UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~November 3, 2017~~May 4, 2018



o	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 Lowe’s Blvd., Mooresville, NC		28117
(Address of principal executive offices)		(Zip Code)

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

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. ý Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). ý Yes o 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 ý		Accelerated filer o
Non-accelerated filer o		Smaller reporting company o
		Emerging growth company o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes ý 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 ~~12/~~6/1/~~2017~~2018
Common Stock, $0.50 par value		~~829,760,597~~816,153,978

LOWE’S COMPANIES, INC.

- TABLE OF CONTENTS -



PART I - Financial Information			Page No.

	Item 1.	Financial Statements

		Consolidated Balance Sheets — ~~November 3, 2017~~May 4, 2018 (Unaudited), ~~October 28, 2016~~May 5, 2017 (Unaudited) and February ~~3, 2017~~2, 2018	3

		Consolidated Statements of Current and Retained Earnings (Unaudited) — Three ~~and nine~~ months ended ~~November 3,~~May 4, 2018 and May 5, 2017 ~~and October 28, 2016~~	4

		Consolidated Statements of Comprehensive Income (Unaudited) — Three ~~and nine~~ months ended ~~November 3,~~May 4, 2018 and May 5, 2017 ~~and October 28, 2016~~	4

		Consolidated Statements of Cash Flows (Unaudited) — ~~Nine~~Three months ended ~~November 3,~~May 4, 2018 and May 5, 2017 ~~and October 28, 2016~~	5

		Notes to Consolidated Financial Statements (Unaudited)	6

		Report of Independent Registered Public Accounting Firm	14

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2423

	Item 4.	Controls and Procedures	2423

PART II - Other Information

	Item 1.	Legal Proceedings	2524

	Item 1A.	Risk Factors	2524

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

	Item 5.	Other Information	25

	Item 6.	Exhibits	26

		Signature	27

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

Lowe’s Companies, Inc.

Consolidated Balance Sheets

In Millions, Except Par Value Data


		(Unaudited)		(Unaudited)							(Unaudited)			(Unaudited)
		November 3, 2017		October 28, 2016			February 3, 2017				May 4, 2018			May 5, 2017			February 2, 2018
Assets
Current assets:
Cash and cash equivalents		$	743	$	960		$	558			$	1,565		$	1,963		$	588
Short-term investments		85		123			100				205			84			102
Merchandise inventory - net		12,393		10,990			10,458				13,204			12,254			11,393
Other current assets		788		655			884				1,059			975			689
Total current assets		14,009		12,728			12,000				16,033			15,276			12,772
Property, less accumulated depreciation		19,818		20,037			19,949				19,500			19,748			19,721
Long-term investments		370		436			366				321			477			408
Deferred income taxes - net		347		331			222				199			272			168
Goodwill		1,327		1,034			1,082				1,288			1,081			1,307
Other assets		912		804			789				896			759			915
Total assets		$	36,783	$	35,370		$	34,408			$	38,237		$	37,613		$	35,291

Liabilities and equity
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings		$	171	$	—		$	510			$	—		$	—		$	1,137
Current maturities of long-term debt		297		800			795				896			295			294
Accounts payable		8,903		7,836			6,651				10,104			9,905			6,590
Accrued compensation and employee benefits		808		704			790				715			725			747
Deferred revenue		1,404		1,258			1,253				1,439			1,415			1,378
Other current liabilities		2,155		2,035			1,975				2,620			2,346			1,950
Total current liabilities		13,738		12,633			11,974				15,774			14,686			12,096
Long-term debt, excluding current maturities		15,570		14,395			14,394				14,948			15,770			15,564
Deferred revenue - extended protection plans		794		745			763				808			769			803
Other liabilities		939		889			843				962			857			955
Total liabilities		31,041		28,662			27,974				32,492			32,082			29,418

Equity:
Shareholders' equity:
Preferred stock - $5 par value, none issued		—		—			—				—			—			—
Common stock - $0.50 par value;
Shares issued and outstanding
November 3, 2017	831
October 28, 2016	873
February 3, 2017	866	415		437			433
May 4, 2018										822
May 5, 2017										853
February 2, 2018										830	411			426			415
Capital in excess of par value		—		—			—				—			—			22
Retained earnings		5,289		6,376			6,241				5,405			5,346			5,425
Accumulated other comprehensive income/(loss)		38		(214		)	(240		)		(71		)	(241		)	11
Total Lowe’s Companies, Inc. shareholders’ equity		5,742		6,599			6,434
Noncontrolling interest		—		109			—
Total equity		5,742		6,708			6,434
Total liabilities and equity		$	36,783	$	35,370		$	34,408
Total shareholders' equity											5,745			5,531			5,873
Total liabilities and shareholders' equity											$	38,237		$	37,613		$	35,291

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

Lowe’s Companies, Inc.

Consolidated Statements of Current and Retained Earnings (Unaudited)

In Millions, Except Per Share and Percentage Data


	Three Months Ended								Nine Months Ended								Three Months Ended
	November 3, 2017				October 28, 2016				November 3, 2017				October 28, 2016				May 4, 2018				May 5, 2017
Current Earnings	Amount			% Sales	Amount			% Sales	Amount			% Sales	Amount			% Sales	Amount			% Sales	Amount			% Sales
Net sales	$	16,770		100.00	$	15,739		100.00	$	53,125		100.00	$	49,233		100.00	$	17,360		100.00	$	16,860		100.00
Cost of sales	11,057			65.93	10,332			65.65	34,942			65.77	32,201			65.41	11,348			65.37	11,060			65.60
Gross margin	5,713			34.07	5,407			34.35	18,183			34.23	17,032			34.59	6,012			34.63	5,800			34.40
Expenses:
Selling, general and administrative	3,808			22.71	4,084			25.94	11,615			21.87	11,340			23.02	4,187			24.12	3,876			22.99
Depreciation and amortization	358			2.13	384			2.44	1,080			2.03	1,115			2.27	360			2.07	365			2.16
Operating income	1,547			9.23	939			5.97	5,488			10.33	4,577			9.30	1,465			8.44	1,559			9.25
Interest - net	160			0.96	163			1.04	479			0.91	486			0.99	160			0.92	161			0.96
Loss on extinguishment of debt	—			—	—			—	464			0.87	—			—	—			—	464			2.75
Pre-tax earnings	1,387			8.27	776			4.93	4,545			8.55	4,091			8.31	1,305			7.52	934			5.54
Income tax provision	515			3.07	397			2.52	1,652			3.10	1,661			3.37	317			1.83	332			1.97
Net earnings	$	872		5.20	$	379		2.41	$	2,893		5.45	$	2,430		4.94	$	988		5.69	$	602		3.57


Weighted average common shares outstanding - basic	831				873				843				884				825				857
Basic earnings per common share	$	1.05			$	0.43			$	3.42			$	2.74			$	1.19			$	0.70
Weighted average common shares outstanding - diluted	832				874				844				886				826				858
Diluted earnings per common share	$	1.05			$	0.43			$	3.42			$	2.73			$	1.19			$	0.70
Cash dividends per share	$	0.41			$	0.35			$	1.17			$	0.98			$	0.41			$	0.35

Retained Earnings
Balance at beginning of period	$	5,253			$	6,839			$	6,241			$	7,593
Net earnings attributable to Lowe’s Companies, Inc.	872				378				2,893				2,428
Beginning balance																	$	5,425			$	6,241
Cumulative effect of accounting change																	33				—
Net earnings																	988				602
Cash dividends declared	(341		)		(306		)		(984		)		(865		)		(338		)		(299		)
Share repurchases	(495		)		(535		)		(2,861		)		(2,780		)		(703		)		(1,198		)
Balance at end of period	$	5,289			$	6,376			$	5,289			$	6,376			$	5,405			$	5,346

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
	November 3, 2017			October 28, 2016			November 3, 2017			October 28, 2016			May 4, 2018					May 5, 2017
	Amount		% Sales	Amount		% Sales	Amount		% Sales	Amount		% Sales	Amount			% Sales		Amount			% Sales
Net earnings	$	872	5.20	$	379	2.41	$	2,893	5.45	$	2,430	4.94	$	988		5.69		$	602		3.57
Foreign currency translation adjustments - net of tax	173		1.03	152		0.97	278		0.52	179		0.36	(83		)	(0.48	)	(1		)	—
Other comprehensive income	173		1.03	152		0.97	278		0.52	179		0.36
Other comprehensive loss													(83		)	(0.48	)	(1		)	—
Comprehensive income	$	1,045	6.23	$	531	3.38	$	3,171	5.97	$	2,609	5.30	$	905		5.21		$	601		3.57

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

Lowe’s Companies, Inc.

Consolidated Statements of Cash Flows (Unaudited)

In Millions


	Nine Months Ended						Three Months Ended
	November 3, 2017			October 28, 2016			May 4, 2018			May 5, 2017
Cash flows from operating activities:
Net earnings	$	2,893		$	2,430		$	988		$	602
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	1,148			1,190			387			389
Deferred income taxes	(118		)	(72		)	(21		)	(64		)
Loss on property and other assets - net	21			130			6			11
Loss on extinguishment of debt	464			—			—			464
(Gain) loss on cost method and equity method investments	(86		)	300
Loss on cost method and equity method investments							—			7
Share-based payment expense	78			71			24			26
Changes in operating assets and liabilities:
Merchandise inventory - net	(1,783		)	(718		)	(1,846		)	(1,808		)
Other operating assets	186			32			(234		)	(64		)
Accounts payable	2,251			1,859			3,521			3,291
Other operating liabilities	318			47			604			441
Net cash provided by operating activities	5,372			5,269			3,429			3,295

Cash flows from investing activities:
Purchases of investments	(680		)	(1,018		)	(573		)	(153		)
Proceeds from sale/maturity of investments	870			987			556			59
Capital expenditures	(787		)	(820		)	(224		)	(202		)
Proceeds from sale of property and other long-term assets	21			28			5			6
Purchases of derivative instruments	—			(103		)
Proceeds from settlement of derivative instruments	—			179
Acquisition of business - net	(509		)	(2,284		)
Other - net	13			(21		)	—			(1		)
Net cash used in investing activities	(1,072		)	(3,052		)	(236		)	(291		)

Cash flows from financing activities:
Net change in short-term borrowings	(340		)	(44		)	(1,140		)	(511		)
Net proceeds from issuance of long-term debt	2,968			3,267			—			2,968
Repayment of long-term debt	(2,836		)	(1,146		)	(13		)	(2,558		)
Proceeds from issuance of common stock under share-based payment plans	87			88			8			38
Cash dividend payments	(947		)	(815		)	(340		)	(304		)
Repurchase of common stock	(3,054		)	(3,054		)	(728		)	(1,237		)
Other - net	(8		)	48			(2		)	(1		)
Net cash used in financing activities	(4,130		)	(1,656		)	(2,215		)	(1,605		)

Effect of exchange rate changes on cash	15			(6		)	(1		)	6

Net increase in cash and cash equivalents	185			555			977			1,405
Cash and cash equivalents, beginning of period	558			405			588			558
Cash and cash equivalents, end of period	$	743		$	960		$	1,565		$	1,963

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

Lowe’s Companies, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 1: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements (unaudited) and notes to the 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). During the first quarter of fiscal year 2018, the Company conformed the financial reporting calendar of a subsidiary, which did not have a significant effect on the consolidated financial statements. The consolidated financial statements (unaudited), in the opinion of management, contain all adjustments necessary to present fairly the financial position as of ~~November 3,~~May 4, 2018, and May 5, 2017, ~~and October 28, 2016,~~ and the results of operations and comprehensive income for the three ~~and nine~~ months ended ~~November 3,~~May 4, 2018, and May 5, 2017, ~~and October 28, 2016,~~ and cash flows for the ~~nine~~three months ended ~~November 3, 2017~~May 4, 2018 and ~~October 28, 2016.~~May 5, 2017.

These interim 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 February ~~3, 2017~~2, 2018 (the Annual Report). The financial results for the interim periods may not be indicative of the financial results for the entire fiscal year.

~~Reclassifications~~

~~Certain prior period amounts have been reclassified to conform to current presentation.~~

Accounting Pronouncements Recently Adopted

Effective February ~~4, 2017,~~3, 2018, the Company adopted Accounting Standards Update 2014-09 (ASU ~~2016-09)~~2014-09), ~~Compensation-Stock Compensation~~Revenue from Contracts with Customers (Topic ~~718): Improvements~~606), and all the related amendments, using the modified retrospective method. ASU 2014-09 requires a company to ~~Employee Share-Based Payment Accounting~~recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.~~. All excess~~

Upon adoption of ASU 2014-09, the Company recorded an immaterial adjustment to the opening balance of retained earnings as of February 3, 2018, with related adjustments to deferred revenue, accounts payable and related tax ~~benefits or deficiencies~~effects. The adjustment to retained earnings primarily relates to the change in revenue recognition related to ~~share-based payments~~gift card breakage. The adoption of the guidance also required a change in the timing of how installation services are recognized, the presentation of sales return reserve on the consolidated balance sheet, and a change in the ~~provision for income taxes, which has increased the volatility within our provision for income taxes, as these amounts were previously reported within equity. As a result~~presentation of the ~~adoption, we~~Company’s profit sharing income from its proprietary credit program. We applied ASU 2014-09 only to contracts that were not completed prior to fiscal 2018. Results for reporting periods beginning after February 2, 2018 are presented under ASU 2014-09, while comparative prior period amounts have ~~recognized $10 million~~not been restated and $34 million of excess tax benefits in our provision for income taxes for the three and nine months ended November 3, 2017, respectively. The recognition of these benefits contributed $0.01 and $0.04 to diluted earnings per share for the three and nine months ended November 3, 2017, respectively. Excess tax benefits were historically reflected as a financing activity in the statements of cash flows, and after adoption, are included within operating activities. Cash paid to tax authorities by the Company when directly withholding shares for tax purposes will continue to be ~~classified as a financing activity~~presented under accounting standards in effect in those periods. See Note 2 for additional details of the Company’s revenues.

The impact of adopting the new revenue recognition guidance on our consolidated statement of ~~cash flows. Share-based payment expense will continue~~earnings is as follows:



	Three Months Ended May 4, 2018
Consolidated Statements of Earnings (in millions)	As Reported		Under Historical Guidance		Impact of Adopting ASU 2014-09
Net sales	$	17,360	$	17,231	$	129
Cost of sales	11,348		11,364		(16		)
Gross margin	6,012		5,867		145
Selling, general and administrative	4,187		4,043		144
Operating income	1,465		1,464		1
Pre-tax earnings	1,305		1,304		1
Net earnings	$	988	$	987	$	1

The impacts of adopting the new revenue recognition guidance to ~~reflect estimated forfeitures of share-based payment awards. The Company has adopted the applicable provisions of the ASU prospectively.~~assets and liabilities on our consolidated balance sheets are as follows:



	Balance at May 4, 2018
Consolidated Balance Sheets (in millions)	As Reported		Under Historical Guidance		Impact of Adopting ASU 2014-09
Assets
Other current assets	$	1,059	$	862	$	197

Liabilities
Accounts payable	10,104		10,092		12
Deferred revenue	1,439		1,517		(78		)
Other current liabilities	2,620		2,406		214

Accounting Pronouncements Not Yet Adopted

In January 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350). The ASU eliminates Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation to the identified assets and liabilities of the reporting unit to measure goodwill impairment. Under the amendments in this update, a goodwill impairment test is performed by comparing the fair value of the reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The adoption of this guidance by the Company is not expected to have a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated

financial statements but expects the ASU to have a material impact on its consolidated balance sheets, as a result of the requirement to recognize right-of-use assets and lease liabilities.

~~In May 2014,~~

Note 2: Net Sales

Net sales consists primarily of revenue, net of sales tax, associated with contracts with customers for the ~~FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers. The ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer~~sale of goods orand services ~~to customers~~ in ~~an amount~~amounts that ~~reflects~~reflect consideration the ~~consideration~~Company is entitled to ~~which the entity expects to be entitled~~ in exchange for those goods orand services. In addition, the ASU has expanded disclosure requirements regarding revenue. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of the ASU to fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2016. Companies may use either a full retrospective or a modified retrospective approach to adopt this ASU.

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



(In millions)	Three Months Ended
(In millions)	May 4, 2018		May 5, 2017
Products	$	16,501	$	16,220
Services	624		585
Other	235		55
Net sales	$	17,360	$	16,860

Revenue from products primarily relates to ~~evaluate~~in-store and online merchandise purchases, which are recognized at the ~~impact~~point in time when the customer obtains control of ~~adopting this standard~~the merchandise, which is at the time of in-store purchase or delivery of the product to the customer. A provision for anticipated merchandise returns is provided through a reduction of sales and ~~its subsequent related amendments and interpretations. However, based on our assessment, which will be finalized~~cost of sales in the ~~fourth quarter~~period that the related sales are recorded. Under ASU 2014-09, the merchandise return reserve is presented on a gross basis, with a separate asset and liability included in the consolidated balance sheets as of ~~2017, the Company does not expect~~reporting periods after February 2, 2018. Reporting periods prior to the adoption of ~~this standard~~ASU 2014-09 reflect merchandise return reserves on a net basis. As of May 4, 2018, anticipated sales returns of $305 million are reflected in other current liabilities, and the associated right of return assets of $197 million are reflected in other current assets. As of May 5, 2017, the merchandise return reserve, net of the associated asset, was $101 million reflected in other current liabilities.

Revenues from services primarily relate to ~~have~~professional installation services the Company provides through subcontractors related to merchandise purchased by a ~~material impact on its consolidated financial statements.~~customer. In certain instances, installation services include materials provided by the subcontractor, and both product and installation are included in service revenue. The Company recognizes revenue associated with services as they are rendered, and the majority of services are completed within one week from initiation.

Deferred revenue is presented for merchandise that has ~~determined~~not yet transferred control to the ~~adoption~~customer and for services that have not yet been provided, but for which tender has been accepted. Deferred revenue is recognized in sales either at a point in time when the customer obtains control of merchandise through pickup or delivery, or over time as services are provided to the customer. Deferred revenues associated with amounts received for which customers have not taken possession of the ~~guidance will impact the timing~~merchandise or for which installation has not yet been completed were $1.0 billion and $967 million at May 4, 2018 and May 5, 2017, respectively. The majority of ~~recognition of its stored value card breakage. Currently, breakage~~revenue for goods and services is recognized ~~using~~in the ~~remote method and will be recognized using the proportional method upon adoption of the guidance.~~ quarter following revenue deferral.

Stored-value cards

In addition, the Company ~~expects a change~~defers revenues from stored-value cards, which include gift cards and returned merchandise credits, and recognizes revenue into sales when the cards are redeemed. The liability associated with outstanding stored-value cards was $437 million and $449 million at May 4, 2018, and May 5, 2017, respectively, and these amounts are included in ~~the presentation of the sales return reserve~~deferred revenue on the consolidated balance ~~sheet,~~sheets. Upon adoption of ASU 2014-09, the Company recognizes income from unredeemed stored-value cards in proportion to the pattern of rights exercised by the customer. Amounts recognized as itbreakage were insignificant for the three months ended May 4, 2018 and May 5, 2017.

Extended protection plans

The Company also defers revenues for its separately-priced extended protection plan contracts, which is ~~currently reported~~a Lowe’s-branded program for which the Company is ultimately self-insured. The Company recognizes revenue from extended protection plan sales on a ~~net~~straight-line basis over the respective contract term. Extended protection plan contract terms primarily range from one to five years from the date of purchase or the end of the manufacturer’s warranty, as ~~well~~applicable. Deferred revenue from extended protection plans recognized into sales were insignificant for the three months ending May 4, 2018 and May 5, 2017. Incremental direct acquisition costs associated with the sale of extended protection plans are also deferred and recognized as a change in the timing of how installation services are recognized. The Company is also evaluating principal versus agent conclusions as it relates to certain arrangements with third parties that could impact the presentation of revenueexpense on a ~~gross or net basis.~~straight-line basis over the respective contract term and were insignificant at May 4, 2018 and May 5, 2017, respectively. The ~~Company does not expect any significant modifications to existing systems or material changes~~Company’s extended protection plan deferred costs are included in other assets (noncurrent) on the ~~Company’s internal controls over financial reporting. The adoption~~consolidated balance sheets. All other costs, such as costs of services performed under the ~~ASU will result in increased footnote disclosure requirements.~~contract, general and administrative expenses, and advertising expenses are expensed as incurred.

The ~~Company plans to adopt this ASU~~liability for extended protection plan claims incurred is included in other current liabilities on the ~~first quarter~~consolidated balance sheets and was not material in any of ~~fiscal~~the periods presented. Expenses for claims are recognized when incurred and totaled $46 million and $36 million for the three months ended May 4, 2018 and ~~based on its ongoing assessment~~May 5, 2017, respectively.

Disaggregation of ~~potential impacts to its consolidated financial statements,~~Revenues

The following table presents the ~~Company expects to use a modified retrospective approach to adoption.~~Company’s net sales disaggregated by merchandise division:



	Three Months Ended
	May 4, 2018				May 5, 2017
(In millions)	Total Sales		%		Total Sales		%
Home Décor ¹	$	7,009	40	%	$	6,752	40	%
Building & Maintenance ²	6,797		39		6,484		38
Seasonal ³	3,223		19		3,472		21
Other	331		2		152		1
Total	$	17,360	100	%	$	16,860	100	%


¹	Home Décor includes the following product categories: Appliances, Fashion Fixtures, Flooring, Kitchens, and Paint


²	Building & Maintenance includes the following product categories: Lumber & Building Materials, Millwork, Rough Plumbing & Electrical, and Tools & Hardware


³	Seasonal includes the following product categories: Lawn & Garden and Seasonal & Outdoor Living

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



(In millions)	Three Months Ended
(In millions)	May 4, 2018		May 5, 2017
United States	$	16,173	$	15,868
International	1,187		992
Net Sales	$	17,360	$	16,860

Practical Expedients

Sales commissions and selling-related goods or services are considered immaterial and are expensed as incurred because the amortization period of the assets would be one year or less. These costs are reflected within selling, general and administrative expenses.

Note ~~2: Acquisitions -~~ On June 23, 2017, the Company completed its acquisition of Maintenance Supply Headquarters, a leading distributor of maintenance, repair and operations (MRO) products serving the multifamily housing industry. The aggregate purchase price of this acquisition was $513 million and is included in the investing section of the consolidated statements of cash flows, net of the cash acquired. The acquisition is expected to enable the Company to deepen and broaden its relationship with Pro customers and better serve their needs. Acquisition-related costs were expensed as incurred and were not significant.

~~The following table summarizes the preliminary purchase price allocation:~~

(In millions) June 23, 2017
Allocation:
Cash acquired $ 4
Merchandise inventory - net 68
Other current assets 36
Property 12
Goodwill 160
Other assets 260
Accounts payable (18 )
Other current liabilities (9 )
Net assets acquired $ 513

Intangible assets acquired totaled $259 million, and include a trademark of $34 million with a useful life of 15 years and a customer list of $225 million with a useful life of 20 years, each of which are included in other assets in the accompanying consolidated balance sheets. The goodwill of $160 million is primarily attributable to the synergies expected to arise after the acquisition and is deductible for tax purposes.

~~Pro forma and historical financial information has not been provided as the acquisition was not material to the consolidated financial statements.~~

~~Note~~ 3: ~~Investment in Australian Joint Venture -~~ During the second quarter of fiscal 2017, the Company completed the sale of our interest in the Australian joint venture with Woolworths Limited and received proceeds of $199 million, which is included in cash flows from investing activities in the accompanying consolidated statements of cash flows. The proceeds from the sale exceeded the carrying value of the investment and resulted in a gain of $96 million. The carrying value prior to the sale reflected the non-cash impairment charges taken in fiscal years 2015 and 2016. The gain is included in selling, general and administrative expense in the accompanying consolidated statements of current and retained earnings.

~~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

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

The following table presents the Company’s financial assets measured at fair value on a recurring basis as of ~~November 3,~~May 4, 2018, May 5, 2017, ~~October 28, 2016,~~ and February ~~3, 2017.~~2, 2018. The fair values of these instruments approximated amortized costs.


		Fair Value Measurements at							Fair Value Measurements at
(In millions)	Measurement Level	November 3, 2017		October 28, 2016		February 3, 2017		Measurement Level	May 4, 2018		May 5, 2017		February 2, 2018
Short-term investments:
Available-for-sale securities
Money market funds	Level 1	$	70	$	28	$	81	Level 1	$	188	$	70	$	86
Certificates of deposit	Level 1	15		55		15		Level 1	17		12		16
Municipal obligations	Level 2	—		37		4		Level 2	—		2		—
Municipal floating rate obligations	Level 2	—		3		—
Total short-term investments		$	85	$	123	$	100		$	205	$	84	$	102
Long-term investments:
Available-for-sale securities
Municipal floating rate obligations	Level 2	$	368	$	430	$	359	Level 2	$	321	$	472	$	407
Certificates of deposit	Level 1	2		2		2		Level 1	—		3		1
Municipal obligations	Level 2	—		4		5		Level 2	—		2		—
Total long-term investments		$	370	$	436	$	366		$	321	$	477	$	408

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.

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

During the three ~~and nine~~ months ended ~~November 3,~~May 4, 2018 and May 5, 2017, the Company had no significant measurements of assets and liabilities at fair value on a nonrecurring basis subsequent to their initial recognition. During the three and nine months ended October 28, 2016, the Company’s only significant assets or liabilities measured at fair value on a nonrecurring basis subsequent to their initial recognition were certain long-lived assets, goodwill, and cost method investments, which were classified as

Level 3 fair value measurements. These non-cash impairment charges were included in selling, general and administrative expense in the accompanying consolidated statements of current and retained earnings.

The following table presents the Company’s non-financial assets measured at estimated fair value on a nonrecurring basis and the resulting impairment losses included in earnings for the three and nine months ended October 28, 2016. Because these assets are not measured at fair value on a recurring basis, certain fair value measurements presented in the table may reflect values at earlier measurement dates and may no longer represent the fair values at October 28, 2016.

Fair Value Measurements
Impairment Losses
(In millions) October 28, 2016
Three Months Ended October 28, 2016
Nine Months Ended October 28, 2016
Assets-held-for-use:
Operating locations $ 3
$ (31 ) $ (34 )
Goodwill —
(46 ) (46 )
Other assets:
Cost method investments 103
(290 ) (290 )
Total $ 106
$ (367 ) $ (370 )

Fair Value of Financial Instruments

The Company’s financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable, accrued liabilities and long-term debt and are reflected in the financial statements at cost. With the exception of long-term debt, cost approximates fair value for these items due to their short-term nature. 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 capitalized lease obligations, are as follows:


	November 3, 2017				October 28, 2016				February 3, 2017				May 4, 2018				May 5, 2017				February 2, 2018
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Unsecured notes (Level 1)	$	14,958	$	15,974	$	14,318	$	15,948	$	14,321	$	15,305	$	14,963	$	15,151	$	15,203	$	15,948	$	14,961	$	15,608
Mortgage notes (Level 2)	7		7		10		10		7		7		6		7		7		7		6		7
Long-term debt (excluding capitalized lease obligations)	$	14,965	$	15,981	$	14,328	$	15,958	$	14,328	$	15,312	$	14,969	$	15,158	$	15,210	$	15,955	$	14,967	$	15,615

Note 5:4: Restricted Investment Balances - 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 $188 million at May 4, 2018, $70 million at ~~November 3,~~May 5, 2017, ~~$53 million at October 28, 2016,~~ and ~~$81~~$86 million at February ~~3, 2017.~~2, 2018.

Restricted balances included in long-term investments were ~~$332~~$298 million at ~~November 3, 2017, $348~~May 4, 2018, $340 million at ~~October 28, 2016,~~May 5, 2017, and ~~$354~~$381 million at February ~~3, 2017.~~2, 2018.

Note 6:5: Property - Property is shown net of accumulated depreciation of ~~$17.1~~$17.4 billion at ~~November 3, 2017,~~May 4, 2018, $~~17.1~~16.9 billion at ~~October 28, 2016,~~May 5, 2017, and $~~17.0~~17.2 billion at February ~~3, 2017.~~2, 2018.

Note ~~7: Extended Protection Plans -~~ The Company sells separately-priced extended protection plan contracts under a Lowe’s-branded program for which the Company is self-insured. The Company recognizes revenue from extended protection plan sales on a straight-line basis over the respective contract term. Extended protection plan contract terms primarily range from one to four years from the date of purchase or the end of the manufacturer’s warranty, as applicable. Changes in deferred revenue for extended protection plan contracts are summarized as follows:

Three Months Ended Nine Months Ended
(In millions) November 3, 2017 October 28, 2016 November 3, 2017 October 28, 2016
Deferred revenue - extended protection plans, beginning of period $ 790
$ 744
$ 763
$ 729
Additions to deferred revenue 96
88
304
280
Deferred revenue recognized (92 ) (87 ) (273 ) (264 )
Deferred revenue - extended protection plans, end of period $ 794
$ 745
$ 794
$ 745

Incremental direct acquisition costs associated with the sale of extended protection plans are also deferred and recognized as expense on a straight-line basis over the respective contract term. Deferred costs associated with extended protection plan contracts were $19 million at November 3, 2017, $17 million at October 28, 2016, and $18 million at February 3, 2017. The Company’s extended protection plan deferred costs are included in other assets (noncurrent) on the accompanying consolidated balance sheets. All other costs, such as costs of services performed under the contract, general and administrative expenses, and advertising expenses are expensed as incurred.

The liability for extended protection plan claims incurred is included in other current liabilities on the consolidated balance sheets and was not material in any of the periods presented. Expenses for claims are recognized when incurred and totaled $43 million and $119 million for the three and nine months ended November 3, 2017, respectively, and $39 million and $107 million for the three and nine months ended October 28, 2016, respectively.

~~Note 8: Long-Term Debt -~~ ~~During the first quarter of fiscal 2017, the Company issued $3.0 billion of unsecured notes as follows:~~

Issue Date Principal Amount (in millions) Maturity Date Fixed vs. Floating Interest Rate Discount (in millions)
May 3, 2017 $ 1,500
May 2027 Fixed 3.100% $ 9
May 3, 2017 $ 1,500
May 2047 Fixed 4.050% $ 23

~~Interest on the notes issued in 2017 is payable semiannually in arrears in May and November of each year until maturity.~~

The indenture governing the notes issued in 2017 contains 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, to 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 to the date of purchase. The indenture governing the notes does 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. However, the indenture includes various restrictive covenants, none of which is expected to impact the Company’s liquidity or capital resources.

Also during the first quarter, the Company completed a cash tender offer to purchase and retire $1.6 billion combined aggregate principal amount of its outstanding notes and recognized a loss on extinguishment of debt of $464 million.

~~Note 9:~~6: Shareholders’ 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. On January 27, 2017, the Company’s Board of Directors authorized a $5.0 billion share repurchase program with no expiration, which was announced on the same day. On January 26, 2018, the Company’s Board of Directors authorized an additional $5.0 billion share repurchase program with no expiration, which was announced on the same day. As of ~~November 3, 2017,~~May 4, 2018, the Company had ~~$2.1~~$6.2 billion remaining in its share repurchase program.

In March 2017, the Company entered into an Accelerated Share Repurchase (ASR) agreement with a third-party financial institution to repurchase $500 million of the Company’s common stock. At inception, pursuant to the agreement, the Company paid $500 million to the financial institution using cash on hand, and took delivery of 5.3 million shares. The Company finalized the transaction and received an additional 0.8 million shares prior to the end of the first quarter.

In May 2017, the Company entered into an ASR agreement with a third-party financial institution to repurchase $500 million of the Company’s common stock. At inception, pursuant to the agreement, the Company paid $500 million to the financial institution using cash on hand, and took delivery of 5.2 million shares. The Company finalized the transaction and received an additional 1.2 million shares prior to the end of the second quarter.

In August 2017, the Company entered into an ASR agreement with a third-party financial institution to repurchase $250 million of the Company’s common stock. At inception, pursuant to the agreement, the Company paid $250 million to the financial institution using cash on hand, and took delivery of 2.9 million shares. The Company finalized the transaction and received an additional 0.3 million shares prior to the end of the third quarter.

Under the terms of each of the ASR agreements, upon settlement, the Company would either receive additional shares from the financial institution or be required to deliver additional shares or cash to the financial institution. The Company controlled its election to either deliver additional shares or cash to the financial institution and was subject to provisions which limited the number of shares the Company would be required to deliver.

The final number of shares received upon settlement of each of the ASR agreements was determined with reference to the volume-weighted average price of the Company’s common stock over the term of the respective ASR agreement. The initial repurchase of shares under each of the agreements resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share.

Each of the ASR agreements was accounted for as a treasury stock transaction and forward stock purchase contract. The par value of the shares received was recorded as a reduction to common stock with the remainder recorded as a reduction to capital in excess of par value and retained earnings. The forward stock purchase contract was considered indexed to the Company’s own stock and was classified as an equity instrument.

During the three ~~and nine~~ months ended ~~November 3, 2017,~~May 4, 2018, the Company ~~also~~ repurchased shares of its common stock through the open market totaling ~~3.2~~8.7 million ~~and 21.8 million~~ shares ~~respectively,~~ for a cost of ~~$250 million and $1.8 billion, respectively.~~$750 million.

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.

Shares repurchased for the three ~~and nine~~ months ended ~~November 3,~~May 4, 2018 and May 5, 2017 ~~and October 28, 2016~~ were as follows:


	Three Months Ended						Three Months Ended
	November 3, 2017			October 28, 2016			May 4, 2018			May 5, 2017
(In millions)	Shares	Cost ¹		Shares	Cost ¹		Shares	Cost ¹		Shares	Cost ¹
Share repurchase program	6.4	$	500	8.3	$	550	8.7	$	750	15.2	$	1,250
Shares withheld from employees	0.4	27		0.3	24		0.1	8		0.2	14
Total share repurchases	6.8	$	527	8.6	$	574	8.8	$	758	15.4	$	1,264


¹	Reductions of ~~$495~~$703 million and ~~$535 million~~$1.2 billion were recorded to retained earnings, after capital in excess of par value was depleted, for the three months ended ~~November 3, 2017 and October 28, 2016, respectively.~~

Nine Months Ended
November 3, 2017 October 28, 2016
(In millions) Shares

Cost ²

Shares

Cost ²

Share repurchase program 37.5
$ 3,000
39.0
$ 2,949
Shares withheld from employees 0.5
41
1.1
77
Total share repurchases 38.0
$ 3,041
40.1
$ 3,026


²	~~Reductions of $2.9 billion and $2.8 billion were recorded to retained earnings, after capital in excess of par value was depleted, for the nine months ended~~ ~~November 3,~~May 4, 2018 and May 5, 2017, ~~and October 28, 2016,~~ respectively.

Note ~~10:~~7: Earnings Per Share - The Company calculates basic and diluted earnings per common share using the two-class method. Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all of the net earnings for the period had been distributed. The Company’s participating securities consist of share-based

payment awards that contain a nonforfeitable right to receive dividends and, therefore, are considered to participate in undistributed earnings with common shareholders.

Basic earnings per common share excludes dilution and is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares as of the balance sheet date, as adjusted for the potential dilutive effect of non-participating share-based awards. The following table reconciles earnings per common share for the three ~~and nine~~ months ended ~~November 3, 2017~~May 4, 2018 and ~~October 28, 2016:~~May 5, 2017:


	Three Months Ended						Nine Months Ended						Three Months Ended
(In millions, except per share data)	November 3, 2017			October 28, 2016			November 3, 2017			October 28, 2016			May 4, 2018			May 5, 2017
Basic earnings per common share:
Net earnings attributable to Lowe’s Companies, Inc.	$	872		$	378		$	2,893		$	2,428
Net earnings													$	988		$	602
Less: Net earnings allocable to participating securities	(2		)	(2		)	(10		)	(9		)	(3		)	(2		)
Net earnings allocable to common shares, basic	$	870		$	376		$	2,883		$	2,419		$	985		$	600
Weighted-average common shares outstanding	831			873			843			884			825			857
Basic earnings per common share	$	1.05		$	0.43		$	3.42		$	2.74		$	1.19		$	0.70
Diluted earnings per common share:
Net earnings attributable to Lowe’s Companies, Inc.	$	872		$	378		$	2,893		$	2,428
Net earnings													$	988		$	602
Less: Net earnings allocable to participating securities	(2		)	(2		)	(10		)	(9		)	(3		)	(2		)
Net earnings allocable to common shares, diluted	$	870		$	376		$	2,883		$	2,419		$	985		$	600
Weighted-average common shares outstanding	831			873			843			884			825			857
Dilutive effect of non-participating share-based awards	1			1			1			2			1			1
Weighted-average common shares, as adjusted	832			874			844			886			826			858
Diluted earnings per common share	$	1.05		$	0.43		$	3.42		$	2.73		$	1.19		$	0.70

Stock options to purchase ~~1.0~~0.6 million and 0.8 million shares of common stock were anti-dilutive for the three ~~and nine~~ months ended ~~November 3, 2017. Stock options to purchase 1.1 million~~May 4, 2018 and ~~0.9 million shares of common stock were anti-dilutive for the three and nine months ended October 28, 2016,~~May 5, 2017, respectively.

Note ~~11:~~8: Income Taxes - The Company’s effective income tax rates were ~~37.1%~~24.3% and ~~51.2%~~35.5% for the three months ended ~~November 3,~~May 4, 2018 and May 5, 2017, ~~and October 28, 2016,~~ respectively. The lower effective income tax rate for the three months ended ~~November 3, 2017~~May 4, 2018 was primarily ~~attributable~~due to the ~~non-cash impairment charge associated with our investment in~~enactment of the ~~Australian joint venture,~~Tax Cuts and Jobs Act (Tax Act) during fiscal 2017, which ~~was recognized~~lowered the corporate federal income tax rate from 35% to 21%.

Based on the Company’s interpretation of the Tax Act, the Company made reasonable estimates to record provisional adjustments during the ~~third~~fourth quarter of fiscal ~~2016. The loss was considered capital~~2017. However, the final impact may differ due to subsequent legislative action, changes in ~~nature~~interpretations and ~~since no capital gains were identified through which~~assumptions, as well as the ~~Company could utilize this loss, a full~~issuance of additional guidance from the Internal Revenue Service and state taxing authorities. We have not made any measurement-period adjustments related to these items during the three months ended May 4, 2018, because we have not finalized the following items: the earnings and profits of the relevant subsidiaries, deemed repatriation of deferred foreign income, and prior year deferred tax ~~valuation allowance was established. As a result,~~activity. The Company will continue to evaluate the ~~loss did not result in a tax benefit.~~

~~Our effective income tax rates were 36.3%~~Tax Act and ~~40.6% for~~gather additional information within the ~~nine months ended November 3, 2017 and October 28, 2016, respectively. The lower effective income tax rate for~~measurement period allowed, which will be completed no later than the nine months ended November 3, 2017 was primarily attributable to the non-cash impairment charge associated with our investment in the Australian joint venture, and from the sale of this investment during the secondfourth quarter of fiscal 2017, which did not result in tax expense due to the reduction of the previously established deferred tax valuation allowance. The lower effective income tax rate for the nine months ended November 3, 2017 was also driven by the recognition of excess tax benefits related to share-based payments after the adoption of ASU 2016-09. See Note 1 to the consolidated financial statements included herein for more information regarding ASU 2016-09.2018.

Note ~~12:~~9: Supplemental Disclosure

Net interest expense is comprised of the following:


	Three Months Ended						Nine Months Ended						Three Months Ended
(In millions)	November 3, 2017			October 28, 2016			November 3, 2017			October 28, 2016			May 4, 2018			May 5, 2017
Long-term debt	$	146		$	151		$	438		$	437		$	145		$	145
Capitalized lease obligations	14			13			41			40			15			14
Interest income	(2		)	(4		)	(10		)	(10		)	(3		)	(3		)
Interest capitalized	(2		)	(1		)	(4		)	(3		)	(1		)	(1		)
Interest on tax uncertainties	—			—			(1		)	2
Other	4			4			15			20			4			6
Interest - net	$	160		$	163		$	479		$	486		$	160		$	161

Supplemental disclosures of cash flow information:


	Nine Months Ended				Three Months Ended
(In millions)	November 3, 2017		October 28, 2016		May 4, 2018		May 5, 2017
Cash paid for interest, net of amount capitalized	$	610	$	588	$	288	$	285
Cash paid for income taxes - net	$	1,322	$	1,657	$	43	$	43
Non-cash investing and financing activities:
Non-cash property acquisitions, including assets acquired under capital lease	$	91	$	72	$	8	$	3
Cash dividends declared but not paid	$	341	$	306	$	338	$	299

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

~~Mooresville, North Carolina~~

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 ~~November 3,~~May 4, 2018 and May 5, 2017, ~~and October 28, 2016, and~~ the related consolidated statements of current and retained earnings, ~~and~~ comprehensive income, ~~for the fiscal three-month~~ and ~~nine-month periods ended November 3, 2017 and October 28, 2016, and of~~ cash flows for the fiscal ~~nine-month~~three-month periods ended ~~November 3,~~May 4, 2018 and May 5, 2017, and ~~October 28, 2016. These consolidated~~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 ~~statements are~~information for it to be in conformity with accounting principles generally accepted in the ~~responsibility~~United States of ~~the Company’s management.~~America.

We ~~conducted our reviews~~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 February 2, 2018, 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 April 2, 2018, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of February 2, 2018 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 reviews 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 ~~Public Company Accounting Oversight Board (United States),~~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.

Based on our reviews, we are not aware of any material modifications that should be made to such consolidated interim financial statements for them 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), the consolidated balance sheet of the Company as of February 3, 2017, 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 April 3, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet of the Company as of February 3, 2017 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

Charlotte, North Carolina

~~December~~June 5, ~~2017~~2018

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~~ months ended ~~November 3, 2017,~~May 4, 2018, and ~~October 28, 2016.~~May 5, 2017. 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 February ~~3, 2017~~2, 2018 (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 2016. In fiscal 2017, there is a one week shift as a result of the 53rd week in fiscal 2016. For purposes of the following discussion, comparable store sales, comparable store average ticket and comparable store customer transactions are based upon comparable 13 week periods.2017. 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

Net sales and net earnings increased for the ~~third~~first quarter of ~~2017~~2018 by ~~6.5%~~3.0% to ~~$16.8~~$17.4 billion and ~~130.3%~~64.1% to ~~$872~~$988 million, respectively. Diluted earnings per common share increased ~~144.2%~~70.0% in the ~~third~~first quarter of ~~2017~~2018 to ~~$1.05~~$1.19 from ~~$0.43~~$0.70 in the ~~third~~first quarter of the prior year. Diluted earnings per common share in the ~~third~~first quarter of ~~2017~~2018 increased ~~19.3%~~15.5% from adjusted diluted earnings per share of ~~$0.88~~$1.03 in the same period of the prior year (see discussion of non-GAAP financial measures beginning on page 17). During the first quarter, the Company adopted the revenue recognition accounting standard ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (ASU 2014-09) resulting in the reclassification of certain items within operating income. This accounting standard has been adopted on a modified retrospective basis, therefore, the prior year has not been adjusted. The net effect of this change was an increase to sales of approximately $129 million in the first quarter, driven primarily by the reclassification of profit sharing income associated with the proprietary credit program from SG&A. Continuing to deliver on our commitment to return excess cash to shareholders, during the ~~third~~first quarter of ~~2017,~~2018, we paid ~~$344~~$340 million in dividends and repurchased ~~$500~~$750 million of common stock through our share repurchase program.

We entered the first quarter of 2018 well positioned to capitalize on Spring demand with enhanced marketing activity, targeted digital marketing content, strong product assortment, and seasonal staffing to help customers complete their home improvement projects. A late Spring selling season generated by unfavorable weather across geographies restricted traffic growth and exerted pressure on comparable sales, negatively impacting outdoor product categories. During the ~~third~~first quarter of ~~2017, all~~2018, six of 14 U.S. regions generated comparable sales increases ~~as we drove increased traffic in-store and online with compelling messaging and integrated omni-channel experiences,~~ while ~~continuing to capitalize on a supportive macro-economic backdrop and customers’ continued desire to invest in their homes. In addition, all~~two regions were flat. Five of 11 product categories generated positive comparable sales while one product category was flat, with particular strength in Appliances, Rough Plumbing & Electrical, Lumber & Building Materials, ~~Appliances,~~Tools & Hardware, and ~~Rough Plumbing & Electrical.~~Millwork. We continued to see strong demand from the Pro customer for the quarter with comparable sales above the company average.

Hurricanes Harvey and Irma positively impacted third quarter comparable sales by approximately 140 basis points. Our merchants, vendors, logistics, and store teams were able to work together seamlessly to ensure customers had the right products to protect and repair their homes. Our teams sent over 11,000 truckloads of product to impacted areas supporting both DIY and Pro customers as they prepared for the storms and worked to repair properties afterward. We also added Account Executive Pro Services (AEPs) to the Texas and Florida markets to support the incremental demand from Pro customers.

~~We continued to build upon our strong foundation with the Pro customer by continuing to optimize our product and service offerings to better serve their unique needs.~~ During the quarter, we continued taking the necessary actions to ~~drive Pro awareness~~transform our supply chain, better empower our associates, and re-engineer key processes such as Pick Up In Store and centralized project quoting. We are working to improve traffic conversion by accelerating associate readiness and knowledge through ~~Pro-exclusive offers, digital focus on LowesForPros.com,~~our training programs and ~~our growing Pro services team. The addition of Maintenance Supply Headquarters (MSH) and Central Wholesalers, Inc. further expanded our capabilities~~better aligning staffing to ~~serve the multi-family housing industry through enhanced product and service offerings while strengthening our platform with both new and existing Pro customers.~~

customer traffic. In addition, we continued to execute on our strategic priorities during the quarter, including leveraging our omni-channel capabilities to help customers achieve project results. We also continue to leverage our investments in Lowes.com to provide an upgraded online shopping experience by delivering an optimized mobile experience, improved product and content recommendations, refined search algorithms, optimized assortment informed by digital line reviews and expanded product views, including video content. We are working to further advance our ~~online platform making it easier~~Pick Up In Store experience, with dedicated space and clear signage to ensure that product is staged and ready for ~~customers to engage with our in-home Project Specialists and request services online, as well as working to centralize our~~pickup within two hours of an order being placed. The new process ~~for providing installation quotes, allowing for~~drives greater efficiency in order fulfillment and ~~a more consistent customer experience.~~improves our ability to meet the expectations of customers allowing them to pick up products quickly.

~~Looking ahead,~~In 2018, we ~~plan to build upon our strong foundation by developing capabilities to anticipate and support customers’ evolving needs and~~will continue to focus ~~on strengthening~~ our ~~operating discipline and execution. We look forward~~resources in what is most relevant to the ~~introduction of Craftsman products in-store~~customer, building the capabilities required to deliver simple and ~~online beginning~~seamless omni-channel experiences for customers and engaging them in the ~~second half of 2018. We believe this partnership with Stanley Black & Decker strengthens our ability to deliver on customer expectations across many product categories and~~moments that matter most. This will allow ~~both DIY~~us to strengthen our competitiveness and ~~Pro customers greater access~~position us to ~~high quality, value-oriented product offerings for their next~~continue to capitalize on home improvement ~~project. We~~demand.

On May 20, 2018, the Company’s Board of Directors appointed Marvin R. Ellison as President and Chief Executive Officer, in each case, effective as of July 2, 2018, at which time he will also join the Board of Directors. On May 20, 2018, the Board of Directors also appointed Richard W. Dreiling as Chairman of the Board of Directors, effective as of July 2, 2018. Mr. Ellison and Mr. Dreiling will succeed Robert A. Niblock, who will be retiring as Chairman, President and Chief Executive Officer of the Company and member of the Board of Directors, in each case, effective as of July 2, 2018.

On June 4, 2018, the Company announced that Marshall A. Croom plans to retire from the Company, effective October 5, 2018. Mr. Croom will continue in his role as Chief Financial Officer until his successor is appointed, and then remain ~~committed to balancing our promotional strategy~~ with our pricing optimization efforts to improve profitability, and we will further leverage our new store leadership model and make investments in customer-facing hours in order to capitalize upon strong traffic trends to deliver an improved customer experience.the Company during a transition period until his retirement date.

OPERATIONS

The following tables set forth the percentage relationship to net sales of each line item of the consolidated statements of current and retained earnings (unaudited), as well as the percentage change in dollar amounts from the prior period. These tables 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
	November 3, 2017		October 28, 2016		2017 vs. 2016		2017 vs. 2016		May 4, 2018		May 5, 2017		2018 vs. 2017		2018 vs. 2017
Net sales	100.00	%	100.00	%	N/A		6.5	%	100.00	%	100.00	%	N/A		3.0	%
Gross margin	34.07		34.35		(28	)	5.7		34.63		34.40		23		3.7
Expenses:
Selling, general and administrative	22.71		25.94		(323	)	(6.7	)	24.12		22.99		113		8.0
Depreciation and amortization	2.13		2.44		(31	)	(6.8	)	2.07		2.16		(9	)	(1.4	)
Operating income	9.23		5.97		326		64.7		8.44		9.25		(81	)	(6.0	)
Interest - net	0.96		1.04		(8	)	(2.1	)	0.92		0.96		(4	)	(0.2	)
Loss on extinguishment of debt									—		2.75		(275	)	(100.0	)
Pre-tax earnings	8.27		4.93		334		78.8		7.52		5.54		198		39.7
Income tax provision	3.07		2.52		55		29.7		1.83		1.97		(14	)	(4.6	)
Net earnings	5.20	%	2.41	%	279		130.3	%	5.69	%	3.57	%	212		64.1	%

Nine Months Ended Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Period
Percentage Increase / (Decrease) in Dollar Amounts from Prior Period
November 3, 2017 October 28, 2016 2017 vs. 2016
2017 vs. 2016
Net sales 100.00 % 100.00 % N/A
7.9 %
Gross margin 34.23
34.59
(36 ) 6.8
Expenses:
Selling, general and administrative 21.87
23.02
(115 ) 2.4
Depreciation and amortization 2.03
2.27
(24 ) (3.2 )
Operating income 10.33
9.30
103
19.9
Interest - net 0.91
0.99
(8 ) (1.4 )
Loss on extinguishment of debt 0.87
—
87
100.0
Pre-tax earnings 8.55
8.31
24
11.1
Income tax provision 3.10
3.37
(27 ) (0.6 )
Net earnings 5.45 % 4.94 % 51
19.1 %

Note: The Company adopted ASU 2014-09 and all the related amendments using the modified retrospective method, effective February 3, 2018. Prior period results have not been restated, which affects comparability.


	Three Months Ended						Nine Months Ended						Three Months Ended
Other Metrics	November 3, 2017			October 28, 2016			November 3, 2017			October 28, 2016			May 4, 2018			May 5, 2017
Comparable sales increase ¹	5.7		%	2.7		%	4.0		%	3.9		%	0.6		%	1.9		%
Total customer transactions (in millions) ²	231			229			742			718
Average ticket ^{2, 3}	$	72.63		$	68.65		$	71.59		$	68.59
Total customer transactions (in millions)													232			238
Average ticket ²													$	74.98		$	70.79
At end of period:
Number of stores	2,144			2,119									2,154			2,137
Sales floor square feet (in millions)	214			213									215			214
Average store size selling square feet (in thousands) ⁴	100			100
Return on invested capital ⁵	19.5		%	13.6		%
Average store size selling square feet (in thousands) ³													100			100
Return on invested capital ⁴													19.4		%	15.6		%

A comparable location is defined as a 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. Acquired locations are included in the comparable sales calculation beginning in the first full month following the first anniversary of the date of the acquisition. Comparable sales include online sales, which positively impacted ~~third~~first quarter fiscal ~~2017~~2018 comparable sales by approximately ~~95 basis points and fiscal 2017 comparable sales by approximately 105~~85 basis points. The comparable store sales calculation included in the preceding table was calculated using comparable 13-week ~~and 39-week periods, respectively.~~periods.


²	~~In fiscal 2017, there was a one week shift as a result of the 53~~^rd ~~week in fiscal 2016.~~


³	Average ticket is defined as net sales divided by the total number of customer transactions.


⁴³	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 112,000 square feet of retail selling space.


⁵⁴	Return on invested capital is a non-GAAP financial measure. See below for additional information and a reconciliation to the most comparable GAAP measure.

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 discrete items, as further described below, not contemplated in ~~Lowe’s 2017 and 2016~~the Company’s original business ~~outlooks.~~outlook for fiscal 2017. Unless otherwise noted, the income tax effect of these adjustments is calculated using the marginal rates for the respective periods.

In the ~~third~~first quarter of ~~2016,~~2017, the ~~company~~Company recognized ~~$462~~a $464 million loss on extinguishment of ~~non-cash pre-tax charges which included the following:~~

~~$290 million impairment resulting from the wind down of our investment~~debt in ~~the Australian joint venture~~connection with ~~Woolworths Limited (Woolworths).~~

~~$96 million related to~~ a ~~write-off for projects that were canceled as part of the company’s ongoing review of strategic initiatives in an effort to focus on critical projects that will drive desired outcomes.~~

~~$76 million related to goodwill and long-lived asset impairments associated with the company’s Orchard Supply Hardware (Orchard) operations as part of a strategic reassessment of this business.~~

$1.6 billion cash tender offer.

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 this non-GAAP financial measure may differ from the method used by other companies for this or similar non-GAAP financial measures. Accordingly, these non-GAAP measures may not be comparable to the measures used by other companies.


	Three Months Ended									Three Months Ended
	November 3, 2017				October 28, 2016					May 4, 2018				May 5, 2017
	Pre-Tax Earnings	Tax	Net Earnings		Pre-Tax Earnings	Tax		Net Earnings		Pre-Tax Earnings	Tax	Net Earnings		Pre-Tax Earnings	Tax		Net Earnings
Diluted earnings per share, as reported			$	1.05				$	0.43			$	1.19				$	0.70
Non-GAAP adjustments - per share impacts
Australian joint venture impairment	—	—	—		0.33	—		0.33
Project write-offs	—	—	—		0.11	(0.04	)	0.07
Orchard Supply Hardware goodwill and long-lived asset impairment	—	—	—		0.09	(0.04	)	0.05
Loss on extinguishment of debt										—	—	—		0.54	(0.21	)	0.33
Adjusted diluted earnings per share			$	1.05				$	0.88			$	1.19				$	1.03

Return on Invested Capital

Return on Invested Capital (ROIC) is calculated using a non-GAAP financial measure. We believe ROIC is a meaningful metric for investors because it ~~measures~~represents management’s measure of how effectively the Company ~~uses~~is using capital to generate profits.

~~We define ROIC as trailing four quarters’ net operating profit after tax divided by the average of ending debt and equity for the last five quarters.~~ Although ROIC is a common financial metric, numerous methods exist for calculating ROIC. Accordingly, the method used by our management to calculate ROIC may differ from the methods other companies use to calculate their ROIC. We encourage you to understand the methods used by another company to calculate its ROIC before comparing its ROIC to ours.

We ~~consider return on~~define ROIC as trailing four quarters’ net operating profit after tax (NOPAT) divided by the average of ending debt and equity for the last five quarters. NOPAT is a non-GAAP financial measure, and net earnings is considered to be the ~~financial measure computed in accordance with GAAP that is the~~ most ~~directly~~ comparable GAAP financial measure to ~~ROIC. The difference between these two measures is that ROIC adjusts net earnings to exclude tax adjusted non-operating income/(expense).~~

NOPAT. The calculation of ROIC, together with a reconciliation of NOPAT to ~~the calculation of return on average debt and equity,~~net earnings, the most comparable GAAP financial measure, is as follows:

For the Periods Ended
(In millions, except percentage data) November 3, 2017 October 28, 2016
Calculation of Return on Invested Capital
Numerator ¹

Net earnings $ 3,556
$ 2,441
Plus:
Interest expense - net 639
630
Loss on extinguishment of debt 464
—
Provision for income taxes 2,099
1,945
Net operating profit 6,758
5,016
Less:
Income tax adjustment ²
2,509
2,066
Net operating profit after tax $ 4,249
$ 2,950
Effective tax rate 37.1 % 44.3 %
Denominator
Average debt and equity ³
$ 21,806
$ 21,725
Return on invested capital 19.5 % 13.6 %

Calculation of Return on Average Debt and Equity
Numerator ¹

Net earnings $ 3,556
$ 2,441
Denominator
Average debt and equity ³
$ 21,806
$ 21,725
Return on average debt and equity 16.3 % 11.2 %

¹~~Amounts used in the calculation of the numerator are based on the trailing four quarters.~~

²~~Income tax adjustment is defined as net operating profit multiplied by the effective tax rate.~~



	For the Periods Ended
(In millions, except percentage data)	May 4, 2018			May 5, 2017
Calculation of Return on Invested Capital
Numerator
Net earnings	$	3,833		$	2,811
Plus:
Interest expense - net	632			649
Loss on extinguishment of debt	—			464
Provision for income taxes	2,027			1,895
Net operating profit	6,492			5,819
Less:
Income tax adjustment ¹	2,245			2,343
Net operating profit after tax	$	4,247		$	3,476
Denominator
Average debt and equity ²	$	21,890		$	22,216
Return on invested capital	19.4		%	15.6		%


³¹	Income tax adjustment is defined as net operating profit multiplied by the effective tax rate, which was 34.6% and 40.3% for the periods ended May 4, 2018 and May 5, 2017, respectively.


²	Average debt and equity is defined as average debt, including current maturities and short-term borrowings, plus total equity for the last five quarters.

Results of Operations

Net Sales – Net sales infor the ~~third~~first quarter of ~~2017~~2018 increased ~~6.5%~~3.0% to ~~$16.8~~$17.4 billion. The ~~increase in total~~adoption of the revenue recognition accounting standard ASU 2014-09, contributed 0.8% to sales ~~was driven~~growth, primarily ~~by an increase in comparable sales,~~due to a reclassification of profit sharing income associated with the ~~acquisitions of Maintenance Supply Headquarters and Central Wholesalers, Inc., and new stores partially offset by the calendar shift~~proprietary credit program from ~~the 53~~^rd ~~week in fiscal 2016.~~SG&A to sales. Comparable sales increased ~~5.7%~~0.6% over the same period, driven by a ~~4.8%~~4.3% increase in comparable average ticket, ~~and~~offset by a ~~0.9% increase~~3.7% decrease in comparable customer transactions. ~~Acquisitions~~New stores and ~~new stores~~the addition of Maintenance Supply Headquarters also contributed ~~0.7% and 0.5%~~ to sales growth ~~respectively, while~~during the ~~calendar week shift negatively impacted sales 0.4% for the third quarter of 2017.~~ quarter.

During the ~~third~~first quarter of ~~2017, all product categories~~2018, we experienced comparable sales increases ~~with~~in five of 11 product categories, as well as flat comparable sales in Fashion Fixtures. Comparable sales increases were above the company average in Appliances, Rough

Plumbing & Electrical, Lumber & Building Materials, ~~Appliances,~~Tools & Hardware, and Rough Plumbing & Electrical. Lumber & Building Materials benefited from an increased demand for hurricane-related products such as plywood, pressure-treated lumber, fencing, shingles, drywall, and insulation, an increase in Pro customer demand, and inflation.Millwork. Strong brand and service advantages in Appliances, as well as our continued investment in customer experience both in-store and online, drove double-digit comparable sales during the quarter. We ~~also~~ achieved strong comparable sales in Rough Plumbing & Electrical driven by continued improvements in brand relevance and demand from the Pro customer.

~~Net sales increased 7.9%~~ In addition, Tools & Hardware, Lumber & Building Materials, and Millwork also continued to ~~$53.1 billion for~~benefit from strong demand from the first nine months of 2017 compared to 2016. RONA represented 2.6% of the sales growth. Comparable sales increased 4.0% over the same period, primarily driven by a 3.9% increase in comparable average ticket and a 0.1% increase in customer transactions.Pro customer.

Gross Margin – For the ~~third~~first quarter of ~~2017,~~2018, gross margin ~~decreased 28~~increased 23 basis points as a percentage of sales. Gross margin was ~~negatively~~positively impacted by 2558 basis points due to the adoption of the revenue recognition accounting standard ASU 2014-09, which primarily resulted in a reclassification of profit sharing income associated with the proprietary credit program from SG&A to sales. In addition, gross margin was positively impacted by approximately 10 basis points due to value improvement and pricing optimization efforts. These were partially offset by approximately 15 basis points due to competitive actions taken in the prior year and 20approximately 5 basis points due to mix of products sold. These were partially offset by approximately 25 basis points of leverage as we cycled the inclusion of purchase price adjustments in the prior year related to RONA’s opening balance sheet primarily associated with inventory, as well as the mix of the RONA business.

~~Gross margin as a percentage of sales decreased 36 basis points in the first nine months of 2017 compared to 2016 due to the same factors that~~Transportation costs, shrink, and inflation negatively impacted gross margin inby 15 basis points during the ~~third~~ quarter.

SG&A – For the ~~third~~first quarter of ~~2017,~~2018, SG&A expense ~~leveraged 323~~deleveraged 113 basis points as a percentage of sales compared to the ~~third~~first quarter of 2016. This was primarily driven by 184 basis points of leverage due to the prior year non-cash impairment charge related to the investment in the Australian joint venture, 61 basis points of leverage associated with the prior year write-off of canceled technology-enabled projects, and 48 basis points of leverage associated with goodwill and long-lived asset impairments related to Orchard operations recorded in the prior year. In addition, operating salaries leveraged 27 basis points as we streamlined our store leadership model.

~~SG&A expense as a percentage of sales leveraged 115 basis points in the first nine months of 2017 compared to 2016.~~2017. This was driven ~~primarily~~ by 77 basis points of leverage attributable to the prior year non-cash impairment charge and the current year sale of our interest in the Australian joint venture, 35 basis points of leverage in operating salaries, 19 basis points of leverage due to the prior year write-off of canceled technology-enabled projects, and 15 basis points of leverage associated with goodwill and long-lived asset impairments related to Orchard operations recorded in the prior year. These were partially offset by 1566 basis points of deleverage ~~primarily~~ due to the ~~prior year settlement~~adoption of the ~~foreign currency option contract entered into~~revenue recognition accounting standard ASU 2014-09, which primarily resulted in ~~advance~~a reclassification of profit sharing income associated with the ~~RONA acquisition and 11~~proprietary credit program from SG&A to sales, 32 basis points of deleverage in ~~risk insurance.~~operating salaries, and 18 basis points of deleverage in customer delivery to meet increased demand in Appliances.

Depreciation and Amortization – Depreciation and amortization leveraged 319 basis points for the ~~third~~first quarter of ~~2017~~2018 compared to the prior year primarily due to ~~the increase in sales and~~ assets becoming fully ~~depreciated, partially offset by incremental expense due to the acquisition of Maintenance Supply Headquarters.~~depreciated. Property, less accumulated depreciation, decreased to ~~$19.8~~$19.5 billion at ~~November 3, 2017,~~May 4, 2018, compared to ~~$20.0~~$19.7 billion at ~~October 28, 2016.~~May 5, 2017. As of ~~November 3,~~May 4, 2018 and May 5, 2017, ~~and October 28, 2016,~~ we owned ~~78% and~~ 79% of our stores, ~~respectively,~~ which included stores on leased land.

~~Depreciation and amortization leveraged 24 basis points for the first nine months of 2017 compared to 2016 due to the same factors that impacted depreciation and amortization for the third quarter.~~

Interest – Net – Interest expense for the ~~third~~first quarter ~~and first nine months~~ of ~~2017~~2018 decreased primarily as a result of the cash tender offer to purchase and retire $1.6 billion aggregate principal amount of our outstanding notes in the first quarter of 2017 and the payoff of scheduled debts at maturity. These were partially offset by the issuance of unsecured notes in ~~April 2016 and~~ May ~~2017, respectively.~~2017.

Loss on Extinguishment of Debt – During the first quarter of 2017, we repurchased and retired $1.6 billion aggregate principal amount of our outstanding debt resulting in a loss on extinguishment of debt of $464 million.

Income Tax Provision – Our effective income tax rates were ~~37.1%~~24.3% and ~~51.2%~~35.5% for the three months ended ~~November 3,~~May 4, 2018 and May 5, 2017, and October 28, 2016, respectively. During the third quarter of 2016, the Company recognized a non-cash impairment charge associated with our investment in the Australian joint venture. The loss was considered capital in nature and, since no capital gains were identified through which the Company could utilize this loss, a full deferred tax valuation allowance was established. As a result, the loss did not result in a tax benefit.

~~Our effective income tax rates were 36.3% and 40.6% for the nine months ended November 3, 2017 and October 28, 2016,~~ respectively. The ~~lower~~decrease in the effective income tax rate ~~for the nine months ended November 3, 2017 was~~is primarily attributable to the non-cash impairment charge associated with our investment in the Australian joint venture, and from the sale of this investment during the second quarter of fiscal 2017, which did not result in tax expense due to the ~~reduction~~enactment of the ~~previously established deferred~~Tax Act, effective January 1, 2018, which lowered the federal tax ~~valuation allowance.~~rate from 35% to 21%.

During 2017, we adopted ASU 2016-09 regarding improvements to employee share-based accounting requiring entities to recognize excess tax benefits and deficiencies within income taxes. Previously, excess tax benefits and certain tax deficiencies were recorded within equity. This change resulted in a favorable discrete item for the nine months ended November 3, 2017, and reduced our effective income tax rate by 76 basis points.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

~~Cash Flows~~Sources of Liquidity

~~The following table summarizes~~Cash flows from operations, supplemented with our short-term and long-term borrowings, have been sufficient to fund our operations while allowing us to make strategic investments that will grow our business, and to return excess cash ~~flow activities for~~to shareholders in the ~~nine months ended November 3, 2017~~form of dividends and ~~October 28, 2016:~~share repurchases. We believe that our sources of liquidity will continue to be adequate to fund our operations and investments to grow our business, repay our debt as it becomes due, pay dividends, and fund our share repurchases over the next 12 months.

Cash Flows Provided by Operating Activities

Nine Months Ended
(In millions) November 3, 2017 October 28, 2016
Net cash provided by (used in):
Operating activities 5,372
5,269
Investing activities (1,072 ) (3,052 )
Financing activities (4,130 ) (1,656 )



	Three Months Ended
(In millions)	May 4, 2018		May 5, 2017
Net cash provided by operating activities	$	3,429	$	3,295

Cash flows from operating activities continued to provide the primary source of our liquidity. The increase in net cash provided by operating activities for the ~~nine~~three months ended ~~November 3, 2017,~~May 4, 2018, versus the ~~nine~~three months ended ~~October 28, 2016,~~May 5, 2017, was driven primarily by ~~an increase~~changes in working capital, partially offset by a decrease in net earnings adjusted for non‐cash ~~expenses partially offset by changes in working capital.~~expenses.

~~The decrease~~

Cash Flows Used in ~~net~~Investing Activities



	Three Months Ended
(In millions)	May 4, 2018			May 5, 2017
Net cash used in investing activities	$	(236	)	$	(291	)

Net cash used in investing activities ~~for the nine months ended November 3, 2017, versus the nine months ended October 28, 2016, was driven~~ primarily ~~by a decrease in cash used~~consist of transactions related to acquire businesses and a decrease in purchases of investments and derivative instruments, partially offset by a decrease in proceeds from the sale/maturity of investments and derivative instruments. We used $509 million to acquire Maintenance Supply Headquarters during the first nine months of 2017 compared to $2.3 billion to acquire RONA during the first nine months of 2016.capital expenditures.

Capital expenditures

Our capital expenditures generally consist of investments in our strategic initiatives to enhance our ability to serve customers, existing stores, and expansion plans. The following table provides our capital expenditures for the three months ended May 4, 2018, and May 5, 2017:



	Three Months Ended
(In millions)	May 4, 2018		May 5, 2017
Existing store investments ¹	$	135	$	70
Strategic initiatives ²	71		53
New stores	18		79
Total capital expenditures	$	224	$	202


¹	Includes store equipment for existing stores, facility repairs, enhancements to existing information technology assets, and remerchandising


²	Represents investments to support our omnichannel strategy as well as information technology investments to enhance customers’ experience.

Our 2018 capital expenditures forecast is approximately $1.7 billion. The increase in our forecast, relative to historical capital expenditures, is primarily attributable to incremental cash flow benefit related to the enactment of the Tax Cuts and Jobs Act of 2017.

Cash Flows Used in Financing Activities



	Three Months Ended
(In millions)	May 4, 2018			May 5, 2017
Net cash used in financing activities	$	(2,215	)	$	(1,605	)

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

Short-term Borrowing Facilities

We have an unsecured revolving credit agreement with a syndicate of banks (the 2016 Credit Facility) which provides for borrowings up to $1.75 billion and supports our commercial paper program. The amount available to be drawn under the 2016 Credit Facility is reduced by the amount of borrowings under our commercial paper program. All of our short-term borrowings in the three months ended May 4, 2018, and May 5, 2017, were under the commercial paper program. The following table includes additional information related to our short-term borrowings for the ~~nine~~three months ended May 4, 2018, and May 5, 2017:



	Three Months Ended
(In millions, except for interest rate data)	May 4, 2018			May 5, 2017
Net change in short-term borrowings	$	(1,140	)	$	(511	)
Amount outstanding at quarter-end	$	—		$	—
Maximum amount outstanding at any month-end	$	892		$	878
Weighted-average interest rate of short-term borrowings outstanding	—		%	—		%

The 2016 Credit Facility expires in November ~~3, 2017, versus~~2021 and contains customary representations, warranties, and covenants. We were in compliance with those covenants at May 4, 2018. Subject to obtaining commitments from the ~~nine~~lenders and satisfying other conditions specified in the 2016 Credit Facility, the Company may increase the aggregate availability by an additional $500 million.

Long-term Debt

The following table includes additional information related to the Company’s long-term debt for the three months ended ~~October 28, 2016, was driven primarily by~~May 4, 2018, and May 5, 2017:



	Three Months Ended
(In millions)	May 4, 2018			May 5, 2017
Net proceeds from issuance of long-term debt	$	—		$	2,968
Repayment of long-term debt	$	(13	)	$	(2,558	)

During the ~~completion of a cash tender offer in~~three months ended May 5, 2017, ~~a decrease in net proceeds from the issuance of long-term debt, and an increase in repayments of short-term borrowings. We~~we paid approximately $2.0 billion to purchase $1.6 billion of our higher coupon notes prior to maturity in connection with ~~the~~a cash tender offer. We issued $3.0 billion of unsecured notes to fund the tender offer, ~~and~~ finance current year maturities, ~~(see~~and for other general corporate purposes, which included share repurchases, capital expenditures, strategic investments, and working capital needs.

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. 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 three months ended May 4, 2018, and May 5, 2017:



	Three Months Ended
(In millions, except per share data)	May 4, 2018		May 5, 2017
Total amount paid for share repurchases	$	728	$	1,237
Total number of shares repurchased	8.5		15.1
Average price paid per share	$	85.98	$	81.76

As of May 4, 2018, we had $6.2 billion remaining available under our share repurchase program with no expiration date. We expect to repurchase shares totaling $2.5 billion in 2018 (including the amount repurchased in the first quarter of fiscal year 2018). See Note 86 to the consolidated financial statements included herein for additional ~~information). In April 2016, we issued $3.3 billion of unsecured notes to fund the acquisition of RONA.~~information regarding share repurchases.

~~Sources of Liquidity~~Dividends

~~Liquidity is provided primarily by~~Our dividend payment dates are established such that dividends are paid in the quarter immediately following the quarter in which they are declared. The following table provides additional information related to our ~~cash flows from operations, short-term borrowing facilities,~~dividend payments for three months ended May 4, 2018, and ~~long-term debt.~~May 5, 2017:



	Three Months Ended
(In millions, except per share data)	May 4, 2018		May 5, 2017
Total cash dividend payments	$	340	$	304
Dividends paid per share	$	0.41	$	0.35

We have a $1.75 billion unsecured revolving credit agreement with a syndicate of banks that expires in November 2021. Subject to obtaining commitments from the lenders and satisfying other conditions specified in the credit agreement, we may increase the aggregate availability by an additional $500 million. The credit facility supports our commercial paper program and has a $500 million letter of credit sublimit. Letters of credit issued pursuant to the credit facility reduce the amount available for borrowing under its terms. Borrowings made are unsecured and priced at fixed rates based upon market conditions at the time of funding in accordance with the terms of the credit facility. The credit agreement contains customary representations, warranties, and covenants for a transaction of this type. We were in compliance with those covenants at November 3, 2017. As of November 3, 2017, there were $171 million of outstanding borrowings under the commercial paper program and no outstanding borrowings or letters of credit under the credit facility.Capital Resources

We expect to continue to have access to the capital markets on both ~~short-~~short-term and long-term bases 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 ~~December~~June 5, ~~2017,~~2018, 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. Although we currently do not expect a downgrade in our debt ratings, our 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	A-	A3
Senior Debt Outlook	Stable	Stable

We believe that net cash provided by operating and financing activities will be adequate not only for our operating requirements, but also for investments in our existing stores and distribution facilities, investments in information technology, expansion plans, acquisitions, if any, and to return cash to shareholders through both dividends and share repurchases over the next 12 months. 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.

~~Cash Requirements~~

~~Capital expenditures~~

Our fiscal 2017 capital forecast is approximately $1.2 billion. Investments in our existing stores, including investments in remerchandising, store equipment, and technology, are expected to account for approximately 45% of net cash outflow. Our expansion plans are expected to account for approximately 30% of planned net cash outflow. Approximately 20% of planned net cash outflow is for corporate programs, including investments to enhance the customer experience, as well as enhancements to the corporate infrastructure. Other planned capital expenditures, accounting for approximately 5% of planned net cash outflow, are for investments in our existing distribution network.

~~Debt and capital~~

Unsecured debt of $250 million is scheduled to mature in September 2018. See Note 8 to the consolidated financial statements included herein for additional information regarding long-term debt, including fiscal year 2017 financing activities.

We have an ongoing share repurchase program, authorized by the Company’s Board of Directors, which is executed through purchases made from time to time either in the open market or through private off-market transactions. Shares purchased under the share repurchase program are retired and returned to authorized and unissued status. As of November 3, 2017, we had $2.1 billion remaining available under our share repurchase program with no expiration date. Our fiscal year 2017 guidance assumes approximately $3.5 billion in share repurchases for the fiscal year. See Note 9 to the consolidated financial statements included herein for additional information regarding share repurchases.

Dividends declared during the third quarter of 2017 totaled $341 million. Our dividend payment dates are established such that dividends are paid in the quarter immediately following the quarter in which they are declared.

OFF-BALANCE SHEET ARRANGEMENTS

Other than in connection with executing operating leases, 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

During the first quarter of 2017, we issued $3.0 billion of unsecured notes in the ordinary course of business and used the proceeds from this issuance to repurchase $1.6 billion of unsecured debt before maturity. We also repaid $750 million of debt maturities during the first nine months of 2017. The table below summarizes our contractual obligations relating to long-term debt, excluding capitalized lease obligations, at November 3, 2017. Interest payments included in the table below are calculated based on the rates in effect at November 3, 2017. The unsecured notes are further described in Note 8 to the consolidated financial statements included herein.

Payments Due by Period
(In millions) Total
Less Than 1 Year
1-3 Years
4-5 Years
After 5 Years
Long-term debt (principal amounts, excluding discounts and debt issuance costs) $ 15,115
$ 251
$ 1,551
$ 1,786
$ 11,527
Long-term debt (interest payments) 9,350
576
1,111
1,013
6,650
Total $ 24,465
$ 827
$ 2,662
$ 2,799
$ 18,177

As of ~~November 3, 2017,~~May 4, 2018, there were no ~~other~~ material changes to our contractual obligations and commercial commitments outside the ordinary course of business since the end of ~~2016.~~2017. 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.

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,” and similar expressions are forward-looking statements. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties. Forward-looking statements include, but are not limited to, statements about future financial and operating results, Lowe’s plans, objectives, business outlook, priorities, expectations and intentions, expectations for sales growth, comparable sales, earnings and performance, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for services, share repurchases, Lowe’s strategic initiatives, including those relating to acquisitions by Lowe’s and the expected impact of such transactions on our strategic and operational plans and financial results, and any statement of an assumption underlying any of the foregoing and other statements that are not historical facts. Although we believe that the expectations, opinions, projections and comments reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and we can give no assurance that such statements 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, changes to tax laws applicable to corporate multinationals, such as the recently enacted U.S. Tax Cuts and Jobs Act of 2017, 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, inflation or deflation of commodity prices, disruptions caused by our management changes, and other factors that can negatively affect our customers, as well as our ability to: (i) respond to adverse trends in the housing industry, a reduced rate of growth in household formation, and slower rates of growth in housing renovation and repair activity,

as well as uneven recovery in commercial building activity; (ii) secure, develop, and otherwise implement new technologies and processes necessary to realize the benefits of our strategic initiatives focused on omni-channel sales and marketing presence and enhance our efficiency; (iii) attract, train, and retain highly-qualified associates; (iv) manage our business effectively as we adapt our operating model to meet the changing expectations of our customers; (v) maintain, improve, upgrade and protect our critical information systems from data security breaches, ransomware and other cyber threats; (vi) respond to fluctuations in the prices and availability of services, supplies, and products; (vii) respond to the growth and impact of competition; (viii) address changes in existing or new laws or regulations that affect consumer credit, employment/labor, trade, product safety, transportation/logistics, energy costs, health care, tax or environmental issues; (ix) positively and effectively manage our public image and reputation and respond appropriately to unanticipated failures to maintain a high level of product and service quality that could result in a negative impact on customer confidence and adversely affect sales; and (x) effectively manage our relationships with selected suppliers of brand name products and key vendors and service providers, including third-party installers. In addition, we could experience impairment losses if either the actual results of our operating stores are not consistent with the assumptions and judgments we have made in estimating future cash flows and determining asset fair values, or we are required to reduce the carrying amount of our investment in certain unconsolidated entities. With respect to acquisitions, potential risks include the effect of such transactions on Lowe’s and the target company’s strategic relationships, operating results and businesses

generally; our ability to integrate personnel, labor models, financial, IT and other systems successfully; disruption of our ongoing business and distraction of management; hiring additional management and other critical personnel; increasing the scope, geographic diversity, and complexity of our operations; significant integration costs or unknown liabilities; and failure to realize the expected benefits of the transaction. For more information about these and other risks and uncertainties that we are exposed to, you should read “Item 1A - Risk Factors” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” included in our most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the SEC) and the description of material changes thereto, if any, included in our Quarterly Reports on Form 10-Q or subsequent filings with the SEC.

The forward-looking statements contained in this Form 10-Q are expressly qualified in their entirety by the foregoing cautionary statements. The foregoing list of important factors that may affect future results is not exhaustive. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. All such forward-looking statements are based upon data available as of the date of this Form 10-Q or other specified date and speak only as of such date. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf about any of the matters covered in this Form 10-Q are qualified by these cautionary statements and the risk factors disclosed in “Item 1A - Risk Factors” in the Annual Report and the description of material changes thereto, if any, included in our Quarterly Reports on Form 10-Q or subsequent filings with the SEC. We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, change in circumstances, future events or otherwise, except as may be required by law.

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 February ~~3, 2017.~~2, 2018.

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 ~~November 3, 2017,~~May 4, 2018, 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 ~~November 3, 2017,~~May 4, 2018, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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

There have been no material changes in the Company’s risk factors from those disclosed in “Item 1A - Risk Factors” in the Annual ~~Report.~~Report, except with respect to the risk factor regarding the retirement of our Chief Executive Officer and the appointment of a new Chief Executive Officer, which has been amended and restated as follows:

If we do not successfully manage the transitions associated with the retirement of our Chairman and Chief Executive Officer and Chief Financial Officer and the appointment of a new Chairman and a new Chief Executive Officer and Chief Financial Officer, it could be viewed negatively by our customers and shareholders and could have an adverse impact on our business.

On March 26, 2018, we announced that Robert A. Niblock planned to retire as Chairman of the Board of Directors, President and Chief Executive Officer after a 25-year career with the Company. On May 20, 2018, the Board of Directors appointed Marvin R. Ellison as President and Chief Executive Officer, in each case, effective as of July 2, 2018, at which time he will also join the Board of Directors. On May 20, 2018, the Board of Directors also appointed Richard R. Dreiling as Chairman of the Board of Directors, effective as of July 2, 2018. Mr. Ellison and Mr. Dreiling will succeed Mr. Niblock, who will be retiring as Chairman, President and Chief Executive Officer of the Company and member of the Board of Directors, in each case, effective as of July 2, 2018. On June 4, 2018, we announced that Marshall A. Croom plans to retire from the Company, effective October 5, 2018. Mr. Croom will continue in his role as Chief Financial Officer until his successor is appointed, and then remain with the Company during a transition period until his retirement date. Such leadership transitions can be inherently difficult to manage, and an inadequate transition may cause disruption to our business, including to our relationships with our customers, suppliers, vendors and employees. It may also make it more difficult to hire and retain key employees.

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~~first quarter of fiscal ~~2017:~~2018:

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 5, 2017 - September 1, 2017 ³
4,638,797
$ 77.21
4,638,074
$ 2,197,136,831
September 2, 2017 - October 6, 2017 1,161,732
78.65
823,328
2,132,162,709
October 7, 2017 - November 3, 2017 ³
963,108
79.95
962,287
2,076,164,467
As of November 3, 2017 6,763,637
$ 77.84
6,423,689
$ 2,076,164,467



	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
February 3, 2018 - March 2, 2018	305,097	$	86.28	291,538	$	6,918,395,242
March 3, 2018 - April 6, 2018	5,009,476	86.62		4,937,492	6,490,729,723
April 7, 2018 - May 4, 2018	3,507,876	84.76		3,507,392	6,193,429,784
As of May 4, 2018	8,822,449	$	85.87	8,736,422	$	6,193,429,784


¹	The 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.


²	On January 27, 2017, the Company’s Board of Directors authorized a $5.0 billion share repurchase program with no expiration, which was announced on the same day.

~~In August 2017, the Company entered into an Accelerated Share Repurchase (ASR) agreement with a third-party financial institution to repurchase $250 million of~~ On January 26, 2018, the Company’s ~~common stock. Pursuant to the agreement, the Company paid $250 million to the financial institution and received an initial delivery~~Board of ~~2.9 million shares. In November 2017, prior to the end of the third quarter of 2017, the Company finalized the transaction and received~~Directors authorized an additional ~~0.3 million shares. The average price paid per~~$5.0 billion share ~~in settlement of~~repurchase program with no expiration, which was announced on 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 9to the consolidated financial statements included herein for additional information regarding share repurchases.~~

same day.

Item 5. - Other Information

Submission of Matters to a Vote of Security Holders - The Company held its annual meeting of shareholders on June 1, 2018 (the Annual Meeting). For more information on the proposals, see the Company’s definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on April 20, 2018. Set forth below are the final voting results for each of the proposals submitted to the Company’s shareholders at the Annual Meeting.

(1) Election of Directors



	VOTES FOR	VOTES WITHHELD	BROKER NON-VOTES
Raul Alvarez	604,664,567	6,382,533	119,574,465
David H. Batchelder	605,734,778	5,312,322	119,574,465
Angela F. Braly	602,058,368	8,988,732	119,574,465
Sandra B. Cochran	535,026,317	76,020,783	119,574,465
Laurie Z. Douglas	606,021,461	5,025,639	119,574,465
Richard W. Dreiling	602,130,336	8,916,764	119,574,465
Marshall O. Larsen	579,964,345	31,082,755	119,574,465
James H. Morgan	605,715,919	5,331,181	119,574,465
Robert A. Niblock	593,062,534	17,984,566	119,574,465
Brian C. Rogers	606,417,190	4,629,910	119,574,465
Bertram L. Scott	605,166,402	5,880,698	119,574,465
Lisa W. Wardell	605,854,026	5,193,074	119,574,465
Eric C. Wiseman	604,506,147	6,540,953	119,574,465

(2) Advisory approval of Lowe’s named executive officer compensation in fiscal 2017



VOTES FOR	VOTES AGAINST	ABSTENTIONS	BROKER NON-VOTES
586,015,681	22,356,663	2,674,756	119,574,465

(3) Ratification of the appointment of Deloitte & Touche LLP as Lowe’s independent registered public accounting firm for fiscal 2018



VOTES FOR	VOTES AGAINST	ABSTENTIONS
715,313,097	13,941,141	1,367,327

(4) Shareholder proposal to reduce the threshold to call special shareholder meetings to 10% of outstanding shares



VOTES FOR	VOTES AGAINST	ABSTENTIONS	BROKER NON-VOTES
278,011,544	320,211,186	12,824,370	119,574,465

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 27, 2016.
8-K 001-07898 3.1 May 31, 2016

12.1
Statement re Computation of Ratio of Earnings to Fixed Charges.‡

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.‡

‡ Filed herewith.
† Furnished herewith.



Exhibit Number		Incorporated by Reference
Exhibit Number	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 20, 2018.	8-K	001-07898	3.1	May 22, 2018

10.1	Offer Letter between Marvin R. Ellison and Lowe’s Companies, Inc. entered into on May 21, 2018.	8-K	001-07898	10.1	May 22, 2018

12.1	Statement re Computation of Ratio of Earnings to Fixed Charges.‡

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.‡


‡	Filed herewith.
†	Furnished herewith.

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)

~~December~~June 5, ~~2017~~2018		By: /s/ Matthew V. Hollifield
Date		Matthew V. Hollifield Senior Vice President and Chief Accounting Officer



(In millions)	June 23, 2017
Allocation:
Cash acquired	$	4
Merchandise inventory - net	68
Other current assets	36
Property	12
Goodwill	160
Other assets	260
Accounts payable	(18		)
Other current liabilities	(9		)
Net assets acquired	$	513



	Fair Value Measurements		Impairment Losses
(In millions)	October 28, 2016		Three Months Ended October 28, 2016			Nine Months Ended October 28, 2016
Assets-held-for-use:
Operating locations	$	3	$	(31	)	$	(34	)
Goodwill	—		(46		)	(46		)
Other assets:
Cost method investments	103		(290		)	(290		)
Total	$	106	$	(367	)	$	(370	)



Issue Date	Principal Amount (in millions)		Maturity Date	Fixed vs. Floating	Interest Rate	Discount (in millions)
May 3, 2017	$	1,500	May 2027	Fixed	3.100%	$	9
May 3, 2017	$	1,500	May 2047	Fixed	4.050%	$	23



	Payments Due by Period
(In millions)	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
Long-term debt (principal amounts, excluding discounts and debt issuance costs)	$	15,115	$	251	$	1,551	$	1,786	$	11,527
Long-term debt (interest payments)	9,350		576		1,111		1,013		6,650
Total	$	24,465	$	827	$	2,662	$	2,799	$	18,177