What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-25 compared with 2023-03-27 · 286 added, 324 removed, 880 unchanged (41% of the section changed)

11 unchanged sentences

Property and Accumulated Depreciation

Goodwill and Intangible Assets

D ivestiture of the Canadian Retail Business

Divestiture of the Canadian Retail Business

Derivative Instruments

6 unchanged sentences

Other Information

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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Their report appears on page 38 .

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Lowe’s Companies, Inc.

To the shareholders and the Board of Directors of Lowe’s Companies, Inc.

Opinion on the Financial Statements

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

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.

and subsidiaries (the “Company”) as of February 2, 2024 and February 3, 2023, the related consolidated statements of earnings, comprehensive income, shareholders’ (deficit)/equity, and cash flows, for each of the three years in the period ended February 2, 2024, and the related notes (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 2, 2024 and February 3, 2023, and the results of its operations and its cash flows for each of the three years in the period ended February 2, 2024, 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 2, 2024, 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 25, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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Critical Audit Matter Description

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 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.

The funds are recorded as a reduction to the cost of inventory as they are earned.

As the related inventory is sold, the amounts are recorded as a reduction to cost of sales.

We identified vendor funds as a critical audit matter because of the volume and varying terms of the individual vendor agreements.

This required an increased extent of effort when performing audit procedures to evaluate whether the vendor funds were recorded in accordance with the terms of the vendor agreements.

The Company receives funds from vendors in the normal course of business, principally as a result of purchase volumes, early payments, or sales-based promotions of vendors’ products.

Generally, these vendor funds do not represent the reimbursement of specific, incremental, and identifiable costs incurred by the Company to sell the vendor’s product.

Therefore, the Company treats these funds as a reduction in the cost of inventory and are recognized as a reduction of cost of sales when the inventory is sold.

Funds that are determined to be reimbursements of specific, incremental, and identifiable costs incurred to sell vendors’ products are recorded as an offset to the related expense.

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

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

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We identified the completeness and accuracy of vendor funds as a critical audit matter given the significance of vendor funds to the financial statements and volume of the individual vendor agreements.

This required an increased extent of effort when performing audit procedures to evaluate whether the vendor funds were completely and accurately recorded in accordance with the vendor agreements.

How the Critical Audit Matter Was Addressed in the Audit

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 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.

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

• We tested the design and operating effectiveness of controls over vendor funds, including management’s controls over the identification of vendor agreements as well as 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.

• 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 when 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 sent confirmations to test the completeness of programs as well as the accuracy of amounts earned and terms of the agreement directly with the vendor.

• Where confirmation responses from vendors were not received, we completed alternative procedures, such as agreement to underlying contractual arrangements and tested the settlement of the arrangement.

/s/ Deloitte & Touche LLP

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We have served as the Company's auditor since 1962.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Lowe’s Companies, Inc.

To the shareholders and the Board of Directors of Lowe’s Companies, Inc.

Opinion on Internal Control over Financial Reporting

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 2, 2024, 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.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the fiscal year ended February 2, 2024, of the Company and our report dated March 25, 2024, expressed an unqualified opinion on those financial statements.

Basis for Opinion

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March 25, 2024

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Lowe’s Companies, Inc.

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Fiscal Years Ended

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

February 2, 2024 February 3, 2023 January 28, 2022

Current Earnings Amount % Sales Amount % Sales Amount % Sales

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Interest – net 1,382 1.60 1,123 1.16 885 0.92

Loss on extinguishment of debt — — — — 1,060 1.18

Pre-tax earnings 10,175 11.78 9,036 9.31 11,208 11.64

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Fiscal Years Ended

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

February 2, 2024 February 3, 2023 January 28, 2022

Amount % Sales Amount % Sales Amount % Sales

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Other 2 — ( 2 ) — ( 5 ) ( 0.01 )

Other comprehensive income 343 0.36 100 0.10 — —

Other comprehensive (loss)/income ( 7 ) ( 0.01 ) 343 0.36 100 0.10

Comprehensive income $ 7,719 8.94 % $ 6,780 6.99 % $ 8,542 8.87 %

See accompanying notes to consolidated financial statements.

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Lowe’s Companies, Inc.

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(In millions, except par value)

February 3, 2023 January 28, 2022

February 2, 2024 February 3, 2023

Current assets:

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Accumulated deficit ( 15,637 ) ( 14,862 )

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

Accumulated other comprehensive income 300 307

Total shareholders’ deficit ( 15,050 ) ( 14,254 )

1 unchanged sentence

See accompanying notes to consolidated financial statements.

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Lowe’s Companies, Inc.

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

Income/(Loss) Total

(Loss)/Income Total

Shares Amount

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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 )

Net earnings — — — 7,726 — 7,726

Other comprehensive income — — — — 343 343

Other comprehensive loss — — — — ( 7 ) ( 7 )

Cash dividends declared, $ 4.35 per share

5 unchanged sentences

See accompanying notes to consolidated financial statements.

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Lowe’s Companies, Inc.

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Fiscal Years Ended

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

February 2, 2024 February 3, 2023 January 28, 2022

Cash flows from operating activities:

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Asset impairment and loss on property - net 83 2,118 34

Loss on sale of business 421 — —

Loss on extinguishment of debt — — 1,060

(Gain)/loss on sale of business ( 79 ) 421 —

Share-based payment expense 210 223 230

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

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

Net (decrease)/increase in cash and cash equivalents ( 427 ) 215 ( 3,557 )

Cash and cash equivalents, beginning of year 1,348 1,133 4,690

1 unchanged sentence

See accompanying notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

YEARS ENDED FEBRUARY 2, 2024, FEBRUARY 3, 2023, AND JANUARY 28, 2022

Summary of Significant Accounting Policies

Lowe’s Companies, Inc.

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

and subsidiaries (the Company) is the world’s second-largest home improvement retailer and operated 1,746 stores and outlets in the United States as of February 2, 2024.

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.

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Fiscal 2022 contained 53 weeks, and fiscal years 2023 and 2021 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 references herein for the years 2023, 2022, and 2021 represent the fiscal years ended February 2, 2024, February 3, 2023, and January 28, 2022, respectively.

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

All intercompany accounts and transactions have been eliminated.

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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 in accumulated other comprehensive income/(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.

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

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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.

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.

The proceeds from sales of available-for-sale debt securities were insignificant for 2023 and $ 10 million and $ 308 million for 2022 and 2021, 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.

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 fair value upon recognition and as of each balance sheet date thereafter.

Changes in the estimated fair value of the contingent consideration are recognized 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.

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.

Available-for-sale debt securities classified as long-term as of February 2, 2024, will mature in one to three 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.

Restricted balances included in short-term investments were $ 307 million as of February 2, 2024, and $ 384 million as

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of February 3, 2023.

Restricted balances included in long-term investments were $ 252 million as of February 2, 2024, and $ 100 million as of February 3, 2023.

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

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

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

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

The Company’s reserve for loss on obsolete inventory was $ 245 million as of February 2, 2024, and $ 139 million as of February 3, 2023.

The Company also records an inventory reserve for the estimated shrinkage between physical inventories.

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Changes in the estimated shrink reserve are made based on the timing and results of physical inventories.

The Company receives funds from vendors in the normal course of business, principally as a result of purchase volumes, sales, early payments, or promotions of vendors’ products.

The Company’s reserve for inventory shrinkage was $ 425 million as of February 2, 2024, and $ 428 million as of February 3, 2023.

The Company receives funds from vendors in the normal course of business, principally as a result of purchase volumes, early payments, or sales-based promotions of vendors’ products.

Generally, these vendor funds do not represent the reimbursement of specific, incremental, and identifiable costs incurred by the Company to sell the vendor’s product.

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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 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 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 held fixed-to-floating interest rate swap agreements as fair value hedges on certain debt as of February 2, 2024, and February 3, 2023.

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

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

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

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

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.

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 (loss)/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.

Credit Programs and Sale of Business Accounts Receivable - The Company has branded and private label proprietary credit cards which generate sales that are not reflected in receivables.

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The Company has the option, but no obligation, to purchase the receivables at the end of the agreement.

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.

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.

Any gain or loss on the sale is determined based on the previous carrying amounts of the transferred assets allocated at fair value between the receivables sold and the interests retained.

Fair value is based on the present value of expected future cash flows, taking into account the key assumptions of anticipated credit losses, payment rates, late fee rates, Synchrony’s servicing costs, and the discount rate commensurate with the uncertainty involved.

Prior to September 2023, the Company also had an agreement with Synchrony under which Synchrony purchased at face value commercial business accounts receivable originated by the Company and services these accounts.

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

When the Company transferred its commercial business accounts receivable, it retained certain interests in those receivables, including the funding of a loss reserve and its obligation

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related to Synchrony’s ongoing servicing of the receivables sold.

Any gain or loss on the sale was determined based on the previous carrying amounts of the transferred assets allocated at fair value between the receivables sold and the interests retained.

Fair value was based on the present value of expected future cash flows, taking into account the key assumptions of anticipated credit losses, payment rates, late fee rates, Synchrony’s servicing costs, and the discount rate commensurate with the uncertainty involved.

Due to the short-term nature of the receivables sold, changes to the key assumptions would not materially impact the recorded gain or loss on the sales of receivables or the fair value of the retained interests in the receivables.

Total commercial business accounts receivable sold to Synchrony were $ 5.2 billion in 2022, $ 4.3 billion in 2021, and $ 3.3 billion in 2020.

The Company recognized losses of $ 76 million in 2022, $ 50 million in 2021, and $ 54 million in 2020 on these receivable sales, which primarily relates to servicing costs that are remitted to Synchrony monthly.

In 2023, Synchrony exercised an option under the agreement to directly extend credit to the commercial accounts receivable customers, for which the related transition period was completed in August 2023.

In 2023, prior to the option’s effective date, $ 3.1 billion of accounts receivable were sold to Synchrony and the Company recognized losses of $ 63 million related to the servicing costs remitted to Synchrony monthly.

In 2022 and 2021, total commercial business accounts receivable sold to Synchrony were $ 5.2 billion and $ 4.3 billion, respectively, and the Company recognized losses of $ 76 million and $ 50 million, respectively.

Property and Depreciation - Property is recorded at cost.

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Upon disposal, the cost of properties and related accumulated depreciation is removed from the accounts, with gains and losses reflected in SG&A expense in the consolidated statements of earnings.

Property consists of land, buildings and building improvements, equipment, finance lease assets, and construction in progress.

Property consists of land, buildings and building improvements, equipment, and construction in progress.

Buildings and building improvements includes owned buildings, as well as buildings under finance lease and leasehold improvements.

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

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

The Company reviews goodwill for impairment at the reporting unit level, which is the operating segment level or one level below the operating segment level.

Goodwill is not amortized but is evaluated for impairment at least annually on the first day of the fourth quarter or whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable.

The 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.

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, 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.

If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

Any impairment identified is included within SG&A expense in the consolidated statements of earnings.

The income tax effect from any tax deductible goodwill on the carrying amount of the reporting unit, if applicable, is considered in determining the goodwill impairment loss.

A reporting unit is an operating segment or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management.

During fiscal 2022, goodwill was allocated to the U.S.

Home Improvement reporting unit.

In fiscal 2022, we completed our annual qualitative assessment of the recoverability of goodwill for the U.S.

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

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

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

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

Acquisitions — — 8

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

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

February 3, 2023 January 28, 2022

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

$ 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.

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

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

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

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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

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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.

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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 supplier finance programs which facilitate participating suppliers’ ability to finance payment obligations from the Company with designated third-party financial institutions.

Accounts Payable - The Company has an agreement with a third party to provide a supplier finance program which facilitates 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.

The Company’s goal in entering into these arrangements is to capture overall supply chain savings in the form of pricing, payment terms, or vendor funding, created by facilitating suppliers’ ability to finance payment obligations at more favorable discount rates, while providing them with greater working capital flexibility.

The Company’s goal in entering into these arrangements is to capture overall savings in the form of pricing, payment terms, or vendor funding, created by facilitating suppliers’ ability to finance payment obligations at more favorable discount rates, while providing them with greater working capital flexibility.

The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers’ decisions to finance amounts under these arrangements.

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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

(In millions) February 2, 2024 February 3, 2023 January 28, 2022

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

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

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

(In millions) February 2, 2024 February 3, 2023

Accrued dividends $ 633 $ 633

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Total $ 3,445 $ 3,488

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

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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.

Total self-insurance liabilities, including the current and non-current portions, were $ 1.1 billion as of February 2, 2024, and February 3, 2023.

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 February 3, 2023, and January 28, 2022.

Outstanding surety bonds relating to self-insurance were $ 280 million as of February 2, 2024, and $ 270 million as of February 3, 2023.

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.

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.

In October 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, were 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 sheet.

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.

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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.

In August 2022, the Inflation Reduction Act (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.

8 unchanged sentences

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

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

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

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

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

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

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

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

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

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n Costs associated with inventory shrinkage and obsolescence;

n Costs of services performed under the extended protection plan.

n Payroll and benefit costs for retail and corporate employees;

n Costs of services performed under the Lowe’s protection plan.

n Generally, payroll and benefit costs for retail and corporate employees;

n Occupancy costs of retail and corporate facilities;

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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 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.

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

Net cash flow hedge gains, net of tax, classified in accumulated other comprehensive income were $ 301 million, $ 315 million, and $ 6 million as of February 2, 2024, February 3, 2023, and January 28, 2022, respectively.

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

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

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

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

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

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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.

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

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.

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

Accounting Pronouncements Not Yet Adopted - In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment

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The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets.

Under the ASU, all disclosure requirements in this update and ASC 280, Segment Reporting , will be required for public entities with a single reportable segment.

The ASU is effective for the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2025, and subsequent interim periods, with early adoption permitted.

The Company is currently evaluating the impact of adopting this ASU on its disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The ASU expands income tax disclosures in the effective tax rate reconciliation table and income taxes paid.

The ASU is effective for the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2026.

The Company is currently evaluating the impact of adopting this ASU on its disclosures.

In March 2024, the SEC adopted its climate-related final rule SEC Release No.

34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which will require registrants to provide certain climate-related information in their registration statements and annual reports.

The rules require significant effects of severe weather events and other natural conditions, as well as amounts related to carbon offsets and renewable energy credits or certificates to be disclosed in the audited financial statements in certain circumstances.

The disclosure requirements related to financial statements are effective for the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2026.

The Company is currently evaluating the impact of the rule on its disclosures.

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

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

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(In millions) Years Ended

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

February 2, 2024 February 3, 2023 January 28, 2022

Products $ 83,002 $ 93,392 $ 92,415

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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 February 3, 2023 January 28, 2022

(In millions) Classification February 2, 2024 February 3, 2023

Anticipated sales returns Other current liabilities $ 191 $ 234

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

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

(In millions) February 2, 2024 February 3, 2023

Retail deferred revenue $ 796 $ 933

1 unchanged sentence

Deferred revenue $ 1,408 $ 1,603

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Deferred revenue - Lowe’s protection plans

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

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

(In millions) February 2, 2024 February 3, 2023

Deferred revenue - Lowe’s protection plans $ 1,225 $ 1,201

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(In millions) Years Ended

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

February 2, 2024 February 3, 2023 January 28, 2022

Lowe’s protection plan deferred revenue recognized into sales $ 549 $ 527 $ 488

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

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

February 2, 2024 February 3, 2023 January 28, 2022

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

Home Décor ¹ $ 36,221 37.3 % $ 35,712 37.1 % $ 33,152 37.0 %

$ 32,130 37.2 % $ 36,202 37.3 % $ 35,688 37.1 %

Building Products 2

Hardlines ³ 27,190 28.0 28,412 29.5 27,931 31.2

26,894 31.1 31,269 32.2 29,854 31.0

25,020 29.0 26,993 27.8 28,205 29.3

Other 2,333 2.7 2,595 2.7 2,503 2.6

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(In millions) Years Ended

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

February 2, 2024 February 3, 2023 January 28, 2022

United States $ 86,377 $ 92,010 $ 90,348

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• Level 3 - inputs to the valuation techniques that are unobservable for the assets or liabilities

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

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Fair Value Measurements at

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

(In millions) Classification Measurement Level February 2, 2024 February 3, 2023

Available-for-sale debt securities:

Treasury securities Short-term investments Level 1 $ 152 $ 157

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 56 43

Corporate debt securities Short-term investments Level 2 50 78

Certificates of deposit Short-term investments Level 1 42 40

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

Commercial paper Short-term investments Level 2 5 52

Municipal obligations Short-term investments Level 2 2 —

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

Treasury securities Long-term investments Level 1 213 86

Corporate debt securities Long-term investments Level 2 35 12

Municipal obligations Long-term investments Level 2 2 3

Foreign government debt securities Long-term investments Level 2 4 —

Municipal obligations Long-term investments Level 2 — 2

Derivative instruments:

Forward interest rate swaps Other current assets Level 2 $ — $ 251

Forward interest rate swaps Other assets Level 2 — 48

Fixed-to-floating interest rate swaps Other liabilities Level 2 76 88

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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

The performance-based contingent consideration is related to the fiscal 2022 sale of the Canadian retail business and is classified as a Level 3 long-term investment.

The Company determined the initial fair value for contingent consideration as of February 3, 2023, 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.

Subsequent measurements of fair value of the contingent consideration are based on an income approach, which requires certain assumptions considering operating performance of the business and a risk-adjusted discount rate.

The rollforward of the fair value of contingent consideration is as follows:

(In millions) February 2, 2024 February 3, 2023

Beginning balance $ 21 $ —

Recognition of contingent consideration at initial fair value — 21

Change in fair value 102 —

Proceeds received ( 123 ) —

Ending balance $ — $ 21

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

For the fiscal year ended February 2, 2024, 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.

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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 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.

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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 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 represented the lowest level for which identifiable cash flows were 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.

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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

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The fair values of the Company’s mortgage notes were estimated using discounted cash flow analyses, based on the future cash outflows associated with these arrangements and discounted using the applicable incremental borrowing rate.

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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:

February 3, 2023 January 28, 2022

February 2, 2024 February 3, 2023

(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 February 3, 2023 January 28, 2022

(In millions) Estimated Depreciable Lives, In Years February 2, 2024 February 3, 2023

Land N/A $ 6,785 $ 6,793

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

The Company recognized depreciation and amortization expense, inclusive of amounts presented in cost of sales, of $ 1.9 billion in 2022, $ 1.8 billion in 2021, and $ 1.5 billion in 2020.

Goodwill and Intangible Assets

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

February 3, 2023 January 28, 2022

(In millions) Gross

Carrying Amount Accumulated

Amortization Gross

Carrying Amount Accumulated

Goodwill $ 311 $ — $ 311 $ —

Definite-lived intangible assets:

Customer-related 1

$ 238 $ ( 71 ) $ 344 $ ( 88 )

Trademarks and trade names 1

20 ( 18 ) 263 ( 131 )

Other 1 ( 1 ) 1 ( 1 )

Total definite-lived intangible assets $ 259 $ ( 90 ) $ 608 $ ( 220 )

Indefinite-lived intangible assets:

Trademark $ 134 $ — $ 134 $ —

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

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

Amortization expense $ 28 $ 32 $ 59

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

(In millions) Amortization Expense

Fiscal 2023 $ 15

Fiscal 2024 13

Fiscal 2025 13

Fiscal 2026 12

Fiscal 2027 11

Thereafter 105

The Company recognized depreciation and amortization expense, inclusive of amounts presented in cost of sales, of $ 1.9 billion in 2023 and 2022, and $ 1.8 billion in 2021.

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

(In millions)

Classification February 3, 2023 January 28, 2022

Classification February 2, 2024 February 3, 2023

Operating lease assets Operating lease right-of-use assets $ 3,733 $ 3,518

6 unchanged sentences

Total lease liabilities $ 4,733 $ 4,597

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.

1 Finance lease assets are recorded net of accumulated amortization of $ 326 million as of February 2, 2024, and $ 244 million as of February 3, 2023.

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

(In millions)

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

February 2, 2024 February 3, 2023 January 28, 2022

Finance lease cost

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The future minimum rental payments required under operating and finance lease obligations as of February 2, 2024, having initial or remaining non-cancelable lease terms in excess of one year are summarized as follows:

Maturity of lease liabilities

(In millions)

Operating Leases 1

2023 $ 665 $ 113 $ 778

2024 606 99 705

2025 635 95 730

2026 565 80 645

2027 488 49 537

After 2027 2,050 257 2,307

Fiscal 2024 $ 671 $ 107 $ 778

Fiscal 2025 722 100 822

Fiscal 2026 680 86 766

Fiscal 2027 608 54 662

Fiscal 2028 571 48 619

Thereafter 2,010 227 2,237

Total lease payments 5,262 622 5,884

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3 Calculated using the lease-specific incremental borrowing rate.

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

Lease Term and Discount Rate February 2, 2024 February 3, 2023

Weighted-average remaining lease term (years)

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(In millions)

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

February 2, 2024 February 3, 2023 January 28, 2022

Cash paid for amounts included in the measurement of lease liabilities

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1 Excludes $ 179 million of leases signed but not yet commenced as of February 2, 2024.

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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.

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 an initial fair value of $ 21 million, which was 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.

1 unchanged sentence

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

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

During the fiscal year ended February 2, 2024, the Company recognized a gain on sale of $ 79 million associated with performance-based contingent consideration received and final adjustments to the selling price.

A summary of the significant activity included within SG&A expense in the consolidated statements of earnings associated with the sale of the Canadian retail business is as follows:

(In millions) February 2, 2024 February 3, 2023

Long-lived asset impairment $ — $ 2,061

Loss on sale 421

Transaction costs 19

(Gain)/loss on sale ( 79 ) 421

Other closing costs — 19

Total $ ( 79 ) $ 2,501

Commercial Paper Program

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.

In September 2023, the Company entered into an amended and restated $ 2.0 billion five-year unsecured revolving credit agreement (2023 Credit Agreement), which amended and restated the Company’s $ 2.0 billion five-year unsecured revolving credit agreement entered into in March 2020, and as amended (2020 Credit Agreement), to extend the term until September 2028.

The 2023 Credit Agreement, along with the $ 2.0 billion five-year unsecured third amended and restated credit agreement entered into in December 2021, and as amended (Third Amended and Restated Credit Agreement), support the Company’s commercial paper program.

The amounts available to be drawn under the 2023 Credit Agreement and the Third Amended and Restated Credit Agreement are reduced by the amount of borrowings under the commercial paper program.

Subject to obtaining commitments from the lenders and satisfying other conditions specified in the 2023 Credit Agreement and Third Amended and Restated 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 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.

The Company was in compliance with those financial covenants as of February 2, 2024.

There were no borrowings under the Company’s commercial paper program, Third Amended and Restated Credit Agreement, or the 2023 Credit Agreement as of February 2, 2024.

Total combined availability under the Credit Agreements was $ 4.0 billion as of February 2, 2024.

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 outstanding borrowings under the Company’s Third Amended and Restated Credit Agreement or the 2020 Credit Agreement as of February 3, 2023.

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Long-Term Debt

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(In millions, except percentage data)

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

Weighted-Average Interest Rate as of February 2, 2024 February 2, 2024 February 3, 2023

Secured debt:

9 unchanged sentences

Notes due fiscal 2059-2063 5.19 % 2,713 2,219

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

Finance lease obligations due through fiscal 2042 509 562

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1 Real properties with an aggregate book value of $ 12 million as of February 2, 2024, 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:

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

(In millions) Principal

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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 February 3, 2023.

The Company was in compliance with all financial covenants of these agreements as of February 2, 2024.

During 2023, the Company issued $ 3.0 billion of unsecured fixed rate notes (collectively, the 2023 Notes) as follows:

3 unchanged sentences

March 2023 $ 1,000 April 2026 4.800 % $ 3

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

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

March 2023 $ 1,000 July 2033 5.150 % $ 4

March 2023 $ 500 July 2053 5.750 % $ 5

March 2023 $ 500 April 2063 5.850 % $ 5

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 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.

Interest on the March 2023 Notes with April maturity dates is payable semiannually in arrears in April and October of each year until maturity.

Interest on the March 2023 Notes with July maturity dates is payable semiannually in arrears in January and July of each year until maturity.

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

4 unchanged sentences

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.

The indentures governing the 2023 and 2022 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.

4 unchanged sentences

The discounts associated with these issuances, which include the underwriting and issuance discounts, are recorded in long-term debt and are being amortized over the respective terms of the notes using the effective interest method.

During 2020, the Company completed cash tender offers to purchase and retire $ 3.0 billion combined aggregate principal amount of its outstanding notes with a weighted average interest rate of 4.80 %.

As a result of the 2020 cash tender offers, the Company recognized a loss on extinguishment of debt of $ 1.1 billion which includes premium paid to holders of the debt, unamortized deferred financing fees and original issue discounts, and loss on reverse treasury lock derivative contracts.

See Note 9 for additional information regarding the reverse treasury lock derivative contracts.

Derivative Instruments

Derivatives Designated as Hedging Instruments

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

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

(In millions) February 2, 2024 February 3, 2023

Cash flow hedges:

Forward interest rate swap agreement notional amounts $ 1,290 $ 2,560

Forward interest rate swap agreements $ — $ 1,290

Fair value hedges:

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

Fixed-to-floating interest rate swap agreements $ 850 $ 850

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

In connection with the issuance of our March 2023 Notes, we settled forward interest rate swap contracts with a combined notional amount of $ 2.0 billion and received a payment of $ 247 million.

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:

Cash flow hedges – net of tax (expense)/benefit of ($ 102 ) million, ($ 35 ) million, and $ 21 million, respectively

The (loss)/gain from forward interest rate swap derivatives, both matured and outstanding, designated as cash flow hedges recorded in other comprehensive (loss)/income and earnings for 2023, 2022, and 2021, including its line item in the financial statements, is as follows:

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(In millions) February 2, 2024 February 3, 2023 January 28, 2022

Other comprehensive (loss)/income:

Cash flow hedges – net of tax benefit/(expense) of $ 5 million, ($ 102 ) million, and ($ 35 ) million, respectively

$ ( 14 ) $ 311 $ 103

1 unchanged sentence

Interest – net $ 15 $ 1 $ ( 11 )

Other Derivatives Not Designated as Hedging Instruments

To hedge the economic risk of changes in value of the 2020 cash tender offers prior to the pricing date, the Company entered into reverse treasury lock derivative contracts with a combined notional amount of $ 2.0 billion.

Upon the pricing of the 2020 cash tender offers, the Company settled the reverse treasury lock derivative contracts and made a payment to its counterparty for $ 26 million, which is included in loss on extinguishment of debt in the consolidated statements of earnings for the year ended January 29, 2021.

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

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.

Authorized shares of preferred stock were 5.0 million ($ 5 par value) as of February 2, 2024, and February 3, 2023, 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 February 3, 2023, and January 28, 2022.

Authorized shares of common stock were 5.6 billion ($ 0.50 par value) as of February 2, 2024, and February 3, 2023.

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 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.

On December 7, 2022, the Company announced that its Board of Directors authorized $ 15.0 billion of share repurchases under the program.

As of February 2, 2024, the Company had $ 14.6 billion remaining under the program.

1 unchanged sentence

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

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.

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.

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.

4 unchanged sentences

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

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

13 unchanged sentences

Q2 2023 Q2 2023 1,000 — — — 3.9 0.7 4.6

Q3 2023 Q3 2023 1,500 — — — 5.3 1.7 7.0

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.

4 unchanged sentences

Total shares repurchased for 2023, 2022, and 2021 were as follows:

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

February 2, 2024 February 3, 2023 January 28, 2022

(In millions) Shares Cost Shares Cost Shares Cost

10 unchanged sentences

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 24.6 million shares remaining available for grants as of February 2, 2024.

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).

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 February 3, 2023, there were 18.8 million s hares remaining available for purchases.

The 2020 Employee Stock Purchase Plan (the ESPP) permits a maximum of 20.0 million shares to be offered for purchase.

As of February 2, 2024, there were 18.1 million s hares remaining available for purchase.

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The Company recognized share-based payment expense within SG&A expense in the consolidated statements of earnings of $ 210 million, $ 224 million, and $ 230 million in 2023, 2022, and 2021, respectively.

The total associated income tax benefit recognized, exclusive of excess tax benefits, was $ 30 million, $ 36 million, and $ 40 million in 2023, 2022, and 2021, respectively.

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.

Total unrecognized share-based payment expense for all share-based payment plans was $ 248 million as of February 2, 2024, of which $ 147 million will be recognized in 2024, $ 85 million in 2025, and $ 16 million thereafter.

This results in these amounts being recognized over a weighted-average period of 1.4 years.

11 unchanged sentences

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 2022, 2021, and 2020 are as follows:

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

The weighted average assumptions used in the Black-Scholes option-pricing model and weighted-average grant date fair value for options granted in 2023, 2022, and 2021 are as follows:

February 2, 2024 February 3, 2023 January 28, 2022

Weighted-average assumptions used:

5 unchanged sentences

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 $ 28 million, $ 41 million, and $ 46 million in 2023, 2022, and 2021, respectively.

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Transactions related to stock options for the fiscal year ended February 2, 2024, are summarized as follows:

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

Outstanding at January 28, 2022 2,011 $ 106.43

(in thousands, except per share and years data) Shares Weighted-Average Exercise Price Per Share Weighted-Average Remaining Term Aggregate Intrinsic Value

Outstanding as of February 3, 2023 1,845 $ 122.90

Granted 303 200.83

1 unchanged sentence

Exercised ( 249 ) 98.93

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

Vested and expected to vest at February 3, 2023 1

Outstanding as of February 2, 2024 1,830 $ 136.74 6.43 $ 151,472

Vested and expected to vest as of February 2, 2024 1

1,795 $ 135.46 6.38 $ 150,802

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

Exercisable as of February 2, 2024 1,308 $ 111.67 5.58 $ 141,018

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

8 unchanged sentences

Transactions related to restricted stock awards for the fiscal year ended February 2, 2024, are summarized as follows:

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

Nonvested at January 28, 2022 2,307 $ 117.04

(in thousands, except per share data) Shares Weighted-Average Grant-Date Fair Value Per Share

Nonvested as of February 3, 2023 1,792 $ 158.20

Granted 804 201.78

1 unchanged sentence

Canceled or forfeited ( 183 ) 197.42

Nonvested at February 3, 2023 1,792 $ 158.20

Nonvested as of February 2, 2024 1,378 $ 199.88

Deferred Stock Units

2 unchanged sentences

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.

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.

Deferred stock units granted to non-employee Directors in 2023, 2022, and 2021 are as follows:

(In thousands, except per share data) February 2, 2024 February 3, 2023 January 28, 2022

Deferred shares granted to non-employee Directors 11 12 10

Weighted-average grant date fair value per share $ 206.52 $ 200.27 $ 194.83

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

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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.

1 unchanged sentence

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

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

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

The Company’s performance share units contain performance and service conditions that must be satisfied for an employee to earn the right to benefit from the award, as well as a market condition modifier.

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

2 unchanged sentences

The weighted-average assumptions used in the Monte Carlo simulations for these awards granted in 2023, 2022, and 2021 are as follows:

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

February 2, 2024 February 3, 2023 January 28, 2022

Weighted-average assumptions used:

5 unchanged sentences

The weighted-average grant-date fair value per unit of performance share units classified as equity awards granted was $ 209.50 , $ 200.06 , and $ 208.74 in 2023, 2022, and 2021, respectively.

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

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

The total fair value of performance share units vesting was approximately $ 105 million and $ 74 million in 2023 and 2022, respectively.

There were no performance share units vesting in 2021.

Transactions related to performance share units classified as equity awards for the fiscal year ended February 2, 2024, are summarized as follows:

(In thousands) 1

(in thousands, except per share data) Units 1

Weighted-Average Grant-Date Fair Value Per Unit

Nonvested at January 28, 2022 646 $ 180.13

Nonvested as of February 3, 2023 557 $ 203.93

Granted 195 209.50

1 unchanged sentence

Canceled or forfeited ( 52 ) 205.94

Nonvested at February 3, 2023 557 $ 203.93

Nonvested as of February 2, 2024 437 $ 206.23

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

6 unchanged sentences

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 weighted-average

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grant-date fair value per share of restricted stock units granted was $ 188.22 , $ 192.46 , and $ 184.40 in 2023, 2022, and 2021, respectively.

The total fair value of restricted stock units vesting was approximately $ 67 million, $ 73 million, and $ 47 million in 2023, 2022, and 2021, respectively.

Transactions related to restricted stock units for the fiscal year ended February 2, 2024, are summarized as follows:

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

Nonvested at January 28, 2022 894 $ 113.51

(in thousands, except per share data) Shares Weighted-Average Grant-Date Fair Value Per Share

Nonvested as of February 3, 2023 593 $ 156.24

Granted 299 188.22

1 unchanged sentence

Canceled or forfeited ( 80 ) 186.06

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.

Nonvested as of February 2, 2024 476 $ 188.84

The purchase price of the shares under the ESPP equals 85 % of the closing price on the date of purchase.

The Company’s share-based payment expense per share is equal to 15 % of the closing price on the date of purchase.

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 0.7 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.

Under the ESPP, the Company issued 0.7 million shares of common stock in 2023 and 2022, and 0.6 million shares of common stock in 2021, and recognized $ 21 million of share-based payment expense in 2023 and $ 20 million of share-based payment expense in 2022 and 2021.

Employee Retirement Plans

11 unchanged sentences

The Company recognized expense associated with these employee retirement plans of $ 167 million, $ 174 million, and $ 177 million in 2023, 2022, and 2021, respectively.

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

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

February 2, 2024 February 3, 2023 January 28, 2022

Statutory federal income tax rate 21.0 % 21.0 % 21.0 %

State income taxes, net of federal tax benefit 3.8 4.8 4.0

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

Expiration of capital loss carryforward 2.5 — —

Valuation allowance 0.7 5.5 —

Expiration of capital loss carryforward — 2.5 —

Loss on divestiture of Canadian retail business ( 1.0 ) ( 4.1 ) —

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

1 unchanged sentence

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

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

(In millions) February 2, 2024 February 3, 2023 January 28, 2022

Federal $ 1,955 $ 2,226 $ 2,069

9 unchanged sentences

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

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

(In millions) February 2, 2024 February 3, 2023

Deferred tax assets:

14 unchanged sentences

Net deferred tax assets $ 248 $ 250

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.

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As of February 2, 2024, and February 3, 2023, the Company had Canadian net operating loss carryforwards of $ 1.3 billion and $ 1.6 billion, respectively.

The net operating losses expire in 2024 through 2043.

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.

As of February 2, 2024, and February 3, 2023, the Company had capital loss carryforwards of $ 2.7 billion and $ 2.5 billion, respectively, for Canadian tax purposes which do not expire.

A valuation allowance of $ 1.1 billion was recorded as of February 2, 2024, and February 3, 2023.

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

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

(In millions) February 2, 2024 February 3, 2023 January 28, 2022

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

2 unchanged sentences

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

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 unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate were $ 37 million as of February 2, 2024, and February 3, 2023.

The net interest expense recognized by the Company related to uncertain tax positions was $ 1 million for 2023, $ 3 million for 2022, and $ 12 million for 2021.

The Company had $ 14 million of accrued interest related to uncertain tax positions as of February 2, 2024, and February 3, 2023.

No penalties were recognized related to uncertain tax positions for 2023 or 2022.

There was $ 4 million in penalties recognized related to uncertain tax positions for 2021.

The Company had $ 4 million of accrued penalties related to uncertain tax positions as of February 2, 2024, and February 3, 2023.

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

11 unchanged sentences

The following table reconciles earnings per common share for 2023, 2022, and 2021:

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

(In millions, except per share data) February 2, 2024 February 3, 2023 January 28, 2022

Basic earnings per common share:

5 unchanged sentences

Basic earnings per common share $ 13.23 $ 10.20 $ 12.07

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(In millions, except per share data) February 2, 2024 February 3, 2023 January 28, 2022

Diluted earnings per common share:

18 unchanged sentences

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

2023, $ 952 million;

2024, $ 548 million;

2025, $ 331 million;

2026, $ 259 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.

(In millions) Commitments

Fiscal 2024 $ 912

Fiscal 2025 679

Fiscal 2026 345

Fiscal 2027 263

Fiscal 2028 26

Thereafter 53

Total $ 2,278

As of February 2, 2024, the Company held standby and documentary letters of credit issued under banking arrangements which totaled $ 512 million.

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

2 unchanged sentences

The Company purchased services from this vendor in the amount of $ 217 million in 2023, $ 228 million in 2022, and $ 269 million in 2021.

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

Amounts payable to this vendor were insignificant to the Company as of February 2, 2024, and February 3, 2023.

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.

The Company purchased products from this vendor in the amount of $ 203 million in 2021.

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

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Other Information

Interest – net is comprised of the following:

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

(In millions) February 2, 2024 February 3, 2023 January 28, 2022

Long-term debt $ 1,438 $ 1,108 $ 827

Lease obligations 29 30 32

Finance lease obligations 24 29 30

Short-term borrowings 15 5 5

5 unchanged sentences

Supplemental disclosures of cash flow information:

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

(In millions) February 2, 2024 February 3, 2023 January 28, 2022

Cash paid for interest, net of amount capitalized $ 1,464 $ 976 $ 837

4 unchanged sentences

Sales by product category:

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

February 2, 2024 February 3, 2023 January 28, 2022

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

Appliances $ 12,344 14.3 % $ 13,509 13.9 % $ 13,424 13.9 %

Lumber 9,499 9.8 9,727 10.1 8,308 9.3

Seasonal & Outdoor Living 7,740 9.0 8,697 9.0 9,321 9.7

Lumber 7,020 8.1 9,766 10.1 10,011 10.4

Lawn & Garden 6,729 7.8 6,929 7.1 7,484 7.8

Kitchens & Bath 6,167 7.1 6,951 7.2 6,717 7.0

Hardware 5,828 6.7 6,181 6.4 5,993 6.2

Building Materials 5,245 6.1 5,065 5.2 4,501 4.7

Millwork 5,181 6.0 5,770 5.9 5,339 5.5

1 unchanged sentence

Rough Plumbing 4,971 5.8 5,333 5.5 4,727 4.9

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

Décor 5,235 5.4 5,437 5.6 5,214 5.8

Tools 4,723 5.5 5,185 5.3 5,407 5.6

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

Electrical 4,478 5.2 5,334 5.5 5,276 5.5

Flooring 4,327 5.0 5,046 5.2 4,959 5.2

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

Décor 4,175 4.8 5,290 5.5 5,494 5.7

Other 2,331 2.7 2,597 2.6 2,503 2.6

1 unchanged sentence

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

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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