UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~July 30, ~~2020~~2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number 1-7898

LOWE’S COMPANIES, INC.

(Exact name of registrant as specified in its charter)


North Carolina						56-0578072
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1000 Lowes Blvd., Mooresville, North Carolina						28117
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code:						(704) 758-1000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.50 per share	LOW	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


CLASS						OUTSTANDING AT ~~11/23/2020~~8/24/2021
Common Stock, $0.50 par value						~~732,722,859~~692,432,690

LOWE’S COMPANIES, INC.

- TABLE OF CONTENTS -


			Page No.
Forward-Looking Statements			ii
PART I - Financial Information			1
	Item 1.	Financial Statements	1
		Consolidated ~~Balance Sheets~~	1
		~~Consolidated~~ Statements of Earnings	21
		Consolidated Statements of Comprehensive Income	1
		Consolidated Balance Sheets	2
		Consolidated Statements of Shareholders’ (Deficit)/Equity	3
		Consolidated Statements of Cash Flows	5
		Notes to Consolidated Financial Statements	6
		Note 1: Summary of Significant Accounting Policies	6
		Note 2: Revenue	76
		Note 3: Investments	8
		Note 4: Fair Value Measurements	9
		Note 5 ~~: Exit Activities~~5: Goodwill and Intangible Assets	11
		Note 6 :6: Short-Term Borrowings	1112
		Note 7 :7: Long-Term Debt	12
		Note 8 :8: Derivative Instruments	12
		Note 9: Shareholders’ 9(Deficit)/~~: Shareholders’~~ Equity	13
		Note 10 :10: Earnings Per Share	14
		Note 1 1 :11: Income Taxes	14
		Note 1 2 :12: Supplemental Disclosure	15
		Report of Independent Registered Public Accounting Firm	16
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2625
	Item 4.	Controls and Procedures	2726
PART II - Other Information			2827
	Item 1.	Legal Proceedings	2827
	Item 1A.	Risk Factors	2827
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2827
	Item 6.	Exhibits	2928
		Signature	3029


						i

Table of Contents

FORWARD-LOOKING STATEMENTS

This Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements including words such as “believe”, “expect”, “anticipate”, “plan”, “desire”, “project”, “estimate”, “intend”, “will”, “should”, “could”, “would”, “may”, “strategy”, “potential”, ~~��opportunity”~~“opportunity”, “outlook”, “scenario”, “guidance”, and similar expressions are forward-looking statements. Forward-looking statements involve, among other things, expectations, projections, and assumptions about future financial and operating results, objectives, business outlook, priorities, sales growth, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for products and services, share repurchases, Lowe’s strategic initiatives, including those relating to acquisitions and dispositions and the impact of such transactions on our strategic and operational plans and financial results. Such statements involve risks and uncertainties and we can give no assurance that they will prove to be correct. Actual results may differ materially from those expressed or implied in such statements.

A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by these forward-looking statements including, but not limited to, changes in general economic conditions, such as the rate of unemployment, interest rate and currency fluctuations, fuel and other energy costs, slower growth in personal income, changes in consumer spending, changes in the rate of housing turnover, the availability of consumer credit and of mortgage financing, changes in commodity prices, trade policy changes or ~~threatened changes in~~additional tariffs, ~~outbreak~~outbreaks of public health crises, such as the COVID-19 pandemic, availability and cost of goods from suppliers, ~~changes in our management and key personnel,~~ and other factors that can negatively affect our customers.

Investors and others should carefully consider the foregoing factors and other uncertainties, risks and potential events including, but not limited to, those described in “Item 1A - Risk Factors” in our most recent Annual Report on Form 10-K and as may be updated from time to time in Item 1A in our quarterly reports on Form 10-Q or other subsequent filings with the SEC, and in “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” of this report on Form 10-Q. All such forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update these statements other than as required by law.


						ii

Table of Contents

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

~~Lowe’s Companies, Inc.~~

~~Consolidated Balance Sheets (Unaudited)~~

~~In Millions, Except Par Value Data~~

October 30, 2020 November 1, 2019 January 31, 2020
Assets
Current assets:
Cash and cash equivalents $ 8,249 $ 794 $ 716
Short-term investments 1,852 127 160
Merchandise inventory – net 15,712 13,716 13,179
Other current assets 1,103 1,025 1,263
Total current assets 26,916 15,662 15,318
Property, less accumulated depreciation 18,683 18,371 18,669
Operating lease right-of-use assets 3,823 3,873 3,891
Long-term investments 202 363 372
Deferred income taxes – net 241 479 216
Other assets 1,015 1,016 1,005
Total assets $ 50,880 $ 39,764 $ 39,471
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $ 0 $ 637 $ 1,941
Current maturities of long-term debt 609 574 597
Current operating lease liabilities 530 499 501
Accounts payable 12,759 8,822 7,659
Accrued compensation and employee benefits 1,117 779 684
Deferred revenue 1,614 1,222 1,219
Other current liabilities 2,935 2,530 2,581
Total current liabilities 19,564 15,063 15,182
Long-term debt, excluding current maturities 21,185 16,635 16,768
Noncurrent operating lease liabilities 3,907 3,942 3,943
Deferred revenue – extended protection plans 1,007 875 894
Other liabilities 1,144 791 712
Total liabilities 46,807 37,306 37,499
Shareholders' equity:
Preferred stock, $5 par value: Authorized – 5.0 million shares; Issued and
outstanding – 0ne
0 0 0
Common stock, $0.50 par value: Authorized – 5.6 billion shares; Issued and
outstanding – 752 million, 768 million, and 763 million shares, respectively
376 384 381
Capital in excess of par value 0 0 0
Retained earnings 3,942 2,238 1,727
Accumulated other comprehensive loss (245) (164) (136)
Total shareholders' equity 4,073 2,458 1,972
Total liabilities and shareholders' equity $ 50,880 $ 39,764 $ 39,471

~~See accompanying notes to the consolidated financial statements (unaudited).~~

~~Table of Contents~~

Lowe’s Companies, Inc.

Consolidated Statements of Earnings (Unaudited)

In Millions, Except Per Share and Percentage Data


		Three Months Ended								Nine Months Ended									Three Months Ended								Six Months Ended
		October 30, 2020				November 1, 2019				October 30, 2020				November 1, 2019					July 30, 2021				July 31, 2020				July 30, 2021				July 31, 2020
Current Earnings	Current Earnings	Amount		% Sales		Amount		% Sales		Amount		% Sales		Amount		% Sales		Current Earnings	Amount		% Sales		Amount		% Sales		Amount		% Sales		Amount		% Sales
Net sales	Net sales	$	22,309	100.00	%	$	17,388	100.00	%	$	69,286	100.00	%	$	56,121	100.00	%	Net sales	$	27,570	100.00	%	$	27,302	100.00	%	$	51,993	100.00	%	$	46,977	100.00	%
Cost of sales	Cost of sales	15,009		67.28		11,748		67.56		46,170		66.64		38,159		67.99		Cost of sales	18,258		66.22		17,998		65.92		34,551		66.45		31,161		66.33
Gross margin	Gross margin	7,300		32.72		5,640		32.44		23,116		33.36		17,962		32.01		Gross margin	9,312		33.78		9,304		34.08		17,442		33.55		15,816		33.67
Expenses:	Expenses:																	Expenses:
Selling, general and administrative	Selling, general and administrative	4,770		21.38		3,772		21.69		13,985		20.18		11,682		20.82		Selling, general and administrative	4,693		17.02		5,020		18.39		9,187		17.67		9,215		19.62
Depreciation and amortization	Depreciation and amortization	355		1.59		310		1.79		1,008		1.46		924		1.65		Depreciation and amortization	409		1.49		327		1.20		800		1.54		653		1.39
Operating income	Operating income	2,175		9.75		1,558		8.96		8,123		11.72		5,356		9.54		Operating income	4,210		15.27		3,957		14.49		7,455		14.34		5,948		12.66
Interest – net	Interest – net	221		0.99		177		1.02		644		0.93		508		0.90		Interest – net	216		0.78		219		0.80		427		0.82		423		0.90
Loss on extinguishment of debt		1,060		4.75		0		0		1,060		1.53		0		0

Pre-tax earnings	Pre-tax earnings	894		4.01		1,381		7.94		6,419		9.26		4,848		8.64		Pre-tax earnings	3,994		14.49		3,738		13.69		7,028		13.52		5,525		11.76
Income tax provision	Income tax provision	202		0.91		332		1.90		1,562		2.25		1,077		1.92		Income tax provision	976		3.54		910		3.33		1,688		3.25		1,360		2.89
Net earnings	Net earnings	$	692	3.10	%	$	1,049	6.04	%	$	4,857	7.01	%	$	3,771	6.72	%	Net earnings	$	3,018	10.95	%	$	2,828	10.36	%	$	5,340	10.27	%	$	4,165	8.87	%

Weighted average common shares outstanding – basic	Weighted average common shares outstanding – basic	752				769				753				782				Weighted average common shares outstanding – basic	705				752				711				754
Basic earnings per common share	Basic earnings per common share	$	0.92			$	1.36			$	6.42			$	4.81			Basic earnings per common share	$	4.27			$	3.74			$	7.48			$	5.50
Weighted average common shares outstanding – diluted	Weighted average common shares outstanding – diluted	754				770				754				783				Weighted average common shares outstanding – diluted	707				753				713				755
Diluted earnings per common share	Diluted earnings per common share	$	0.91			$	1.36			$	6.41			$	4.80			Diluted earnings per common share	$	4.25			$	3.74			$	7.46			$	5.50

See accompanying notes to the consolidated financial statements (unaudited).

Lowe’s Companies, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

In Millions, Except Percentage Data


		Three Months Ended								Nine Months Ended									Three Months Ended								Six Months Ended
		October 30, 2020				November 1, 2019				October 30, 2020				November 1, 2019					July 30, 2021				July 31, 2020				July 30, 2021				July 31, 2020
		Amount		% Sales		Amount		% Sales		Amount		% Sales		Amount		% Sales			Amount		% Sales		Amount		% Sales		Amount		% Sales		Amount		% Sales
Net earnings	Net earnings	$	692	3.10	%	$	1,049	6.04	%	$	4,857	7.01	%	$	3,771	6.72	%	Net earnings	$	3,018	10.95	%	$	2,828	10.36	%	$	5,340	10.27	%	$	4,165	8.87	%
Foreign currency translation adjustments – net of tax	Foreign currency translation adjustments – net of tax	18		0.08		24		0.13		(27)		(0.04)		60		0.11		Foreign currency translation adjustments – net of tax	(44)		(0.17)		114		0.41		58		0.11		(45)		(0.10)
Cash flow hedges – net of tax	Cash flow hedges – net of tax	24		0.11		(1)		0		(84)		(0.12)		(15)		(0.03)		Cash flow hedges – net of tax	(9)		(0.03)		(5)		(0.02)		15		0.03		(108)		(0.23)
Other	Other	(2)		(0.01)		0		0		2		0		0		0		Other	(1)		—		(1)		—		(2)		—		4		0.01
Other comprehensive income/(loss)		40		0.18		23		0.13		(109)		(0.16)		45		0.08
Other comprehensive (loss)/income																		Other comprehensive (loss)/income	(54)		(0.20)		108		0.39		71		0.14		(149)		(0.32)
Comprehensive income	Comprehensive income	$	732	3.28	%	$	1,072	6.17	%	$	4,748	6.85	%	$	3,816	6.80	%	Comprehensive income	$	2,964	10.75	%	$	2,936	10.75	%	$	5,411	10.41	%	$	4,016	8.55	%

See accompanying notes to the consolidated financial statements (unaudited).


						1

Table of Contents

Lowe’s Companies, Inc.

Consolidated Balance Sheets (Unaudited)

In Millions, Except Par Value Data


	July 30, 2021		July 31, 2020		January 29, 2021
Assets
Current assets:
Cash and cash equivalents	$	4,835	$	11,641	$	4,690
Short-term investments	1,420		1,085		506
Merchandise inventory – net	17,322		13,831		16,193
Other current assets	1,506		1,160		937
Total current assets	25,083		27,717		22,326
Property, less accumulated depreciation	19,031		18,734		19,155
Operating lease right-of-use assets	3,820		3,798		3,832
Long-term investments	225		326		200
Deferred income taxes – net	221		267		340
Other assets	1,024		921		882
Total assets	$	49,404	$	51,763	$	46,735

Liabilities and shareholders' (deficit)/equity
Current liabilities:
Short-term borrowings	$	1,000	$	1,000	$	—
Current maturities of long-term debt	1,344		609		1,112
Current operating lease liabilities	557		520		541
Accounts payable	12,011		12,916		10,884
Accrued compensation and employee benefits	1,331		1,139		1,350
Deferred revenue	2,041		1,715		1,608
Other current liabilities	3,380		3,471		3,235
Total current liabilities	21,664		21,370		18,730
Long-term debt, excluding current maturities	21,967		20,197		20,668
Noncurrent operating lease liabilities	3,841		3,859		3,890
Deferred revenue – extended protection plans	1,097		981		1,019
Other liabilities	1,010		1,000		991
Total liabilities	49,579		47,407		45,298

Shareholders' (deficit)/equity:
Preferred stock, $5 par value: Authorized – 5.0 million shares; Issued and outstanding – none	—		—		—
Common stock, $0.50 par value: Authorized – 5.6 billion shares; Issued and outstanding – 699 million, 756 million, and 731 million shares, respectively	350		378		366
Capital in excess of par value	—		129		90
(Accumulated deficit)/retained earnings	(460)		4,134		1,117
Accumulated other comprehensive loss	(65)		(285)		(136)
Total shareholders' (deficit)/equity	(175)		4,356		1,437
Total liabilities and shareholders' (deficit)/equity	$	49,404	$	51,763	$	46,735

See accompanying notes to the consolidated financial statements (unaudited).


						2

Table of Contents

Lowe’s Companies, Inc.

Consolidated Statements of Shareholders’ (Deficit)/Equity (Unaudited)

In Millions


		Three Months Ended October 30, 2020															Three Months Ended July 30, 2021
		Common Stock			Capital in Excess of Par Value				Retained Earnings		Accumulated Other Comprehensive Loss										Total Shareholders’ Equity			Common Stock									Capital in Excess of Par Value					Retained Earnings/ (Accumulated Deficit)				Accumulated Other Comprehensive Loss					Total
		Shares	Amount										Total Shareholders’ Equity			Shares	Amount			Capital in Excess of Par Value												Total
Balance July 31, 2020		756	$	378			$	129						$	4,134			$	(285)										$	4,356
Balance April 30, 2021																							Balance April 30, 2021	715					$	358				$	—				$	98			$	(11)				$	445

Net earnings	Net earnings	—	—		—				692		—										692		Net earnings	—					—				—					3,018				—					3,018
Other comprehensive income		—	—		—				—		40										40
Cash dividends declared, $0.60 per share		—	—		—				(452)		—										(452)
Other comprehensive loss																							Other comprehensive loss	—					—				—					—				(54)					(54)
Cash dividends declared, $0.80 per share																							Cash dividends declared, $0.80 per share	—					—				—					(563)				—					(563)
Share-based payment expense	Share-based payment expense	—	—		39				—		—										39		Share-based payment expense	—					—				63					—				—					63
Repurchases of common stock	Repurchases of common stock	(4)	(2)		(187)				(432)		—										(621)		Repurchases of common stock	(16)					(8)				(117)					(3,013)				—					(3,138)
Issuance of common stock under share-based payment plans	Issuance of common stock under share-based payment plans	0	0		19				—		—										19		Issuance of common stock under share-based payment plans	—					—				54					—				—					54
Balance October 30, 2020		752	$	376	$	0			$	3,942	$	(245)									$	4,073
Balance July 30, 2021																							Balance July 30, 2021	699					$	350			$	—				$	(460)			$	(65)				$	(175)

		Nine Months Ended October 30, 2020															Six Months Ended July 30, 2021
		Common Stock			Capital in Excess of Par Value				Retained Earnings		Accumulated Other Comprehensive Loss										Total Shareholders’ Equity			Common Stock									Capital in Excess of Par Value					Retained Earnings/ (Accumulated Deficit)				Accumulated Other Comprehensive Loss					Total
		Shares	Amount										Total Shareholders’ Equity			Shares	Amount						Capital in Excess of Par Value																		Total
Balance January 31, 2020		763	$	381			$	0						$	1,727			$	(136)								$	1,972
Balance January 29, 2021																									Balance January 29, 2021	731					$	366				$	90					$	1,117		$	(136)				$	1,437

Net earnings	Net earnings	—	—		—				4,857		—										4,857		Net earnings	—					—				—					5,340				—					5,340
Other comprehensive loss		—	—		—				—		(109)										(109)
Cash dividends declared, $1.70 per share		—	—		—				(1,284)		—										(1,284)
Other comprehensive income																							Other comprehensive income	—					—				—					—				71					71
Cash dividends declared, $1.40 per share																							Cash dividends declared, $1.40 per share	—					—				—					(993)				—					(993)
Share-based payment expense	Share-based payment expense	—	—		103				—		—										103		Share-based payment expense	—					—				113					—				—					113
Repurchases of common stock		(13)	(6)		(203)				(1,358)		—										(1,567)
Repurchase of common stock																							Repurchase of common stock	(33)					(17)				(265)					(5,924)				—					(6,206)
Issuance of common stock under share-based payment plans	Issuance of common stock under share-based payment plans	2	1		100				—		—										101		Issuance of common stock under share-based payment plans	1					1				62					—				—					63
Balance October 30, 2020		752	$	376	$	0			$	3,942	$	(245)									$	4,073
Balance July 30, 2021																							Balance July 30, 2021	699					$	350			$	—				$	(460)			$	(65)				$	(175)


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		Three Months Ended November 1, 2019															Three Months Ended July 31, 2020
		Common Stock			Capital in Excess of Par Value				Retained Earnings		Accumulated Other Comprehensive Loss										Total Shareholders’ Equity			Common Stock						Capital in Excess of Par Value			Retained Earnings				Accumulated Other Comprehensive Loss					Total
		Shares	Amount										Total Shareholders’ Equity			Shares	Amount			Capital in Excess of Par Value									Total
Balance August 2, 2019		776	$	388			$	0						$	2,439			$	(187)								$	2,640

Balance May 1, 2020																							Balance May 1, 2020	755			$	377			$	10		$	1,722			$	(393)				$	1,716
Net earnings	Net earnings	—	—		—				1,049		—										1,049		Net earnings	—			—			—			2,828				—					2,828
Other comprehensive income	Other comprehensive income	—	—		—				—		23										23		Other comprehensive income	—			—			—			—				108					108
Cash dividends declared, $0.55 per share	Cash dividends declared, $0.55 per share	—	—		—				(423)		—										(423)		Cash dividends declared, $0.55 per share	—			—			—			(416)				—					(416)
Share-based payment expense	Share-based payment expense	—	—		20				—		—										20		Share-based payment expense	—			—			41			—				—					41
Repurchases of common stock		(8)	(4)		(27)				(827)		—										(858)

Issuance of common stock under share-based payment plans	Issuance of common stock under share-based payment plans	0	—		7				—		—										7		Issuance of common stock under share-based payment plans	1			1			78			—				—					79
Balance November 1, 2019		768	$	384	$	0			$	2,238	$	(164)									$	2,458
Balance July 31, 2020																							Balance July 31, 2020	756			$	378		$	129		$	4,134			$	(285)				$	4,356

		Nine Months Ended November 1, 2019															Six Months Ended July 31, 2020
		Common Stock			Capital in Excess of Par Value				Retained Earnings		Accumulated Other Comprehensive Loss										Total Shareholders’ Equity			Common Stock						Capital in Excess of Par Value			Retained Earnings				Accumulated Other Comprehensive Loss					Total
		Shares	Amount										Total Shareholders’ Equity			Shares	Amount						Capital in Excess of Par Value													Total
Balance February 1, 2019		801	$	401			$	0						$	3,452			$	(209)						$	3,644
Cumulative effect of accounting change		—	—		—				(263)		—										(263)
Balance January 31, 2020																							Balance January 31, 2020	763			$	381		$	—		$	1,727						$	(136)				$	1,972

Net earnings	Net earnings	—	—		—				3,771		—										3,771		Net earnings	—			—			—			4,165				—					4,165
Other comprehensive income		—	—		—				—		45										45
Cash dividends declared, $1.58 per share		—	—		—				(1,233)		—										(1,233)
Other comprehensive loss																							Other comprehensive loss	—			—			—			—				(149)					(149)
Cash dividends declared, $1.10 per share																							Cash dividends declared, $1.10 per share	—			—			—			(831)				—					(831)
Share-based payment expense	Share-based payment expense	—	—		72				—		—										72		Share-based payment expense	—			—			64			—				—					64
Repurchases of common stock	Repurchases of common stock	(36)	(18)		(148)				(3,489)		—										(3,655)		Repurchases of common stock	(10)			(5)			(15)			(927)				—					(947)
Issuance of common stock under share-based payment plans	Issuance of common stock under share-based payment plans	3	1		76				—		—										77		Issuance of common stock under share-based payment plans	3			2			80			—				—					82
Balance November 1, 2019		768	$	384	$	0			$	2,238	$	(164)									$	2,458
Balance July 31, 2020																							Balance July 31, 2020	756			$	378		$	129		$	4,134			$	(285)				$	4,356

See accompanying notes to the consolidated financial statements (unaudited).


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Lowe’s Companies, Inc.

Consolidated Statements of Cash Flows (Unaudited)

In Millions


		Nine Months Ended					Six Months Ended
		October 30, 2020		November 1, 2019			July 30, 2021		July 31, 2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net earnings	Net earnings	$	4,857	$	3,771	Net earnings	$	5,340	$	4,165
Adjustments to reconcile net earnings to net cash provided by operating activities:	Adjustments to reconcile net earnings to net cash provided by operating activities:					Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	1,152		1,029		Depreciation and amortization	907		747
Noncash lease expense	Noncash lease expense	356		341		Noncash lease expense	252		234
Deferred income taxes	Deferred income taxes	5		(88)		Deferred income taxes	110		(14)
Loss on property and other assets – net	Loss on property and other assets – net	114		93		Loss on property and other assets – net	1		80
Loss on extinguishment of debt		1,060		0

Share-based payment expense	Share-based payment expense	107		75		Share-based payment expense	115		64
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Merchandise inventory – net	Merchandise inventory – net	(2,545)		(1,129)		Merchandise inventory – net	(1,096)		(674)
Other operating assets	Other operating assets	147		(96)		Other operating assets	(203)		66
Accounts payable	Accounts payable	5,099		523		Accounts payable	1,115		5,259
Deferred revenue						Deferred revenue	511		583
Other operating liabilities	Other operating liabilities	1,133		(408)		Other operating liabilities	(139)		1,242
Net cash provided by operating activities	Net cash provided by operating activities	11,485		4,111		Net cash provided by operating activities	6,913		11,752

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of investments	Purchases of investments	(2,548)		(563)		Purchases of investments	(1,635)		(1,132)
Proceeds from sale/maturity of investments	Proceeds from sale/maturity of investments	1,032		556		Proceeds from sale/maturity of investments	692		260
Capital expenditures	Capital expenditures	(1,172)		(927)		Capital expenditures	(846)		(710)
Proceeds from sale of property and other long-term assets	Proceeds from sale of property and other long-term assets	60		71		Proceeds from sale of property and other long-term assets	78		46

Other – net	Other – net	(24)		0		Other – net	(134)		(24)
Net cash used in investing activities	Net cash used in investing activities	(2,652)		(863)		Net cash used in investing activities	(1,845)		(1,560)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net change in commercial paper	Net change in commercial paper	(941)		(85)		Net change in commercial paper	—		(941)
Net proceeds from issuance of debt	Net proceeds from issuance of debt	7,929		2,972		Net proceeds from issuance of debt	2,988		3,961
Repayment of debt	Repayment of debt	(5,582)		(1,092)		Repayment of debt	(568)		(568)
Proceeds from issuance of common stock under share-based payment plans	Proceeds from issuance of common stock under share-based payment plans	102		78		Proceeds from issuance of common stock under share-based payment plans	63		83
Cash dividend payments	Cash dividend payments	(1,252)		(1,195)		Cash dividend payments	(870)		(836)
Repurchases of common stock	Repurchases of common stock	(1,528)		(3,649)		Repurchases of common stock	(6,174)		(966)
Other – net	Other – net	(32)		(7)		Other – net	(366)		(4)
Net cash used in financing activities		(1,304)		(2,978)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(4,927)		729

Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	4		1		Effect of exchange rate changes on cash	4		4

Net increase in cash and cash equivalents, including cash classified within current assets held for sale		7,533		271
Less: Net decrease in cash classified within current assets held for sale		0		12
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	7,533		283		Net increase in cash and cash equivalents	145		10,925
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	716		511		Cash and cash equivalents, beginning of period	4,690		716
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	8,249	$	794	Cash and cash equivalents, end of period	$	4,835	$	11,641

See accompanying notes to the consolidated financial statements (unaudited).


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Lowe’s Companies, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 1: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements (unaudited) and notes to the condensed consolidated financial statements (unaudited) are presented in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The condensed consolidated financial statements (unaudited), in the opinion of management, contain all normal recurring adjustments necessary to present fairly the financial position as of ~~October~~July 30, 2021, and July 31, 2020, and ~~November 1, 2019,~~ the results of operations, comprehensive income, and shareholders’ (deficit)/equity for the three and ~~nine~~six months ended ~~October~~July 30, ~~2020,~~2021, and ~~November 1, 2019,~~July 31, 2020, and cash flows for the ~~nine~~six months ended ~~October~~July 30, ~~2020,~~2021, and ~~November 1, 2019.~~July 31, 2020. The January ~~31, 2020~~29, 2021 consolidated balance sheet was derived from the audited financial statements.

These interim condensed consolidated financial statements (unaudited) should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Lowe’s Companies, Inc. (the Company) Annual Report on Form 10-K for the fiscal year ended January ~~31, 2020~~29, 2021 (the Annual Report). The financial results for the interim periods may not be indicative of the financial results for the entire fiscal year.

~~Impacts of COVID-19~~

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. In response to the COVID-19 pandemic, federal, state and local governments put in place travel restrictions, quarantines, “shelter-in-place” orders, and various other restrictive measures in an attempt to control the spread of the disease. Such restrictions or orders have resulted in, and continue to result in, business closures, work stoppages, slowdowns and delays, among other effects that impact the Company’s operations, as well as customer demand and the operations of our suppliers.

At the onset of the pandemic, the Company implemented a number of measures to facilitate a safer store environment and to provide support for its associates, customers and community. During the first quarter, the Company expanded associate benefits in response to COVID-19 to provide additional paid time off, special payments to hourly associates, temporary wage increases and other benefits. During the second and third quarters of 2020, the Company provided additional bonus payments to hourly associates, in addition to continued enhanced cleaning protocols and charitable contributions. These actions resulted in $288 million and $1.0 billion of expense included in selling, general and administrative (SG&A) expense in the consolidated statements of earnings for the three and nine months ended October 30, 2020, respectively.

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

The Company continues to evaluate the carrying amounts of its long-lived assets whenever certain events or changes in circumstances indicate that the carrying amounts may not be recoverable, including potential market impacts from the COVID-19 pandemic. The Company performed its quarterly assessment of long-lived assets and did not record any material long-lived asset impairments.

In addition, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which was enacted on March 27, 2020, includes measures to assist companies in response to the COVID-19 pandemic. In accordance with the CARES Act, the Company has deferred the payment of qualifying employer payroll taxes which are required to be paid over two years, with half due by December 31, 2021 and the other half due by December 31, 2022. As of October 30, 2020, the Company deferred $407 million of qualifying employer payroll taxes which is included in other liabilities in the consolidated balance sheet and included in cash flows from other operating liabilities in the consolidated statement of cash flows.

~~Table of Contents~~

Reclassifications

Certain prior period amounts have been reclassified to conform to current period presentation, including the ~~addition~~reclassification of ~~cash flow hedges – net of tax on the consolidated statements of comprehensive income, and the inclusion of goodwill within~~excess property from other assets to property, less accumulated depreciation on the consolidated balance ~~sheets.~~sheet as of July 31, 2020, and the separate disclosure of changes in deferred revenue within operating activities on the consolidated statement of cash flows for the six months ended July 31, 2020.

Accounting Pronouncements Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting. The ASU, ~~provides~~and subsequent clarifications, provide practical expedients for contract modification accounting related to the transition away from the London Interbank Offered Rate (LIBOR) and other interbank offering rates to alternative reference rates. The expedients are applicable to contract modifications made and hedging relationships entered into on or before December 31, 2022. The Company intends to use the expedients where needed for reference rate transition. The Company continues to evaluate this standard update and does not currently expect a material impact to the Company’s financial statements or disclosures.

Recent accounting pronouncements pending adoption not discussed in this Form 10-Q or in the ~~2019~~2020 Form 10-K are either not applicable to the Company or are not expected to have a material impact on the Company.

Note 2: Revenue - 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.

The following table presents the Company’s sources of revenue:


(In millions)	(In millions)	Three Months Ended				Nine Months Ended				(In millions)	Three Months Ended				Six Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020
Products	Products	$	21,342	$	16,379	$	66,724	$	53,259	Products	$	26,365	$	26,359	$	49,887	$	45,380
Services	Services	552		545		1,459		1,690		Services	629		508		1,209		907
Other	Other	415		464		1,103		1,172		Other	576		435		897		690
Net sales	Net sales	$	22,309	$	17,388	$	69,286	$	56,121	Net sales	$	27,570	$	27,302	$	51,993	$	46,977

A provision for anticipated merchandise returns is provided through a reduction of sales and cost of sales in the period that the related sales are recorded. The merchandise return reserve is presented on a gross basis, with a separate asset and liability


						6

Table of Contents

included in the consolidated balance sheets. ~~Anticipated~~The balances and classification within the consolidated balance sheets for anticipated sales returns ~~reflected in other current liabilities were $281 million at October 30, 2020, $227 million at November 1, 2019,~~ and ~~$194 million at January 31, 2020. The~~the associated right of return assets ~~reflected in other current assets were $180 million at October 30, 2020, $148 million at November 1, 2019, and $129 million at January 31, 2020.~~are as follows:


(In millions)	Classification	July 30, 2021		July 31, 2020		January 29, 2021
Anticipated sales returns	Other current liabilities	$	303	$	272	$	252
Right of return assets	Other current assets	194		173		164

Deferred revenue - retail and stored-value cards

~~The~~Retail deferred ~~revenues associated with~~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 were $1.2 billion at October 30, 2020, $778 million at November 1, 2019, and $685 million at January 31, 2020.~~completed. The majority of revenue for goods and services is recognized in the quarter following revenue deferral.

~~Deferred~~ Stored-value cards deferred revenue ~~- stored-value cards~~

~~The deferred revenues associated with~~includes outstanding stored-value cards ~~(gift~~such as gift cards and returned merchandise ~~credits) were $439 million, $444 million,~~credits that have not yet been redeemed. Deferred revenue for retail and ~~$534 million at October 30, 2020, November 1, 2019, and January 31, 2020, respectively, and these amounts~~stored-value cards are ~~included in deferred revenue on the consolidated balance sheets. Amounts recognized~~ as ~~breakage were insignificant for the three and nine months ended October 30, 2020, and November 1, 2019.~~follows:


(In millions)	July 30, 2021		July 31, 2020		January 29, 2021
Retail deferred revenue	$	1,538	$	1,282	$	1,046
Stored-value cards deferred revenue	503		433		562
Deferred revenue	$	2,041	$	1,715	$	1,608

~~Table of Contents~~

Deferred revenue - extended protection plans

The ~~deferred~~Company defers revenues ~~from separately priced~~for its separately-priced long-term extended protection ~~plans were $1.0 billion, $875 million,~~plan contracts and $894 million at October 30, 2020, November 1, 2019, and January 31, 2020, respectively. Revenue recognized into sales were $106 million and $314 million for the three and nine months ended October 30, 2020, respectively, and $103 million and $303 million for the three and nine months ended November 1, 2019, respectively. Incremental direct acquisition costs associated with the sale of extended protection plans for contracts greater than one year are also deferred and recognized as expenserecognizes revenue on a straight-line basis over the respective contract ~~term and were insignificant at October 30, 2020, and November 1, 2019.~~

~~The liability for extended protection plan claims incurred is included in other current liabilities on the consolidated balance sheets and was not material in any of the periods presented.~~term. Expenses for claims are recognized in cost of sales when incurred and totaled $43 million and $121 million for the three and nine months ended October 30, 2020, respectively, and $45 million and $141 million for the three and nine months ended November 1, 2019, respectively.incurred.


(In millions)	July 30, 2021		July 31, 2020		January 29, 2021
Deferred revenue - extended protection plans	$	1,097	$	981	$	1,019


	Three Months Ended				Six Months Ended
(In millions)	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020
Extended protection plan deferred revenue recognized into sales	$	120	$	101	$	237	$	208
Extended protection plan claim expenses	44		42		97		78


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Disaggregation of Revenues

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


		Three Months Ended								Nine Months Ended									Three Months Ended								Six Months Ended
		October 30, 2020				November 1, 2019				October 30, 2020				November 1, 2019					July 30, 2021				July 31, 2020				July 30, 2021				July 31, 2020
(In millions)	(In millions)	Net Sales		%		Net Sales		%		Net Sales		%		Net Sales		%		(In millions)	Net Sales		%		Net Sales		%		Net Sales		%		Net Sales		%
Home Décor 1	Home Décor 1	$	8,168	36.6	%	$	6,490	37.3	%	$	23,855	34.4	%	$	19,929	35.5	%	Home Décor 1	$	9,163	33.2	%	$	8,714	31.9	%	$	17,473	33.6	%	$	15,678	33.4	%
Building Products 2		7,587		34.0		5,794		33.3		21,527		31.1		17,405		31.0
Hardlines 3		6,013		27.0		4,551		26.2		22,466		32.4		17,235		30.7
Hardlines 2																		Hardlines 2	9,083		33.0		10,066		36.9		16,868		32.5	%	16,483		35.1	%
Building Products 3																		Building Products 3	8,638		31.3		7,993		29.3		16,543		31.8	%	13,952		29.7	%
Other	Other	541		2.4		553		3.2		1,438		2.1		1,552		2.8		Other	686		2.5		529		1.9		1,109		2.1	%	864		1.8	%
Total	Total	$	22,309	100.0	%	$	17,388	100.0	%	$	69,286	100.0	%	$	56,121	100.0	%	Total	$	27,570	100.0	%	$	27,302	100.0	%	$	51,993	100.0	%	$	46,977	100.0	%

Note: Merchandise division net sales for the prior period have been reclassified to conform to the current period presentation.

1 Home Décor includes the following product categories: Appliances, Décor, Flooring, Kitchens & Bath, and Paint

2 Hardlines includes the following product categories: Hardware, Lawn & Garden, Seasonal & Outdoor Living, and Tools

3 Building Products includes the following product categories: Building Materials, Electrical, Lighting, Lumber, Millwork, and Rough Plumbing

3 ~~Hardlines includes the following product categories: Hardware, Lawn & Garden, Seasonal & Outdoor Living, and Tools~~

The following table presents the Company’s net sales disaggregated by geographical area:


(In millions)	(In millions)	Three Months Ended				Nine Months Ended				(In millions)	Three Months Ended				Six Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020
United States	United States	$	20,832	$	16,131	$	65,153	$	52,225	United States	$	25,655	$	25,561	$	48,587	$	44,321
International		1,477		1,257		4,133		3,896
Canada										Canada	1,915		1,741		3,406		2,656
Net Sales	Net Sales	$	22,309	$	17,388	$	69,286	$	56,121	Net Sales	$	27,570	$	27,302	$	51,993	$	46,977

Note 3: Investments -

Available-for-sale debt securities are recorded at fair value, and unrealized gains and losses are recorded, net of tax, as a component of accumulated other comprehensive loss. Net unrealized gains on available-for-sale debt securities as of ~~October~~July 30, 2021, July 31, 2020, ~~November 1, 2019,~~ and January ~~31, 2020,~~29, 2021, were not material. Refer to Note 4 for the fair value of the Company’s available-for-sale debt securities by investment type.

~~Held-to-maturity~~Held to maturity securities are U.S. Treasury bills which the Company has the ability and intent to hold until maturity and are stated at amortized cost. Gross unrecognized holding gains and losses on the Company’s held-to-maturity securities were not material ~~as of October 30,~~for the period ended July 31, 2020.

~~Table of Contents~~

The Company’s investments are as follows:


(In millions)	(In millions)	October 30, 2020		November 1, 2019		January 31, 2020		(In millions)	July 30, 2021		July 31, 2020		January 29, 2021
Short-term investments:	Short-term investments:							Short-term investments:
Available-for-sale debt securities	Available-for-sale debt securities	$	702	127		$	160	Available-for-sale debt securities	$	1,420	$	435	$	506
Held-to-maturity securities	Held-to-maturity securities	1,150		0		0		Held-to-maturity securities	—		650		—
Total short-term investments	Total short-term investments	$	1,852	$	127	$	160	Total short-term investments	$	1,420	$	1,085	$	506
Long-term investments:	Long-term investments:							Long-term investments:
Available-for-sale debt securities	Available-for-sale debt securities	$	202	$	363	$	372	Available-for-sale debt securities	$	225	$	326	$	200
Total long-term investments	Total long-term investments	$	202	$	363	$	372	Total long-term investments	$	225	$	326	$	200

~~The maturities~~


						8

Table of ~~available-for-sale and held-to-maturity securities at October 30, 2020, are as follows:~~Contents

Available-for-Sale
(In millions) Cost Basis Fair Value Held-to-Maturity
Due in one year or less $ 699 $ 702 $ 1,150
Due after one year through five years 198 202 0
Total $ 897 $ 904 $ 1,150

Restricted Investments

Short-term and long-term investments include restricted balances pledged as collateral primarily for the Company’s extended protection plan ~~program. Restricted balances included in short-term investments were $402 million at October 30, 2020, $127 million at November 1, 2019,~~program and ~~$160 million at January 31, 2020.~~are as follows:

~~Restricted balances included in long-term investments were $202 million at October 30, 2020, $363 million at November 1, 2019, and $372 million at January 31, 2020.~~


(In millions)	July 30, 2021		July 31, 2020		January 29, 2021
Short-term restricted investments	$	520	$	260	$	506
Long-term restricted investments	225		326		200
Total restricted investments	$	745	$	586	$	706

Note 4: Fair Value Measurements - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the hierarchy are defined as follows:

•Level 1 - inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities

•Level 2 - inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly

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


						9

Table of Contents

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

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of ~~October~~July 30, 2021, July 31, 2020, ~~November 1, 2019,~~ and January ~~31, 2020.~~29, 2021:


			Fair Value Measurements at								Fair Value Measurements at
(In millions)	(In millions)	Measurement Level	October 30, 2020		November 1, 2019		January 31, 2020		(In millions)	Measurement Level	July 30, 2021		July 31, 2020		January 29, 2021
Assets:	Assets:								Assets:
Short-term investments:	Short-term investments:								Short-term investments:
Available-for-sale debt securities	Available-for-sale debt securities								Available-for-sale debt securities
Certificates of deposit	Certificates of deposit	Level 1	$	300	$	0	$	0	Certificates of deposit	Level 1	$	959	$	175	$	—
U.S. Treasury notes		Level 1	220		13		13
U.S Treasury securities									U.S Treasury securities	Level 1	139		104		223
Money market funds	Money market funds	Level 1	96		83		105		Money market funds	Level 1	131		98		109
Commercial paper									Commercial paper	Level 2	117		—		97
Corporate debt securities	Corporate debt securities	Level 2	49		12		23		Corporate debt securities	Level 2	50		35		47
Agency securities	Agency securities	Level 2	37		19		19		Agency securities	Level 2	14		23		30
Foreign government debt securities									Foreign government debt securities	Level 2	10		—		—

Total short-term investments	Total short-term investments		$	702	$	127	$	160	Total short-term investments		$	1,420	$	435	$	506

Long-term investments:	Long-term investments:								Long-term investments:
Available-for-sale debt securities	Available-for-sale debt securities								Available-for-sale debt securities
U.S. Treasury notes		Level 1	$	140	$	258	$	280
U.S. Treasury securities									U.S. Treasury securities	Level 1	$	148	$	250	$	129
Corporate debt securities	Corporate debt securities	Level 2	52		75		62		Corporate debt securities	Level 2	49		61		58
Foreign government debt securities									Foreign government debt securities	Level 2	15		—		—
Municipal obligations	Municipal obligations	Level 2	10		0		0		Municipal obligations	Level 2	13		—		13
Agency securities	Agency securities	Level 2	0		30		30		Agency securities	Level 2	—		15		—

Total long-term investments	Total long-term investments		$	202	$	363	$	372	Total long-term investments		$	225	$	326	$	200
Other assets:									Other assets:
Derivative instruments									Derivative instruments
Fixed-to-floating interest rate swaps									Fixed-to-floating interest rate swaps	Level 2	$	3	$	—	$	—
Forward interest rate swaps									Forward interest rate swaps	Level 2	2		—		4
Total other assets									Total other assets		$	5	$	—	$	4

Liabilities:	Liabilities:								Liabilities:
Other current liabilities:	Other current liabilities:								Other current liabilities:
Derivative instruments	Derivative instruments								Derivative instruments
Forward interest rate swaps	Forward interest rate swaps	Level 2	$	9	$	0	$	11	Forward interest rate swaps	Level 2	$	3	$	20	$	8
Total other current liabilities	Total other current liabilities		$	9	$	0	$	11	Total other current liabilities		$	3	$	20	$	8
Other liabilities:	Other liabilities:								Other liabilities:
Derivative instruments	Derivative instruments								Derivative instruments
Forward interest rate swaps	Forward interest rate swaps	Level 2	$	5	$	0	$	0	Forward interest rate swaps	Level 2	$	—	$	21	$	—
Total other liabilities	Total other liabilities		$	5	$	0	$	0	Total other liabilities		$	—	$	21	$	—

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

When available, quoted prices were used to determine fair value. When quoted prices in active markets were available, investments were classified within Level 1 of the fair value hierarchy. When quoted prices in active markets were not available, fair values were determined using pricing models, and the inputs to those pricing models were based on observable market inputs. The inputs to the pricing models were typically benchmark yields, reported trades, broker-dealer quotes, issuer spreads, and benchmark securities, among others.


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

During the three and ~~nine~~six months ended ~~October~~July 30, ~~2020,~~2021, and ~~November 1, 2019,~~July 31, 2020, the Company had no material measurements of assets and liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

Other Fair Value Disclosures

The Company’s financial assets and liabilities not measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable, held-to-maturity securities, short-term borrowings, accounts payable, and long-term debt and are reflected in the financial statements at cost. As further described in Note 8, certain long-term debt is associated with a fair value hedge and reflected in the financial statements at fair value. With the exception of long-term debt, cost approximates fair value for these items due to

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their short-term nature. The fair values of the Company’s unsecured notes were estimated using quoted market prices. 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.

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


		October 30, 2020				November 1, 2019				January 31, 2020					July 30, 2021				July 31, 2020				January 29, 2021
(In millions)	(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Unsecured notes (Level 1)	Unsecured notes (Level 1)	$	21,119	$	24,340	$	16,646	$	18,184	$	16,648	$	18,808	Unsecured notes (Level 1)	$	22,592	$	25,705	$	20,109	$	24,998	$	21,121	$	24,349
Mortgage notes (Level 2)	Mortgage notes (Level 2)	5		5		5		5		5		6		Mortgage notes (Level 2)	5		5		5		5		5		5
Long-term debt (excluding finance lease obligations)	Long-term debt (excluding finance lease obligations)	$	21,124	$	24,345	$	16,651	$	18,189	$	16,653	$	18,814	Long-term debt (excluding finance lease obligations)	$	22,597	$	25,710	$	20,114	$	25,003	$	21,126	$	24,354

Note 5: ~~Exit Activities~~Goodwill and Intangible Assets - - ~~During fiscal year 2019,~~Goodwill and intangible assets resulting from acquisitions are recorded within other assets on the ~~Company incurred costs associated with a strategic reassessment of its business to drive an increased focus~~consolidated balance sheets and are evaluated for impairment annually on ~~its core home improvement operations and to improve overall operating performance and profitability. During~~ the ~~third quarter of fiscal 2019, as a result~~first day of the ~~Company’s strategic review of its Canadian operations,~~fourth quarter or whenever events or changes in circumstances indicate that it is more likely than not that the Company recognized pre-tax charges of $53 million associated with long-lived asset impairment. Expenses associated with long-lived asset impairment are included in SG&A expense in the consolidated statements of earnings. Subsequent to the end of the third quarter of fiscal 2019, a decision was made to close 34 under-performing stores in Canada and take additional restructuring actions to improve future sales and profitability of the Canadian operations. The store closings were completed in the first quarter of fiscal 2020. A summary of the significant charges associated with the strategic review of the Canadian operations is as follows:carrying amount may not be recoverable.

Costs Incurred
Three Months Ended Nine Months Ended
(In millions) November 1, 2019 November 1, 2019
Long-lived asset impairment $ 53 $ 53
Total $ 53 $ 53

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


	July 30, 2021				July 31, 2020				January 29, 2021
(In millions)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Goodwill	$	311	$	—	$	311	$	—	$	311	$	—

Definite-lived intangible assets:
Customer-related 1	$	347	$	(80)	$	367	$	(89)	$	372	$	(99)
Trademarks and trade names 1	267		(126)		254		(82)		264		(119)
Other	1		(1)		12		(12)		12		(11)
Total definite-lived intangible assets	$	615	$	(207)	$	633	$	(183)	$	648	$	(229)

Indefinite-lived intangible assets:
Trademark 2	$	134	$	—	$	—	$	—	$	—	$	—
Total intangible assets	$	749	$	(207)	$	633	$	(183)	$	648	$	(229)

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

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


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Note 6: Short-Term Borrowings - ~~In March 2020, the Company entered into a~~

Commercial Paper Program

The $1.02 billion five-year unsecured revolving credit agreement ~~(the~~entered into in March 2020 (2020 Credit Agreement) ~~with a syndicate of banks. In connection with the 2020 Credit Agreement, the Company refinanced the 364-Day Credit Agreement (2019 Credit Agreement), dated as of September 9, 2019,~~ and terminated any commitments under the 2019 Credit Agreement as of March 23, 2020. Borrowings under the 2020 Credit Agreement will bear interest calculated according to a Base Rate or a Eurocurrency Rate plus an applicable margin. The 2020 Credit Agreement contains customary representations, warranties and covenants for a transaction of this type. The Company was in compliance with those financial covenants at October 30, 2020.

~~The 2020 Credit Agreement, along with~~ the $1.98 billion ~~five year~~five-year unsecured second amended and restated credit agreement (Second Amended and Restated Credit Agreement) entered into in September 2018 ~~supports~~support the Company’s commercial paper program. The amounts available to be drawn under the 2020 Credit Agreement and the Second Amended and Restated Credit Agreement are reduced by the amount of borrowings under the commercial paper program. As of ~~October~~July 30, 2021, July 31, 2020, and ~~November 1, 2019,~~January 29, 2021, there were 0no outstanding borrowings under the Company’s commercial paper program, the 2020 Credit Agreement, or the Second Amended and Restated Credit Agreement. As of October 30, 2020, there were 0 outstanding borrowings under the Company’s commercial paper program. As of November 1, 2019, outstanding borrowings under the Company’s commercial paper program were $637 million, with a weighted average interest rate of 1.97%. Total combined availability under the 2020 Credit Agreement and the Second Amended and Restated Credit Agreement was $3.0 billion as of ~~October~~July 30, ~~2020.~~2021.

Other Short-Term Borrowings

In April 2021, the Company entered into a $1.0 billion unsecured 364-day term loan facility (2021 Term Loan), which has a maturity date of April 21, 2022. There was $1.0 billion in outstanding borrowings under the 2021 Term Loan as of July 30, 2021, with an interest rate of 0.79%.

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Note 7: Long-Term Debt - On ~~October 22, 2020,~~March 31, 2021, the Company issued ~~$4.0~~$2.0 billion of unsecured fixed rate notes ~~(October 2020~~(2021 Notes) as follows:

Principal Amount
(in millions) Maturity Date Interest Rate Discount (in millions)
$ 1,000 April 2028 1.300% $ 5
$ 1,250 October 2030 1.700% $ 10
$ 1,750 October 2050 3.000% $ 17

~~On March 26, 2020, the Company issued $4.0 billion of unsecured fixed rate notes (March 2020 Notes) as follows:~~


Principal Amount (in millions)	Principal Amount (in millions)	Maturity Date	Interest Rate	Discount (in millions)		Principal Amount (in millions)	Maturity Date	Interest Rate	Discount (in millions)
$	750	April 2025	4.000%	$	4	1,500	April 2031	2.625%	$	7
$	1,250	April 2030	4.500%	$	12	500	April 2051	3.500%	$	5
$	750	April 2040	5.000%	$	10
$	1,250	April 2050	5.125%	$	13

Interest on the ~~October 2020~~2021 Notes ~~and March 2020 Notes (collectively, the 2020 Notes)~~ is payable semiannually in arrears in April and October of each year until maturity.

The indentures governing the ~~2020~~2021 Notes contain a provision that allows the Company to redeem these notes at any time, in whole or in part, at specified redemption prices, plus accrued and unpaid interest, if any, up to, but excluding, the date of redemption. The indenture also contains a provision that allows the holders of the notes to require the Company to repurchase all or any part of their notes if a change of control triggering event occurs. If elected under the change of control provisions, the repurchase of the notes will occur at a purchase price of 101% of the principal amount, plus accrued and unpaid interest, if any, on such notes up to, but excluding, the date of purchase. The indentures governing the ~~2020~~2021 Notes do not limit the aggregate principal amount of debt securities that the Company may issue and does not require the Company to maintain specified financial ratios or levels of net worth or liquidity.

In addition, during October 2020, the Company completed a cash tender offer (the 2020 Cash Tender Offer) 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 Offer, 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 8~~ ~~for additional information regarding the reverse treasury lock derivative contracts.~~

Note 8: Derivative Instruments

~~Cash Flow Hedges~~

- The Company utilizes ~~derivative financial instruments~~forward interest rate swap agreements to hedge its exposure to changes in benchmark interest rates on forecasted debt issuances. The Company ~~held forward~~also utilizes fixed-to-floating interest rate swap agreements ~~with~~as fair value hedges on certain debt. The notional amounts ~~totaling $638 million at October 30, 2020, and $770 million at January 31, 2020. The Company did not hold forward interest rate swap agreements at November 1, 2019.~~ for the Company’s material derivative instruments are as follows:


(In millions)	July 30, 2021		July 31, 2020		January 29, 2021
Cash flow hedges:
Forward interest rate swap agreement notional amounts	$	1,975	$	638	$	638
Fair value hedges:
Fixed-to-floating interest rate swap agreement notional amounts	$	450	$	—	$	—

See Note 4 for the gross fair values of the Company’s outstanding derivative financial instruments and corresponding fair value classifications. The cash flows related to ~~forward interest rate swap agreements~~settlement of the Company’s hedging derivative financial instruments are ~~included within operating activities~~classified in the ~~accompanying~~ consolidated statements of cash ~~flows.~~flows based on the nature of the underlying hedged items.

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


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designated as cash flow hedges recorded in other comprehensive ~~loss~~(loss)/income and earnings for the three and ~~nine~~six months ended ~~October~~July 30, ~~2020,~~2021, and ~~November 1, 2019,~~July 31, 2020, including its line item in the financial statements, is as follows:


(In millions)	Three Months Ended				Six Months Ended
	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020
Other comprehensive (loss)/income
Cash flow hedges – net of tax benefit/(expense) of $5 million, $1 million, $(4) million, and $35 million, respectively	$	(16)	$	(3)	$	12	$	(107)
Net earnings
Interest – net	$	3	$	3	$	5	$	4

~~Table~~The Company accounts for the fixed-to-floating interest rate swap agreements as fair value hedges using the shortcut method of ~~Contents~~

(In millions) Three Months Ended Nine Months Ended
October 30, 2020 November 1, 2019 October 30, 2020 November 1, 2019
Other comprehensive income/(loss)
Cash flow hedges – net of tax (expense)/benefit of
($7) million, $0 million, $28 million, $6 million,
respectively
$ 22 $ 0 $ (85) $ (15)
Net earnings
Interest – net $ 3 $ 0 $ 7 $ 1

~~Other Derivatives Not Designated as Hedging Instruments~~

~~To hedge~~accounting under which the ~~economic risk of changes~~hedges are assumed to be perfectly effective. Thus, the change in fair value of the ~~2020 Cash Tender Offer prior to its pricing date,~~derivative instruments offsets the ~~Company entered into reverse treasury lock derivative contracts with a combined notional of $2.0 billion. Upon~~change in fair value on the ~~pricing of the 2020 Cash Tender Offer, the Company settled the reverse treasury lock derivative contracts~~hedged debt, and ~~made a payment to its counterparty for $26 million, which~~there is ~~included in loss on extinguishment of debt~~no net impact in the consolidated statements of earnings ~~for~~from the ~~three and nine months ended October 30, 2020. The cash flows related to these contracts are included within financing activities in~~fair value of the ~~accompanying consolidated statements of cash flows.~~derivatives.

Note 9: Shareholders’ (Deficit)/Equity - The Company has a share repurchase program that is executed through purchases made from time to time either in the open market, which may be made under pre-set trading plans meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934, or through private off-market transactions. Shares purchased under the repurchase program are ~~retired and~~ returned to authorized and unissued status. As of ~~October~~July 30, ~~2020,~~2021, the Company had ~~$8.1~~$13.6 billion remaining in its share repurchase program. Due to the uncertainty caused by the COVID-19 pandemic, the Company temporarily suspended its share repurchases during the first quarter of 2020, but reinstated share repurchases under the program during the third quarter of 2020.

In February ~~2020,~~2021, the Company entered into an Accelerated Share Repurchase (ASR) agreement with a third-party financial institution to repurchase ~~$500 million~~$2.0 billion of the Company’s common stock. In addition, in May 2021, the Company entered into a variable notional ASR agreement with a third-party financial institution to repurchase $2.1 billion of the Company’s common stock. The terms of the ASR agreements entered into during the six months ended July 30, 2021, are as follows (in millions):


Agreement Execution Date	Agreement Settlement Date	ASR Agreement Amount		Minimum Notional Amount1		Maximum Notional Amount1		Cash Payment Received at Settlement1		Initial Shares Delivered at Inception	Additional Shares Delivered at Settlement	Total Shares Delivered
Q1 2021	Q1 2021	$	2,000	$	—	$	—	$	—	10.7	0.2	10.9
Q2 2021	Q2 2021	$	2,132	1,750		2,500		368		7.2	4.0	11.2

1 The Company entered into a variable notional ASR agreement with a third-party financial institution to repurchase between a minimum notional amount and a maximum notional amount. At inception ~~pursuant to the agreement,~~of each transaction, the Company paid ~~$500 million to~~ the ~~financial institution using cash on hand~~maximum notional amount and ~~took delivery of 3.9 million~~received shares. The Company finalized the transaction and received an additional ~~1.6 million~~ shares prior to the end of the ~~first~~second quarter. The Company reflected the difference in the prepayment amount (maximum notional amount) and the final notional amount of $368 million as a receivable in other current assets in the consolidated balance sheet as of July 30, 2021, and other financing – net in the consolidated statement of cash flows for the six months ended July 30, 2021. The balance was received in cash from the third-party financial institution subsequent to the end of the second quarter.

In addition, ~~during the three and nine months ended October 30, 2020,~~ the Company repurchased shares of its common stock through the open market ~~totaling 3.6 million and 7.7 million shares, respectively, for a cost of $617 million and $1.1 billion, respectively.~~as follows:

Three Months Ended

Six Months Ended

July 30, 2021

(In millions)

Cost

Open market share repurchases

5.2

1,000

10.7

2,000

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


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Shares repurchased for the three and ~~nine~~six months ended ~~October~~July 30, ~~2020,~~2021, and ~~November 1, 2019,~~July 31, 2020, were as follows:


		Three Months Ended							Three Months Ended
		October 30, 2020			November 1, 2019				July 30, 2021			July 31, 2020
(In millions)	(In millions)	Shares	Cost 1		Shares	Cost 1		(In millions)	Shares	Cost 1		Shares	Cost
Share repurchase program	Share repurchase program	3.6	$	617	7.7	$	835	Share repurchase program	16.4	$	3,132	—	$	—
Shares withheld from employees	Shares withheld from employees	0	4		0.2	23		Shares withheld from employees	—	7		—	—
Total share repurchases	Total share repurchases	3.6	$	621	7.9	$	858	Total share repurchases	16.4	$	3,139	—	$	—

1 ~~Reductions~~Reduction of ~~$431 million and $827 million~~$3.0 billion was recorded to (accumulated deficit)/retained earnings, after capital in excess of par value was depleted, for the three months ended ~~October~~July 30, ~~2020 and November 1, 2019, respectively.~~2021.

~~Table of Contents~~


		Nine Months Ended							Six Months Ended
		October 30, 2020			November 1, 2019				July 30, 2021			July 31, 2020
(In millions)	(In millions)	Shares	Cost 1		Shares	Cost 1		(In millions)	Shares	Cost 1		Shares	Cost 1
Share repurchase program	Share repurchase program	13.2	$	1,557	35.3	$	3,618	Share repurchase program	32.8	$	6,132	9.5	$	940
Shares withheld from employees	Shares withheld from employees	0.1	10		0.3	36		Shares withheld from employees	0.4	74		0.1	7
Total share repurchases	Total share repurchases	13.3	$	1,567	35.6	$	3,654	Total share repurchases	33.2	$	6,206	9.6	$	947

1Reductions of ~~$1.4~~$5.9 billion and ~~$3.5 billion~~$927 million were recorded to (accumulated deficit)/retained earnings, after capital in excess of par value was depleted, for the ~~nine~~six months ended~~October~~ July 30, ~~2020,~~2021 and ~~November 1, 2019,~~July 31, 2020, respectively.

Note 10: Earnings Per Share - The Company calculates basic and diluted earnings per common share using the two-class method. The following table reconciles earnings per common share for the three and ~~nine~~six months ended ~~October~~July 30, ~~2020,~~2021, and ~~November 1, 2019:~~July 31, 2020:

Three Months Ended Nine Months Ended
(In millions, except per share data) October 30, 2020 November 1, 2019 October 30, 2020 November 1, 2019
Basic earnings per common share:
Net earnings $ 692 $ 1,049 $ 4,857 $ 3,771
Less: Net earnings allocable to participating securities (3) (3) (20) (11)
Net earnings allocable to common shares, basic $ 689 $ 1,046 $ 4,837 $ 3,760
Weighted-average common shares outstanding 752 769 753 782
Basic earnings per common share $ 0.92 $ 1.36 $ 6.42 $ 4.81
Diluted earnings per common share:
Net earnings $ 692 $ 1,049 $ 4,857 $ 3,771
Less: Net earnings allocable to participating securities (3) (3) (20) (11)
Net earnings allocable to common shares, diluted $ 689 $ 1,046 $ 4,837 $ 3,760
Weighted-average common shares outstanding 752 769 753 782
Dilutive effect of non-participating share-based awards 2 1 1 1
Weighted-average common shares, as adjusted 754 770 754 783
Diluted earnings per common share $ 0.91 $ 1.36 $ 6.41 $ 4.80

Anti-dilutive securities excluded from diluted weighted-average common shares outstanding totaled 0.3 million and 0.1 million shares for the three and nine months ended October 30, 2020, respectively. Anti-dilutive securities excluded from diluted weighted-average common shares outstanding totaled 0.9 million and 0.9 million shares for the three and nine months ended November 1, 2019, respectively.


	Three Months Ended				Six Months Ended
(In millions, except per share data)	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020
Basic earnings per common share:
Net earnings	$	3,018	$	2,828	$	5,340	$	4,165
Less: Net earnings allocable to participating securities	(11)		(12)		(22)		(16)
Net earnings allocable to common shares, basic	$	3,007	$	2,816	$	5,318	$	4,149
Weighted-average common shares outstanding	705		752		711		754
Basic earnings per common share	$	4.27	$	3.74	$	7.48	$	5.50
Diluted earnings per common share:
Net earnings	$	3,018	$	2,828	$	5,340	$	4,165
Less: Net earnings allocable to participating securities	(11)		(12)		(22)		(16)
Net earnings allocable to common shares, diluted	$	3,007	$	2,816	$	5,318	$	4,149
Weighted-average common shares outstanding	705		752		711		754
Dilutive effect of non-participating share-based awards	2		1		2		1
Weighted-average common shares, as adjusted	707		753		713		755
Diluted earnings per common share	$	4.25	$	3.74	$	7.46	$	5.50

Anti-dilutive securities excluded from diluted weighted-average common shares	0.3		0.0		0.3		0.7

Note 11: Income Taxes - The Company’s effective income tax rates were ~~22.6%~~24.4% and ~~24.3%~~24.0% for the three and ~~nine~~six months ended ~~October~~July 30, ~~2020,~~2021, respectively, and ~~24.0%~~24.4% and ~~22.2%~~24.6% for the three and ~~nine~~six months ended ~~November 1, 2019.~~July 31, 2020, respectively. The decrease in the effective tax rate for the ~~three~~six months ended ~~October~~July 30, ~~2020, was impacted by higher earnings at RONA inc. which has a full valuation allowance against its deferred tax assets, and a favorable discrete item related~~2021, is primarily due to excess tax benefits ~~of stock compensation. The increase in the effective tax rate for the nine months ended October 30, 2020, is due to a favorable tax benefit recorded during the first quarter of 2019~~ associated with ~~the planned exit~~vesting and exercises of ~~the Mexico retail operations.~~share based compensation.


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Note 12: Supplemental Disclosure

Net interest expense is comprised of the following:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
(In millions)	(In millions)	October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019		(In millions)	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020
Long-term debt	Long-term debt	$	213	$	171	$	610	$	498	Long-term debt	$	205	$	211	$	406	$	398
Finance lease obligations		8		7		25		21
Lease obligations										Lease obligations	8		8		15		17
Short-term borrowings	Short-term borrowings	1		0		13		7		Short-term borrowings	1		2		1		12

Interest income	Interest income	(6)		(5)		(18)		(24)		Interest income	(3)		(8)		(7)		(12)
Interest capitalized	Interest capitalized	0		0		0		(1)		Interest capitalized	(1)		—		(1)		—
Interest on tax uncertainties	Interest on tax uncertainties	0		0		0		(2)		Interest on tax uncertainties	(1)		—		(1)		—
Other	Other	5		4		14		9		Other	7		6		14		8
Interest – net	Interest – net	$	221	$	177	$	644	$	508	Interest – net	$	216	$	219	$	427	$	423

Supplemental disclosures of cash flow information:


		Nine Months Ended					Six Months Ended
(In millions)	(In millions)	October 30, 2020		November 1, 2019		(In millions)	July 30, 2021		July 31, 2020
Cash paid for interest, net of amount capitalized	Cash paid for interest, net of amount capitalized	$	750	$	647	Cash paid for interest, net of amount capitalized	$	437	$	369
Cash paid for income taxes – net	Cash paid for income taxes – net	$	1,357	$	1,029	Cash paid for income taxes – net	$	1,546	$	670
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Leased assets obtained in exchange for new finance lease liabilities	Leased assets obtained in exchange for new finance lease liabilities	$	55	$	156	Leased assets obtained in exchange for new finance lease liabilities	$	97	$	53
Leased assets obtained in exchange for new operating lease liabilities 1	Leased assets obtained in exchange for new operating lease liabilities 1	$	355	$	374	Leased assets obtained in exchange for new operating lease liabilities 1	$	224	$	193

Cash dividends declared but not paid	Cash dividends declared but not paid	$	452	$	423	Cash dividends declared but not paid	$	563	$	416

1 Excludes ~~$565~~$587 million of leases signed but not yet commenced as of ~~October~~July 30, ~~2020.~~2021.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated balance sheets of Lowe’s Companies, Inc. and subsidiaries (the “Company”) as of ~~October~~July 30, ~~2020~~2021 and ~~November 1, 2019,~~July 31, 2020, the related consolidated statements of earnings, comprehensive income, ~~and~~ shareholders’ (deficit)/equity, for the fiscal three-month and ~~nine-month~~six-month periods ended ~~October~~July 30, 2021 and July 31, 2020, and ~~November 1, 2019, and of~~ cash flows for the fiscal ~~nine-month~~six-month periods ended ~~October~~July 30, ~~2020~~2021 and ~~November 1, 2019,~~July 31, 2020, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of January ~~31, 2020,~~29, 2021, and the related consolidated statements of earnings, comprehensive income, shareholders’ equity, and cash flows for the fiscal year then ended (not presented herein); and in our report dated March ~~23, 2020,~~22, 2021, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding the adoption of Financial Accounting Standards Board Accounting Standards Update 2016-02, Leases (Topic 842). In our opinion, the information set forth in the accompanying consolidated balance sheet as of January ~~31, 2020,~~29, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our review in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ DELOITTE & TOUCHE LLP

Charlotte, North Carolina

~~November 25, 2020~~August 26, 2021


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Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis summarizes the significant factors affecting our consolidated operating results, liquidity and capital resources during the three and ~~nine~~six months ended ~~October~~July 30, ~~2020,~~2021, and ~~November 1, 2019.~~July 31, 2020. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that are included in our Annual Report on Form 10-K for the fiscal year ended January ~~31, 2020~~29, 2021 (the Annual Report), as well as the consolidated financial statements (unaudited) and notes to the consolidated financial statements (unaudited) contained in this report. Unless otherwise specified, all comparisons made are to the corresponding period of ~~2019.~~2020. This discussion and analysis is presented in six sections:

•Executive Overview

•Operations

•Financial Condition, Liquidity and Capital Resources

•Off-Balance Sheet Arrangements

•Contractual Obligations and Commercial Commitments

•Critical Accounting Policies and Estimates

EXECUTIVE OVERVIEW

Performance Overview

Net sales in the ~~third~~second quarter of ~~2020~~2021 increased ~~28.3%~~1.0% to ~~$22.3~~$27.6 billion compared to net sales of ~~$17.4~~$27.3 billion in the ~~third~~second quarter of ~~2019.~~2020. The increase in total sales was primarily driven by an increase in ~~comparable sales.~~average ticket of 13.8%, partially offset by a decline in customer transactions of 12.8%. Net earnings in the ~~third~~second quarter of ~~2020~~2021 were ~~$692 million~~$3.0 billion, which represents ~~a decrease~~an increase of ~~34.1%~~6.7% compared to net earnings of ~~$1.0~~$2.8 billion in the ~~third~~second quarter of ~~2019.~~2020. Diluted earnings per common share ~~decreased 32.7%~~increased 13.8% in the ~~third~~second quarter of ~~2020~~2021 to ~~$0.91~~$4.25 from ~~$1.36~~$3.74 in the ~~third~~second quarter of 2019. Included in the third quarter results is a $1.1 billion pre-tax loss related to the extinguishment of debt from a cash tender offer to purchase and retire $3.0 billion combined aggregate principal amount of its outstanding notes with a weighted average interest rate of 4.80%. The Company funded the cash tender offer with a $4 billion issuance of unsecured notes with a weighted average interest rate of 2.17%. These efforts took advantage of a favorable interest rate environment to reduce our long-term interest expense. Also included in the third quarter of fiscal 2020 results are operating costs related to the Canada restructuring. The third quarter of 2019 included $53 million of pre-tax charges related to long-lived asset impairments associated with the Canada restructuring.2020. Excluding the impact of ~~these items, adjusted~~the Canada restructuring in the second quarter of 2020, diluted earnings per common share increased ~~40.4%~~13.3% to ~~$1.98~~$4.25 in the ~~third~~second quarter of ~~2020~~2021 from adjusted diluted earnings per common share of ~~$1.41~~$3.75 in the ~~third~~second quarter of ~~2019~~2020 (see the discussion of non-GAAP financial measures).

For the first ~~nine~~six months of ~~2020,~~2021, cash flows from operating activities were approximately ~~$11.5~~$6.9 billion, while ~~$1.2 billion~~$846 million was used for capital expenditures. Continuing to deliver on our commitment to return excess cash to shareholders, we ~~reinstated our share repurchase program during the third quarter and~~ repurchased ~~$621 million~~$3.1 billion of common stock and paid ~~$416~~$430 million in dividends during the three months ended ~~October~~July 30, ~~2020.~~2021.

During the ~~third~~second quarter of ~~2020, strong execution enabled us to meet broad-based demand driven~~2021, comparable sales declined by ~~a consumer focus on redesigning the function~~1.6%. Five of 15 U.S. regions and ~~enjoyment~~seven of ~~the home. Comparable sales increased by 30.1% with greater than 15% growth in all~~ 15 ~~merchandising divisions and triple-digit growth online. All geographic regions~~product categories generated positive comparable sales ~~of at least 20%. We have experienced consistent strong project demand from both Do-It-Yourself (DIY) and Pro customers throughout~~during the quarter. During the ~~third~~ quarter, ~~we made~~there was a ~~significant merchandising investment~~decline in Do-It-Yourself (DIY) demand compared to ~~reset~~last year as customers transitioned back to pre-pandemic purchase patterns and increased weekend mobility after Memorial Day. In the ~~layout~~prior year, DIY consumer mobility was limited, so many of our ~~U.S. stores (U.S. Stores Reset)~~customers were tackling smaller projects around their homes. However, the execution of our Total Home strategy, which was launched at the end of 2020, allowed us to ~~better align our product adjacencies and create a more intuitive shopping experience, especially for~~capitalize on Pro ~~customers. As a result of this ongoing U.S. Stores Reset, the Company incurred $100 million of expense~~customer demand, resulting in 21% growth in Pro customer sales during the ~~third~~ quarter ~~of fiscal 2020 and expects~~compared to ~~incur approximately $150 million of expense in the fourth quarter of fiscal 2020.~~prior year.

~~Our~~This quarter we enhanced our omnichannel ~~capabilities have enabled us~~customer experience with the launch of our Virtual Kitchen Design. Additionally, as we continue to ~~meet~~integrate the ~~expectations of~~online and in-store shopping experience, we are launching “Visual Search”, which allows our customers to ~~shop whichever way they choose. With~~utilize the ~~re-platforming~~cameras on their smartphones to access expanded product offerings available on Lowes.com. Our dedicated in-store fulfillment teams continue to be an integral part of ~~Lowes.com to the cloud, we have been deploying enhancements to deliver a better~~our omnichannel customer experience, ~~including online delivery scheduling. Also during the third quarter, we began adding touchless~~as our customers utilize in-store pickup, curbside pickup, or our new buy online pickup in store (BOPIS) lockers to fulfill their shopping flexibility needs.

Our Perpetual Productivity Improvement (PPI) initiatives drove store payroll operating efficiency this quarter through operational process improvements that reduced the amount of time our ~~stores, which complement~~associates spent on tasking activities so they could focus on serving customers. During 2021, we have also installed our ~~curbside pickup~~Lowe’s-designed self-checkout solution in over 550 stores. This self-checkout option features a simplified user interface to drive higher customer adoption rates and ~~BOPIS pickup at checkout. We are focused on rolling out these lockers to our major metro markets for the holiday season.~~incremental payroll leverage.


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COVID-19 Response

We ~~continue~~remain committed to ~~be guided by our three key priorities in navigating the COVID-19 pandemic: 1) protecting~~ the health and safety of our associates and customers, ~~through a safe store environment and shopping experience; 2) providing support~~while supporting the communities in which we operate. With the surge of the Delta variant across the U.S. during the second quarter, we reinstated mask requirements for ~~our community, including healthcare providers and first responders; and 3) financially supporting~~all of our associates, during this challenging time. In response to these priorities, we have implemented store safety initiatives to support social distancing and enhance cleaning procedures, as well as adopted a requirement for all front-line associates to wear masks and a nationwide standard for all customers to wear masks. As partregardless of ~~our commitment to provide financial assistance to our associates,~~their vaccination status. During the quarter, we incurred ~~an incremental $245~~$27 million of ~~expense to support our associates~~additional COVID-related expenses in the third quarter. This included two additional discretionary bonus payments for our hourly associates, bringing our total investment in our associates to $807 million for the first nine months of fiscal 2020. In support of our ~~communities, we have contributed $104 million in community pandemic relief year-to-date, including grants to support minority-owned~~associates and ~~rural small businesses.~~store safety initiatives.

Looking Forward

~~In the fourth quarter of 2020, we expect to have our U.S. Stores Reset complete for over 90% of our U.S. stores, which is expected to improve bay productivity~~Transforming and ~~better support long-term sales growth. We also continue to focus on our previously announced investment in~~modernizing our supply chain ~~infrastructure to expand our omnichannel retailing capabilities that will drive sustainable growth. In addition, we are focused~~has been a key focus for the Company the last few years. During the quarter, significant progress was made on our ~~growth opportunity online~~market-based delivery model for big and ~~removing points of friction~~bulky product. In this new delivery model, products flow directly to customer homes from our ~~online shopping experience.~~distribution network, which will provide our customers with higher on-time delivery rates and improved customer satisfaction.

~~While~~The pillars of our Total Home strategy include a focus on the Pro customer, online business expansion, modernization of our installation services, improving localization efforts, and elevating our product assortment, which together are designed to enhance customer engagement and grow market share. As part of this strategy, we ~~remain optimistic about~~continue to expand products available for installation and are leveraging our ~~performance,~~e-commerce platform to deliver a better customer experience. Although the business environment remains uncertain, we have limited visibility into long-term business trends in this unprecedented operating environment, including the volume or duration of customer demand or potential supply chain constraints. However, we remainare confident that we ~~are making the right investments~~will continue to drive ~~sustainable growth.~~market share gains and operating efficiency through the agility of our Total Home strategy.

OPERATIONS

The following table sets forth the percentage relationship to net sales of each line item of the consolidated statements of earnings (unaudited), as well as the percentage change in dollar amounts from the prior period. This table should be read in conjunction with the following discussion and analysis and the consolidated financial statements (unaudited), including the related notes to the consolidated financial statements (unaudited).


		Three Months Ended				Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Period	Percentage Increase / (Decrease) in Dollar Amounts from Prior Period			Three Months Ended				Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Period	Percentage Increase / (Decrease) in Dollar Amounts from Prior Period
		October 30, 2020		November 1, 2019		2020 vs. 2019	2020 vs. 2019			July 30, 2021		July 31, 2020		2021 vs. 2020	2021 vs. 2020
Net sales	Net sales	100.00	%	100.00	%	N/A	28.3	%	Net sales	100.00	%	100.00	%	N/A	1.0	%
Gross margin	Gross margin	32.72		32.44		28	29.4		Gross margin	33.78		34.08		(30)	0.1
Expenses:	Expenses:								Expenses:
Selling, general and administrative	Selling, general and administrative	21.38		21.69		(31)	26.4		Selling, general and administrative	17.02		18.39		(137)	(6.5)
Depreciation and amortization	Depreciation and amortization	1.59		1.79		(20)	14.5		Depreciation and amortization	1.49		1.20		29	25.3
Operating income	Operating income	9.75		8.96		79	39.6		Operating income	15.27		14.49		78	6.4
Interest – net	Interest – net	0.99		1.02		(3)	25.4		Interest – net	0.78		0.80		(2)	(1.5)
Loss on extinguishment of debt		4.75		—		475	N/A

Pre-tax earnings	Pre-tax earnings	4.01		7.94		(393)	(35.3)		Pre-tax earnings	14.49		13.69		80	6.8
Income tax provision	Income tax provision	0.91		1.90		(99)	(39.0)		Income tax provision	3.54		3.33		21	7.2
Net earnings	Net earnings	3.10	%	6.04	%	(294)	(34.1)	%	Net earnings	10.95	%	10.36	%	59	6.7	%


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		Nine Months Ended				Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Period	Percentage Increase / (Decrease) in Dollar Amounts from Prior Period			Six Months Ended				Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Period	Percentage Increase / (Decrease) in Dollar Amounts from Prior Period
		October 30, 2020		November 1, 2019		2020 vs. 2019	2020 vs. 2019			July 30, 2021		July 31, 2020		2021 vs. 2020	2021 vs. 2020
Net sales	Net sales	100.00	%	100.00	%	N/A	23.5	%	Net sales	100.00	%	100.00	%	N/A	10.7	%
Gross margin	Gross margin	33.36		32.01		135	28.7		Gross margin	33.55		33.67		(12)	10.3
Expenses:	Expenses:								Expenses:
Selling, general and administrative	Selling, general and administrative	20.18		20.82		(64)	19.7		Selling, general and administrative	17.67		19.62		(195)	(0.3)
Depreciation and amortization	Depreciation and amortization	1.46		1.65		(19)	9.1		Depreciation and amortization	1.54		1.39		15	22.6
Operating income	Operating income	11.72		9.54		218	51.7		Operating income	14.34		12.66		168	25.3
Interest – net	Interest – net	0.93		0.90		3	26.9		Interest – net	0.82		0.90		(8)	0.8
Loss on extinguishment of debt		1.53		—		153	N/A

Pre-tax earnings	Pre-tax earnings	9.26		8.64		62	32.4		Pre-tax earnings	13.52		11.76		176	27.2
Income tax provision	Income tax provision	2.25		1.92		33	45.1		Income tax provision	3.25		2.89		36	24.2
Net earnings	Net earnings	7.01	%	6.72	%	29	28.8	%	Net earnings	10.27	%	8.87	%	140	28.2	%

The following table sets forth key metrics utilized by management in assessing business performance. This table should be read in conjunction with the following discussion and analysis and the consolidated financial statements (unaudited), including the related notes to the consolidated financial statements (unaudited).

Beginning on February 1, 2020, the Company changed the basis in which it presents the comparable sales metric. The current metric is presented on a transacted basis when tender is accepted from a customer. Prior to this change, the Company’s comparable sales metric was based on when control of the good or service passed to the customer, which included timing impacts of deferred sales. These timing impacts have historically had an insignificant impact on annual comparable sales. The purpose of the change was to align the metric with how the Lowe’s management team evaluates the business throughout the year and views performance relative to peers. For the three and nine months ended October 30, 2020, the impact of excluding deferred sales increased the comparable sales metric by 8 basis points and 88 basis points, respectively. For the three and nine months ended November 1, 2019, the impact of excluding deferred sales decreased the comparable sales metric by 10 basis points and 26 basis points, respectively. The comparable sales metric for the three and nine months ended November 1, 2019, has been recast to conform to the current year presentation.

~~Table of Contents~~


		Three Months Ended						Nine Months Ended							Three Months Ended						Six Months Ended
Other Metrics	Other Metrics	October 30, 2020			November 1, 2019			October 30, 2020			November 1, 2019			Other Metrics	July 30, 2021			July 31, 2020			July 30, 2021			July 31, 2020
Comparable sales increase 1		30.1		%	2.1		%	25.6		%	2.4		%
Comparable sales (decrease)/increase 1														Comparable sales (decrease)/increase 1	(1.6)		%	34.2		%	9.8		%	23.6		%
Total customer transactions (in millions)	Total customer transactions (in millions)	257			221			819			720			Total customer transactions (in millions)	287			330			548			563
Average ticket 2	Average ticket 2	$	86.96		$	78.71		$	84.55		$	77.95		Average ticket 2	$	95.97		$	82.79		$	94.91		$	83.45
At end of period:	At end of period:													At end of period:
Number of stores	Number of stores	1,969			2,004									Number of stores	1,973			1,968
Sales floor square feet (in millions)	Sales floor square feet (in millions)	208			209									Sales floor square feet (in millions)	208			208
Average store size selling square feet (in thousands) 3	Average store size selling square feet (in thousands) 3	106			104									Average store size selling square feet (in thousands) 3	105			106
Net earnings to average debt and equity 4	Net earnings to average debt and equity 4	19.5		%	11.7		%							Net earnings to average debt and equity 4	23.7		%	20.7		%
Return on invested capital 4	Return on invested capital 4	25.1		%	14.2		%							Return on invested capital 4	29.1		%	23.3		%

1 A comparable location is defined as a retail location that has been open longer than 13 months. A location that is identified for relocation is no longer considered comparable in the month of its relocation. The relocated location must then remain open longer than 13 months to be considered comparable. A location we have decided to close is no longer considered comparable as of the beginning of the month in which we announce its closing. Comparable sales are presented on a transacted basis when tender is accepted from a customer. Comparable sales include online sales, which positively impacted ~~third~~second quarter fiscal 2021 and fiscal 2020 comparable sales by approximately ~~485~~70 basis points and 650 basis points, respectively, and year-to-date fiscal 2021 and fiscal 2020 comparable sales by approximately ~~530~~170 basis ~~points.~~points and 545 basis points, respectively. The comparable store sales calculation included in the preceding table was calculated using comparable 13-week and ~~39-week~~26-week periods.

2 Average ticket is defined as net sales divided by the total number of customer transactions.

3 Average store size selling square feet is defined as sales floor square feet divided by the number of stores open at the end of the period. The average Lowe’s-branded home improvement store has approximately ~~112 thousand~~112,000 square feet of retail selling space.

4 Return on invested capital is calculated using a non-GAAP financial measure. Net earnings to average debt and equity is the most comparable GAAP ratio. See below for additional information and reconciliations of non-GAAP measures.


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Non-GAAP Financial Measures

Adjusted Diluted Earnings Per Share

Adjusted diluted earnings per share is considered a non-GAAP financial measure. The Company believes this non-GAAP financial measure provides useful insight for analysts and investors in evaluating what management considers the Company’s core financial performance. Adjusted diluted earnings per share excludes the impact of ~~certain~~a discrete ~~items, as~~item, further described below, not contemplated in the Company’s ~~original~~ business ~~outlooks~~outlook for the ~~third~~second quarter of fiscal ~~2020 and fiscal 2019.~~2020. Unless otherwise noted, the income tax effect of these adjustments is calculated using the marginal rates for the respective periods.

Fiscal 2020 Impacts

•Beginning in the third quarter of fiscal 2019, the Company began a strategic review of its Canadian operations, and in the fourth quarter of fiscal 2019, the Company announced additional actions to improve future performance and profitability of its Canadian operations. As a result of this review and related actions, during the ~~three months ended October 30,~~second quarter of 2020, the Company recognized ~~$13~~$10 million of pre-tax operating costs related to remaining inventory write-downs and other closing costs ~~(Canada restructuring).~~

•~~In the third quarter of fiscal 2020, the Company recognized a $1.1 billion loss on extinguishment of debt in connection with a $3.0 billion cash tender offer (Loss on extinguishment of debt).~~

~~Fiscal 2019 Impacts~~

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

Adjusted diluted earnings per share should not be considered an alternative to, or more meaningful indicator of, the Company’s diluted earnings per common share as prepared in accordance with GAAP. The Company’s methods of determining non-GAAP financial measures may differ from the method used by other companies and may not be comparable.

~~Table of Contents~~


		Three Months Ended										Three Months Ended
		October 30, 2020				November 1, 2019					July 31, 2020
		Pre-Tax Earnings	Tax	Net Earnings		Pre-Tax Earnings	Tax	Net Earnings				Pre-Tax Earnings	Tax	Net Earnings
Diluted earnings per share, as reported	Diluted earnings per share, as reported			$	0.91			$	1.36	Diluted earnings per share, as reported				$	3.74
Non-GAAP adjustments – per share impacts	Non-GAAP adjustments – per share impacts									Non-GAAP adjustments – per share impacts
Loss on extinguishment of debt		1.40	(0.35)	1.05		—	—	—

Canada restructuring	Canada restructuring	0.02	—	0.02		0.07	(0.02)	0.05		Canada restructuring		0.01	—	0.01

Adjusted diluted earnings per share	Adjusted diluted earnings per share			$	1.98			$	1.41	Adjusted diluted earnings per share				$	3.75

Return on Invested Capital

Return on Invested Capital (ROIC) is calculated using a non-GAAP financial measure. Management believes ROIC is a meaningful metric for analysts and investors as a measure of how effectively the Company is using capital to generate profits. Although ROIC is a common financial metric, numerous methods exist for calculating ROIC. Accordingly, the method used by our management may differ from the methods used by other companies. We encourage you to understand the methods used by another company to calculate ROIC before comparing its ROIC to ours.


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We define ROIC as the rolling 12 months’ lease adjusted net operating profit after tax (Lease adjusted NOPAT) divided by the average of current year and prior year ending debt and equity. Lease adjusted NOPAT is a non-GAAP financial measure, and net earnings is considered to be the most comparable GAAP financial measure. The calculation of ROIC, together with a reconciliation of net earnings to Lease adjusted NOPAT, is as follows:


		For the Periods Ended							For the Periods Ended
(In millions, except percentage data)	(In millions, except percentage data)	October 30, 2020			November 1, 2019			(In millions, except percentage data)	July 30, 2021			July 31, 2020
Calculation of Return on Invested Capital	Calculation of Return on Invested Capital							Calculation of Return on Invested Capital
Numerator	Numerator							Numerator
Net Earnings	Net Earnings	$	5,367		$	2,947		Net Earnings	$	7,009		$	5,724
Plus:	Plus:							Plus:
Interest expense – net	Interest expense – net	827			665			Interest expense – net	852			783
Loss on extinguishment of debt	Loss on extinguishment of debt	1,060			—			Loss on extinguishment of debt	1,060			—
Operating lease interest	Operating lease interest	177			186			Operating lease interest	165			182
Provision for income taxes	Provision for income taxes	1,828			1,177			Provision for income taxes	2,233			1,957
Lease adjusted net operating profit	Lease adjusted net operating profit	9,259			4,975			Lease adjusted net operating profit	11,319			8,646
Less:	Less:							Less:
Income tax adjustment 1	Income tax adjustment 1	2,353			1,414			Income tax adjustment 1	2,735			2,203
Lease adjusted net operating profit after tax	Lease adjusted net operating profit after tax	$	6,906		$	3,561		Lease adjusted net operating profit after tax	$	8,584		$	6,443

Denominator	Denominator							Denominator
Average debt and equity 2	Average debt and equity 2	$	27,525		$	25,106		Average debt and equity 2	$	29,537		$	27,637
Net earnings to average debt and equity	Net earnings to average debt and equity	19.5		%	11.7		%	Net earnings to average debt and equity	23.7		%	20.7		%
Return on invested capital	Return on invested capital	25.1		%	14.2		%	Return on invested capital	29.1		%	23.3		%

1 Income tax adjustment is defined as lease adjusted net operating profit multiplied by the effective tax rate, which was ~~25.4%~~24.2% and ~~28.4%~~25.5% for the periods ended ~~October~~July 30, ~~2020,~~2021, and ~~November 1, 2019,~~July 31, 2020, respectively.

2 Average debt and equity is defined as average current year and prior year ending debt, including current maturities, short-term borrowings, and operating lease liabilities, plus the average current year and prior year ending total equity.

Results of Operations

Net Sales – Net sales in the ~~third~~second quarter of ~~2020~~2021 increased ~~28.3%~~1.0% to ~~$22.3~~$27.6 billion. ~~The increase in total sales was primarily driven by comparable sales growth.~~ Comparable sales ~~increased 30.1%~~decreased 1.6% over the same period, driven by a ~~16.4% increase~~12.9% decrease in comparable customer transactions ~~and a 13.7%~~partially offset by an 11.3% increase in comparable average ticket.

~~Table of Contents~~

During the ~~third~~second quarter of ~~2020,~~2021, we experienced comparable sales increases in ~~all~~seven of 15 product categories, ~~with broad-based strength~~including Electrical, Lumber, Kitchens & Bath, Flooring, Appliances, Décor, and Rough Plumbing. We delivered strong comparable sales in ~~performance across both DIY~~Electrical and ~~Pro customers. Comparable sales were above the Company average in~~ Lumber ~~Lawn & Garden, Seasonal & Outdoor Living, and Décor. Lumber experienced~~due to strong unit demand ~~across DIY and~~from Pro ~~customers. As~~ customers, actively engaged in outdoor landscaping and other beautification projects, Lawn & Garden experienced broad based strength across the category. Hurricane preparation activities and favorable weather drove growth in Seasonal & Outdoor Living. Décor experienced strong performance in home accents and home organization as ~~customers~~well as unit price increases driven by inflation. Customers continue to ~~look for impactful DIY projects.~~appreciate our allen+roth® offerings, which led to strong sales in countertops, kitchen cabinets, and vanities within our Kitchens and Bath category. New product offerings drove strong sales in Flooring. Décor also delivered strong sales in the quarter as we leveraged our Total Home strategy to support customers with their home remodeling needs. We experienced the lowest comparable sales in Tools, Paint, and Hardware in the quarter due to cycling record prior year demand at the onset of the COVID-19 pandemic. Geographically, ~~all~~five of 15 U.S. regions ~~and the Canadian region~~ experienced positive comparable sales, and comparable sales for our Canadian operations in ~~excess of 20%.~~local currency were in line with our U.S. comparable sales.

Net sales increased ~~23.5%~~10.7% to ~~$69.3~~$52.0 billion for the first ~~nine~~six months of ~~2020~~2021 compared to ~~2019. The increase in total sales was driven primarily by an increase in comparable sales.~~2020. Comparable sales increased ~~25.6%~~9.8% over the same period, ~~primarily~~ driven by a ~~14.0% increase in customer transactions and a 11.6%~~12.5% increase in comparable average ~~ticket.~~ticket, partially offset by a 2.7% decrease in comparable customer transactions.

Gross Margin – For the ~~third~~second quarter of ~~2020,~~2021, gross margin as a percentage of sales ~~increased 28~~decreased 30 basis points. The gross margin ~~increase~~decrease for the quarter is driven by 35 basis points of deleverage from supply chain costs, 25 basis points of pressure from lumber product mix shifts, 20 basis points of deleverage from less favorable product mix in other categories, and 20 basis points of deleverage from inventory shrink and live goods damages from extreme weather conditions. These unfavorable


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impacts are partially offset by approximately 6540 basis points of total rate improvement, driven by continued improvements ~~from our~~in managing product costs and disciplined pricing ~~and promotional~~ strategies, and ~~35 basis points due to a favorable product mix as demand was stronger in higher margin categories. These favorable impacts were partially offset by~~ 30 basis points of leverage from ~~lower~~higher credit ~~revenue, 25 basis points of deleverage from inventory shrink, and 20 basis points of deleverage from supply chain costs.~~revenue.

Gross margin as a percentage of sales ~~increased 135~~decreased 12 basis points in the first ~~nine~~six months of ~~2020~~2021 compared to ~~2019.~~2020. Gross margin was ~~positively~~negatively impacted by 60 basis points of product mix shifts, 30 basis points of deleverage from supply chain costs, and 20 basis points of deleverage from inventory shrink and damages. These unfavorable impacts are partially offset by approximately ~~165~~85 basis points of total rate improvement driven by continued improvements in managing product costs and 35disciplined pricing strategies, and 10 basis points of leverage ~~due to favorable product mix, partially offset by 30 basis points of deleverage due to tariff pressure and 15 bps of deleverage~~ from ~~inventory shrink.~~higher credit revenue.

SG&A – For the ~~third~~second quarter of ~~2020,~~2021, SG&A expense leveraged 31137 basis points as a percentage of sales compared to the ~~third~~second quarter of ~~2019.~~2020. This is primarily driven by approximately 90145 basis points of leverage due to lower COVID-19 related expenses, including special payments to hourly front-line associates, emergency paid leave, charitable contributions, and cleaning costs. These were partially offset by approximately 20 basis points of deleverage related to higher employee healthcare costs.

SG&A expense as a percentage of sales leveraged 195 basis points in the first six months of 2021 compared to 2020. This was primarily driven by approximately 145 basis points of leverage due to lower COVID-19 related expenses and approximately 40 basis points of leverage in retail operating salaries due to increased sales and improved operating efficiencies 35 basis points of occupancy leverage due to higher sales volume compared to fixed occupancy costs, 35 basis points of leverage in employee benefits due to the CARES Act employee retention tax credit, 25 basis points of leverage in advertising expense due to optimizing our channel mix, and 20 basis points of leverage from the prior year’s long-lived asset impairment due to the Company’s strategic review of the Canadian operations initiated during the third quarter of 2019. These were partially offset by 130 basis points of deleverage due to COVID-19 related expenses, including two hourly front-line employee bonuses, emergency paid leave, and increased cleaning costs and other safety-related programs, as well as 45 basis points of deleverage due to our U.S. Stores Reset.

~~SG&A expense~~ as a ~~percentage~~result of sales leveraged 64 basis points in the first nine months of 2020 compared to 2019. This was primarily driven by 105 basis points of leverage in retail operating salaries, 35 basis points of leverage in advertising, 35 basis points of leverage in employee benefits, and 35 basis points of leverage in occupancy costs. These were partially offset by 150 basis points of deleverage due to COVID-19 related expenses.our PPI initiative.

Depreciation and Amortization – Depreciation and amortization ~~leveraged 20~~deleveraged 29 basis points as a percentage of sales for the ~~third~~second quarter of ~~2020~~2021 compared to the prior year primarily due to ~~an increase in sales during the period.~~increased capital investment related to store environment and technology throughout 2020. Property, less accumulated depreciation, increased to $19.0 billion at July 30, 2021, compared to $18.7 billion at October 30, 2020, compared to $18.4 billion at November 1, 2019. As of October 30, 2020, and November 1, 2019, we owned 84% and 83% of our stores, respectively, which included stores on leased land.July 31, 2020.

Depreciation and amortization ~~leveraged 19~~deleveraged 15 basis points as a percentage of sales for the first ~~nine~~six months of ~~2020~~2021 compared to ~~2019~~2020 primarily due to the same factors that impacted depreciation and amortization for the ~~third~~second quarter.

Interest – Net – Interest expense for the ~~third~~second quarter of ~~2020 increased~~2021 leveraged two basis points primarily as a result of lower interest costs from the ~~issuance of $4.0 billion unsecured notes in March 2020 and $4.0 billion unsecured notes in~~ October 2020 cash tender offers and the ~~$1.0 billion term loan entered in January 2020 that was repaid during the quarter, as well as amortization~~payoff of ~~the loss on cash flow hedges.~~scheduled debts at maturity.

Interest expense for the first ~~nine~~six months of ~~2020 increased~~2021 leveraged eight basis points primarily due to the same factors that impacted interest expense for the ~~third quarter.~~second quarter as well as increased sales in the current year.

~~Loss on Extinguishment of Debt~~ ~~– During the third quarter of 2020, we repurchased and retired $3.0 billion aggregate principal amount of our outstanding debt resulting in a loss on extinguishment of debt of $1.1 billion.~~

~~Table of Contents~~

Income Tax Provision – Our effective income tax rates were ~~22.6%~~24.4% and 24.0% for the three and six months ended ~~October~~July 30, ~~2020,~~2021, respectively, and ~~November 1, 2019, respectively. The decrease in the effective tax rate~~were 24.4% and 24.6% for the quarter was impacted by higher earnings at RONA inc., which has a full valuation allowance on its deferred tax assets, as well as a favorable discrete item related to excess tax benefits of stock compensation.

~~Our effective income tax rates were 24.3%~~three and ~~22.2% for the nine~~six months ended ~~October 30,~~July 31, 2020, ~~and November 1, 2019,~~ respectively. The increase in the effective tax rate for the first nine months is due to a favorable tax benefit recorded during the first quarter of 2019 associated with a change in approach to pursue a sale of the Mexico operations through liquidation.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

~~Significant customer demand and operating performance year-to-date drove a substantial increase in cash~~Cash flows from ~~operations. These increases,~~operations, supplemented with our short-term and long-term borrowings, ~~have provided ample liquidity~~remain sufficient to fund our operations while allowing us to make strategic investments ~~in our omnichannel capabilities~~ to support long-term growth and return excess cash to shareholders in the form of dividends and share repurchases. Due to the uncertainty caused by the COVID-19 pandemic, we temporarily suspended our share repurchases during the first quarter of fiscal 2020, but reinstated share repurchases under this program during the third quarter. As of ~~October~~July 30, ~~2020,~~2021, we held ~~$8.2~~$4.8 billion of cash and cash equivalents, as well as $3$3.0 billion in undrawn capacity on our revolving credit facilities.

Cash Flows Provided by Operating Activities


		Nine Months Ended					Six Months Ended
(In millions)	(In millions)	October 30, 2020		November 1, 2019		(In millions)	July 30, 2021		July 31, 2020
Net cash provided by operating activities	Net cash provided by operating activities	$	11,485	$	4,111	Net cash provided by operating activities	$	6,913	$	11,752

Cash flows from operating activities continued to provide the primary source of our liquidity. The ~~increase~~decrease in net cash provided by operating activities for the ~~nine~~six months ended ~~October~~July 30, ~~2020, versus~~2021, compared to the ~~nine~~six months ended ~~November 1, 2019,~~July 31, 2020, was driven primarily by ~~higher net earnings and~~ changes in working ~~capital.~~capital, partially offset by higher net earnings. Accounts payable increased by $1.1 billion for the first ~~nine~~six months of ~~2020 by $5.1 billion,~~2021, compared to an increase for the first ~~nine~~six months of ~~2019~~2020 of ~~$523 million, driving an additional $4.6 billion in operating cash flows for the first nine months of fiscal 2020.~~$5.3 billion. The increase in accounts payable in the prior year was driven by ~~higher sustained~~a ramp up in inventory purchase volume ~~in 2020 as compared~~for the first half to ~~2019.~~meet sustained customer demand at the beginning of the COVID-19 pandemic. In the current year, we have continued to experience sustained


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demand levels and maintained a higher level of inventory purchases and related accounts payable. Other operating liabilities ~~increased $1.1 billion~~decreased $139 million for the first ~~nine~~six months of ~~2020~~2021 compared to ~~a decrease~~an increase of ~~$408 million~~$1.2 billion in the first ~~nine~~six months of ~~2019.~~2020. The ~~increase~~decrease in other operating liabilities in the current year compared to the prior year is primarily driven by ~~increases~~COVID-related accrued discretionary bonuses for employees in ~~deferred revenue, increased accrued compensation~~the prior year and ~~employee benefits,~~the timing of estimated federal and increased accrued payroll taxes due to the deferral of qualifying employer payroll taxes in accordance with the CARES Act. Inventory decreased operating cash flow for the first nine months of 2020 by approximately $2.5 billion, compared to a decrease of approximately $1.1 billion for the first nine months of 2019, primarily due to higher inventory purchases to meet sustained customer demand in 2020.state income tax payments.

Cash Flows Used in Investing Activities


		Nine Months Ended					Six Months Ended
(In millions)	(In millions)	October 30, 2020		November 1, 2019		(In millions)	July 30, 2021		July 31, 2020
Net cash used in investing activities	Net cash used in investing activities	$	(2,652)	$	(863)	Net cash used in investing activities	$	(1,845)	$	(1,560)

Net cash used in investing activities primarily consists of transactions related to capital expenditures and investments.

~~Table of Contents~~

Capital expenditures

Our capital expenditures generally consist of investments in our strategic initiatives to enhance our ability to serve customers, improve existing stores, and support expansion plans. The following table provides our capital expenditures for the ~~nine~~six months ended ~~October~~July 30, ~~2020,~~2021, and ~~November 1, 2019:~~July 31, 2020:


		Nine Months Ended					Six Months Ended
(In millions)	(In millions)	October 30, 2020		November 1, 2019		(In millions)	July 30, 2021		July 31, 2020
Existing store investments 1		$	960	$	694
Core business investments 1						Core business investments 1	$	655	$	587
Strategic initiatives 2	Strategic initiatives 2	138		127		Strategic initiatives 2	114		78
New stores, new corporate facilities and international 3	New stores, new corporate facilities and international 3	74		106		New stores, new corporate facilities and international 3	77		45
Total capital expenditures	Total capital expenditures	$	1,172	$	927	Total capital expenditures	$	846	$	710

1Includes merchandising resets, facility repairs, replacements of IT and store equipment, among other specific efforts.

2Represents investments related to our strategic focus areas aimed at improving customers’ experience and driving improved performance in the near and long ~~term.~~term (excluding acquisitions).

3Represents expenditures primarily related to land purchases, buildings, and personal property for new store projects and new corporate facilities projects, as well as expenditures related to our international operations.

Our ~~2020~~fiscal year 2021 outlook for capital expenditures is approximately ~~$1.7~~$2.0 billion.

Cash Flows Used in or Provided by Financing Activities


		Nine Months Ended					Six Months Ended
(In millions)	(In millions)	October 30, 2020		November 1, 2019		(In millions)	July 30, 2021		July 31, 2020
Net cash used in financing activities		$	(1,304)	$	(2,978)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	$	(4,927)	$	729

Net cash used in or provided by financing activities primarily consists of transactions related to our long-term debt, short-term borrowings, share repurchases, and cash dividend payments.

~~Short-term Borrowing Facilities~~Total Debt

During the six months ended July 30, 2021, we issued $2.0 billion of unsecured notes, the proceeds of which are to be used for general corporate purposes. During the six months ended July 30, 2021, we also paid $525 million to retire scheduled debts at maturity.

In ~~March 2020,~~April 2021, we entered into a ~~$1.02~~$1.0 billion ~~five year~~ unsecured ~~revolving credit agreement (the 2020 Credit Agreement)~~364-day term loan facility (2021 Term Loan), which has a maturity date of April 21, 2022. Outstanding borrowings under the 2021 Term Loan were $1.0 billion, with ~~a syndicate~~an interest rate of ~~banks. In addition, we have a $1.98 billion five year unsecured revolving second amended and restated credit agreement (the Second Amended and Restated Credit Agreement) with a syndicate~~0.79%, as of banks. Subject to obtaining commitments from the lenders and satisfying other conditions specified in the 2020 Credit Agreement and the Second Amended and Restated Credit Agreement, the Company may increase the combined aggregate availability of both agreements by an additional $520 million.July 30, 2021.

The 2020 Credit Agreement and the Second Amended and Restated Credit Agreement support our commercial paper program. The amount available to be drawn under the 2020 Credit Agreement and the Second Amended and Restated Credit Agreement is reduced by the amount of borrowings under our commercial paper program. There were no outstanding borrowings under


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the Company’s commercial paper program, the 2020 Credit Agreement, or the Second Amended and Restated Credit Agreement as of ~~October~~July 30, ~~2020,~~2021, and ~~November 1, 2019.~~July 31, 2020. Total combined availability under the 2020 Credit Agreement and the Second Amended and Restated Credit Agreement as of ~~October~~July 30, ~~2020,~~2021, was $3.0 billion.

The ~~following table includes additional information related to our short-term borrowings for the nine months ended October 30, 2020, and November 1, 2019:~~

Nine Months Ended
(In millions, except for interest rate data) October 30, 2020 November 1, 2019
Net change in commercial paper $ (941) $ (85)
Maximum commercial paper outstanding at any month-end $ 1,858 $ 1,189
Short-term borrowings outstanding at quarter-end $ — $ 637
Weighted-average interest rate of short-term borrowings outstanding — % 1.97 %

~~Table of Contents~~

~~The~~2021 Term Loan, 2020 Credit Agreement and the Second Amended and Restated Credit Agreement ~~contains~~contain customary representations, warranties, and covenants. We were in compliance with those covenants at ~~October~~July 30, ~~2020.~~

~~Long-Term Debt~~2021.

The following table includes additional information related to ~~the Company’s long-term~~our debt for the ~~nine~~six months ended ~~October~~July 30, ~~2020,~~2021, and ~~November 1, 2019:~~July 31, 2020:

Nine Months Ended
(In millions) October 30, 2020 November 1, 2019
Net proceeds from issuance of debt $ 7,929 $ 2,972
Repayment of debt $ (5,582) $ (1,092)

During the nine months ended October 30, 2020, we issued $8.0 billion of unsecured notes. This is comprised of $4.0 billion of unsecured notes issued in March 2020 to finance current year maturities and for other general corporate purposes and $4.0 billion of unsecured notes issued in October 2020 to fund the 2020 Cash Tender Offer to purchase existing unsecured notes and for other general corporate purposes. We completed the tender offer in October 2020 in which we purchased and retired $3.0 billion of our higher coupon notes prior to maturity to take advantage of a favorable interest rate environment to reduce our long-term interest expense. As part of this transaction, we incurred $1.1 billion of debt extinguishment costs which included premium to noteholders and the cost of reverse treasury lock derivative contracts associated with the tender offer. During the nine months ended October 30, 2020, we paid $500 million to repay scheduled long-term debts at maturity, as well as $1.0 billion early repayment of the 364-day term loan facility entered into in January 2020.


	Six Months Ended
(In millions, except for interest rate data)	July 30, 2021			July 31, 2020
Net proceeds from issuance of debt	$	2,988		$	3,961
Repayment of debt	$	(568)		$	(568)
Net change in commercial paper	$	—		$	(941)
Maximum commercial paper outstanding at any month-end	$	400		$	1,858
Short-term borrowings outstanding at quarter-end	$	1,000		$	1,000
Weighted-average interest rate of short-term borrowings outstanding	0.79		%	1.42		%

Share Repurchases

We have an ongoing share repurchase program, authorized by the Company’s Board of Directors, that is executed through purchases made from time to time either in the open market or through private off-market transactions. We also withhold shares from employees to satisfy tax withholding liabilities. Shares repurchased are retired and returned to authorized and unissued status. Due to the uncertainty caused by the COVID-19 pandemic, we temporarily suspended our share repurchases during the first quarter of fiscal 2020, but as announced on September 29, 2020, determined to reinstate the previously authorized share repurchase program. The following table provides, on a settlement date basis, the total number of shares repurchased, average price paid per share, and the total amount paid for share repurchases for the ~~nine~~six months ended ~~October~~July 30, ~~2020,~~2021, and ~~November 1, 2019:~~July 31, 2020:


		Nine Months Ended					Six Months Ended
(In millions, except per share data)	(In millions, except per share data)	October 30, 2020		November 1, 2019		(In millions, except per share data)	July 30, 2021		July 31, 2020
Total amount paid for share repurchases	Total amount paid for share repurchases	$	1,528	$	3,649	Total amount paid for share repurchases	$	6,174	$	966
Total number of shares repurchased	Total number of shares repurchased	13.1		35.6		Total number of shares repurchased	33.1		9.8
Average price paid per share	Average price paid per share	$	116.99	$	102.59	Average price paid per share	$	186.73	$	98.78

During the quarter, the Company entered into and finalized a variable notional ASR agreement with a third-party financial institution to repurchase shares. The Company’s prepayment of the maximum notional amount of the variable notional ASR at the inception of the agreement resulted in a $368 million balance to be refunded to the Company subsequent to quarter end. This prepayment is reflected in other financing – net in the consolidated statements of cash flows as of the end of the second quarter.

As of ~~October~~July 30, ~~2020,~~2021, we had ~~$8.1~~$13.6 billion remaining available under our share repurchase program with no expiration date.

Dividends

Dividends are paid in the quarter immediately following the quarter in which they are declared. Dividends paid per share increased from ~~$1.51~~$1.10 per share for the ~~nine~~six months ended ~~November 1, 2019,~~July 31, 2020, to ~~$1.65~~$1.40 per share for the ~~nine~~six months ended ~~October~~July 30, ~~2020.~~2021.

Capital Resources

We expect to continue to have access to the capital markets on both a short-term and long-term basis when needed for liquidity purposes by issuing commercial paper or new long-term debt. The availability and the borrowing costs of these funds could be adversely affected, however, by a downgrade of our debt ratings or a deterioration of certain financial ratios. The table below reflects our debt ratings by Standard & Poor’s (S&P) and Moody’s as of ~~November 25, 2020,~~August 26, 2021, which we are disclosing to enhance understanding of our sources of liquidity and the effect of our ratings on our cost of funds. Our debt ratings have enabled, and should continue to enable, us to refinance our debt as it becomes due at favorable rates in capital markets. Our commercial


						24

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~~commercial~~ paper and senior debt ratings may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating.


Debt Ratings	S&P	Moody’s
Commercial Paper	A-2	P-2
Senior Debt	BBB+	Baa1
Senior Debt Outlook	Stable	Stable

There are no provisions in any agreements that would require early cash settlement of existing debt or leases as a result of a downgrade in our debt rating or a decrease in our stock price. In addition, we do not believe it will be necessary to repatriate significant cash and cash equivalents and short-term investments held in foreign affiliates to fund domestic operations.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet financing that has, or is reasonably likely to have, a material, current or future effect on our financial condition, cash flows, results of operations, liquidity, capital expenditures or capital resources.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

In March ~~2020,~~2021, we issued ~~$4.0~~$2.0 billion of unsecured notes in the ordinary course of business ~~and~~to be used ~~a portion of the net proceeds from the sale of the notes~~ for the repayment of $500 million aggregate principal amount due April 2020. In October 2020, we issued $4.0 billion of unsecured notes in the ordinary course of business and used the proceeds from this issuance to repurchase $3.0 billion of unsecured debt before maturity.general corporate purposes. The table below summarizes our contractual obligations relating to long-term debt, excluding operating and finance lease obligations, at ~~October~~July 30, ~~2020~~.2021. The unsecured notes issued in the first ~~and third quarters~~quarter of fiscal ~~2020~~year 2021 are further described in Note 7 to the consolidated financial statements included herein.


		Payments Due by Period											Payments Due by Period
				Less Than		1-3		4-5		After 5					Less Than		1-3		4-5		After 5
(In millions)	(In millions)	Total		1 Year		Years		Years		Years		(In millions)	Total		1 Year		Years		Years		Years
Long-term debt (principal amounts, excluding discounts and debt issuance costs)	Long-term debt (principal amounts, excluding discounts and debt issuance costs)	$	21,313	$	525	$	1,768	$	1,951	$	17,069	Long-term debt (principal amounts, excluding discounts and debt issuance costs)	$	22,788	$	1,250	$	518	$	3,301	$	17,719
Long-term debt (interest payments)	Long-term debt (interest payments)	19,455		775		1,467		1,376		15,837		Long-term debt (interest payments)	11,981		814		1,549		1,455		8,163
Total	Total	$	40,768	$	1,300	$	3,235	$	3,327	$	32,906	Total	$	34,769	$	2,064	$	2,067	$	4,756	$	25,882

As of ~~October~~July 30, ~~2020,~~2021, there were no other material changes to our contractual obligations and commercial commitments outside the ordinary course of business since the end of ~~2019.~~fiscal year 2020. Refer to the Annual Report on Form 10-K for additional information regarding our contractual obligations and commercial commitments.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are described in Note 1 to the consolidated financial statements presented in the Annual Report. Our critical accounting policies and estimates are described in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report. Our significant and critical accounting policies have not changed significantly since the filing of the Annual Report.

Item 3. - Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to certain market risks, including changes in foreign currency exchange rates related to our international operations, interest rates, and commodity prices. The Company’s market risks have not changed materially from that disclosed in the Annual Report for the fiscal year ended January ~~31, 2020.~~29, 2021.


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Item 4. - Controls and Procedures

The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s “disclosure controls and procedures,” (as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act)). Based upon their evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of ~~October~~July 30, ~~2020,~~2021, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the SEC (1) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

In addition, no change in the Company’s internal control over financial reporting occurred during the quarter ended ~~October~~July 30, ~~2020,~~2021, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Although most of our corporate employees are working remotely due to the COVID-19 global health crisis, we have not experienced a material impact to our internal control over financial reporting. We continue to monitor the pandemic and its effects on the design and operating effectiveness of our internal controls.


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Table of Contents

Part II – OTHER INFORMATION

Item 1. - Legal Proceedings

The Company is from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. With respect to such lawsuits, claims and proceedings, the Company records reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on its results of operations, financial position or cash flows. The Company maintains liability insurance for certain risks that are subject to certain self-insurance limits.

Item 1A. - Risk Factors

~~In addition to~~There have been no material changes in the ~~other information set forth in this Quarterly Report, you should carefully consider the~~Company’s risk factors ~~described~~from those disclosed in ~~Part I,~~ “Item 1A. Risk Factors” in our Annual Report filed with the SEC on March 23, 2020, and as updated in Item 1A in our first quarter report on Form 10-Q filed with the SEC on May 28, 2020, which could materially affect our business, financial condition and/or operating results.22, 2021.

Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table sets forth information with respect to purchases of the Company’s common stock made during the ~~third quarter of fiscal 2020:~~three months ended July 30, 2021:

Total Number of Shares Purchased 1
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 2
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 2
August 1, 2020 - August 28, 2020 5,818 $ 158.53 — $ 8,717,610,699
August 29, 2020 - October 2, 2020 327,547 166.54 324,542 8,663,561,264
October 3, 2020 - October 30, 2020 3,314,043 170.51 3,301,996 8,100,499,267
As of October 30, 2020 3,647,408 $ 170.14 3,626,538 $ 8,100,499,267


	Total Number of Shares Purchased 1	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 2	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 2
May 1, 2021 - May 28, 2021 3	8,846,056	$	191.38	8,845,527	$	14,268,152,105
May 29, 2021 - July 2, 2021	2,027,385	190.92		1,996,334	13,887,152,851
July 3, 2021 - July 30, 2021 3	5,534,538	191.35		5,530,090	13,585,565,726
As of July 30, 2021	16,407,979	$	191.32	16,371,951	$	13,585,565,726

1The total number of shares repurchased includes shares withheld from employees to satisfy either the exercise price of stock options or the statutory withholding tax liability upon the vesting of share-based awards.

2On December ~~12, 2018,~~9, 2020, the ~~Company’s~~Company announced that its Board of Directors authorized ~~an additional $10.0~~$15.0 billion of share ~~repurchase~~repurchases under the program with no ~~expiration,~~expiration.

3In May 2021, the Company entered into a variable notional Accelerated Share Repurchase (ASR) agreement with a third-party financial institution to repurchase between $1.8 billion and $2.5 billion of the Company’s common stock. At inception, pursuant to the agreement, the Company paid $2.5 billion to the financial institution and received an initial delivery of 7.2 million shares. In July, prior to the end of the second quarter, the Company finalized the transaction for $2.1 billion and received an additional 4.0 million shares. A $368 million cash payment from the financial institution, which is equal to the difference between the $2.5 billion payment made at inception and the final notional amount, was ~~announced on~~received after the ~~same day.~~end of the second quarter. The average price paid per share in settlement of the ASR agreement included in the table above was determined with reference to the volume-weighted average price of the Company’s common stock over the term of the ASR agreement. See Note 9 to the consolidated financial statements included herein for additional information regarding share repurchases.


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Item 6. - Exhibits

Exhibit
Number Incorporated by Reference
Exhibit Description Form File No. Exhibit Filing Date
3.1
Restated Charter of Lowe’s Companies, Inc.
10-Q 001-07898 3.1 September 1, 2009
3.2
Bylaws of Lowe’s Companies, Inc., as amended and restated May 29, 2020.
8-K 001-07898 3.1 June 2, 2020
4.1
Seventeenth Supplemental Indenture, dated as of October 22, 2020, between Lowe’s Companies, Inc. and U.S. Bank National Association (as successor trustee).
8-K 001-07898 4.2 October 22, 2020
10.1
Form of Lowe’s Companies, Inc. Performance Share Unit Award Agreement. *‡
10.2
Offer Letter between Lowe’s Companies, Inc. and Dan C . Griggs, Jr. entered into on October 2, 2020 .*‡
15.1
Deloitte & Touche LLP Letter re Unaudited Interim Financial Information.‡
31.1
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.‡
31.2
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.‡
32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.†
32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.†
101.INS XBRL Instance Document.‡
101.SCH XBRL Taxonomy Extension Schema Document.‡
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.‡
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.‡
101.LAB XBRL Taxonomy Extension Label Linkbase Document.‡
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.‡
104 Cover Page Interactive Data File (formatted as Inline XBRL document and included in Exhibit 101).‡
* Indicates a management contract or compensatory plan or arrangement.
‡ Filed herewith.
† Furnished herewith.

Exhibit
Number

Incorporated by Reference

Exhibit Description

Form

File No.

Exhibit

Filing Date

3.1

Restated Charter of Lowe’s Companies, Inc.

10-Q

001-07898

3.1

September 1, 2009

3.2

Bylaws of Lowe’s Companies, Inc., as amended and restated May 29, 2020.

8-K

001-07898

3.1

June 2, 2020

10.1

Lowe’s Companies, Inc. Directors’ Deferred Compensation Plan, as amended and restated May 28, 2021.‡

15.1

Deloitte & Touche LLP Letter re Unaudited Interim Financial Information.‡

31.1

Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.‡

31.2

Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.‡

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.†

32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.†

101.INS

Inline XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.‡

101.SCH

Inline XBRL Taxonomy Extension Schema Document.‡

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.‡

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.‡

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.‡

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.‡

104

Cover Page Interactive Data File (formatted as Inline XBRL document and included in Exhibit 101).‡

Indicates a management contract or compensatory plan or arrangement.

‡

Filed herewith.

†

Furnished herewith.


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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						LOWE’S COMPANIES, INC.
						(Registrant)

~~November 25, 2020~~August 26, 2021						By: /s/ Dan C. Griggs, Jr.
Date						Dan C. Griggs, Jr. Senior Vice President, Tax and Chief Accounting Officer


						29


	Available-for-Sale
(In millions)	Cost Basis		Fair Value		Held-to-Maturity
Due in one year or less	$	699	$	702	$	1,150
Due after one year through five years	198		202		0
Total	$	897	$	904	$	1,150


	Costs Incurred
	Three Months Ended		Nine Months Ended
(In millions)	November 1, 2019		November 1, 2019
Long-lived asset impairment	$	53	$	53



Total	$	53	$	53