial statements or disclosures.

Recent accounting pronouncements pending adoption not discussed in this Form 10-K are either not applicable to the Company or are not expected to have a material impact on the Company.

were approximately 7.7 % and 6.9 %, respectively, at January 31, 2020.

Accounting Pronouncements Not Yet Adopted - Recent accounting pronouncements pending adoption not discussed in this Form 10-K are either not applicable to the Company or are not expected to have a material impact on the Company.

Net sales consists primarily of revenue, net of sales tax, associated with contracts with customers for the sale of goods and services in amounts that reflect consideration the Company is entitled to in exchange for those goods and services.

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(In millions) Years Ended

January 29, 2021 January 31, 2020 February 1, 2019

January 28, 2022 January 29, 2021 January 31, 2020

Products $ 92,415 $ 86,046 $ 68,377

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Net sales $ 96,250 $ 89,597 $ 72,148

Anticipated sales returns reflected in other current liabilities were $ 252 million at January 29, 2021, and $ 194 million at January 31, 2020.

The associated right of return assets reflected in other current assets were $ 164 million at January 29, 2021, and $ 129 million at January 31, 2020.

Deferred revenue - retail

Deferred revenues associated with amounts received for which customers have not taken possession of the merchandise or for which installation has not yet been completed were $ 1.0 billion at January 29, 2021, and $ 685 million at January 31, 2020.

The majority of revenue for goods and services is recognized in the quarter following revenue deferral.

Deferred revenue - stored-value cards

The deferred revenues associated with outstanding stored-value cards (gift cards and returned merchandise credits) were $ 562 million and $ 534 million at January 29, 2021 and January 31, 2020, respectively, and these amounts are included in deferred revenue on the consolidated balance sheets.

Amounts recognized as breakage were insignificant for the years ended January 29, 2021, January 31, 2020, and February 1, 2019.

Deferred revenue - extended protection plans

The deferred revenues from separately priced extended protection plans were $ 1.0 billion at January 29, 2021, and $ 894 million at January 31, 2020.

Previously deferred revenue recognized into sales were $ 430 million for the fiscal year ended January 29, 2021, $ 408 million for the fiscal year ended January 31, 2020, and $ 390 million for the fiscal year ended February 1, 2019.

Incremental direct acquisition costs associated with the sale of extended protection plans for contracts greater than one year are also deferred and recognized as expense on a straight-line basis over the respective contract term and were insignificant at January 29, 2021, January 31, 2020, and February 1, 2019.

The liability for extended protection plan claims incurred is included in other current liabilities on the consolidated balance sheets and was not material in any of the periods presented.

Expenses for claims are recognized when incurred and totaled $ 158 million for the fiscal year ended January 29, 2021, $ 184 million for the fiscal year ended January 31, 2020, and $ 183 million for the fiscal year ended February 1, 2019.

The balances and classification within the consolidated balance sheets for anticipated sales returns and the associated right of return assets are as follows:

(In millions) Classification January 28, 2022 January 29, 2021

Anticipated sales returns Other current liabilities $ 245 $ 252

Right of return assets Other current assets 151 164

Deferred revenue - retail and stored-value cards

Deferred revenue for retail and stored-value cards are as follows:

(In millions) January 28, 2022 January 29, 2021

Retail deferred revenue $ 1,285 $ 1,046

Stored-value cards deferred revenue 629 562

Deferred revenue $ 1,914 $ 1,608

Deferred revenue - Lowe’s protection plans

Deferred revenue associated with Lowe’s protection plans is as follows:

(In millions) January 28, 2022 January 29, 2021

Deferred revenue - Lowe’s protection plans $ 1,127 $ 1,019

Lowe’s protection plan sales previously recorded as deferred revenue and claim expenses incurred are as follows:

(In millions) Years Ended

January 28, 2022 January 29, 2021 January 31, 2020

Lowe’s protection plan deferred revenue recognized into sales $ 488 $ 430 $ 408

Lowe’s protection plan claim expenses 178 158 184

Disaggregation of Revenues

The following table presents the Company’s net sales disaggregated by merchandise division:

January 29, 2021 January 31, 2020 February 1, 2019

January 28, 2022 January 29, 2021 January 31, 2020

(In millions) Total Sales % Total Sales % Total Sales %

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(In millions) Years Ended

January 29, 2021 January 31, 2020 February 1, 2019

January 28, 2022 January 29, 2021 January 31, 2020

United States $ 90,348 $ 84,303 $ 67,147

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Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The Company’s available-for-sale debt securities represented the only significant assets measured at fair value on a recurring basis for the fiscal years ended January 29, 2021 and January 31, 2020.

The following table presents the Company’s financial assets measured at fair value on a recurring basis.

The fair values of these instruments approximate amortized cost.

The following table presents the Company’s financial assets and financial liabilities measured at fair value on a recurring basis.

Fair Value Measurements at

(In millions) Measurement Level January 29, 2021 January 31, 2020

Short-term investments:

Available-for-sale debt securities:

Treasury securities Level 1 $ 223 $ 13

Money market funds Level 1 109 105

Commercial Paper Level 2 97 —

Corporate debt securities Level 2 47 23

Agency securities Level 2 30 19

Total short-term investments $ 506 $ 160

Long-term investments:

(In millions) Classification Measurement Level January 28, 2022 January 29, 2021

Available-for-sale debt securities:

Treasury securities Level 1 $ 129 $ 280

Corporate debt securities Level 2 58 62

Agency securities Level 2 — 30

Municipal obligations Level 2 13 —

Total long-term investments $ 200 $ 372

Other assets:

Derivative instruments

Forward interest rate swaps Level 2 $ 4 $ —

Total other assets $ 4 $ —

Other current liabilities:

Money market funds Short-term investments Level 1 $ 120 $ 109

Treasury securities Short-term investments Level 1 75 223

Commercial Paper Short-term investments Level 2 30 97

Certificates of deposit Short-term investments Level 1 14 —

Foreign government debt securities Short-term investments Level 2 14 —

Fair Value Measurements at

(In millions) Classification Measurement Level January 28, 2022 January 29, 2021

Municipal obligations Short-term investments Level 2 10 —

Corporate debt securities Short-term investments Level 2 8 47

Agency securities Short-term investments Level 2 — 30

Treasury securities Long-term investments Level 1 132 129

Corporate debt securities Long-term investments Level 2 50 58

Foreign government debt securities Long-term investments Level 2 14 —

Municipal obligations Long-term investments Level 2 3 13

Derivative instruments:

Forward interest rate swaps Level 2 $ 8 $ 11

Total other current liabilities $ 8 $ 11

Forward interest rate swaps Other current assets Level 2 $ 66 $ —

Forward interest rate swaps Other assets Level 2 48 4

Forward interest rate swaps Other current liabilities Level 2 — 8

Fixed-to-floating interest rate swaps Other liabilities Level 2 21 —

There were no transfers between Levels 1, 2, or 3 during any of the periods presented.

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Other Fair Value Disclosures

The Company’s financial assets and liabilities not measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings, and long-term debt and are reflected in the financial statements at cost.

The Company’s financial assets and liabilities not measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable, accounts payable, and long-term debt and are reflected in the financial statements at cost.

With the exception of long-term debt, cost approximates fair value for these items due to their short-term nature.

As further described in Note 9 , certain long-term debt is associated with a fair value hedge, and the changes in fair value of the hedged debt is included in the carrying value of long-term debt on the consolidated balance sheets.

The fair values of the Company’s unsecured notes were estimated using quoted market prices.

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Property, less accumulated depreciation $ 19,071 $ 19,155

1 Effective as of January 29, 2021, excess property amounts previously reported in other assets were reclassified to property, less accumulated depreciation.

Prior year amounts have been reclassified to conform to current period presentation.

As of January 29, 2021 and January 31, 2020, included in property, less accumulated depreciation are assets under finance lease of $ 661 million less accumulated depreciation of $ 122 million and $ 597 million less accumulated depreciation of $ 42 million, respectively.

The related amortization expense for assets under finance leases are included in depreciation and amortization expense.

The Company recognized depreciation and amortization expense, inclusive of amounts presented in cost of sales, of $ 1.5 billion in 2020 and $ 1.4 billion in 2019 and $ 1.6 billion in 2018.

Included in property, less accumulated depreciation are right-of-use assets under finance leases.

The related amortization expense for right-of-use assets under finance leases is included in depreciation and amortization expense.

The Company recognized depreciation and amortization expense, inclusive of amounts presented in cost of sales, of $ 1.8 billion in 2021, $ 1.5 billion in 2020, and $ 1.4 billion in 2019.

Goodwill and Intangible Assets

The carrying amount of goodwill as well as the gross carrying amount and accumulated amortization of intangible assets consist of the following:

January 28, 2022 January 29, 2021

(In millions) Gross

Carrying Amount Accumulated

Amortization Gross

Carrying Amount Accumulated

Goodwill $ 311 $ — $ 311 $ —

Definite-lived intangible assets:

Customer-related 1

$ 344 $ ( 88 ) $ 372 $ ( 99 )

Trademarks and trade names 1

263 ( 131 ) 264 ( 119 )

Other 1 ( 1 ) 12 ( 11 )

Total definite-lived intangible assets $ 608 $ ( 220 ) $ 648 $ ( 229 )

Indefinite-lived intangible assets:

$ 134 $ — $ — $ —

Total intangible assets $ 742 $ ( 220 ) $ 648 $ ( 229 )

1 Certain definite-lived intangible assets are denominated in a foreign currency and subject to translation.

2 In April 2021, the Company acquired the STAINMASTER ® brand for total consideration of $ 134 million, which was determined to have an indefinite life.

Amortization expense for intangible assets is as follows:

(In millions) January 28, 2022 January 29, 2021 January 31, 2020

Amortization expense $ 32 $ 59 $ 39

Amortization expense expected to be recognized in future periods for intangible assets is as follows:

(In millions) Amortization Expense

Fiscal 2022 $ 35

Fiscal 2023 32

Fiscal 2024 32

Fiscal 2025 32

Fiscal 2026 31

Thereafter 226

The lease-related assets and liabilities recorded on the balance sheet are summarized in the following table:

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1 Finance lease assets are recorded net of accumulated amortization of $ 206 million as of January 28, 2022, and $ 122 million as of January 29, 2021.

The table below presents the lease costs for finance and operating leases for fiscal years ended January 29, 2021 and January 31, 2020:

The table below presents the lease costs for finance and operating leases:

(In millions)

January 29, 2021

January 31, 2020

January 28, 2022 January 29, 2021 January 31, 2020

Finance lease cost

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1 Operating lease payments include $ 268 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $ 638 million of minimum lease payments for leases signed but not yet commenced.

2 Finance lease payments include $ 11 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $ 6 million of minimum lease payments for leases signed but not yet commenced.

2 Finance lease payments exclude $ 6 million of minimum lease payments for leases signed but not yet commenced.

3 Calculated using the lease-specific incremental borrowing rate.

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(In millions)

January 29, 2021

January 31, 2020

January 28, 2022 January 29, 2021 January 31, 2020

Cash paid for amounts included in the measurement of lease liabilities

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Exit Activities

During fiscal years 2020, 2019, and 2018, the Company has incurred costs associated with an ongoing strategic reassessment of its business to drive an increased focus on its core home improvement operations and to improve overall operating performance and profitability.

During fiscal years 2020 and 2019, the Company incurred costs associated with an ongoing strategic reassessment of its business to drive an increased focus on its core home improvement operations and to improve overall operating performance and profitability.

As a result of this reassessment, the Company decided to exit certain activities and close certain locations as further described below.

Expenses associated with long-lived asset impairment, discontinued projects, severance, and lease obligations are included in SG&A expense in the consolidated statements of earnings.

Expenses associated with long-lived asset impairment, severance, and other closing costs are included in SG&A expense in the consolidated statements of earnings.

Expenses associated with accelerated depreciation are included in depreciation and amortization expense in the consolidated statements of earnings.

Inventory adjustments to net realizable value are included in cost of sales in the consolidated statements of earnings.

Canada Restructuring

During the third quarter of fiscal 2019, the Company began a strategic review of its Canadian operations, and as a result, recognized pre-tax charges of $ 53 million associated with long-lived asset impairment.

Subsequent to the end of the Company’s third quarter of fiscal 2019, a decision was made to close 34 under-performing stores in Canada and take additional restructuring actions to improve future sales and profitability of the Canadian operations.

Subsequent to the end of the Company’s third quarter of fiscal 2019, a decision was made to close 34 under-performing stores in Canada and take additional

restructuring actions to improve future sales and profitability of the Canadian operations.

As a result of these actions, during fiscal 2020, the Company recognized pre-tax charges of $ 35 million.

2 unchanged sentences

(In millions) January 29, 2021

January 31, 2020

January 31, 2020 Amount

Long-lived asset impairment $ — $ 53 $ 53

3 unchanged sentences

Total $ 35 $ 108 $ 143

During fiscal year ending February 1, 2019, the Company recorded pre-tax charges of $ 1.1 billion associated with its exit of Orchard Supply Hardware, the closing of 20 U.S.

home improvement stores and 31 locations in Canada, the exit of the Company’s Mexico operations, and the exit of other non-core activities within its U.S home improvement business.

Prior to the adoption of ASU 2016-02, Leases (Topic 842) , as of February 2, 2019, when locations under operating leases were closed, a liability was recognized for the fair value of future contractual obligations, including future minimum lease payments, property taxes, utilities, common area maintenance, and other ongoing expenses, net of estimated sublease income and other recoverable items.

Subsequent changes to the liabilities, including a change resulting from a revision to either the timing or the amount of estimated cash flows, were recognized in the period of change.

The following table summarizes store closing lease obligations activity during the twelve months ended January 28, 2022 and January 29, 2021:

(In millions) Lease obligations

Accrual for exit activities, balance at February 1, 2019 $ 361

ASU 2016-02 adoption impact 2

Cash payments ( 43 )

Adjustments 1

Accrual for exit activities, balance at January 31, 2020 $ 88

(In millions) January 28, 2022

January 29, 2021

Accrual for exit activities, balance at beginning of year $ 69 $ 88

Cash payments ( 14 ) ( 18 )

Adjustments 1

Accrual for exit activities, balance at January 29, 2021 $ 69

Accrual for exit activities, balance at end of year $ 54 $ 69

1 Adjustments represent lease terminations and changes in estimates around sublease assumptions.

2 Upon adoption of ASU 2016-02, Leases (Topic 842), rent liabilities previously recognized in connection with leases were included in the determination of right-of-use assets at transition.

Short-Term Borrowings

Commercial Paper Program

In March 2020, the Company entered into a $ 1.02 billion five-year unsecured revolving credit agreement (the 2020 Credit Agreement) with a syndicate of banks.

In connection with the 2020 Credit Agreement, the Company refinanced the $ 250 million 364 -Day Credit Agreement (2019 Credit Agreement), dated as of September 9, 2019, and terminated any commitments under the 2019 Credit Agreement as of March 23, 2020.

In December 2021, the Company entered into a $ 2.0 billion five-year unsecured revolving third amended and restated credit agreement (the Third Amended and Restated Credit Agreement) with a syndicate of banks.

The Third Amended and Restated Credit Agreement amends and restates the Company’s amended and restated credit agreement, dated September 10, 2018 (the Second Amended and Restated Credit Agreement), to among other things (i) extend the maturity date of the revolving credit facility to December 2026 and (ii) increase the aggregate availability to a total of $ 2.0 billion.

Borrowings under the Third Amended and Restated Credit Agreement will bear interest calculated according to a Base Rate or a Eurocurrency Rate, plus an applicable margin.

Also in December 2021, the Company amended the five-year unsecured revolving credit agreement dated March 23, 2020 (the 2020 Credit Agreement) with a syndicate of banks.

The amendment, among other things, increased the availability of the unsecured revolving credit agreement to $ 2.0 billion, maturing in March 2025.

Borrowings under the 2020 Credit Agreement will bear interest calculated according to a Base Rate or a Eurocurrency Rate, plus an applicable margin.

The 2020 Credit Agreement

contains customary representations, warranties and covenants for a transaction of this type.

The Company was in compliance with those covenants at January 29, 2021.

In September 2018, the Company entered into a $ 1.75 billion five-year unsecured revolving second amended and restated credit agreement (the Second Amended and Restated Credit Agreement) with a syndicate of banks.

In January 2019, the Company increased the aggregate availability under the Second Amended and Restated Credit Agreement by $ 230 million for a total of $ 1.98 billion available.

Borrowings under the Second Amended and Restated Credit Agreement will bear interest calculated according to a Base Rate or a Eurocurrency rate, plus an applicable margin.

Subject to obtaining commitments from the lenders and satisfying other conditions specified in the Second Amended and Restated Credit Agreement, the Company may increase the aggregate availability by an additional $ 270 million.

The Second Amended and Restated Credit Agreement contains customary representations, warranties, and covenants for a transaction of this type.

The Company was in compliance with those covenants at January 29, 2021.

The 2020 Credit Agreement and the Second Amended and Restated Credit Agreement (collectively, Credit Agreements) support the Company’s commercial paper program.

Subject to obtaining commitments from the lenders and satisfying other conditions specified in the Third Amended and Restated Credit Agreement and the 2020 Credit Agreement (collectively, the Credit Agreements), the Company may increase the combined aggregate availability of both agreements by an additional $ 1.0 billion.

The Credit Agreements contain customary representations, warranties, and covenants for transactions of these type.

The Company was in compliance with those financial covenants at January 28, 2022.

The Credit Agreements support the Company’s commercial paper program.

The amounts available to be drawn under the Credit Agreements are reduced by the amount of borrowings under the commercial paper program.

There were no outstanding borrowings under the Company’s commercial paper program, the Third Amended and Restated Credit Agreement, or the 2020 Credit Agreement as of January 28, 2022.

There were no outstanding borrowings under the Company’s commercial paper program, the Second Amended and Restated Credit Agreement or the 2020 Credit Agreement as of January 29, 2021.

Outstanding borrowings under the Company’s commercial paper program were $ 941 million, with a weighted average interest rate of 2.10 %, as of January 31, 2020.

There were no outstanding borrowings under the Second Amended and Restated Credit Agreement or the 2019 Credit Agreement as of January 31, 2020.

Total combined availability under the 2020 Credit Agreement and Second Amended and Restated Credit Agreement was $ 3.0 billion as of January 29, 2021.

Total combined availability under the Credit Agreements was $ 4.0 billion as of January 28, 2022.

Other Short-Term Borrowings

In January 2020, the Company entered into a $ 1.0 billion unsecured 364 -day term loan facility (the Term Loan), which was scheduled to mature in December 2020, but was repaid early in September 2020.

Outstanding borrowings under the Term Loan were $ 1.0 billion, with a weighted average interest rate of 2.29 %, as of January 31, 2020.

The weighted average interest rate of total short-term borrowings was 2.14 % as of January 31, 2020.

In April 2021, the Company entered into a $ 1.0 billion unsecured 364-day term loan facility (the 2021 Term Loan), which was scheduled to mature in April 2022, but was repaid early in January 2022.

Long-Term Debt

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Notes due fiscal 2047-2051 3.77 % 4,729 4,234

Finance or capitalized lease obligations due through fiscal 2037 654 712

Finance lease obligations due through fiscal 2042 666 654

Total long-term debt 24,727 21,780

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1 Real properties with an aggregate book value of $ 16 million as of January 28, 2022, were pledged as collateral for secured debt.

Debt maturities, exclusive of unamortized original issue discounts, unamortized debt issuance costs, and finance lease obligations, for the next five fiscal years and thereafter are as follows:

2021, $ 1.0 billion;

2022, $ 765 million;

2023, $ 503 million;

2024, $ 450 million;

2025, $ 1.5 billion;

thereafter, $ 17.1 billion.

Debt maturities, exclusive of unamortized original issue discounts, unamortized debt issuance costs, fair-value hedge adjustments, and finance lease obligations, for the next five fiscal years and thereafter are as follows:

(In millions) Principal

Fiscal 2022 $ 765

Fiscal 2023 503

Fiscal 2024 450

Fiscal 2025 1,500

Fiscal 2026 1,350

Thereafter 19,717

Total $ 24,285

The Company’s unsecured notes are issued under indentures that generally have similar terms and, therefore, have been grouped by maturity date for presentation purposes in the table above.

The notes contain certain restrictive covenants, none of which are expected to impact the Company’s capital resources or liquidity.

The Company was in compliance with all covenants of these agreements at January 29, 2021.

During 2020, the Company issued $ 8.0 billion of unsecured fixed rate notes as follows:

The Company was in compliance with all financial covenants of these agreements at January 28, 2022.

During 2021, the Company issued $ 4.0 billion of unsecured fixed rate notes (collectively, the 2021 Notes) as follows:

Issue Date Principal Amount

3 unchanged sentences

March 2021 $ 500 April 2051 3.500 % $ 5

September 2021 $ 1,000 September 2028 1.700 % $ 6

September 2021 $ 1,000 September 2041 2.800 % $ 10

Interest on the September 2021 Notes is payable semiannually in arrears in March and September of each year until maturity.

Interest on the March 2021 Notes is payable semiannually in arrears in April and October of each year until maturity.

During 2020, the Company issued $ 8.0 billion of unsecured fixed rate notes (collectively, the 2020 Notes) as follows:

Issue Date Principal Amount

(in millions) Maturity Date Interest Rate Discount

(in millions)

March 2020 $ 750 April 2025 4.000 % $ 4

March 2020 $ 1,250 April 2030 4.500 % $ 12

March 2020 $ 750 April 2040 5.000 % $ 10

March 2020 $ 1,250 April 2050 5.125 % $ 13

October 2020 $ 1,000 April 2028 1.300 % $ 5

1 unchanged sentence

October 2020 $ 1,750 October 2050 3.000 % $ 17

Interest on the March 2020 Notes and October 2020 Notes (collectively, the 2020 Notes) is payable semiannually in arrears in April and October of each year until maturity.

During 2019, the Company issued $ 3.0 billion of unsecured fixed rate notes as follows:

Issue Date Principal Amount

(in millions) Maturity Date Interest Rate Discount

(in millions)

April 2019 $ 1,500 April 2029 3.650 % $ 9

April 2019 $ 1,500 April 2049 4.550 % $ 19

Interest on the notes issued in 2019 (the 2019 Notes) is payable semiannually in arrears in April and October of each year until maturity.

Interest on the 2020 Notes is payable semiannually in arrears in April and October of each year until maturity.

The indentures governing the 2021 and 2020 Notes contain a provision that allows the Company to redeem these notes at any time, in whole or in part, at specified redemption prices, plus accrued interest, if any, up to the date of redemption.

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Derivative Instruments

Derivatives Designated as Hedging Instruments

The notional amounts of the Company’s material derivative instruments are as follows:

(In millions) January 28, 2022 January 29, 2021

Cash flow hedges:

The Company held forward interest rate swap agreements with notional amounts totaling $ 638 million at January 29, 2021, and $ 770 million at January 31, 2020.

Forward interest rate swap agreement notional amounts $ 2,560 $ 638

Fair value hedges:

Fixed-to-floating interest rate swap agreement notional amounts $ 850 $ —

See Note 3 for the gross fair values of the Company’s outstanding derivative financial instruments and corresponding fair value classifications.

The impact of forward interest rate swap derivatives, both matured and outstanding, designated as cash flow hedges recorded in other comprehensive income and earnings for 2021, 2020, and 2019, including its line item in the financial statements, is as follows:

(In millions) January 29, 2021 January 31, 2020 February 1, 2019

(In millions) January 28, 2022 January 29, 2021 January 31, 2020

Other comprehensive income:

1 unchanged sentence

$ 103 $ ( 76 ) $ ( 23 )

Net earnings:

Interest – net $ 11 $ 10 $ 2

3 unchanged sentences

The cash flows related to these contracts are included within financing activities in the accompanying consolidated statements of cash flows.

Shareholders’ Equity

Shareholders’ (Deficit)/Equity

Authorized shares of preferred stock were 5.0 million ($ 5 par value) at January 28, 2022 and January 29, 2021, none of which have been issued.

2 unchanged sentences

The Company has a share repurchase program that is executed through purchases made from time to time either in the open market or through private off-market transactions.

Shares purchased under the repurchase program are retired and returned to authorized and unissued status.

Shares purchased under the repurchase program are returned to authorized and unissued status.

On December 15, 2021, the Company announced that its Board of Directors authorized a $ 13.0 billion share repurchase under the program, in addition to the $ 15.0 billion of share repurchases authorized by the Board of Directors in December 2020, with no expiration.

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These ASR agreements were accounted for as treasury stock transactions and forward stock purchase contracts.

The par value of the shares received was recorded as a reduction to common stock with the remainder recorded as a reduction to capital in excess of par value and retained earnings.

The par value of the shares received was recorded as a reduction to common stock with the remainder recorded as a reduction to capital in excess of par value and (accumulated deficit)/retained earnings.

The forward stock purchase contracts were considered indexed to the Company’s own stock and were classified as equity instruments.

The terms of each ASR agreement entered into during the last three fiscal years, structured as outlined above, follow (in millions):

The terms of each ASR agreement entered into during the last three fiscal years, structured as outlined above, are as follows (in millions):

Agreement Execution Date ASR Settlement Date ASR Agreement Amount Minimum Notional Amount 1

10 unchanged sentences

Q3 2021 Q3 2021 1,592 1,500 2,000 408 5.9 1.7 7.6

Q4 2021 Q4 2021 3,000 — — — 10.3 1.6 11.9

1 The Company entered into variable notional ASR agreements with third-party financial institutions to repurchase between a minimum notional amount and a maximum notional amount.

3 unchanged sentences

The Company also withholds shares from employees to satisfy either the exercise price of stock options exercised or the statutory withholding tax liability resulting from the vesting of restricted stock awards and performance share units.

Shares repurchased for 2020, 2019, and 2018 were as follows:

January 29, 2021 January 31, 2020 February 1, 2019

Total shares repurchased for 2021, 2020, and 2019 were as follows:

January 28, 2022 January 29, 2021 January 31, 2020

(In millions) Shares Cost 1

4 unchanged sentences

Total share repurchases 63.0 $ 13,074 34.3 $ 4,951 41.3 $ 4,325

1 Reductions of $ 4.7 billion, $ 4.1 billion, and $ 2.8 billion were recorded to retained earnings, after capital in excess of par value was depleted, for 2020, 2019, and 2018, respectively.

Accounting for Share-Based Payments

1 Reductions of $ 12.6 billion, $ 4.7 billion, and $ 4.1 billion were recorded to (accumulated deficit)/retained earnings, after capital in excess of par value was depleted, for 2021, 2020, and 2019, respectively.

Share-Based Payments

Overview of Share-Based Payment Plans

The Company has a number of active and inactive equity incentive plans (the Incentive Plans) under which the Company has been authorized to grant share-based awards to key employees and non-employee directors.

The Company has a number of active equity incentive plans (the Incentive Plans) under which the Company has been authorized to grant share-based awards to key employees and non-employee directors.

The Company also has an employee stock purchase plan (the ESPP) that allows employees to purchase Company shares at a discount through payroll deductions.

All of these plans contain a non-discretionary anti-dilution provision that is designed to equalize the value of an award as a result of any stock dividend, stock split, recapitalization, or any other similar equity restructuring.

A total of 199.0 million shares have been previously authorized for grant to key employees and non-employee directors under all of the Company’s Incentive Plans, but only 80.0 million of those shares were authorized for grants of share-based awards under the Company’s currently active Incentive Plans.

At January 29, 2021, there were 27.7 million shares remaining available for grants under the currently active Incentive Plans

A total of 80.0 million shares were authorized for grants of share-based awards to key employees and non-employee directors under the Company’s currently active Incentive Plans, of which there were 27.0 million shares remaining available for grants as of January 28, 2022.

On May 29, 2020, shareholders approved the Lowe’s Companies, Inc.

1 unchanged sentence

The first offering date under

the 2020 ESPP began December 1, 2020, following the expiration of the Lowe’s Companies Employee Stock Purchase Plan – Stock Options for Everyone (the Former ESPP), under which 50.5 million of the 70.0 million authorized shares were issued from its adoption to expiration on the last exercise date on November 30, 2020.

The first offering period under the 2020 ESPP ends May 31, 2021 with the automatic exercise of options to occur the same day, thus no shares have been issued thereunder at the time of filing this Annual Report, and 20.0 million s hares remaining available for purchases.

the 2020 ESPP began December 1, 2020, following the expiration of the Lowe’s Companies Employee Stock Purchase Plan – Stock Options for Everyone (the Former ESPP).

From its adoption to expiration on November 30, 2020, there were 50.5 million of the 70.0 million authorized shares issued under the Former ESPP.

The first offering period under the 2020 ESPP ended May 31, 2021, with the automatic exercise of options occurring the same day.

As of January 28, 2022, there were 19.4 million s hares remaining available for purchases.

The Company recognized share-based payment expense within SG&A expense in the consolidated statements of earnings of $ 230 million, $ 155 million, and $ 98 million in 2021, 2020, and 2019, respectively.

15 unchanged sentences

The weighted average assumptions used in the Black-Scholes option-pricing model and weighted-average grant date fair value for options granted in 2021, 2020, and 2019 are as follows:

January 29, 2021 January 31, 2020 February 1, 2019

January 28, 2022 January 29, 2021 January 31, 2020

Weighted-average assumptions used:

18 unchanged sentences

Restricted stock awards are valued at the market price of a share of the Company’s common stock on the date of grant.

In general, these awards vest at the end of a three-year period from the date of grant.

Beginning in fiscal 2019, certain awards vest 50 % at the end of a two-year period from the date of grant and 50 % at the end of a three-year period from the date of grant.

In general, these awards vest 50 % at the end of a two-year period from the date of grant and 50 % at the end of a three-year period from the date of grant.

Certain awards vest 100 % at the end of a three-year period from the date of grant.

All awards are expensed on a straight-line basis over a three-year period, which is considered to be the requisite service period.

14 unchanged sentences

The annual award amount used to determine the number of deferred stock units granted to each Director was $ 175,000 for 2021, 2020, and 2019.

During 2018, the Company appointed a new Chairman of the Board who received an additional grant of deferred stock units.

The award amount used to determine the additional units granted was $ 140,000 .

During 2021, 9,800 deferred stock units were granted and immediately vested for non-employee Directors.

1 unchanged sentence

The total fair value of deferred stock units vested was $ 2 million, $ 2 million, and $ 2 million in 2021, 2020, and 2019, respectively.

At January 29, 2021, there were 142 thousand deferred stock units outstanding, all of which are vested.

At January 28, 2022, there were 107,000 deferred stock units outstanding, all of which are vested.

Performance Share Units

The Company issues performance share units classified as equity awards.

Expense is recognized on a straight-line basis over the requisite service period, based on the probability of achieving the performance condition, with changes in expectations recognized as an adjustment to earnings in the period of the change.

Expense is recognized on a straight-line basis over the requisite service period, based on the probability of achieving the performance condition, with changes in expectations

recognized as an adjustment to earnings in the period of the change.

Compensation cost is not recognized for performance share units that do not vest because service or performance conditions are not satisfied, and any previously recognized compensation cost is reversed.

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The Company’s performance share units are classified as equity and contain performance and service conditions that must be satisfied for an employee to earn the right to benefit from the award.

For awards issued in fiscal 2019 and after, the performance condition is primarily based on the achievement of the Company’s target return on invested capital (ROIC).

For awards issued prior to fiscal 2019, the performance condition is primarily based on the achievement of the Company’s target return on non-cash average assets (RONCAA).

The performance share units contain a market condition modifier, in addition to having a performance and service condition.

The performance condition for these awards continues to be based primarily on the achievement of the Company’s ROIC or RONCAA targets.

The performance condition for these awards continues to be based primarily on the achievement of the Company’s return on invested capital (ROIC) targets.

The market condition is based on the Company’s total shareholder return (TSR) compared to the median TSR of companies listed in the S&P 500 Index over a three-year performance period.

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The weighted-average assumptions used in the Monte Carlo simulations for these awards granted in 2021, 2020, and 2019 are as follows:

January 29, 2021 January 31, 2020

January 28, 2022 January 29, 2021 January 31, 2020

Weighted-average assumptions used:

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The weighted-average grant-date fair value per unit of performance share units classified as equity awards granted was $ 208.74 , $ 203.85 , and $ 115.93 in 2021, 2020, and 2019, respectively.

The total fair value of performance share units vesting was approximately $ 0 million, $ 19 million, and $ 13 million in 2020, 2019, and 2018, respectively.

There were no performance share units vesting in 2021 or 2020.

The total fair value of performance share units vesting was approximately $ 19 million in 2019.

Transactions related to performance share units classified as equity awards for the fiscal year ended January 28, 2022 are summarized as follows:

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¹ The number of units presented is based on achieving the targeted performance goals as defined in the performance share unit agreements.

As of January 29, 2021, the maximum number of nonvested units that could vest under the provisions of the agreements was 0.4 million for the RONCAA awards and 1.1 million for the ROIC awards.

As of January 28, 2022, the maximum number of nonvested units that could vest under the provisions of the agreements was 1.3 million.

Restricted Stock Units

Restricted stock units do not have dividend rights and are valued at the market price of a share of the Company’s common stock on the date of grant less the present value of dividends expected during the requisite service period.

In general, these awards vest at the end of a three-year period from the date of grant.

Beginning in fiscal 2019, certain awards vest 50 % at the end of a two-year period from the date of grant and 50 % at the end of a three-year period from the date of grant.

In general, these awards vest 50 % at the end of a two-year period from the date of grant and 50 % at the end of a three-year period from the date of grant.

Certain awards vest 100 % at the end of a three-year period from the date of grant.

All awards are expensed on a straight-line basis over that period, which is considered to be the requisite service period.

The Company uses historical data to estimate the timing and amount of forfeitures.

The Company uses historical data to estimate the

timing and amount of forfeitures.

The weighted-average grant-date fair value per share of restricted stock units granted was $ 184.40 , $ 75.59 , and $ 103.40 in 2021, 2020, and 2019, respectively.

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Nonvested at January 28, 2022 894 $ 113.51

On May 29, 2020, shareholders approved the 2020 ESPP.

The first offering date under the 2020 ESPP began December 1, 2020, following the expiration of the Former ESPP.

The purchase price of the shares under both the 2020 ESPP and the Former ESPP equals 85 % of the closing price on the date of purchase.

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The ESPP is considered a liability award and is measured at fair value at each reporting date, and the share-based payment expense is recognized over the six-month offering period.

Under the Former ESPP, the Company issued 0.7 million shares of common stock in 2020, 0.8 million shares of common stock in 2019, and 0.9 million shares of common stock in 2018 and recognized $ 16 million of share-based payment expense pursuant to the Former ESPP in 2020 and $ 13 million of share-based payment expense pursuant to the Former ESPP in 2019 and 2018.

The first offering period under the 2020 ESPP ends May 31, 2021 with the automatic exercise of options to occur the same day;

no shares have been issued thereunder at the time of filing this Annual Report.

Under the 2020 ESPP, the Company issued 0.6 million shares of common stock in 2021 and recognized $ 20 million of share-based payment expense.

Under the Former ESPP, the Company issued 0.7 million and 0.8 million shares of common stock in 2020 and 2019, respectively, and recognized $ 16 million and $ 13 million of share-based payment expense pursuant to the Former ESPP in 2020 and 2019, respectively.

Employee Retirement Plans

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Eligible employees may participate in the 401(k) Plan the first of the month after thirty days of employment.

The Company makes contributions to the 401(k) Plan each payroll period, based upon a matching formula applied to employee deferrals (the Company

The Company makes contributions to the 401(k) Plan each payroll period, based upon a matching formula applied to employee deferrals (the Company Match).

Participants are eligible to receive the Company Match pursuant to the terms of the 401(k) Plan.

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The following is a reconciliation of the federal statutory tax rate to the effective tax rate:

January 29, 2021 January 31, 2020 February 1, 2019

January 28, 2022 January 29, 2021 January 31, 2020

Statutory federal income tax rate 21.0 % 21.0 % 21.0 %

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Valuation allowance — — 1.3

Goodwill impairment — — 5.5

Mexico impairment — — ( 1.4 )

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The components of the income tax provision are as follows:

(In millions) January 29, 2021 January 31, 2020 February 1, 2019

(In millions) January 28, 2022 January 29, 2021 January 31, 2020

Federal $ 2,069 $ 1,578 $ 935

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Total deferred tax liabilities ( 1,690 ) ( 1,555 )

Net deferred tax asset $ 340 $ 216

Net deferred tax assets $ 164 $ 340

As of January 28, 2022, the Company reported a deferred tax asset of $ 225 million, for the capital loss realized in 2017 for U.S.

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A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:

(In millions) January 29, 2021 January 31, 2020 February 1, 2019

(In millions) January 28, 2022 January 29, 2021 January 31, 2020

Unrecognized tax benefits, beginning of year $ 2 $ 4 $ 10

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Unrecognized tax benefits, end of year $ 38 $ 2 $ 4

The amounts of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate were $ 2 million as of January 29, 2021 and $ 3 million as of January 31, 2020.

The interest income and interest expense recognized by the Company related to uncertain tax positions was insignificant for 2020, 2019, and 2018.

Penalties recognized related to uncertain tax positions were insignificant for 2020, 2019, and 2018.

There were no accrued penalties as of January 29, 2021, and penalties were insignificant as of January 31, 2020.

The unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate were $ 38 million as of January 28, 2022 and $ 2 million as of January 29, 2021.

The net interest expense recognized by the Company related to uncertain tax positions was $ 12 million for 2021, and insignificant for 2020 and 2019.

The Company had $ 11 million and $ 1 million of accrued interest related to uncertain tax positions as of January 28, 2022 and January 29, 2021.

Penalties recognized related to uncertain tax positions were $ 4 million for 2021 and insignificant for tax years 2020 and 2019.

The Company had $ 4 million of accrued penalties related to uncertain tax positions as of January 28, 2022, and no accrued penalties as of January 29, 2021.

The Company is subject to examination by various foreign and domestic taxing authorities.

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Basic earnings per common share excludes dilution and is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares outstanding for the period.

Diluted earnings per common share is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares as of the balance sheet date, as adjusted for the potential dilutive effect of non-participating share-based awards.

Diluted earnings per common share is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares as of the balance sheet

date, as adjusted for the potential dilutive effect of non-participating share-based awards.

The following table reconciles earnings per common share for 2021, 2020, and 2019:

(In millions, except per share data) January 29, 2021 January 31, 2020 February 1, 2019

(In millions, except per share data) January 28, 2022 January 29, 2021 January 31, 2020

Basic earnings per common share:

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Diluted earnings per common share $ 12.04 $ 7.75 $ 5.49

Anti-dilutive securities excluded from diluted weighted-average common shares outstanding totaled 0.3 million, 0.9 million, and 0.5 million shares for 2020, 2019, and 2018, respectively.

Anti-dilutive securities excluded from diluted weighted-average common shares 0.3 0.3 0.9

Commitments and Contingencies

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As of January 28, 2022, the Company had non-cancellable commitments of $ 1.6 billion related to certain marketing and information technology programs, and purchases of merchandise inventory.

These commitments include agreements to purchase goods or services that are enforceable, are legally binding, and specify all significant terms, including fixed or minimum quantities to be purchased;

fixed, minimum or variable price provisions;

and the approximate timing of the transaction.

Payments under these commitments are scheduled to be made as follows:

2022, $ 1.1 billion;

2023, $ 402 million;

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2026, $ 9 million.

thereafter, $ 50 million.

At January 28, 2022, the Company held standby and documentary letters of credit issued under banking arrangements which totaled $ 462 million.

The majority of the Company’s letters of credit were issued for insurance and construction contracts.

The majority of the Company’s letters of credit were issued to support the Company’s warranty program.

Related Parties

A member of the Company’s Board of Directors also serves on the Board of Directors of a vendor that provides branded consumer packaged goods to the Company.

A former member of the Company’s Board of Directors also serves on the Board of Directors of a vendor that provides branded consumer packaged goods to the Company.

The Company purchased products from this vendor in the amount of $ 203 million in 2021, $ 214 million in 2020, and $ 165 million in 2019.

Amounts payable to this vendor were insignificant at January 29, 2021 and January 31, 2020.

Amounts payable to this vendor were insignificant to the Company at January 28, 2022 and January 29, 2021.

This was no longer considered a related party relationship as of January 28, 2022.

The Company’s President and Chief Executive Officer also serves on the Board of Directors of a vendor that provides transportation and business services to the Company.

The Company purchased services from this vendor in the amount of $ 269 million in 2021, $ 138 million in 2020, and $ 117 million in 2019.

Amounts payable to this vendor were insignificant at January 29, 2021 and January 31, 2020.

Amounts payable to this vendor were insignificant to the Company at January 28, 2022 and January 29, 2021.

Other Information

Net interest expense is comprised of the following:

(In millions) January 29, 2021 January 31, 2020 February 1, 2019

(In millions) January 28, 2022 January 29, 2021 January 31, 2020

Long-term debt $ 827 $ 807 $ 668

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Supplemental disclosures of cash flow information:

(In millions) January 29, 2021 January 31, 2020 February 1, 2019

(In millions) January 28, 2022 January 29, 2021 January 31, 2020

Cash paid for interest, net of amount capitalized $ 837 $ 824 $ 671

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Sales by product category:

January 29, 2021 January 31, 2020 February 1, 2019

January 28, 2022 January 29, 2021 January 31, 2020

(Dollars in millions) Total Sales % Total Sales % Total Sales %

Appliances $ 13,427 14.0 % $ 12,096 13.5 % $ 9,972 13.8 %

Lumber 9,722 10.1 8,344 9.3 5,710 7.9

Seasonal & Outdoor Living 9,555 9.9 8,854 9.9 6,813 9.4

Lawn & Garden 9,043 9.4 8,864 9.9 6,487 9.0

Lumber 8,337 9 5,709 8 5,863 8

Kitchens & Bath 6,781 7.0 6,154 6.9 5,430 7.5

Tools 5,392 5.6 5,461 6.1 4,295 6.0

Paint 5,371 6 4,074 6 4,040 6

Millwork 5,331 5.5 4,971 5.5 4,202 5.8

Hardware 4,698 5 3,841 5 3,724 5

Paint 5,132 5.3 5,372 6.0 4,073 5.6

Flooring 4,952 5.1 4,445 5.0 3,885 5.4

Rough Plumbing 4,762 4.9 4,334 4.8 3,831 5.3

Hardware 4,581 4.8 4,697 5.2 3,842 5.3

Building Materials 4,370 4.5 4,115 4.6 3,446 4.8

Décor 3,732 3.9 3,469 3.9 2,838 3.9

Lighting 3,482 4 2,888 4 3,022 4

Electrical 3,536 3.7 2,973 3.3 2,447 3.4

Lighting 3,429 3.6 3,481 3.9 2,887 4.0

Other 2,505 2.7 1,967 2.2 1,990 2.9

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data