What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-27 compared with 2022-03-21 · 312 added, 304 removed, 892 unchanged (41% of the section changed)

12 unchanged sentences

Goodwill and Intangible Assets

Exit Activities

D ivestiture of the Canadian Retail Business

Derivative Instruments

Shareholders’ (Deficit)/ Equity

Shareholders’ Deficit

Share-Based Payments

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Further, because of changes in conditions, the effectiveness may vary over time.

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our Internal Control as of January 28, 2022.

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our Internal Control as of February 3, 2023.

In evaluating our Internal Control, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).

Based on our management’s assessment, we have concluded that, as of January 28, 2022, our Internal Control is effective.

Based on our management’s assessment, we have concluded that, as of February 3, 2023, our Internal Control is effective.

Deloitte & Touche LLP, the independent registered public accounting firm that audited the financial statements contained in this Annual Report, was engaged to audit our Internal Control.

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

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.

and subsidiaries (the “Company”) as of February 3, 2023 and January 28, 2022, 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 February 3, 2023, 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 February 3, 2023 and January 28, 2022, and the results of its operations and its cash flows for each of the three fiscal years in the period ended February 3, 2023, 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 February 3, 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 27, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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The Company receives funds from its vendors in the normal course of business, principally as a result of purchase volumes and sales.

In the fiscal year ended January 28, 2022, the Company purchased inventory from a significant number of vendors.

In the fiscal year ended February 3, 2023, the Company purchased inventory from a significant number of vendors.

Many of the vendor funds associated with these purchases are earned under agreements that are negotiated on an annual basis or shorter.

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Our audit procedures related to whether the vendor funds were recorded in accordance with the terms of the vendor agreements included the following, among others:

• We tested the effectiveness of controls over vendor funds, including management’s controls over the accrual and recording of vendor funds as a reduction to the cost of inventory or cost of sales in accordance with the terms of the vendor agreements.

• We selected a sample of vendor funds and recalculated the amount earned using the terms of the vendor agreement, including the amount recorded as a reduction to the cost of inventory and/or the amount recorded as a reduction to cost of sales.

• We tested the effectiveness of controls over vendor funds, including management’s controls over the accrual and recording of vendor funds as a reduction to the cost of inventory as they are earned, and as a reduction to cost of sales as the related inventory is sold, in accordance with the terms of the vendor agreements.

• We selected a sample of vendor funds and recalculated the amount earned using the terms of the vendor agreement, including the amount recorded as a reduction to the cost of inventory as they are earned, and the amount recorded as a reduction to cost of sales as the related inventory is sold.

• We selected a sample of vendor funds and confirmed the amount earned and terms of the agreement directly with the vendor.

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We have audited the internal control over financial reporting of Lowe’s Companies, Inc.

and subsidiaries (the “Company”) 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 (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 28, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the fiscal year ended January 28, 2022, of the Company and our report dated March 21, 2022, expressed an unqualified opinion on those financial statements.

and subsidiaries (the “Company”) as of February 3, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 3, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the fiscal year ended February 3, 2023, of the Company and our report dated March 27, 2023, expressed an unqualified opinion on those financial statements.

Basis for Opinion

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Fiscal Years Ended

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

February 3, 2023 January 28, 2022 January 29, 2021

Current Earnings Amount % Sales Amount % Sales Amount % Sales

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Fiscal Years Ended

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

February 3, 2023 January 28, 2022 January 29, 2021

Amount % Sales Amount % Sales Amount % Sales

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(In millions, except par value)

January 28, 2022 January 29, 2021

February 3, 2023 January 28, 2022

Current assets:

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Total assets $ 43,708 $ 44,640

Liabilities and shareholders’ (deficit)/equity

Liabilities and shareholders’ deficit

Current liabilities:

Short-term borrowings $ 499 $ —

Current maturities of long-term debt 585 868

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Deferred revenue 1,603 1,914

Income taxes payable 1,181 128

Other current liabilities 3,488 3,207

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Commitments and contingencies

Shareholders’ (deficit)/equity:

Shareholders’ deficit:

Preferred stock – $ 5 par value:

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Issued and outstanding – 601 million and 670 million, respectively

Capital in excess of par value — 90

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

Accumulated other comprehensive loss ( 36 ) ( 136 )

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

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

Accumulated deficit ( 14,862 ) ( 5,115 )

Accumulated other comprehensive income/(loss) 307 ( 36 )

Total shareholders’ deficit ( 14,254 ) ( 4,816 )

Total liabilities and shareholders’ deficit $ 43,708 $ 44,640

See accompanying notes to consolidated financial statements.

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

Income/(Loss) Total

Shares Amount

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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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 1 150 — — 151

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

Balance February 3, 2023 601 $ 301 $ — $ ( 14,862 ) $ 307 $ ( 14,254 )

See accompanying notes to consolidated financial statements.

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Fiscal Years Ended

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

February 3, 2023 January 28, 2022 January 29, 2021

Cash flows from operating activities:

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Deferred income taxes ( 239 ) 135 ( 108 )

Loss on property and other assets – net 34 139 117

Asset impairment and loss on property - net 2,118 34 139

Loss on sale of business 421 — —

Loss on extinguishment of debt — — 1,060

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Proceeds from sale of property and other long-term assets 45 113 90

Proceeds from sale of business 491 — —

Other – net ( 1 ) ( 134 ) ( 25 )

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Effect of exchange rate changes on cash ( 16 ) ( 8 ) 10

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

Net increase/(decrease) in cash and cash equivalents 215 ( 3,557 ) 3,974

Cash and cash equivalents, beginning of year 1,133 4,690 716

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

YEARS ENDED FEBRUARY 3, 2023, JANUARY 28, 2022, AND JANUARY 29, 2021

Summary of Significant Accounting Policies

Lowe’s Companies, Inc.

and subsidiaries (the Company) is the world’s second-largest home improvement retailer and operated 1,971 stores in the United States and Canada at January 28, 2022.

and subsidiaries (the Company) is the world’s second-largest home improvement retailer and operated 1,738 stores in the United States at February 3, 2023.

On February 3, 2023, Lowe’s completed the sale of its Canadian retail business, which operated 232 stores in Canada, as well as serviced 210 dealer-owned stores.

The Canadian retail business included a number of complementary formats under the banners of RONA, Lowe’s Canada, Réno-Dépôt, and Dick’s Lumber.

See Note 7 for information on this divestiture.

Below are those accounting policies considered by the Company to be significant.

Fiscal Year - The Company’s fiscal year ends on the Friday nearest the end of January.

Each of the fiscal years presented contained 52 weeks.

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.

Fiscal 2022 contained 53 weeks, and fiscal years 2021 and 2020 each contained 52 weeks.

All references herein for the years 2022, 2021, and 2020 represent the fiscal years ended February 3, 2023, January 28, 2022, and January 29, 2021, 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 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.

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’ (deficit)/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 in accumulated other comprehensive income/(loss).

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

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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, 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.

Investments - Investments generally consist of commercial paper, corporate debt securities, governmental securities, certificates of deposit, 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 income/(loss).

The proceeds from sales of available-for-sale debt securities were $ 10 million, $ 308 million, and $ 42 million for 2022, 2021, and 2020, respectively.

Gross realized gains and losses on the sale of available-for-sale debt securities were not significant for any of the periods presented.

Also included in long-term investments is performance-based contingent consideration associated with the sale of the Canadian retail business.

The Company accounts for the contingent consideration under the fair value option under Accounting Standards Codification (ASC) 825, Financial Instruments, which requires the contingent consideration to be recorded at its initial fair value upon recognition and as of each balance sheet date thereafter.

Changes in the estimated fair value of the contingent consideration are recognized as non-cash changes in fair value included within SG&A expense in the consolidated statements of earnings.

Investments with a stated maturity date of one year or less from the balance sheet date or that are expected to be used in current operations are classified as short-term investments.

All other investments are classified as long-term.

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.

Restricted balances included in short-term investments were $ 271 million at January 28, 2022, and $ 506 million at January 29, 2021.

Restricted balances included in long-term investments were $ 199 million at January 28, 2022, and $ 200 million at January 29, 2021.

Available-for-sale debt securities classified as long-term at February 3, 2023, will mature in one to two years , based on stated maturity dates.

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

Restricted balances included in short-term investments were $ 384 million at February 3, 2023, and $ 271 million at

January 28, 2022.

Restricted balances included in long-term investments were $ 100 million at February 3, 2023, and $ 199 million at January 28, 2022.

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 % 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.

Inventory for certain subsidiaries representing approximately 1 % and 7 % of the consolidated inventory balances as of February 3, 2023, and January 28, 2022, respectively, 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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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.

Derivative Financial Instruments - The Company is exposed to the impact of changes in foreign currency exchange rates, benchmark interest rates, and the prices of commodities used in the normal course of business.

Derivative Financial Instruments - The Company is exposed to the impact of changes in benchmark interest rates and the prices of commodities used in the normal course of business.

The Company occasionally utilizes derivative financial instruments to manage certain business risks.

All derivative financial instruments are recognized at their fair values as either assets or liabilities at the balance sheet date and reported on a gross basis.

The Company held forward interest rate swap agreements to hedge its exposure to changes in benchmark interest rates on forecasted debt issuances as of January 28, 2022 and January 29, 2021.

The Company held forward interest rate swap agreements to hedge its exposure to changes in benchmark interest rates on forecasted debt issuances as of February 3, 2023, and January 28, 2022.

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, 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 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 is amortized to interest expense over the term of the respective debt.

The Company held fixed-to-floating interest rate swap agreements as fair value hedges on certain debt as of February 3, 2023, and 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.

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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The Company also has an agreement with Synchrony under which Synchrony purchases at face value commercial business accounts receivable originated by the Company and services these accounts.

The Company primarily accounts for these transfers as sales of the accounts receivable.

The Company primarily accounts for these

transfers as sales of the accounts receivable.

When the Company transfers its commercial business accounts receivable, it retains certain interests in those receivables, including the funding of a loss reserve and its obligation related to Synchrony’s ongoing servicing of the receivables sold.

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A potential impairment has occurred for long-lived assets held-for-use if projected future undiscounted cash flows expected to result from the use and eventual disposition of the assets are less than the carrying amounts of the assets.

The carrying value of a location’s asset group includes inventory, property, operating and finance lease right-of-use assets, and operating liabilities, including inventory payables, salaries payable and operating lease liabilities.

For operating locations identified for sale or closure, a market approach is used to determine the fair value of the asset group.

The carrying value of an operating location’s asset group includes inventory, property, operating and finance lease right-of-use assets, and operating liabilities, including accounts payables, accrued compensation, and operating lease liabilities.

Financial and non-operating liabilities are excluded from the carrying value of the asset group.

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The evaluation begins with a qualitative assessment to determine whether a quantitative impairment test is necessary.

If, after assessing qualitative factors, we determine it is more likely than not that the fair value of the reporting unit is less than the carrying amount, then the quantitative goodwill impairment test is performed.

If, after assessing qualitative factors, we determine it is more

likely than not that the fair value of the reporting unit is less than the carrying amount, then the quantitative goodwill impairment test is performed.

The quantitative goodwill impairment test used to identify potential impairment compares the fair value of a reporting unit with its carrying amount, including goodwill.

Fair value represents the price a market participant would be willing to pay in a potential sale of the reporting unit and is based on a combination of an income approach, based on discounted future cash flows, and a market approach, based on market multiples applied to free cash flow.

Fair value represents the price a market participant would be willing to pay in a potential sale of the reporting unit and is based on a combination of an income approach, using discounted future cash flows, and a market approach, using market multiples applied to free cash flow.

If the fair value exceeds carrying value, then no goodwill impairment has occurred.

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The changes in the carrying amount of goodwill for 2022, 2021, and 2020 were as follows:

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

(In millions) February 3, 2023 January 28, 2022 January 29, 2021

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

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

January 28, 2022 January 29, 2021

February 3, 2023 January 28, 2022

(In millions) Gross Carrying Amount Cumulative Impairment Gross Carrying Amount Cumulative Impairment

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

$ 311 $ — $ 1,310 $ ( 999 )

1 The reduction in the gross carrying amount and cumulative impairment of goodwill is as a result of the sale of the Canadian retail business in fiscal 2022.

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.

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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.

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.

common area maintenance) components of contracts separately for any underlying asset class.

The Company does not account for lease and non-lease (e.g., common area maintenance) components of contracts separately for any underlying asset class.

If readily determinable, the rate implicit in the lease is used to discount lease payments to present value;

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Sublease income was not significant for any of the periods presented.

Accounts Payable - The Company has agreements with third parties to provide accounts payable tracking systems which facilitate participating suppliers’ ability to finance payment obligations from the Company with designated third-party financial institutions.

Accounts Payable - The Company has agreements with third parties to provide supplier finance programs which facilitate participating suppliers’ ability to finance payment obligations from the Company with designated third-party financial institutions.

Participating suppliers may, at their sole discretion, make offers to finance one or more payment obligations of the Company prior to their scheduled due dates at a discounted price to participating financial institutions.

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However, the Company’s right to offset balances due from suppliers against payment obligations is restricted by these arrangements for those payment obligations that have been financed by suppliers.

The Company’s outstanding payment obligations with participating suppliers were $ 3.0 billion as of January 28, 2022, and $ 2.5 billion as of January 29, 2021, and are included in accounts payable on the consolidated balance sheets, and participating suppliers financed $ 2.3 billion and $ 1.7 billion, respectively, of those payment obligations to participating financial institutions.

Total payment obligations that were placed and settled on the accounts payable tracking systems were $ 11.0 billion and $ 9.7 billion for each of the years ended January 28, 2022 and January 29, 2021, respectively.

The rollforward of the Company’s outstanding payment obligations that suppliers financed to participating financial institutions, which are included in accounts payable on the consolidated balance sheets, are as follows:

(In millions) February 3, 2023 January 28, 2022 January 29, 2021

Financed payment obligations outstanding at the beginning of the year $ 2,274 $ 1,710 $ 1,329

Payment obligations financed during the year 12,159 11,538 10,121

Financed payment obligations paid during the year ( 12,176 ) ( 10,974 ) ( 9,740 )

Financed payment obligations outstanding at the end of the year $ 2,257 $ 2,274 $ 1,710

Other Current Liabilities - Other current liabilities on the consolidated balance sheets consist of:

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

(In millions) February 3, 2023 January 28, 2022

Accrued dividends $ 633 $ 537

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Sales tax liabilities 314 228

Income taxes payable 128 168

Accrued property taxes 119 124

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

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 February 3, 2023, and January 28, 2022.

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 at January 28, 2022 and January 29, 2021.

Outstanding surety bonds relating to self-insurance were $ 270 million at February 3, 2023, and January 28, 2022.

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

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.

Enactment of the Inflation Reduction Act

On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act (IRA) which, among other changes, created a new 15% corporate alternative minimum tax based on adjusted financial statement income, which is effective for the Company beginning February 4, 2023.

The Company does not expect the corporate alternative minimum tax will have a significant impact on the Company’s consolidated financial statements.

Income Tax Relief

On October 5, 2022, the Internal Revenue Service announced that businesses in certain states, including North Carolina, affected by Hurricane Ian would receive tax relief by postponing certain tax-payment deadlines.

Under this relief, the Company’s quarterly federal estimated income tax payments originally due by October 17, 2022 and January 17, 2023, can be deferred until February 15, 2023.

As of February 3, 2023, the Company deferred $ 1.2 billion of federal income taxes payable, which is included in income taxes payable in the consolidated balance sheets.

Shareholders’ Deficit - 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 (accumulated deficit)/retained earnings.

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

In August 2022, the IRA enacted a 1% excise tax on net share repurchases after December 31, 2022.

Any excise tax incurred on share repurchases is recognized as part of the cost basis of the shares acquired in the consolidated statements of shareholders’ (deficit)/equity.

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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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.

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.

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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.

Incremental direct acquisition costs and administrative costs to fulfill the contracts associated with 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.

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n Other administrative costs, such as supplies, and travel and entertainment.

Advertising - Costs associated with advertising are charged to expense as incurred.

Advertising - Costs associated with advertising are charged to SG&A expense as incurred.

Advertising expenses were $ 869 million, $ 877 million, and $ 798 million in 2022, 2021, and 2020, 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.

Comprehensive income represents changes in shareholders’ deficit 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 income/(loss) were ($ 5 ) million, ($ 41 ) million, and ($ 37 ) million at February 3, 2023, January 28, 2022, and January 29, 2021, respectively.

Net cash flow hedge gains/(losses), net of tax, classified in accumulated other comprehensive income/(loss) were $ 315 million, $ 6 million, and ($ 103 ) million at February 3, 2023, January 28, 2022, and January 29, 2021, respectively.

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

Key operating decisions are made at the Company level in order to maintain a consistent retail customer experience.

The Company’s home improvement retail and hardware stores, in addition to online selling channels, sell similar products and services, use similar processes to sell those products and services, and sell their products and services to similar classes of customers.

The Company’s home improvement retail stores, in addition to online selling channels, sell similar products and services, use similar processes to sell those products and services, and sell their products and services to similar classes of customers.

In addition, the Company’s operations exhibit similar long-term economic characteristics.

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

were approximately 7.2 % and 6.1 %, respectively, at January 28, 2022.

As of February 3, 2023, long-lived assets outside of the U.S.

were immaterial as a result of the sale of the Canadian retail business.

Net sales outside of the U.S.

were approximately 5.2 % for the fiscal year ended February 3, 2023.

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

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were approximately 7.5 % and 5.9 %, respectively, at January 29, 2021.

Reclassifications - Income taxes payable for the prior year was reclassified to conform with current year presentation as a separate caption on the consolidated balance sheets.

Accounting Pronouncements Recently Adopted - Effective February 3, 2023, the Company early adopted all disclosure requirements of Accounting Standards Update (ASU) 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations .

The ASU requires disclosure about an entity’s use of supplier finance programs, including the key terms of the program, amount of obligations outstanding at the end of the reporting period, and a rollforward of activity within the program during the period.

The ASU is effective for the Company in fiscal 2023, except for the disclosure of rollforward information, which is effective for fiscal 2024, with early adoption permitted.

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.

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(In millions) Years Ended

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

February 3, 2023 January 28, 2022 January 29, 2021

Products $ 93,392 $ 92,415 $ 86,046

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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

(In millions) Classification February 3, 2023 January 28, 2022

Anticipated sales returns Other current liabilities $ 234 $ 245

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

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

(In millions) February 3, 2023 January 28, 2022

Retail deferred revenue $ 933 $ 1,285

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

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

(In millions) February 3, 2023 January 28, 2022

Deferred revenue - Lowe’s protection plans $ 1,201 $ 1,127

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(In millions) Years Ended

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

February 3, 2023 January 28, 2022 January 29, 2021

Lowe’s protection plan deferred revenue recognized into sales $ 527 $ 488 $ 430

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

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

February 3, 2023 January 28, 2022 January 29, 2021

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

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2 Building Products includes the following product categories:

Building Materials, Electrical, Lighting, Lumber, Millwork, and Rough Plumbing

Building Materials, Electrical, Lumber, Millwork, and Rough Plumbing.

3 Hardlines includes the following product categories:

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(In millions) Years Ended

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

February 3, 2023 January 28, 2022 January 29, 2021

United States $ 92,010 $ 90,348 $ 84,303

International 5,902 5,294 5,001

5,049 5,902 5,294

Net Sales $ 97,059 $ 96,250 $ 89,597

1 The Canadian retail business was sold on February 3, 2023.

Fair Value Measurements

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Fair Value Measurements at

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

(In millions) Classification Measurement Level February 3, 2023 January 28, 2022

Available-for-sale debt securities:

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

Treasury securities Short-term investments Level 1 $ 157 $ 75

Corporate debt securities Short-term investments Level 2 78 8

Commercial Paper Short-term investments Level 2 52 30

Money market funds Short-term investments Level 1 43 120

Certificates of deposit Short-term investments Level 1 40 14

Foreign government debt securities Short-term investments Level 2 14 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 86 132

Corporate debt securities Long-term investments Level 2 12 50

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

Municipal obligations Long-term investments Level 2 2 3

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

Derivative instruments:

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Forward interest rate swaps Other assets Level 2 — 48

Forward interest rate swaps Other current liabilities Level 2 — 8

Fixed-to-floating interest rate swaps Other liabilities Level 2 88 21

Other financial instruments:

Contingent consideration Long-term investments Level 3 $ 21 $ —

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

When available, quoted prices were used to determine fair value.

When quoted prices in active markets were available, investments were classified within Level 1 of the fair value hierarchy.

When quoted prices in active markets were not available, fair values were determined using pricing models, and the inputs to those pricing models were based on observable market inputs.

When quoted prices in active markets were available, financial assets were classified within Level 1 of the fair value hierarchy.

When quoted prices in active markets were not available, fair values for financial assets and liabilities classified within Level 2 were determined using pricing models, and the inputs to those pricing models were based on observable market inputs.

The inputs to the pricing models were typically benchmark yields, reported trades, broker-dealer quotes, issuer spreads and benchmark securities, among others.

The fair value for contingent consideration classified within Level 3 was determined based on an income approach using an option pricing model, calculated using the significant unobservable inputs such as total equity value, volatility, and expected term.

The rollforward of the fair value of the performance-based contingent consideration associated with the sale of the Canadian retail business and classified as Level 3 for the fiscal year ended February 3, 2023, is as follows:

(In millions) February 3, 2023

Beginning balance $ —

Recognition of contingent consideration at initial fair value 21

Ending balance $ 21

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

For the fiscal years ended January 28, 2022 and January 29, 2021, the Company had no material measurements of assets and liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

For the fiscal year ended February 3, 2023, the Company’s only significant assets or liabilities measured at fair value on a nonrecurring basis subsequent to their initial recognition were certain long-lived assets as further described below.

The Company reviews the carrying amounts of long-lived assets whenever certain events or changes in circumstances indicate that the carrying amounts may not be recoverable.

When evaluating long-lived assets for impairment, the asset group is generally at an individual location level, as that is the lowest level for which cash flows are identifiable.

Cash flows for individual locations do not include an allocation of corporate overhead.

The Company evaluates long-lived assets for triggering events on a quarterly basis to determine when assets may not be recoverable.

An impairment loss is recognized when the carrying amount of the asset (disposal) group is not recoverable and exceeds its fair value.

The Company estimates the fair values of assets subject to long-lived asset impairment based on the Company’s own judgments about the assumptions that

market participants would use in pricing the assets and on observable market data, when available.

The Company classifies these fair value measurements as Level 3.

During the third quarter of fiscal 2022, the Company determined it was more likely than not that the assets within the Canadian retail business would be sold or otherwise disposed of significantly before the end of their previously estimated useful lives, and these assets were evaluated for recoverability.

Based on the proposed transaction, the Company reconsidered the appropriate asset grouping of long-lived assets attributable to the Company’s Canadian locations given the change in the Company’s expectations regarding use and disposition of its associated assets.

The Company determined the total Canadian retail business (Canada asset group) to be the appropriate asset group for which the long-lived assets should be evaluated, as this represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

The carrying value of the Canada asset group included substantially all assets and liabilities of the Canadian retail business, including accounts receivable, inventory, property, operating and finance lease right-of-use assets, definite-lived intangible assets, operating liabilities including accounts payable and accrued compensation, and operating and finance lease liabilities.

A market approach of orderly transaction under current market conditions was used in determining the estimated fair value of the Canada asset group, which was based on the proposed transaction price, inclusive of performance-based contingent consideration.

The estimated fair value of the Canada asset group was determined to be $ 421 million.

As a result, the Company recorded $ 2.1 billion of long-lived asset impairment within SG&A expense in the consolidated statements of earnings, which reflected the full carrying value of the long-lived assets of the Canada asset group as of October 28, 2022.

As of February 3, 2023, the Company finalized the sale of the Canadian retail business.

Refer to Note 7 for details of the divestiture.

The following table presents the Company’s impairment losses resulting from non-financial assets measured at estimated fair value on a nonrecurring basis included in earnings for the fiscal year ended February 3, 2023:

(In millions) February 3, 2023

Canada asset group:

Property, less accumulated depreciation $ 1,258

Operating lease right-of-use assets 621

Other assets 182

Total $ 2,097

For the fiscal year ended January 28, 2022, the Company had no material measurements of assets and liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

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, 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, short-term borrowings, 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.

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Carrying amounts and the related estimated fair value of the Company’s long-term debt, excluding finance lease obligations, are as follows:

January 28, 2022 January 29, 2021

February 3, 2023 January 28, 2022

(In millions) Carrying Amount Fair Value Carrying Amount Fair Value

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Property is summarized by major class in the following table:

(In millions) Estimated Depreciable Lives, In Years January 28, 2022 January 29, 2021

(In millions) Estimated Depreciable Lives, In Years February 3, 2023 January 28, 2022

Land N/A $ 6,793 $ 7,278

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Equipment 2 - 15

10,533 10,466

Construction in progress N/A 793 715

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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

February 3, 2023 January 28, 2022

(In millions) Gross

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Indefinite-lived intangible assets:

$ 134 $ — $ — $ —

Trademark $ 134 $ — $ 134 $ —

Total intangible assets $ 393 $ ( 90 ) $ 742 $ ( 220 )

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.

1 Certain definite-lived intangible assets as of January 28, 2022, are denominated in a foreign currency and subject to translation.

Amortization expense for intangible assets is as follows:

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

(In millions) February 3, 2023 January 28, 2022 January 29, 2021

Amortization expense $ 28 $ 32 $ 59

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(In millions)

Classification January 28, 2022 January 29, 2021

Classification February 3, 2023 January 28, 2022

Operating lease assets Operating lease right-of-use assets $ 3,518 $ 4,108

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Total lease liabilities $ 4,597 $ 5,323

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.

1 Finance lease assets are recorded net of accumulated amortization of $ 244 million as of February 3, 2023, and $ 206 million as of January 28, 2022.

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

(In millions)

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

February 3, 2023 January 28, 2022 January 29, 2021

Finance lease cost

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1 Includes short-term leases and sublease income, which are immaterial.

The future minimum rental payments required under operating and finance lease obligations as of January 28, 2022, having initial or remaining non-cancelable lease terms in excess of one year are summarized as follows:

The future minimum rental payments required under operating and finance lease obligations as of February 3, 2023, having initial or remaining non-cancelable lease terms in excess of one year are summarized as follows:

Maturity of lease liabilities

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Present value of lease liabilities $ 4,034 $ 563 $ 4,597

$ 4,657 $ 666 $ 5,323

1 Operating lease payments include $ 261 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $ 602 million of minimum lease payments for leases signed but not yet commenced.

1 unchanged sentence

3 Calculated using the lease-specific incremental borrowing rate.

4 Includes the current portion of $ 636 million for operating leases and $ 103 million for finance leases.

Lease Term and Discount Rate January 28, 2022 January 29, 2021

Lease Term and Discount Rate February 3, 2023 January 28, 2022

Weighted-average remaining lease term (years)

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(In millions)

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

February 3, 2023 January 28, 2022 January 29, 2021

Cash paid for amounts included in the measurement of lease liabilities

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Leased assets obtained in exchange for new operating lease liabilities 1

1 Excludes $ 638 million of leases signed but not yet commenced as of January 28, 2022.

Exit Activities

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, 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.

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.

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

A summary of the significant charges associated with the restructuring of the Canadian operations are as follows:

Years Ended Cumulative

(In millions) January 29, 2021

January 31, 2020 Amount

1 Excludes $ 602 million of leases signed but not yet commenced as of February 3, 2023.

Divestiture of the Canadian Retail Business

On February 3, 2023, the Company sold its Canadian retail business to Sycamore Partners for $ 491 million in cash, and performance-based contingent consideration with a fair value of $ 21 million, which is recognized as a financial asset in long-term investments on the consolidated balance sheet.

The Canadian retail business operated or serviced the corporate and independent dealer-owned stores in a number of complementary formats under different banners, which include RONA, Lowe’s Canada, Réno-Dépôt, and Dick’s Lumber.

The decision to sell the business was made as part of the Company’s strategy to simplify its business model and focus on the U.S.

home improvement business.

During the fiscal year ended February 3, 2023, the Company recorded $ 2.5 billion of pre-tax costs associated with the sale, inclusive of long-lived asset impairment, loss on sale, and transaction costs, which are all included within SG&A expense in the consolidated statements of earnings.

The cumulative foreign currency translation adjustment previously included in accumulated other comprehensive income/(loss) was reclassified to earnings and is included in the loss on sale.

A summary of the significant charges associated with the sale of the Canadian retail business is as follows:

(In millions) February 3, 2023

Long-lived asset impairment $ 2,061

Severance costs 15 17 32

Accelerated depreciation and amortization 1 23 24

Other closing costs 19 15 34

Loss on sale 421

Transaction costs 19

Total $ 2,501

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

(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 end of year $ 54 $ 69

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

Commercial Paper Program

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.

In January 2023, the Company amended its $ 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, which has a maturity date of December 2026 and an aggregate availability of $ 2.0 billion.

Under the amendment, borrowings under the Third Amended and Restated Credit Agreement will bear interest calculated according to a Base Rate or a Term Secured Overnight Financing Rate (SOFR), plus an applicable margin.

Also in January 2023, the Company amended the five-year unsecured revolving credit agreement dated March 23, 2020 (the 2020 Credit Agreement) with a syndicate of banks, which has a maturity date of December 2026 and an aggregate availability of $ 2.0 billion.

Under the amendment, borrowings under the 2020 Credit Agreement will bear interest calculated according to a Base Rate or a Term SOFR, plus an applicable margin.

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 Company was in compliance with those financial covenants at February 3, 2023.

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.

Outstanding borrowings under the Company’s commercial paper program were $ 499 million, with a weighted average interest rate of 4.78 %, as of February 3, 2023.

There were no borrowings under the Third Amended and Restated Credit Agreement or the 2020 Credit Agreement as of February 3, 2023.

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.

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

Other Short-Term Borrowings

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.

Total combined availability under the Credit Agreements was $ 3.5 billion as of February 3, 2023.

Long-Term Debt

Debt Category

(In millions)

Weighted-Average Interest Rate at January 28, 2022 January 28, 2022 January 29, 2021

(In millions, except percentage data)

Weighted-Average Interest Rate at February 3, 2023 February 3, 2023 January 28, 2022

Secured debt:

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Notes due fiscal 2048-2052 3.83 % 4,736 3,251

Notes due fiscal 2053-2057 5.63 % 1,479 —

Notes due fiscal 2058-2062 5.05 % 2,219 —

Finance lease obligations due through fiscal 2042 562 666

Total long-term debt 33,461 24,727

Less current maturities ( 868 ) ( 1,112 )

current maturities ( 585 ) ( 868 )

Long-term debt, excluding current maturities $ 32,876 $ 23,859

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

1 Real properties with an aggregate book value of $ 12 million as of February 3, 2023, were pledged as collateral for secured debt.

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:

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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 financial covenants of these agreements at January 28, 2022.

The Company was in compliance with all financial covenants of these agreements at February 3, 2023.

During 2022, the Company issued $ 9.8 billion of unsecured fixed rate notes (collectively, the 2022 Notes) as follows:

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March 2022 $ 1,500 April 2032 3.750 % $ 7

March 2022 $ 1,500 April 2052 4.250 % $ 14

March 2022 $ 1,250 April 2062 4.450 % $ 12

September 2022 $ 1,000 September 2025 4.400 % $ 3

September 2022 $ 1,250 April 2033 5.000 % $ 9

September 2022 $ 1,500 April 2053 5.625 % $ 18

September 2022 $ 1,000 September 2062 5.800 % $ 16

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.

Interest on the September 2022 Notes and March 2022 Notes with April maturity dates is payable semiannually in arrears in April and October of each year until maturity.

Interest on the September 2022 Notes with September maturity dates is payable semiannually in arrears in March and September of each year until maturity.

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

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March 2021 $ 500 April 2051 3.500 % $ 5

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

October 2020 $ 1,250 October 2030 1.700 % $ 10

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

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

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.

The indentures governing the 2022 and 2021 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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The notional amounts of the Company’s material derivative instruments are as follows:

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

(In millions) February 3, 2023 January 28, 2022

Cash flow hedges:

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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 28, 2022 January 29, 2021 January 31, 2020

In connection with the issuance of the March 2022 Notes, the Company settled forward interest rate swap contracts with a combined notional amount of $ 1.5 billion and received a payment of $ 143 million.

In connection with the issuance of the September 2022 Notes, the Company settled forward interest rate swap contracts with a combined notional amount of $ 1.3 billion and received a payment of $ 136 million.

The gain/(loss) from forward interest rate swap derivatives, both matured and outstanding, designated as cash flow hedges recorded in other comprehensive income and earnings for 2022, 2021, and 2020, including its line item in the financial statements, is as follows:

(In millions) February 3, 2023 January 28, 2022 January 29, 2021

Other comprehensive income:

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

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.

Shareholders’ Deficit

Authorized shares of preferred stock were 5.0 million ($ 5 par value) at February 3, 2023, and January 28, 2022, none of which have been issued.

The Board of Directors may issue the preferred stock (without action by shareholders) in one or more series, having such voting rights, dividend and liquidation preferences, and such conversion and other rights as may be designated by the Board of Directors at the time of issuance.

Authorized shares of common stock were 5.6 billion ($ 0.50 par value) at January 28, 2022 and January 29, 2021.

Authorized shares of common stock were 5.6 billion ($ 0.50 par value) at February 3, 2023, and January 28, 2022.

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 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.

As of January 28, 2022, the Company had $ 19.7 billion remaining under the program.

During the year ended January 28, 2022, the Company entered into Accelerated Share Repurchase (ASR) agreements with third-party financial institutions to repurchase a total of 41.6 million shares of the Company’s common stock for $ 8.7 billion.

On December 7, 2022, the Company announced that its Board of Directors authorized $ 15.0 billion of share repurchases under the program, in addition to the $ 13.0 billion of share repurchases authorized by the Board of Directors in December 2021, with no expiration.

As of February 3, 2023, the Company had $ 20.7 billion remaining under the program.

During the year ended February 3, 2023, the Company entered into Accelerated Share Repurchase (ASR) agreements with third-party financial institutions to repurchase a total of 27.2 million shares of the Company’s common stock for $ 5.3 billion.

At inception, the Company paid the financial institutions using cash on hand and took initial delivery of shares.

Under the terms of the ASR agreements, upon settlement, the Company would either receive additional shares from the financial institution or be required to deliver additional shares or cash to the financial institution.

terms of the ASR agreements, upon settlement, the Company would either receive additional shares from the financial institution or be required to deliver additional shares or cash to the financial institution.

The Company controlled its election to either deliver additional shares or cash to the financial institution and was subject to provisions which limited the number of shares the Company would be required to deliver.

2 unchanged sentences

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 (accumulated deficit)/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.

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

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Q3 2022 Q3 2022 2,250 — — — 8.3 3.3 11.6

Q4 2022 Q4 2022 530 — — — 2.0 0.6 2.6

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.

1 unchanged sentence

When the Company finalized each transaction, it received additional shares as well as a cash payment from the third-party financial institution equal to the difference between the prepayment amount (maximum notional amount) and the final notional amount.

During the year ended January 28, 2022, the Company also repurchased shares of its common stock through the open market totaling 21.0 million shares for a cost of $ 4.3 billion.

During the year ended February 3, 2023, the Company also repurchased shares of its common stock through the open market totaling 43.4 million shares for a cost of $ 8.7 billion.

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.

Total shares repurchased for 2022, 2021, and 2020 were as follows:

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

(In millions) Shares Cost 1

Shares Cost 1

February 3, 2023 January 28, 2022 January 29, 2021

(In millions) Shares Cost Shares Cost Shares Cost

Share repurchase program 1

70.6 $ 14,004 62.6 $ 12,990 34.2 $ 4,940

Shares withheld from employees 0.6 124 0.4 84 0.1 11

Total share repurchases 71.2 $ 14,128 63.0 $ 13,074 34.3 $ 4,951

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.

1 As of January 1, 2023, share repurchases in excess of issuances are subject to a 1 % excise tax, which is included as part of the cost basis of the shares acquired.

Share-Based Payments

Overview of Share-Based Payment Plans

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 has an active equity incentive plan (the Incentive Plan) 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 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.

Both 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 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 Plan, of which there were 26.0 million shares remaining available for grants as of February 3, 2023.

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

2020 Employee Stock Purchase Plan (the 2020 ESPP), which permits a maximum number of shares offered under the new plan of 20.0 million shares.

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).

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).

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.

As of February 3, 2023, there were 18.8 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 $ 224 million, $ 230 million, and $ 155 million in 2022, 2021, and 2020, respectively.

The total associated income tax benefit recognized, exclusive of excess tax benefits, was $ 36 million, $ 40 million, and $ 29 million in 2022, 2021, and 2020, respectively.

Total unrecognized share-based payment expense for all share-based payment plans was $ 299 million at January 28, 2022, of which $ 186 million will be recognized in 2022, $ 97 million in 2023, and $ 16 million thereafter.

Total unrecognized share-based payment expense for all share-based payment plans was $ 273 million at February 3, 2023, of which $ 160 million will be recognized in 2023, $ 96 million in 2024, and $ 17 million thereafter.

This results in these amounts being recognized over a weighted-average period of 1.5 years.

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

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 28, 2022 January 29, 2021 January 31, 2020

The weighted average assumptions used in the Black-Scholes option-pricing

model and weighted-average grant date fair value for options granted in 2022, 2021, and 2020 are as follows:

February 3, 2023 January 28, 2022 January 29, 2021

Weighted-average assumptions used:

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The total intrinsic value of options exercised, representing the difference between the exercise price and the market price on the date of exercise, was approximately $ 41 million, $ 46 million, and $ 60 million in 2022, 2021, and 2020, respectively.

Transactions related to stock options for the fiscal year ended January 28, 2022 are summarized as follows:

Transactions related to stock options for the fiscal year ended February 3, 2023, are summarized as follows:

(In thousands) Weighted-Average Exercise Price Per Share Weighted-Average Remaining Term (In years) Aggregate Intrinsic Value (In thousands)

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Exercised ( 385 ) 95.09

Outstanding at January 28, 2022 2,011 $ 106.43 7.44 $ 258,513

Vested and expected to vest at January 28, 2022 1

Outstanding at February 3, 2023 1,845 $ 122.90 6.89 $ 171,738

Vested and expected to vest at February 3, 2023 1

1,807 $ 121.32 6.84 $ 171,004

Exercisable at January 28, 2022 1,072 $ 93.24 6.66 $ 151,988

Exercisable at February 3, 2023 1,184 $ 100.53 6.09 $ 136,701

1 Includes outstanding vested options as well as outstanding nonvested options after a forfeiture rate is applied.

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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 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.

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

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, or 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.

2 unchanged sentences

The total fair value of restricted stock awards vesting each year was approximately $ 203 million, $ 200 million, and $ 31 million in 2022, 2021, and 2020, respectively.

Transactions related to restricted stock awards for the fiscal year ended January 28, 2022 are summarized as follows:

Transactions related to restricted stock awards for the fiscal year ended February 3, 2023, are summarized as follows:

(In thousands) Weighted-Average Grant-Date Fair Value Per Share

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Canceled or forfeited ( 234 ) 154.37

Nonvested at January 28, 2022 2,307 $ 117.04

Nonvested at February 3, 2023 1,792 $ 158.20

Deferred Stock Units

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

For non-employee Directors, these awards vest immediately and are expensed on the grant date.

During 2021, 2020, and 2019, each non-employee Director was awarded a number of deferred stock units determined by dividing the annual award amount by the fair market value of a share of the Company’s common stock on the award date and rounding up to the next 100 units.

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

Deferred stock units are valued at the market price of a share of the Company’s common stock on the date of grant and earn dividend equivalents.

For non-employee Directors, these awards vest on the earlier of the first anniversary of the grant date and the day immediately preceding the next Annual Meeting of Shareholders, subject to acceleration in certain circumstances, and are expensed on a straight-line basis over the requisite service period.

Awards granted prior to 2022 vested immediately and were expensed on the grant date.

During 2022, 2021, and 2020, each non-employee Director was awarded a number of deferred stock units determined by dividing the annual award amount, or a pro-rata allocation of this amount if appointed to the board after the annual grant date, by the fair market value of a share of the Company’s common stock on the award date and rounding up to the next 100 units.

The annual award amount used to determine the number of deferred stock units granted to each Director was $ 200,000 for 2022, and $ 175,000 for 2021 and 2020.

During 2022, 11,800 deferred stock units were granted for non-employee Directors.

The weighted-average grant-date fair value per share of deferred stock units granted was $ 200.27 , $ 194.83 , and $ 130.35 in 2022, 2021, and 2020, respectively.

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

There were no deferred stock units vested in 2022.

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

At February 3, 2023, there were 118,600 deferred stock units outstanding, which are either fully vested or will be vested within one year.

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 weighted-average assumptions used in the Monte Carlo simulations for these awards granted in 2022, 2021, and 2020 are as follows:

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

February 3, 2023 January 28, 2022 January 29, 2021

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 $ 200.06 , $ 208.74 , and $ 203.85 in 2022, 2021, and 2020, respectively.

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

The total fair value of performance share units vesting was approximately $ 74 million in 2022.

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

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

Transactions related to performance share units classified as equity awards for the fiscal year ended February 3, 2023 are summarized as follows:

(In thousands) 1

2 unchanged sentences

Granted 188 200.06

Vested ( 183 ) 115.90

Canceled or forfeited ( 94 ) 203.88

Nonvested at January 28, 2022 646 $ 180.13

Nonvested at February 3, 2023 557 $ 203.93

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

As of February 3, 2023, the maximum number of nonvested units that could vest under the provisions of the agreements was 1.1 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 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.

In general, these awards vest ratably over 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 $ 192.46 , $ 184.40 , and $ 75.59 in 2022, 2021, and 2020, respectively.

The total fair value of restricted stock units vesting was approximately $ 73 million, $ 47 million, and $ 5 million in 2022, 2021, and 2020, respectively.

Transactions related to restricted stock units for the fiscal year ended January 28, 2022 are summarized as follows:

Transactions related to restricted stock units for the fiscal year ended February 3, 2023, are summarized as follows:

(In thousands) Weighted-Average Grant-Date Fair Value Per Share

3 unchanged sentences

Canceled or forfeited ( 263 ) 152.07

Nonvested at January 28, 2022 894 $ 113.51

Nonvested at February 3, 2023 593 $ 156.24

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 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.

Under the 2020 ESPP, the Company issued 0.7 million and 0.6 million shares of common stock in 2022 and 2021, respectively, and recognized $ 20 million of share-based payment expense in 2022 and 2021.

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

Employee Retirement Plans

12 unchanged sentences

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

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

February 3, 2023 January 28, 2022 January 29, 2021

Statutory federal income tax rate 21.0 % 21.0 % 21.0 %

State income taxes, net of federal tax benefit 4.8 4.0 4.0

Loss on divestiture of Canadian retail business ( 4.1 ) — —

Expiration of capital loss carryforward 2.5 — —

Valuation allowance 5.5 — —

Mexico impairment — — ( 1.4 )

Other, net ( 0.9 ) ( 0.3 ) ( 0.4 )

Effective tax rate 28.8 % 24.7 % 24.6 %

The components of the income tax provision are as follows:

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

The components of the income tax provision/(benefit) are as follows:

(In millions) February 3, 2023 January 28, 2022 January 29, 2021

Federal $ 2,226 $ 2,069 $ 1,578

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The tax effects of cumulative temporary differences that gave rise to the deferred tax assets and liabilities were as follows:

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

(In millions) February 3, 2023 January 28, 2022

Deferred tax assets:

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Deferred tax liabilities:

Operating lease assets ( 1,378 ) ( 1,146 )

Operating lease right-of-use assets ( 974 ) ( 1,378 )

Property ( 438 ) ( 267 )

2 unchanged sentences

Net deferred tax assets $ 250 $ 164

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.

federal income tax purposes related to the exit from the Company’s joint venture investment in Australia.

Since no present or future capital gains have been identified through which the asset can be realized, the Company has a full valuation allowance against the deferred tax asset.

federal tax purposes, this loss has a five-year carryforward period expiring at the end of fiscal 2022.

The Company operates Lowe’s Companies Canada, ULC as a branch and has cumulatively incurred Canadian net operating losses of $ 750 million and $ 769 million as of January 28, 2022 and January 29, 2021, respectively.

The Company operates RONA inc.

as a foreign corporation and has cumulatively incurred Canadian net operating losses of $ 189 million and $ 261 million as of January 28, 2022 and January 29, 2021, respectively.

These net operating losses are subject to expiration in 2024 through 2041.

Deferred tax assets have been established for these foreign net operating losses in the accompanying consolidated balance sheets.

Given the uncertainty regarding the realization of the foreign net deferred tax assets, the Company recorded cumulative valuation allowances of $ 346 million and $ 357 million as of January 28, 2022 and January 29, 2021, respectively.

These valuation allowances are based on management’s assessment of the available positive and negative evidence to estimate the realization of this entity’s existing deferred tax assets.

A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year periods ended January 28, 2022 and January 29, 2021, respectively.

The amount of the deferred tax asset considered realizable, however, could be adjusted if objective negative evidence in the form of cumulative losses is no longer present and if estimates of future taxable income are increased.

As of February 3, 2023, and January 28, 2022, the Company had Canadian net operating loss carryforwards of $ 1.6 billion and $ 939 million, respectively.

The increase in net operating loss carryforwards results primarily from the sale of the Canadian retail business.

The net operating losses expire in 2024 through 2042.

As a result of the sale of the Canadian retail business, the Company generated a capital loss carryforward of $ 2.5 billion for Canadian tax purposes which does not expire.

During 2022, a U.S.

capital loss carryforward of $ 895 million expired unused, resulting in the elimination of the $ 225 million deferred tax asset and a reduction in the valuation allowance in the same amount.

A valuation allowance of $ 1.1 billion and $ 590 million was recorded as of February 3, 2023, and January 28, 2022, respectively.

The increase in the valuation allowance is primarily due to uncertainty regarding the realization of net operating and capital losses resulting from the sale of the Canadian retail business, partially offset by the reversal of the valuation allowance related to the expiration of the U.S.

capital loss.

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

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

(In millions) February 3, 2023 January 28, 2022 January 29, 2021

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

Additions for tax positions of prior years — 38 —

Reductions for tax positions of prior years — — ( 3 )

Settlements ( 1 ) ( 2 ) ( 2 )

Unrecognized tax benefits, end of year $ 37 $ 38 $ 2

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 unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate were $ 37 million and $ 38 million as of February 3, 2023, and January 28, 2022, respectively.

The net interest expense recognized by the Company related to uncertain tax positions was $ 3 million for 2022, $ 12 million for 2021, and insignificant for 2020.

The Company had $ 14 million and $ 11 million of accrued interest related to uncertain tax positions as of February 3, 2023, and January 28, 2022, respectively.

No penalties were recognized related to uncertain tax positions for 2022 and $ 4 million was recognized for 2021.

An insignificant amount was recognized for tax year 2020.

The Company had $ 4 million of accrued penalties related to uncertain tax positions as of February 3, 2023, and January 28, 2022.

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

1 unchanged sentence

state audits covering tax years 2015 to 2021.

An audit of the Company’s Canadian operations by the Canada Revenue Agency for fiscal years 2015 and 2016 is on-going.

Audits performed by the Canada Revenue Agency for fiscal years 2017 and 2018 and the Mexican Tax Administration Service for 2018 are on-going.

The Company remains subject to income tax examinations for fiscal years 2015 through 2021.

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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 2022, 2021, and 2020:

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

(In millions, except per share data) February 3, 2023 January 28, 2022 January 29, 2021

Basic earnings per common share:

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Reasonably possible losses for any of the individual legal proceedings which have not been accrued were not material to the Company’s consolidated financial statements.

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.

As of February 3, 2023, the Company had non-cancellable commitments of $ 2.3 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;

2 unchanged sentences

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

2022, $ 1.1 billion;

2023, $ 952 million;

2 unchanged sentences

2026, $ 259 million;

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

2027, $ 243 million;

and thereafter, $ 7 million.

At February 3, 2023, 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 to support the Company’s warranty program.

Related Parties

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 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 $ 228 million in 2022, $ 269 million in 2021, and $ 138 million in 2020.

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

Amounts payable to this vendor were insignificant to the Company at February 3, 2023, and January 28, 2022.

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 and $ 214 million in 2020.

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

Other Information

Net interest expense is comprised of the following:

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

Interest – net is comprised of the following:

(In millions) February 3, 2023 January 28, 2022 January 29, 2021

Long-term debt $ 1,108 $ 827 $ 807

7 unchanged sentences

Supplemental disclosures of cash flow information:

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

(In millions) February 3, 2023 January 28, 2022 January 29, 2021

Cash paid for interest, net of amount capitalized $ 976 $ 837 $ 824

4 unchanged sentences

Sales by product category:

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

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

February 3, 2023 January 28, 2022 January 29, 2021

(In millions, except percentage data) Total Sales % Total Sales % Total Sales %

Appliances $ 13,508 13.9 % $ 13,424 13.9 % $ 12,091 13.5 %

3 unchanged sentences

Kitchens & Bath 7,010 7.2 6,782 7.0 5,997 6.7

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

Millwork 5,759 5.9 5,329 5.5 4,925 5.5

Paint 5,425 5.6 5,114 5.3 5,473 6.1

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

Rough Plumbing 5,376 5.5 4,774 5.0 4,348 4.9

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

Electrical 5,334 5.5 5,275 5.5 4,709 5.3

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

Décor 5,235 5.4 5,437 5.6 5,214 5.8

Tools 5,168 5.3 5,389 5.6 5,460 6.1

Building Materials 5,080 5.2 4,515 4.7 4,252 4.7

Flooring 5,044 5.2 4,956 5.1 4,377 4.9

Hardware 4,522 4.7 4,434 4.6 4,729 5.3

Other 2,600 2.8 2,506 2.8 1,972 2.1

1 unchanged sentence

Product category sales for prior periods have been reclassified to conform to the current year presentation.

SUPPLEMENTARY DATA

Selected Quarterly Data (UNAUDITED)

The following table summarizes the quarterly consolidated results of operations for 2021 and 2020:

Year Ended January 28, 2022

(In millions, except per share data) First Second Third Fourth

Net sales $ 24,422 $ 27,570 $ 22,918 $ 21,339

Gross margin 8,130 9,312 7,587 7,027

Net earnings 2,321 3,018 1,896 1,206

Basic earnings per common share 3.22 4.27 2.74 1.79

Diluted earnings per common share $ 3.21 $ 4.25 $ 2.73 $ 1.78

Year Ended January 29, 2021

(In millions, except per share data) First Second Third Fourth

Net sales $ 19,675 $ 27,302 $ 22,309 $ 20,311

Gross margin 6,513 9,304 7,300 6,456

Net earnings 1,337 2,828 692 978

Basic earnings per common share 1.76 3.74 0.92 1.33

Diluted earnings per common share $ 1.76 $ 3.74 $ 0.91 $ 1.32

Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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