UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~May 1,~~July 31, 2020



☐			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.)

~~North Carolina~~

~~56-0578072~~

~~(State or other jurisdiction of incorporation or organization)~~

~~(I.R.S. Employer Identification No.)~~

1000 Lowe’s Blvd.

Mooresville,

North Carolina

28117

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code

~~(704)~~

(704)

758-1000

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



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

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

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



CLASS						OUTSTANDING AT ~~5/26/~~8/24/2020
Common Stock, $0.50 par value						~~755,002,775~~755,736,046

LOWE’S COMPANIES, INC.

- TABLE OF CONTENTS -



		Page No.
Forward-Looking Statements					3
PART I - Financial Information					54
		Item 1.	Financial Statements	54
			Consolidated Balance Sheets	54
			Consolidated Statements of Earnings	65
			Consolidated Statements of Comprehensive Income	65
			Consolidated Statements of Shareholders’ Equity	76
			Consolidated Statements of Cash Flows	8
			Notes to Consolidated Financial Statements	9
			Note 1: 1 :Summary of Significant Accounting Policies	9
			Note 2: Revenue	910
			Note 3: Investments	11
			Note 4: Fair Value Measurements	1112
			Note ~~4: Restricted Investment Balances~~5 : Short-Term Borrowings	1214
			Note ~~5: Property and Accumulated Depreciation~~6 : Long-Term Debt	1214
			Note ~~6: Short-Term Borrowings~~7 : Derivative Instruments	1214
			Note ~~7: Long-Term Debt~~8 : Shareholders’ Equity	1315
			Note ~~8: Derivative Instruments~~9 : Earnings Per Share	1316
			Note ~~9: Shareholders’ Equity~~1 0 : Income Taxes	1316
			Note ~~10: Earnings Per Share~~1 1 : Supplemental Disclosure	1416
			~~Note 11: Income Taxes~~	15
	~~Note 12: Supplemental Disclosure~~	15
	Report of Independent Registered Public Accounting Firm	1618
		Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1719
		Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2628
		Item 4.	Controls and Procedures	2628
PART II - Other Information					2730
		Item 1.	Legal Proceedings	2730
		Item 1A.	Risk Factors	2730
		Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2830
		Item 6.	Exhibits	2931
			Signature	3132

Table of Contents

FORWARD-LOOKING STATEMENTS

This Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements including words such as “believe”, “expect”, “anticipate”, “plan”, “desire”, “project”, “estimate”, “intend”, “will”, “should”, “could”, “would”, “may”, “strategy”, “potential”, “opportunity”, “outlook”, “guidance”, and similar expressions are forward-looking statements. Forward-looking statements involve, ~~estimates,~~among other things, expectations, projections, ~~goals, forecasts,~~and 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 products and services, share repurchases, Lowe’s strategic initiatives, including those relating to acquisitions and dispositions ~~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, suchresults. Such statements involve risks and uncertainties and we can give no assurance that ~~such statements~~they will prove to be correct. Actual results may differ materially from those expressed or implied in such statements.

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

Investors and others should carefully consider 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 and otherwise successfully execute on our strategy and implement our strategic initiatives, including acquisitions, dispositions and the closing of certain stores and facilities; (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 system outages, data security breaches, ransomwareforegoing factors 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, environmental issues or privacy and data protection; (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; (x) effectively manage our relationships with selected suppliers of brand name products and key vendors and service providers, including third-party installers; and (xi) respond successfully to the challenges presented by the COVID-19 pandemic and its economic effects. In addition, we could experience impairment losses and other charges 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 and dispositions, potential risks include the effect of such transactions on Lowe’s and the target company’s or operating business’s strategic relationships, operating results and businesses generally; our ability to integrate or divest 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 or decreasing the scope, geographic diversity, and complexity of our operations; significant integration or disposition costs or unknown liabilities; and failure to realize the expected benefits of the transaction. For more information about these and otheruncertainties, risks and ~~uncertainties that we are exposed~~potential events including, but not limited to, ~~you should read~~those described in “Item 1A - Risk Factors” in our most recent Annual Report on Form 10-K and as may be updated from time to time in Item 1A in our quarterly reports on Form 10-Q or other subsequent filings with the SEC, and in “Item 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~~of this 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.10-Q. All such forward-looking statements ~~are based upon data available~~speak only as of the date ~~of this Form 10-Q or other specified date~~they are made, 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~~we do not undertake any obligation to update ~~or revise any forward-looking statement, whether~~these statements other than as ~~a result of new information, change in circumstances, future events or otherwise, except as may be~~ required by law.

Table of Contents

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

Lowe’s Companies, Inc.

Consolidated Balance Sheets (Unaudited)

In Millions, Except Par Value Data

May 1, 2020 May 3, 2019 January 31, 2020
Assets
Current assets:
Cash and cash equivalents $ 5,955
$ 2,973
$ 716
Short-term investments 201
190
160
Merchandise inventory – net 14,283
15,026
13,179
Other current assets 1,487
1,146
1,263
Total current assets 21,926
19,335
15,318
Property, less accumulated depreciation 18,501
18,150
18,669
Operating lease right-of-use assets 3,876
3,926
3,891
Long-term investments 300
235
372
Deferred income taxes – net 215
495
216
Other assets 1,014
1,078
1,005
Total assets $ 45,832
$ 43,219
$ 39,471

Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $ 1,000
$ —
$ 1,941
Current maturities of long-term debt 604
1,008
597
Current operating lease liabilities 506
500
501
Accounts payable 10,841
11,485
7,659
Accrued compensation and employee benefits 982
769
684
Deferred revenue 1,212
1,376
1,219
Other current liabilities 3,180
2,643
2,581
Total current liabilities 18,325
17,781
15,182
Long-term debt, excluding current maturities 20,200
16,542
16,768
Noncurrent operating lease liabilities 3,915
4,064
3,943
Deferred revenue – extended protection plans 915
837
894
Other liabilities 761
759
712
Total liabilities 44,116
39,983
37,499

Shareholders' equity:
Preferred stock, $5 par value: Authorized – 5.0 million shares; Issued and outstanding – none —
—
—
Common stock, $0.50 par value: Authorized – 5.6 billion shares; Issued and outstanding – 755 million, 795 million, and 763 million shares, respectively 377
397
381
Capital in excess of par value 10
—
—
Retained earnings 1,722
3,095
1,727
Accumulated other comprehensive loss (393 ) (256 ) (136 )
Total shareholders' equity 1,716
3,236
1,972
Total liabilities and shareholders' equity $ 45,832
$ 43,219
$ 39,471

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

~~Lowe’s Companies, Inc.~~

~~Consolidated Statements of Earnings (Unaudited)~~

~~In Millions, Except Per Share and Percentage Data~~

Three Months Ended
May 1, 2020 May 3, 2019
Current Earnings Amount % Sales Amount % Sales
Net sales $ 19,675
100.00 $ 17,741
100.00
Cost of sales 13,162
66.90 12,160
68.54
Gross margin 6,513
33.10 5,581
31.46
Expenses:
Selling, general and administrative 4,196
21.32 3,862
21.77
Depreciation and amortization 326
1.66 302
1.70
Operating income 1,991
10.12 1,417
7.99
Interest – net 205
1.04 162
0.92
Pre-tax earnings 1,786
9.08 1,255
7.07
Income tax provision 449
2.28 209
1.17
Net earnings $ 1,337
6.80 $ 1,046
5.90

Weighted average common shares outstanding – basic
755
796

Basic earnings per common share $ 1.76
$ 1.31

Weighted average common shares outstanding – diluted
756
797

Diluted earnings per common share $ 1.76
$ 1.31


	July 31, 2020		August 2, 2019		January 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	11,641	$	1,796	$	716
Short-term investments	1,085		275		160
Merchandise inventory – net	13,831		13,730		13,179
Other current assets	1,160		995		1,263
Total current assets	27,717		16,796		15,318
Property, less accumulated depreciation	18,612		18,203		18,669
Operating lease right-of-use assets	3,798		3,967		3,891
Long-term investments	326		179		372
Deferred income taxes – net	267		512		216
Other assets	1,043		1,038		1,005
Total assets	$	51,763	$	40,695	$	39,471

Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings	$	1,000	$	—	$	1,941
Current maturities of long-term debt	609		1,009		597
Current operating lease liabilities	520		492		501
Accounts payable	12,916		9,499		7,659
Accrued compensation and employee benefits	1,139		717		684
Deferred revenue	1,715		1,324		1,219
Other current liabilities	3,471		2,794		2,581
Total current liabilities	21,370		15,835		15,182
Long-term debt, excluding current maturities	20,197		16,538		16,768
Noncurrent operating lease liabilities	3,859		4,055		3,943
Deferred revenue – extended protection plans	981		868		894
Other liabilities	1,000		759		712
Total liabilities	47,407		38,055		37,499

Shareholders' equity:
Preferred stock, $5 par value: Authorized – 5.0 million shares; Issued and outstanding – 0ne	—		—		—
Common stock, $0.50 par value: Authorized – 5.6 billion shares; Issued and outstanding – 756 million, 776 million, and 763 million shares, respectively	378		388		381
Capital in excess of par value	129		—		—
Retained earnings	4,134		2,439		1,727
Accumulated other comprehensive loss	(285)		(187)		(136)
Total shareholders' equity	4,356		2,640		1,972
Total liabilities and shareholders' equity	$	51,763	$	40,695	$	39,471

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

Table of Contents

Lowe’s Companies, Inc.

Consolidated Statements of Earnings (Unaudited)

In Millions, Except Per Share and Percentage Data


	Three Months Ended														Six Months Ended
	July 31, 2020						August 2, 2019						July 31, 2020				August 2, 2019
Current Earnings	Amount		% Sales		Amount		% Sales		Amount		% Sales		Amount		% Sales
Net sales	$	27,302	100.00	%	$	20,992	100.00	%	$	46,977	100.00	%	$	38,733	100.00	%
Cost of sales	17,998		65.92		14,252		67.89		31,161		66.33		26,412		68.19
Gross margin	9,304		34.08		6,740		32.11		15,816		33.67		12,321		31.81
Expenses:
Selling, general and administrative	5,020		18.39		4,048		19.29		9,215		19.62		7,909		20.42
Depreciation and amortization	327		1.20		311		1.48		653		1.39		614		1.58
Operating income	3,957		14.49		2,381		11.34		5,948		12.66		3,798		9.81
Interest – net	219		0.80		169		0.80		423		0.90		331		0.86

Pre-tax earnings	3,738		13.69		2,212		10.54		5,525		11.76		3,467		8.95
Income tax provision	910		3.33		536		2.56		1,360		2.89		745		1.92
Net earnings	$	2,828	10.36	%	$	1,676	7.98	%	$	4,165	8.87	%	$	2,722	7.03	%


Weighted average common shares outstanding – basic	752				781				754				788
Basic earnings per common share	$	3.74			$	2.14			$	5.50			$	3.44
Weighted average common shares outstanding – diluted	753				781				755				789
Diluted earnings per common share	$	3.74			$	2.14			$	5.50			$	3.44

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											Three Months Ended														Six Months Ended
	May 1, 2020					May 3, 2019						July 31, 2020						August 2, 2019						July 31, 2020				August 2, 2019
	Amount			% Sales		Amount			% Sales			Amount		% Sales		Amount		% Sales		Amount		% Sales		Amount		% Sales
Net earnings	$	1,337		6.80		$	1,046		5.90		Net earnings	$	2,828	10.36	%	$	1,676	7.98	%	$	4,165	8.87	%	$	2,722	7.03	%
Foreign currency translation adjustments – net of tax	(159		)	(0.82	)	(33		)	(0.18	)	Foreign currency translation adjustments – net of tax	114		0.41		69		0.33		(45)		(0.10)		36		0.09
Cash flow hedges – net of tax	(102		)	(0.52	)	(15		)	(0.09	)	Cash flow hedges – net of tax	(5)		(0.02)		—		—		(108)		(0.23)		(16)		(0.04)
Other	4			0.03		—			—		Other	(1)		—		—		—		4		0.01		2		—
Other comprehensive loss	(257		)	(1.31	)	(48		)	(0.27	)
Other comprehensive income/(loss)											Other comprehensive income/(loss)	108		0.39		69		0.33		(149)		(0.32)		22		0.05
Comprehensive income	$	1,080		5.49		$	998		5.63		Comprehensive income	$	2,936	10.75	%	$	1,745	8.31	%	$	4,016	8.55	%	$	2,744	7.08	%

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

Table of Contents

Lowe’s Companies, Inc.

Consolidated Statements of Shareholders’ Equity (Unaudited)

In Millions


	Three Months Ended July 31, 2020
	Common Stock					Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
	Shares	Amount
Balance May 1, 2020	755	$	377	$	10	$	1,722	$	(393)		$	1,716

Net earnings	—	—		—		2,828		—			2,828
Other comprehensive income	—	—		—		—		108			108
Cash dividends declared, $0.55 per share	—	—		—		(416)		—			(416)
Share-based payment expense	—	—		41		—		—			41

Issuance of common stock under share-based payment plans	1	1		78		—		—			79
Balance July 31, 2020	756	$	378	$	129	$	4,134	$	(285)		$	4,356

	Six Months Ended July 31, 2020
	Common Stock					Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
	Shares	Amount
Balance January 31, 2020	763	$	381	$	—	$	1,727	$	(136)		$	1,972

Net earnings	—	—		—		4,165		—			4,165
Other comprehensive loss	—	—		—		—		(149)			(149)
Cash dividends declared, $1.10 per share	—	—		—		(831)		—			(831)
Share-based payment expense	—	—		64		—		—			64
Repurchases of common stock	(10)	(5)		(15)		(927)		—			(947)
Issuance of common stock under share-based payment plans	3	2		80		—		—			82
Balance July 31, 2020	756	$	378	$	129	$	4,134	$	(285)		$	4,356

Table of Contents

Common Stock Capital in Excess
of Par Value Retained Earnings Accumulated Other Comprehensive
Loss Total Shareholders’ Equity
Shares
Amount

Balance January 31, 2020 763
$ 381
$ —
$ 1,727
$ (136 ) $ 1,972
Net earnings 1,337
1,337
Other comprehensive loss (257 ) (257 )
Cash dividends declared, $0.55 per share (415 ) (415 )
Share-based payment expense 23
23
Repurchase of common stock (10 ) (5 ) (15 ) (927 ) (947 )
Issuance of common stock under share-based payment plans 2
1
2
3
Balance May 1, 2020 755
$ 377
$ 10
$ 1,722
$ (393 ) $ 1,716


																			Three Months Ended August 2, 2019
																			Common Stock					Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
																			Shares	Amount
Balance May 3, 2019																		Balance May 3, 2019	795	$	397	$	—	$	3,095	$	(256)		$	3,236

Net earnings																		Net earnings	—	—		—		1,676		—			1,676
Other comprehensive income																		Other comprehensive income	—	—		—		—		69			69
Cash dividends declared, $0.55 per share																		Cash dividends declared, $0.55 per share	—	—		—		(428)		—			(428)
Share-based payment expense																		Share-based payment expense	—	—		13		—		—			13
Repurchases of common stock																		Repurchases of common stock	(20)	(9)		(51)		(1,904)		—			(1,964)
Issuance of common stock under share-based payment plans																		Issuance of common stock under share-based payment plans	1	—		38		—		—			38
Balance August 2, 2019																		Balance August 2, 2019	776	$	388	$	—	$	2,439	$	(187)		$	2,640

																			Six Months Ended August 2, 2019
																			Common Stock					Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
																			Shares	Amount
Balance February 1, 2019	801		$	401		$	—		$	3,452		$	(209	)	$	3,644		Balance February 1, 2019	801	$	401	$	—	$	3,452	$	(209)		$	3,644
Cumulative effect of accounting change									(263		)				(263		)	Cumulative effect of accounting change	—	—		—		(263)		—			(263)
Net earnings									1,046						1,046			Net earnings	—	—		—		2,722		—			2,722
Other comprehensive loss												(47		)	(47		)
Cash dividends declared, $0.48 per share									(382		)				(382		)
Other comprehensive income																		Other comprehensive income	—	—		—		—		22			22
Cash dividends declared, $1.03 per share																		Cash dividends declared, $1.03 per share	—	—		—		(810)		—			(810)
Share-based payment expense						39									39			Share-based payment expense	—	—		52		—		—			52
Repurchase of common stock	(8	)	(5		)	(70		)	(758		)				(833		)
Repurchases of common stock																		Repurchases of common stock	(28)	(14)		(121)		(2,662)		—			(2,797)
Issuance of common stock under share-based payment plans	2		1			31									32			Issuance of common stock under share-based payment plans	3	1		69		—		—			70
Balance May 3, 2019	795		$	397		$	—		$	3,095		$	(256	)	$	3,236
Balance August 2, 2019																		Balance August 2, 2019	776	$	388	$	—	$	2,439	$	(187)		$	2,640

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

Table of Contents

Lowe’s Companies, Inc.

Consolidated Statements of Cash Flows (Unaudited)

In Millions


	Three Months Ended							Six Months Ended
	May 1, 2020			May 3, 2019				July 31, 2020		August 2, 2019
Cash flows from operating activities:							Cash flows from operating activities:
Net earnings	$	1,337		$	1,046		Net earnings	$	4,165	$	2,722
Adjustments to reconcile net earnings to net cash provided by operating activities:							Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	373			337			Depreciation and amortization	747		684
Noncash lease expense	116			114			Noncash lease expense	234		228
Deferred income taxes	46			(106		)	Deferred income taxes	(14)		(121)
Loss (gain) on property and other assets – net	17			(2		)
Loss on property and other assets – net							Loss on property and other assets – net	80		38

Share-based payment expense	27			42			Share-based payment expense	64		51
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Merchandise inventory – net	(1,183		)	(2,478		)	Merchandise inventory – net	(674)		(1,153)
Other operating assets	(206		)	(275		)	Other operating assets	66		(104)
Accounts payable	3,207			3,199			Accounts payable	5,259		1,202
Other operating liabilities	716			260			Other operating liabilities	1,825		36
Net cash provided by operating activities	4,450			2,137			Net cash provided by operating activities	11,752		3,583

Cash flows from investing activities:							Cash flows from investing activities:
Purchases of investments	(70		)	(3		)	Purchases of investments	(1,132)		(245)
Proceeds from sale/maturity of investments	107			54			Proceeds from sale/maturity of investments	260		272
Capital expenditures	(328		)	(205		)	Capital expenditures	(710)		(526)
Proceeds from sale of property and other long-term assets	25			24			Proceeds from sale of property and other long-term assets	46		42
Other – net	(22		)	(1		)	Other – net	(24)		(1)
Net cash used in investing activities	(288		)	(131		)	Net cash used in investing activities	(1,560)		(458)

Cash flows from financing activities:							Cash flows from financing activities:
Net change in commercial paper	(941		)	(722		)	Net change in commercial paper	(941)		(722)
Net proceeds from issuance of debt	3,961			2,972			Net proceeds from issuance of debt	3,961		2,972
Repayment of debt	(543		)	(616		)
Repayment of long-term debt							Repayment of long-term debt	(568)		(629)
Proceeds from issuance of common stock under share-based payment plans	4			32			Proceeds from issuance of common stock under share-based payment plans	83		72
Cash dividend payments	(420		)	(385		)	Cash dividend payments	(836)		(767)
Repurchase of common stock	(966		)	(826		)
Repurchases of common stock							Repurchases of common stock	(966)		(2,770)
Other – net	(3		)	(9		)	Other – net	(4)		(7)
Net cash provided by financing activities	1,092			446
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	729		(1,851)

Effect of exchange rate changes on cash	(15		)	(2		)	Effect of exchange rate changes on cash	4		(1)

Net increase in cash and cash equivalents, including cash classified within current assets held for sale	5,239			2,450			Net increase in cash and cash equivalents, including cash classified within current assets held for sale	10,925		1,273
Less: Net decrease in cash classified within current assets held for sale	—			12			Less: Net decrease in cash classified within current assets held for sale	—		12
Net increase in cash and cash equivalents	5,239			2,462			Net increase in cash and cash equivalents	10,925		1,285
Cash and cash equivalents, beginning of period	716			511			Cash and cash equivalents, beginning of period	716		511
Cash and cash equivalents, end of period	$	5,955		$	2,973		Cash and cash equivalents, end of period	$	11,641	$	1,796

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

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Lowe’s Companies, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 1: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements (unaudited) and notes to the condensed consolidated financial statements (unaudited) are presented in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The condensed consolidated financial statements (unaudited), in the opinion of management, contain all normal recurring adjustments necessary to present fairly the financial position as of ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019, the results of operations, comprehensive income, and shareholders’ equity for the three and six months ended July 31, 2020, and August 2, 2019, and cash flows for the ~~three~~six months ended ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019. The January 31, 2020 consolidated balance sheet was derived from the audited financial statements.

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

Impacts of COVID-19

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

At the onset of the pandemic, the Company implemented a number of measures to facilitate a safer store environment and to provide support for its associates, customers and community. During the first quarter, the Company expanded associate benefits in response to COVID-19 to provide additional paid time off, special payments to hourly associates, temporary wage increases and other benefits. During the second quarter of 2020, the Company provided additional bonus payments to hourly associates, in addition to continued enhanced cleaning protocols and charitable contributions. These actions resulted in $428 million and $740 million of expense included in selling, general and administrative (SG&A) expense in the consolidated statements of earnings for the three and six months ended July 31, 2020, respectively.

Also in response to COVID-19, the Company took proactive steps to further enhance its liquidity position by suspending its share repurchase program, increasing the capacity of its revolving credit facilities and the associated commercial paper program, as well as issuing senior notes in March 2020. See Note 5 and Note 6 for further discussion.

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

In addition, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which was enacted on March 27, 2020, includes measures to assist companies in response to the COVID-19 pandemic. In accordance with the CARES Act, the Company has deferred the payment of qualifying employer payroll taxes which are required to be paid over two years, with half to be paid by December 31, 2021 and the other half by December 31, 2022. As of July 31, 2020, the Company deferred $251 million of qualifying employer payroll taxes which is included in other liabilities in the consolidated balance sheets and included in cash flows from other operating liabilities in the consolidated statements of cash flows.

Reclassifications

Certain prior period amounts have been reclassified to conform to current period presentation, including the addition of cash flow hedges – net of tax on the consolidated statements of comprehensive income, and the inclusion of goodwill within other assets on the consolidated balance sheets.

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Accounting Pronouncements Not Yet Adopted

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

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

Note 2: Revenue - Net sales consists primarily of revenue, net of sales tax, associated with contracts with customers for the sale of goods and services in amounts that reflect consideration the Company is entitled to in exchange for those goods and services.

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


(In millions)	Three Months Ended									Six Months Ended
			July 31, 2020			August 2, 2019			July 31, 2020			August 2, 2019
Products	$	26,359		$	19,976		$	45,380		$	36,877
Services	508			591			907			1,144
Other	435			425			690			712
Net sales	$	27,302		$	20,992		$	46,977		$	38,733

(In millions) Three Months Ended
May 1, 2020 May 3, 2019
Products $ 19,020
$ 16,900
Services 399
554
Other 256
287
Net sales $ 19,675
$ 17,741

Revenue from products primarily relates to in-store and online merchandise purchases, which are recognized at the point in time when the customer obtains control of the merchandise. This occurs at the time of in-store purchase, in-store or curbside pick-up, or delivery of the product to the customer. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of sales in the period that the related sales are recorded. The merchandise return reserve is presented on a gross basis, with a separate asset and liability included in the consolidated balance sheets. Anticipated sales returns reflected in other current liabilities were ~~$352~~$272 million at ~~May 1,~~July 31, 2020, and ~~$287~~$232 million at ~~May 3,~~August 2, 2019. The associated right of return assets reflected in other current assets were ~~$226~~$173 million at ~~May 1,~~July 31, 2020, and ~~$190~~$152 million at ~~May 3,~~August 2, 2019.

Revenues from services primarily relate to professional installation services the Company provides through subcontractors related to merchandise purchased by a 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 - retail

Deferred revenue is presented for merchandise in which control has not yet transferred to the 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 in-store pick-up, curbside 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 merchandise or for which installation has not yet been completed were ~~$774~~$1.3 billion at July 31, 2020, and $875 million at ~~May 1, 2020, and $935 million at May 3,~~August 2, 2019. The majority of revenue for goods and services is recognized in the quarter following revenue deferral.

Deferred revenue - stored-value cards

The ~~Company defers~~deferred 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 $438~~(gift cards and returned merchandise credits) were $433 million and ~~$441~~$449 million at ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019, respectively, and these amounts are included in deferred revenue on the consolidated balance sheets. ~~The Company recognizes income from unredeemed stored-value cards in proportion to the pattern of rights exercised by the customer.~~ Amounts recognized as breakage were insignificant for the three and six months ended ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019.

Deferred revenue - extended protection plans

The ~~Company defers~~deferred revenues ~~for its separately-priced~~from separately priced extended protection plan contracts, which is a Lowe’s-branded program for which the Company is ultimately self-insured. The Company recognizes revenue from extended protection plan sales on a straight-line basis over the respective contract term. Extended protection plan contract terms primarily range from one to five years from the date of purchase or the end of the manufacturer’s warranty, as applicable. Deferred revenue from extended protection plans were $981 million and $868 million at July 31, 2020, and August 2, 2019, respectively. Revenue recognized into sales were ~~$107~~$101 million and $208 million for the three and six months ended ~~May 1,~~July 31, 2020, respectively, and ~~$99~~$101 million and $200 million for the three and six months ended ~~May 3, 2019.~~August 2, 2019, respectively. Incremental direct acquisition costs associated with the sale of extended protection plans for contracts greater than one year are also deferred and recognized as expense on a straight-line basis over the respective contract term and were insignificant at ~~May 1,~~July 31, 2020, and ~~May 3, 2019, respectively. The Company’s extended protection plan deferred costs are included in other assets (noncurrent) on the consolidated balance sheets. All other costs, such as costs~~August 2, 2019.

Table of ~~services performed under the contract, general and administrative expenses, and advertising expenses are expensed as incurred.~~Contents

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 in cost of sales when incurred and totaled ~~$36~~$42 million and $78 million for the three and six months ended ~~May 1,~~July 31, 2020, respectively, and $48 million and $96 million for the three and six months ended ~~May 3, 2019.~~August 2, 2019, respectively.

Disaggregation of Revenues

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


	Three Months Ended							Three Months Ended														Six Months Ended
	May 1, 2020			May 3, 2019				July 31, 2020						August 2, 2019						July 31, 2020				August 2, 2019
(In millions)	Net Sales		%	Net Sales		%	(In millions)	Net Sales		%		Net Sales		%		Net Sales		%		Net Sales		%
Home Décor ¹	$	6,930	35	$	6,336	36
Hardlines ²	6,433		33	5,555		31
Building Products ³	5,965		30	5,397		30
Hardlines ¹							Hardlines ¹	$	10,091	37	%	$	7,188	34	%	$	16,524	35	%	$	12,743	33	%
Home Décor ²							Home Décor ²	8,681		32		7,036		33		15,613		33		13,372		34
Building Products ³							Building Products ³	7,971		29		6,206		30		13,920		30		11,605		30
Other	347		2	453		3	Other	559		2		562		3		920		2		1,013		3
Total	$	19,675	100	$	17,741	100	Total	$	27,302	100	%	$	20,992	100	%	$	46,977	100	%	$	38,733	100	%

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


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


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


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

²Home Décor includes the following product categories: Appliances, Decor, Flooring, Kitchens & Bath, and Paint

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

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


(In millions)	Three Months Ended									Six Months Ended
			July 31, 2020			August 2, 2019			July 31, 2020			August 2, 2019
United States	$	25,561		$	19,447		$	44,321		$	36,094
International	1,741			1,545			2,656			2,639
Net Sales	$	27,302		$	20,992		$	46,977		$	38,733

(In millions) Three Months Ended
May 1, 2020 May 3, 2019
United States $ 18,760
$ 16,647
International 915
1,094
Net Sales $ 19,675
$ 17,741

Note 3: Investments - Available-for-sale debt securities are recorded at fair value, and unrealized gains and losses are recorded, net of tax, as a component of accumulated other comprehensive loss. Net unrealized gains on available-for-sale debt securities as of July 31, 2020, August 2, 2019, and January 31, 2020, were not material. Refer to Note 4 for the fair value of the Company’s available-for-sale debt securities by investment type.

Held-to-maturity securities are U.S. Treasury bills which the Company has the ability and intent to hold until maturity and are stated at amortized cost. Gross unrecognized holding gains and losses on the Company’s held-to-maturity securities were not material for the periods ended July 31, 2020, August 2, 2019, and January 31, 2020.

The Company’s investments are as follows:


(In millions)	July 31, 2020		August 2, 2019		January 31, 2020
Short-term investments:
Available-for-sale debt securities	$	435	275		$	160
Held-to-maturity securities	650		—		—
Total short-term investments	$	1,085	$	275	$	160
Long-term investments:
Available-for-sale debt securities	$	326	$	179	$	372
Total long-term investments	$	326	$	179	$	372

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The maturities of available-for-sale and held-to-maturity securities at July 31, 2020, are as follows:


	Available-for-Sale
(In millions)	Cost Basis		Fair Value		Held-to-Maturity
Due in one year or less	$	433	$	435	$	650
Due after one year through five years	319		326		—
Total	$	752	$	761	$	650

Restricted Investments

Short-term and long-term investments include restricted balances pledged as collateral primarily for the Company’s extended protection plan program. Restricted balances included in short-term investments were $260 million at July 31, 2020, $275 million at August 2, 2019, and $160 million at January 31, 2020.

Restricted balances included in long-term investments were $326 million at July 31, 2020, $179 million at August 2, 2019, and $372 million at January 31, 2020.

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

- ~~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 and liabilities measured at fair value on a recurring basis as of ~~May 1,~~July 31, 2020, ~~May 3,~~August 2, 2019, and January 31, 2020. ~~The fair values~~

Table of ~~these instruments approximated amortized costs.~~Contents


		Fair Value Measurements at								Fair Value Measurements at
(In millions)	Measurement Level	May 1, 2020		May 3, 2019		January 31, 2020		(In millions)	Measurement Level	July 31, 2020		August 2, 2019		January 31, 2020
Assets:								Assets:
Short-term investments:								Short-term investments:
Available-for-sale debt securities								Available-for-sale debt securities
U.S. Treasury securities	Level 1	$	133	$	—	$	13
Certificates of deposit								Certificates of deposit	Level 1	$	175	$	—	$	—
U.S. Treasury notes								U.S. Treasury notes	Level 1	104		—		13
Money market funds	Level 1	33		156		105		Money market funds	Level 1	98		241		105
Corporate debt securities	Level 2	28		12		23		Corporate debt securities	Level 2	35		12		23
Agency securities	Level 2	7		22		19		Agency securities	Level 2	23		22		19
Total short-term investments		$	201	$	190	$	160	Total short-term investments		$	435	$	275	$	160
Long-term investments:								Long-term investments:
Available-for-sale debt securities								Available-for-sale debt securities
U.S. Treasury securities	Level 1	$	214	$	26	$	280
U.S. Treasury notes								U.S. Treasury notes	Level 1	$	250	$	67	$	280
Corporate debt securities	Level 2	56		181		62		Corporate debt securities	Level 2	61		75		62
Agency securities	Level 2	30		28		30		Agency securities	Level 2	15		37		30

Total long-term investments		$	300	$	235	$	372	Total long-term investments		$	326	$	179	$	372

Liabilities:								Liabilities:
Other current liabilities:								Other current liabilities:
Derivative instruments								Derivative instruments
Forward interest rate swaps	Level 2	$	15	$	—	$	11	Forward interest rate swaps	Level 2	$	20	$	—	$	11
Total other current liabilities		$	15	$	—	$	11	Total other current liabilities		$	20	$	—	$	11
Other liabilities:								Other liabilities:
Derivative instruments								Derivative instruments
Forward interest rate swaps	Level 2	$	17	$	—	$	—	Forward interest rate swaps	Level 2	$	21	$	—	$	—
Total other liabilities		$	17	$	—	$	—	Total other liabilities		$	21	$	—	$	—

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

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

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

During the three and six months ended ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019, the Company had no ~~significant~~material measurements of assets and liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

Other Fair Value ~~of Financial Instruments~~Disclosures

The Company’s financial ~~instruments~~assets and liabilities not measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable, held-to-maturity securities, short-term borrowings, accounts payable, ~~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.

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


	July 31, 2020						August 2, 2019						January 31, 2020
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Unsecured notes (Level 1)	$	20,109	$	24,998	$	17,093	$	18,213	$	16,648	$	18,808
Mortgage notes (Level 2)	5		5		6		6		5		6
Long-term debt (excluding finance lease obligations)	$	20,114	$	25,003	$	17,099	$	18,219	$	16,653	$	18,814

May 1, 2020 May 3, 2019 January 31, 2020
(In millions) Carrying Amount Fair Value Carrying Amount Fair Value Carrying Amount Fair Value
Unsecured notes (Level 1) $ 20,106
$ 23,209
$ 17,090
$ 17,261
$ 16,648
$ 18,808
Mortgage notes (Level 2) 5
5
6
6
5
6
Long-term debt (excluding finance lease obligations) $ 20,111
$ 23,214
$ 17,096
$ 17,267
$ 16,653
$ 18,814

~~Note 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 $201 million at May 1, 2020, $190 million at May 3, 2019, and $160 million at January 31, 2020.

~~Restricted balances included in long-term investments were $300 million at May 1, 2020, $235 million at May 3, 2019, and $372 million at January 31, 2020.~~

Note 5: ~~Property and Accumulated Depreciation~~- Property is shown net of accumulated depreciation of $17.4 billion at May 1, 2020, $17.3 billion at May 3, 2019, and $17.3 billion at January 31, 2020. The Company recognized depreciation expense, inclusive of amounts presented in cost of sales and depreciation and amortization, of $359 million for the three months ended May 1, 2020, and $324 million for the three months ended May 3, 2019.

~~Note 6:~~ Short-Term Borrowings - In March 2020, the Company entered into a $1.02 billion five-year unsecured revolving credit agreement (the 2020 Credit Agreement) with a syndicate of banks. In connection with the 2020 Credit Agreement, the Company refinanced the 364-Day Credit Agreement (2019 Credit Agreement), dated as of September 9, 2019, and terminated any commitments under the 2019 Credit Agreement as of March 23, 2020. Borrowings under the 2020 Credit Agreement will bear interest calculated according to a Base Rate or a Eurocurrency Rate plus an applicable margin. The 2020 Credit Agreement contains customary representations, warranties and covenants for a transaction of this type. The Company was in compliance with those financial covenants at ~~May 1,~~July 31, 2020.

The 2020 Credit Agreement, along with the $1.98 billion five year unsecured second amended and restated credit agreement (Second Amended and Restated Credit Agreement) entered into in September 2018, supports the Company’s commercial paper program. The amounts available to be drawn under the 2020 Credit Agreement and the Second Amended and Restated Credit Agreement are reduced by the amount of borrowings under the commercial paper program. As of ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019, there were no outstanding borrowings under the 2020 Credit Agreement, Second Amended and Restated Credit Agreement, or the Company’s commercial paper program. Total combined availability under the 2020 Credit Agreement and the Second Amended and Restated Credit Agreement was $3.0 billion as of ~~May 1,~~July 31, 2020.

As of ~~May 1,~~July 31, 2020, the Company held a $1.0 billion unsecured 364-day term loan facility (Term Loan) entered in January 2020 that matures in December 2020. The weighted average interest rate of outstanding borrowings on the Term Loan was ~~1.86%~~1.42% as of ~~May 1,~~July 31, 2020.

Note 7:6: Long-Term Debt - On March 26, 2020, the Company issued $4.0 billion of unsecured fixed rate notes as follows:


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

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

The indenture governing the notes 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, up to, but excluding, the date of redemption. The indenture also contains a provision that allows the holders of the notes to require the Company to repurchase all or any part of their notes if a change of control triggering event occurs. If elected under the change of control provisions, the repurchase of the notes will occur at a purchase price of 101% of the principal amount, plus accrued and unpaid interest, if any, on such notes up to, but excluding, the date of purchase. The 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.

Note 8:7: Derivative Instruments - The Company utilizes derivative financial instruments to hedge its exposure to changes in benchmark interest rates on forecasted debt issuances. The Company held forward interest rate ~~swaps~~swap agreements with notional amounts totaling $638 million at ~~May 1,~~July 31, 2020, and $770 million at January 31, 2020. The Company did not hold forward interest rate ~~swaps~~swap agreements at ~~May 3,~~August 2, 2019. See Note 34~~, Fair Value Measurements,~~ for the gross fair values of the Company’s outstanding derivative financial instruments and corresponding fair value classifications. The cash flows related to forward interest rate ~~swaps~~swap agreements are included within operating activities in the accompanying consolidated statements of cash flows.

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The Company accounts for these contracts as cash flow hedges, thus the effective portion of gains and losses resulting from changes in fair value are recognized in other comprehensive ~~loss,~~income/(loss), net of tax effects, in the consolidated statements of comprehensive income and is recognized in earnings when the underlying hedged transaction impacts the consolidated statements of earnings. A summary of the gain/(loss) on forward interest rate swap derivatives designated as cash flow hedges recorded in other comprehensive loss and earnings for the three and six months ended ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019, including its line item in the financial statements, is as follows:


(In millions)	Three Months Ended									Six Months Ended
			July 31, 2020			August 2, 2019			July 31, 2020			August 2, 2019
Other comprehensive income/(loss)
Cash flow hedges – net of tax benefit of $1 million, $0 million, $35 million, $6 million, respectively	$	(3)		$	—		$	(107)		$	(16)
Net earnings
Interest – net	$	3		$	—		$	4		$	1

(In millions) Three Months Ended
May 1, 2020 May 3, 2019
Other comprehensive loss
Cash flow hedges - net of tax $ (104 ) $ (15 )
Net earnings
Interest - net $ 1
$ —

Note 9:8: 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. As of ~~May 1,~~July 31, 2020, the Company had $8.7 billion remaining in its share repurchase program. Due to the uncertainty caused by the COVID-19 pandemic, the Company suspended its share repurchases during the first quarter of fiscal 2020.

In February 2020, 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 3.9 million shares. The Company finalized the transaction and received an additional 1.6 million shares prior to the end of the first quarter.

Under the terms of the ASR agreement, 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 limit the number of shares the Company would be required to deliver.

The final number of shares received upon settlement of the ASR agreement was determined with reference to the volume-weighted average price of the Company’s common stock over the term of the applicable ASR agreement. The initial repurchase of shares under 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.

The ASR agreement 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.

In addition, during the ~~three~~six months ended ~~May 1,~~July 31, 2020, the Company repurchased shares of its common stock through the open market totaling 4.0 million shares, for a cost of $440 million. There were 0 shares repurchased through the open market during the three months ended July 31, 2020.

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 six months ended ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019, were as follows:


	Three Months Ended
	July 31, 2020				August 2, 2019
(In millions)	Shares	Cost		Shares	Cost ¹
Share repurchase program	—	$	—	19.6	$	1,964

Total share repurchases	—	$	—	19.6	$	1,964

Three Months Ended
May 1, 2020 May 3, 2019
(In millions) Shares

Cost ¹

Shares

Cost ¹

Share repurchase program 9.5
$ 940
8.0
$ 818
Shares withheld from employees 0.1
7
0.1
13
Total share repurchases 9.6
$ 947
8.1
$ 831
¹Reduction of $1.9 billion was recorded to retained earnings, after capital in excess of par value was depleted, for the three months endedAugust 2, 2019.


	Six Months Ended
	July 31, 2020				August 2, 2019
(In millions)	Shares	Cost ¹		Shares	Cost ¹
Share repurchase program	9.5	$	940	27.6	$	2,783
Shares withheld from employees	0.1	7		0.1	13
Total share repurchases	9.6	$	947	27.7	$	2,796

¹Reductions of $927 million and $2.7 billion were recorded to retained earnings, after capital in excess of par value was depleted, for the six months endedJuly 31, 2020, and August 2, 2019, respectively.


¹ 15 Table of Contents	~~Reductions of $927 million and $758 million were recorded to retained earnings, after capital in excess of par value was depleted, for the three months endedMay 1, 2020, and May 3, 2019, respectively.~~

Note ~~10:~~9: 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 six months ended ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019:


	Three Months Ended						Six Months Ended
(In millions, except per share data)	July 31, 2020		August 2, 2019		July 31, 2020		August 2, 2019
Basic earnings per common share:
Net earnings	$	2,828	$	1,676	$	4,165	$	2,722
Less: Net earnings allocable to participating securities	(12)		(6)		(16)		(9)
Net earnings allocable to common shares, basic	$	2,816	$	1,670	$	4,149	$	2,713
Weighted-average common shares outstanding	752		781		754		788
Basic earnings per common share	$	3.74	$	2.14	$	5.50	$	3.44
Diluted earnings per common share:
Net earnings	$	2,828	$	1,676	$	4,165	$	2,722
Less: Net earnings allocable to participating securities	(12)		(6)		(16)		(9)
Net earnings allocable to common shares, diluted	$	2,816	$	1,670	$	4,149	$	2,713
Weighted-average common shares outstanding	752		781		754		788
Dilutive effect of non-participating share-based awards	1		—		1		1
Weighted-average common shares, as adjusted	753		781		755		789
Diluted earnings per common share	$	3.74	$	2.14	$	5.50	$	3.44

Three Months Ended
(In millions, except per share data) May 1, 2020 May 3, 2019
Basic earnings per common share:
Net earnings $ 1,337
$ 1,046
Less: Net earnings allocable to participating securities (4 ) (3 )
Net earnings allocable to common shares, basic $ 1,333
$ 1,043
Weighted-average common shares outstanding 755
796
Basic earnings per common share $ 1.76
$ 1.31
Diluted earnings per common share:

Net earnings $ 1,337
$ 1,046
Less: Net earnings allocable to participating securities (4 ) (3 )
Net earnings allocable to common shares, diluted $ 1,333
$ 1,043
Weighted-average common shares outstanding 755
796
Dilutive effect of non-participating share-based awards 1
1
Weighted-average common shares, as adjusted 756
797
Diluted earnings per common share $ 1.76
$ 1.31

Anti-dilutive stock options to purchase shares of common stock for the three months ended July 31, 2020, were insignificant. Stock options to purchase 0.7 million shares of common stock were anti-dilutive for the six months ended July 31, 2020. Stock options to purchase 1.0 million and ~~0.6~~0.8 million shares of common stock were anti-dilutive for the three and six months ended ~~May 1, 2020, and May 3,~~August 2, 2019, respectively.

Note ~~11:~~10: Income Taxes - The Company’s effective income tax rates were ~~25.1%~~24.4% and 24.6% for the three and six months ended ~~May 1,~~July 31, 2020, respectively, and ~~16.6%~~24.2% and 21.5% for the three and six months ended ~~May 3,~~August 2, 2019. The increase in the effective tax rate for the ~~quarter~~six months ended July 31, 2020, is primarily due to a favorable tax benefit recorded during the first quarter of 2019 associated with the planned exit of the Mexico retail operations.

Note ~~12:~~11: Supplemental Disclosure

Net interest expense is comprised of the following:


	Three Months Ended						Six Months Ended
(In millions)	July 31, 2020		August 2, 2019		July 31, 2020		August 2, 2019
Long-term debt	$	211	$	173	$	398	$	327
Finance lease obligations	8		7		17		14
Short-term borrowings	2		—		12		6

Interest income	(8)		(12)		(12)		(19)
Interest capitalized	—		—		—		(1)
Interest on tax uncertainties	—		(1)		—		(2)
Other	6		2		8		6
Interest – net	$	219	$	169	$	423	$	331

Three Months Ended
(In millions) May 1, 2020 May 3, 2019
Long-term debt $ 187
$ 154
Short-term borrowings 10
6
Finance lease obligations 8
7
Interest income (5 ) (7 )
Other 5
2
Interest – net $ 205
$ 162

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Supplemental disclosures of cash flow information:


	Six Months Ended
(In millions)	July 31, 2020		August 2, 2019
Cash paid for interest, net of amount capitalized	$	369	$	311
Cash paid for income taxes – net	$	670	$	612
Non-cash investing and financing activities:
Leased assets obtained in exchange for new finance lease liabilities	$	53	$	31
Leased assets obtained in exchange for new operating lease liabilities	$	193	$	317

Cash dividends declared but not paid	$	416	$	428

Three Months Ended
(In millions) May 1, 2020 May 3, 2019
Cash paid for interest, net of amount capitalized $ 345
$ 287
Cash paid for income taxes – net $ 9
$ 19
Non-cash investing and financing activities:
Leased assets obtained in exchange for new finance lease liabilities $ 34
$ 3
Leased assets obtained in exchange for new operating lease liabilities $ 153
$ 145
Cash dividends declared but not paid $ 416
$ 382

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated balance sheets of Lowe’s Companies, Inc. and subsidiaries (the “Company”) as of ~~May 1,~~July 31, 2020 and ~~May 3,~~August 2, 2019, the related consolidated statements of earnings, comprehensive income, and shareholders’ equity for the fiscal three-month and six-month periods ended July 31, 2020 and August 2, 2019, and of cash flows for the fiscal ~~three-month~~six-month periods ended ~~May 1,~~July 31, 2020 and ~~May 3,~~August 2, 2019, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

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

Basis for Review Results

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

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

/s/ DELOITTE & TOUCHE LLP

Charlotte, North Carolina

August 26, 2020

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Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis summarizes the significant factors affecting our consolidated operating results, liquidity and capital resources during the three and six months ended ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that are included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020 (the Annual Report), as well as the consolidated financial statements (unaudited) and notes to the consolidated financial statements (unaudited) contained in this report. Unless otherwise specified, all comparisons made are to the corresponding period of 2019. 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

•Operations

•Financial Condition, Liquidity and Capital Resources

•Off-Balance Sheet Arrangements

•Contractual Obligations and Commercial Commitments

•Critical Accounting Policies and Estimates

EXECUTIVE OVERVIEW

Performance Overview

Net sales in the ~~first~~second quarter of 2020 increased ~~10.9%~~30.1% to ~~$19.7~~$27.3 billion compared to net sales of ~~$17.7~~$21.0 billion in the ~~first~~second quarter of 2019. The increase in total sales was primarily driven by an increase in comparable store sales. Net earnings in the ~~first~~second quarter of 2020 increased ~~27.8%~~68.8% to ~~$1.3~~$2.8 billion compared to net earnings of ~~$1.0~~$1.7 billion in the ~~first~~second quarter of 2019. Diluted earnings per common share increased ~~34.7%~~74.9% in the ~~first~~second quarter of 2020 to ~~$1.76~~$3.74 from ~~$1.31~~$2.14 in the ~~first~~second quarter of 2019. Excluding the impact of operating costs related to the Canada restructuring, adjusted diluted earnings per common share increased ~~44.6%~~74.4% to ~~$1.77~~$3.75 in the ~~first~~second quarter of 2020 from adjusted diluted earnings per common share of ~~$1.22~~$2.15 in the ~~first~~second quarter of 2019 (see the discussion of non-GAAP financial measures).

For the first ~~three~~six months of 2020, cash flows from operating activities were approximately ~~$4.5~~$11.8 billion, while ~~$328~~$710 million was used for capital expenditures. In addition, during the first three months of 2020, we repurchased $947 million of common stock through our share repurchase program; however, during the quarter, we decided to suspend our share repurchases and do not currently anticipate any additional share repurchases in fiscal 2020. We remain committed to returning capital to our shareholders through our dividend program and paid ~~$420~~$416 million in dividends during the ~~first~~second quarter of 2020.

~~Overall,~~We experienced unprecedented customer demand ~~exceeded our expectations~~ during the ~~first~~second quarter of 2020 ~~during a time of global economic uncertainty~~largely due to a consumer mindset that remains heavily focused on the home during the COVID-19 ~~pandemic, particularly in~~pandemic. Our modernization efforts over the ~~latter half of~~last 18 months to implement our retail fundamentals strategy created the ~~quarter. We experienced a comparable~~technology and operational platforms needed to meet these demand levels and grow our business during these challenging times. Comparable sales ~~increase of 11.2% and~~increased by 34.2% with broad-based growth ~~with~~across all channels, product categories and geographies. All 15 U.S. regions ~~generating positive comparable sales. Fourteen of fifteen product categories~~ generated positive comparable sales ~~with weakness limited~~of at least 30%, while our Canadian region’s comparable sales exceeded 20%.

During the second quarter, we completed the re-platforming of Lowes.com to ~~interior installation-heavy product~~the cloud which enabled us to improve site functionality to achieve triple-digit online sales growth during the quarter. With a focus on enhancing our omnichannel capabilities, we launched “mobile check-in” for curbside pickup in ~~Kitchens & Bath as consumers were reluctant~~early July and added an internal order picking app to ~~invite people into their homes.~~improve our associate’s speed and accuracy in fulfilling orders. We also completed the rollout of our touchscreen point of sale system at checkouts across all our stores.

COVID-19 Response

~~As a Company, we began~~Our top priority in navigating the ~~first quarter focused on executing our retail strategy; however, we rapidly re-prioritized our first quarter objectives~~COVID-19 pandemic continues to ~~address~~be protecting the ~~impacts~~health and well-being of COVID-19. With the onset of COVID-19, our focus shifted from running a business to achieve our financial plan to functioning as an essential retailer operating in a pandemic with three key priorities as follows:


1.	~~Creating a safe store environment for our associates and customers,~~


2.	~~Providing support for our community, including health care providers and first responders, and~~


3.	~~Financially supporting our associates during this unprecedented time.~~

We implemented a number of measures to facilitate a safer store environment including shortening our store hours, adding signage and floor markers, adding social distancing ambassadors to monitor customer traffic flow, implementing more stringent cleaning procedures, installing plexiglass shields at the point-of-sale areas, and distributing gloves and masks to our associates and customers through a safe store environment. In addition to ~~wear during their shifts. We incurred $342 million of COVID-19 related expenses~~the safety measures we implemented in the first quarter to support social distancing and enhance cleaning procedures, we added additional safety measures in the second quarter by requiring all front-line associates to wear masks and adopting a nationwide standard for all customers to wear masks. We are also committed to providing financial assistance to our hourly associates and communities which was demonstrated through an incremental total investment during the second quarter of $461 million in support ~~for~~of our hourly associates, ~~vendors,~~communities, and ~~communities.~~store safety initiatives. This support included two ~~special~~bonus payments toin July and August for our hourly front-line associates totaling $228 million, bringing our combined COVID-related financial support for associates to ~~help with~~$562 million year-to-date. In

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~~unexpected expenses, as well as a $2 per hour temporary wage increase for hourly associates during the month~~support of April. We also offered fourteen days of emergency paid leave for all associates who needed it, with an additional two weeks paid leave for those at higher risk for severe illness, and provided telemedicine services to all our associates and their families. In addition, within our communities, we ~~began donating essential protective~~have contributed $101 million in community pandemic relief, including grants to support minority-owned and rural small businesses.

Supply Chain

Due to strong customer demand during the second quarter and the impacts of COVID-19 on production, certain product ~~to help protect first responders~~categories have experienced delays in replenishment. Those categories primarily impacted are Seasonal & Outdoor Living, Appliances, and ~~front-line medical workers.~~

~~Our strategic investments and intense focus on~~Lumber. Despite the supply pressure, our ~~retail fundamentals over the past eighteen months have enabled us to respond more effectively in this rapidly changing environment, and we established the agility to be able to provide~~supply chain teams, partnering with our ~~customers with the essential products they need to keep their homes safe and functional. Our associates~~vendors, were able to ~~leverage their SMART mobile devices~~continue to ~~fulfill Buy Online Pick-up~~ flow considerable product volume to the stores and delivery nodes during the quarter.

Looking Forward

In ~~Store~~the second half of 2020, we plan to continue reinvesting in our business to elevate our product offering, simplify our store environment and ~~Curbside Pick-up more efficiently.~~improve our service offering to support long-term growth. We are beginning a merchandising reset across our store portfolio to better align our product adjacencies to customer shopping patterns, especially for our Pro customers. This reset is forecasted to be completed in the current fiscal year for the majority of stores and is expected to improve bay productivity and better support sales. In addition, ~~our new customer-centric scheduling system allowed us~~we will continue to ~~monitor store traffic and associate availability to customize priorities based on store capacity levels.~~

~~Supply Chain~~

~~Our previous inventory investments gave us a strong in-stock position for Pro and seasonal products. Our supply chain organization also met the unprecedented customer demand~~invest in the first quarter, partly due to the efforts put forth in the past year to bolster our international and domestic carrier network which allowed us to manage through the global health crisis without transportation interruptions. We also leveraged cross-functional collaboration and partnership with vendors to redirect product where necessary. Finally, technology improvements that we previously implemented acrossadvancing our supply chain ~~have created better visibility~~infrastructure to further our omnichannel capabilities and position the Company for ~~our stores with regard~~future growth. Over the next 18 months, we are currently planning to ~~product availability.~~ open 50 cross-dock delivery terminals, seven bulk distribution centers, and four e-commerce fulfillment centers.

~~Looking Forward~~

While we ~~are pleased with the strong~~remain optimistic about our performance, ~~for the quarter,~~ we have limited visibility into future business ~~trends. The~~trends in this unprecedented operating environment. This results in an unusually wide range of potential business outcomes and as such, we cannot be certain of the volume or duration of customer demand or potential supply chain constraints in future ~~periods is uncertain as it is difficult to predict the duration and spread of the COVID-19 pandemic or its impact on our operations and supply chain for the remainder of the year.~~periods.

We are continuing to prioritize investment in the business for future growth, and in certain cases, we have re-prioritized some capital projects to focus on the near-term improvement of our omni-channel capabilities. We also continue to focus on completing our Google Cloud migration in the second quarter to ensure we build a strong infrastructure for Lowes.com. Although our future environment is unpredictable, we are confident in our ability to execute and continue to provide the essential products and services our communities need. We remain committed to serving our customers and communities in the coming months as we navigate the public health challenge of COVID-19.

OPERATIONS

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


	Three Months Ended					Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Period		Percentage Increase / (Decrease) in Dollar Amounts from Prior Period
	July 31, 2020		August 2, 2019		2020 vs. 2019	2020 vs. 2019
Net sales	100.00	%	100.00	%	N/A	30.1	%
Gross margin	34.08		32.11		197	38.0
Expenses:
Selling, general and administrative	18.39		19.29		(90)	24.0
Depreciation and amortization	1.20		1.48		(28)	5.0
Operating income	14.49		11.34		315	66.2
Interest – net	0.80		0.80		—	29.2
Pre-tax earnings	13.69		10.54		315	69.0
Income tax provision	3.33		2.56		77	69.8
Net earnings	10.36	%	7.98	%	238	68.8	%

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	Six Months Ended					Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Period		Percentage Increase / (Decrease) in Dollar Amounts from Prior Period
	July 31, 2020		August 2, 2019		2020 vs. 2019	2020 vs. 2019
Net sales	100.00	%	100.00	%	N/A	21.3	%
Gross margin	33.67		31.81		186	28.4
Expenses:
Selling, general and administrative	19.62		20.42		(80)	16.5
Depreciation and amortization	1.39		1.58		(19)	6.4
Operating income	12.66		9.81		285	56.6
Interest – net	0.90		0.86		4	27.7

Pre-tax earnings	11.76		8.95		281	59.4
Income tax provision	2.89		1.92		97	82.6
Net earnings	8.87	%	7.03	%	184	53.0	%

Three Months Ended Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Period
Percentage Increase / (Decrease) in Dollar Amounts from Prior Period
May 1, 2020 May 3, 2019 2020 vs. 2019
2020 vs. 2019
Net sales 100.00 % 100.00 % N/A
10.9 %
Gross margin 33.10
31.46
164
16.7
Expenses:
Selling, general and administrative 21.32
21.77
(45 ) 8.6
Depreciation and amortization 1.66
1.70
(4 ) 7.9
Operating income 10.12
7.99
213
40.5
Interest – net 1.04
0.92
12
26.2
Pre-tax earnings 9.08
7.07
201
42.4
Income tax provision 2.28
1.17
111
115.5
Net earnings 6.80 % 5.90 % 90
27.8 %

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

Beginning on February 1, 2020, the Company changed the basis in which it presents the comparable sales metric. The current metric is presented on a transacted basis when tender is accepted from a customer. Prior to this change, the Company’s comparable sales metric was based on when control of the good or service passed to the customer, which included timing impacts of deferred sales. These timing impacts have historically had an insignificant impact on annual comparable sales. The purpose of the change was to align the metric with how the Lowe’s management team evaluates the business throughout the year and views performance relative to peers. For the three and six months ended ~~May 1,~~July 31, 2020, the impact of excluding deferred sales increased the comparable sales metric by 291 basis points and ~~May 3,~~125 basis points, respectively. For the three and six months ended August 2, 2019, the impact of excluding deferred sales decreased the comparable sales metric by 6038 basis points and 3034 basis points, respectively. The comparable sales metric for the three and six months ended ~~May 3,~~August 2, 2019, has been recast to conform to the current year presentation.

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Three Months Ended
Other Metrics May 1, 2020 May 3, 2019
Comparable sales increase ¹
11.2 % 3.2 %
Total customer transactions (in millions) 233
230
Average ticket ²
$ 84.38
$ 77.19
At end of period:
Number of stores 1,970
2,002
Sales floor square feet (in millions) 208
209
Average store size selling square feet (in thousands) ³
106
104
Net earnings to average debt and equity ⁴
17.2 % 9.2 %
Return on invested capital ⁴
19.7 % 11.5 %

~~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. Comparable sales include online sales, which positively impacted first quarter fiscal 2020 and first quarter fiscal 2019 comparable sales by approximately 430 basis points and 70 basis points, respectively. The comparable store sales calculation included in the preceding table was calculated using comparable 13-week periods.


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


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


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


	Three Months Ended									Six Months Ended
Other Metrics	July 31, 2020			August 2, 2019			July 31, 2020			August 2, 2019
Comparable sales increase ¹	34.2		%	2.0		%	23.6		%	2.5		%
Total customer transactions (in millions)	330			269			563			499
Average ticket ²	$	82.79		$	77.97		$	83.45		$	77.61
At end of period:
Number of stores	1,968			2,003
Sales floor square feet (in millions)	208			209
Average store size selling square feet (in thousands) ³	106			104
Net earnings to average debt and equity ⁴	20.7		%	10.0		%
Return on invested capital ⁴	23.3		%	12.3		%

¹ 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. Comparable sales include online sales, which positively impacted second quarter fiscal 2020 comparable sales by approximately 650 basis points and year-to-date fiscal 2020 comparable sales by approximately 545 basis points. The comparable store sales calculation included in the preceding table was calculated using comparable 13-week and 26-week periods.

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

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

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

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 the Company’s original business outlooks for the ~~first~~second quarter of fiscal 2020 and fiscal 2019. Unless otherwise noted, the income tax effect of these adjustments is calculated using the marginal rates for the respective periods.

Fiscal 2020 Impacts

•Beginning in the third quarter of fiscal 2019, the Company began a strategic review of its Canadian operations, and in the fourth quarter of fiscal 2019, the Company announced additional actions to improve future performance and profitability of its Canadian operations. As a result of this review and related actions, during the three months ended ~~May 1,~~July 31, 2020, the Company recognized $9$10 million of pre-tax operating costs related to ~~exit~~remaining inventory write-downs and store closing costs (Canada restructuring).

Fiscal 2019 Impacts

•Prior to the beginning of fiscal 2019, the Company announced its intention to exit its Mexico retail operations and had planned to sell the operating business. ~~However, in~~During the ~~first quarter~~three months ended August 2, 2019, the Company recognized a net loss of 2019, after an extensive market evaluation, the decision was made to instead sell the assets of the business through liquidation. That decision resulted in an $82 million tax benefit in the first quarter, partially offset by $12 million in pre-tax operating losses associated with the exit and ongoing wind-down of the Mexico retail operations (Mexico adjustments).

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

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	Three Months Ended												Three Months Ended
	May 1, 2020				May 3, 2019								July 31, 2020						August 2, 2019
	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			$	1.76				��	$	1.31		Diluted earnings per share, as reported			$	3.74			$	2.14
Non-GAAP adjustments – per share impacts												Non-GAAP adjustments – per share impacts
Canada restructuring	0.01	—	0.01		—	—			—			Canada restructuring	0.01	—	0.01		—	—	—
Mexico adjustments	—	—	—		0.01	(0.10	)		(0.09		)	Mexico adjustments	—	—	—		0.02	(0.01)	0.01

Adjusted diluted earnings per share			$	1.77					$	1.22		Adjusted diluted earnings per share			$	3.75			$	2.15

Return on Invested Capital

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

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


	For the Periods Ended
(In millions, except percentage data)	July 31, 2020			August 2, 2019
Calculation of Return on Invested Capital
Numerator
Net Earnings	$	5,724		$	2,527
Plus:
Interest expense – net	783			643
Operating lease interest	182			197
Provision for income taxes	1,957			1,018
Lease adjusted net operating profit	8,646			4,385
Less:
Income tax adjustment ¹	2,203			1,258
Lease adjusted net operating profit after tax	$	6,443		$	3,127

Denominator
Average debt and equity ²	$	27,637		$	25,395
Net earnings to average debt and equity	20.7		%	10.0		%
Return on invested capital	23.3		%	12.3		%

For the Periods Ended
(In millions, except percentage data) May 1, 2020 May 3, 2019
Calculation of Return on Invested Capital
Numerator

Net Earnings $ 4,572
$ 2,372
Plus:
Interest expense – net 733
626
Operating lease interest 189
201
Provision for income taxes 1,583
972
Lease adjusted net operating profit 7,077
4,171
Less:
Income tax adjustment ¹
1,820
1,212
Lease adjusted net operating profit after tax $ 5,257
$ 2,959

Denominator
Average debt and equity ²
$ 26,645
$ 25,676
Net earnings to average debt and equity 17.2 % 9.2 %
Return on invested capital 19.7 % 11.5 %


¹¹Income tax adjustment is defined as net operating profit multiplied by the effective tax rate, which was 25.5% and 28.7% for the periods ended July 31, 2020, and August 2, 2019, respectively.	~~Income tax adjustment is defined as net operating profit multiplied by the effective tax rate, which was 25.7% and 29.1% for the periods ended May 1, 2020, and May 3, 2019, respectively.~~


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

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

Results of Operations

Net Sales – Net sales in the ~~first~~second quarter of 2020 increased ~~10.9%~~30.1% to ~~$19.7~~$27.3 billion. The increase in total sales was primarily driven by comparable store sales ~~growth and new stores, partially offset by closed locations.~~growth. Comparable sales increased ~~11.2%~~34.2% over the same period, driven by a ~~9.6%~~22.6% increase in comparable customer transactions and a 11.6% increase in comparable average ~~ticket and a 1.6% increase in comparable customer transactions.~~ticket.

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During the ~~first~~second quarter of 2020, we experienced comparable sales increases in ~~fourteen of fifteen~~all 15 product categories with broad-based strength in performance across both do-it-yourself (DIY) and Pro customers. Comparable sales were above the Company average in ~~Paint,~~Lumber, Lawn & Garden, ~~Lumber, Hardware,~~ Tools, ~~Appliances,~~Paint, and Seasonal & Outdoor Living. During the quarter, we saw very strong ~~COVID-related~~ demand for ~~essential cleaning products, along with~~DIY areas as consumers focused on the home given the increased time spent there, and wallet share shift away from other ~~home necessities such as refrigerators, freezers~~expendable activities. This included core repair and ~~DIY home repair products. As customers began isolating in their homes this quarter, they engaged in a variety of projects which drove double-digit comparable sales in core spring-related~~maintenance categories, as well as ~~Paint,~~incremental projects to improve the function of their homes. Despite supply pressure, Lumber experienced strong performance across all subdivisions driven by DIY projects and ~~critical repair~~growth in Pro sales. COVID-19 preparation in cleaning and ~~maintenance categories. Favorable weather driven demand~~core spring categories was a key driver in Lawn & ~~Garden~~Garden. Tools and ~~Seasonal & Outdoor Living categories. Lumber~~Paint experienced ~~double-digit comparable sales, with strong unit demand from both~~a significant increase in volume as consumers spent time on DIY friendly home projects and Pro customers, as well as benefited from our improved investments in job lot quantities. Product categories with heavy in-home installation, such as Kitchens & Bath, experienced softness during the quarter.improvements. Geographically, all 15 U.S. regions and the Canadian region experienced positive comparable sales ~~with~~in excess of 20%.

Net sales increased 21.3% to $47.0 billion for the ~~strongest results~~first six months of 2020 compared to 2019. The increase in total sales was driven primarily by an increase in comparable store sales. Comparable sales increased 23.6% over the ~~West~~same period, primarily driven by a 13.0% increase in customer transactions and ~~South.~~a 10.6% increase in comparable average ticket.

Gross Margin – For the ~~first~~second quarter of 2020, gross margin as a percentage of sales increased ~~164~~197 basis points. The gross margin increase for the quarter is driven by approximately ~~110~~140 basis points of total rate improvement, ~~comprised of 150 basis points due to rate mitigation strategies, partially offset~~driven by ~~40 basis points of deleverage due to tariff pressure. In addition to these rate improvement measures, gross margin increased 55~~benefits from our improved pricing and promotional strategy, and 60 basis points due to a favorable product mix as demand ~~shifted away from lower~~was stronger in higher margin categories.

Gross margin as a percentage of sales increased 186 basis points in the first six months of 2020 compared to 2019. Gross margin was positively impacted by approximately 120 basis points of total rate improvement and 45 basis points due to a favorable product mix as demand was stronger in higher margin categories.

SG&A – For the ~~first~~second quarter of 2020, SG&A expense leveraged 4590 basis points as a percentage of sales compared to the ~~first~~second quarter of 2019. This is primarily driven by approximately ~~105~~110 basis points of leverage in retail operating salaries due to increased sales and ~~reduced~~improved operating ~~hours,~~efficiencies, 40 basis points of leverage in employee benefits resulting from lower insurance claims due to COVID-19 deferral of elective medical care, 40 basis points of occupancy leverage due to higher sales volume compared to fixed occupancy costs, and 35 basis points of leverage in advertising expense. These were partially offset by 155 basis points of deleverage due ~~primarily~~ to ~~timing shifts~~COVID-19 related expenses, including two hourly front-line employee bonuses, emergency paid leave, charitable contributions, increased cleaning costs and other safety-related programs.

SG&A expense as a ~~result~~percentage of ~~COVID-19,~~sales leveraged 80 basis points in the first six months of 2020 compared to 2019. This was primarily driven by 115 basis points of leverage in retail operating salaries, 35 basis points of leverage in advertising, and 25 basis points of leverage in employee ~~insurance resulting from lower claims due to COVID-19 deferral of elective medical care. This was~~insurance. These were partially offset by ~~130~~100 basis points of deleverage due to COVID-19 related ~~compensation, including hourly employee special payments to help with unexpected expenses, temporary time off, and an additional $2 per hour temporary wage increase in the month of April.~~compensation.

Depreciation and Amortization – Depreciation and amortization leveraged 428 basis points for the ~~first~~second quarter of 2020 compared to the prior year primarily due to an increase in sales during the period. Property, less accumulated depreciation, increased to ~~$18.5~~$18.6 billion at ~~May 1,~~July 31, 2020, compared to $18.2 billion at ~~May 3,~~August 2, 2019. As of ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019, we owned 84% and 83% of our stores, respectively, which included stores on leased land.

Depreciation and amortization leveraged 19 basis points for the first six months of 2020 compared to 2019 primarily due to the same factors that impacted depreciation and amortization for the second quarter.

Interest – Net – Interest expense for the ~~first~~second quarter of 2020 increased primarily as a result of the issuance of $4.0 billion unsecured notes in March 2020 and the $1.0 billion term loan entered in January 2020.

Interest expense for the first six months of 2020 increased primarily due to the same factors that impacted interest expense for the second quarter.

Income Tax Provision – Our effective income tax rates were ~~25.1%~~24.4% and ~~16.6%~~24.2% for the three months ended ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019, respectively.

Our effective income tax rates were 24.6% and 21.5% for the six months ended July 31, 2020, and August 2, 2019, respectively. The increase in the effective tax rate for the ~~quarter~~first six months is primarily due to a favorable tax benefit recorded during the first quarter of 2019 associated with a change in approach to pursue a sale of the Mexico operations through liquidation.

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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

~~Cash~~Significant customer demand and operating performance year-to-date drove a substantial increase in cash flows from ~~operations,~~operations. These increases, supplemented with our short-term and long-term borrowings, have ~~been sufficient~~provided ample liquidity to fund our operations while allowing us to make strategic investments ~~that will grow~~in our ~~business,~~omnichannel capabilities to support long-term growth and to return excess cash to shareholders in the form of dividends and share repurchases. We have also bolstered our liquidity to plan for unforeseen disruptions with a $4.0 billion unsecured notes issuance and a net increase in the capacity of our revolving credit facilities by $770 million, as further described below. 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, and pay dividends over the next 12 months.dividends. Due to the uncertainty caused by the COVID-19 pandemic, we ~~have~~also suspended our share repurchases ~~and do not anticipate any additional share repurchases in fiscal 2020 beyond what we executed in~~during the first ~~quarter.~~quarter of fiscal 2020. As of July 31, 2020, we held $11.6 billion of cash and cash equivalents, as well as $3 billion in undrawn capacity on our revolving credit facilities.

Cash Flows Provided by Operating Activities


	Six Months Ended
(In millions)	July 31, 2020		August 2, 2019
Net cash provided by operating activities	$	11,752	$	3,583

Three Months Ended
(In millions) May 1, 2020 May 3, 2019
Net cash provided by operating activities $ 4,450
$ 2,137

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 ~~three~~six months ended ~~May 1,~~July 31, 2020, versus the ~~three~~six months ended ~~May 3,~~August 2, 2019, was driven primarily by higher net earnings and changes in working capital. ~~Inventory~~Accounts payable increased for the first ~~three~~six months of 2020 by ~~$1.2~~$5.3 billion, compared to an increase for the first ~~three~~six months of 2019 of ~~$2.5~~$1.2 billion, driving an additional ~~$1.3~~$4.1 billion in operating cash flows for the first ~~quarter~~six months of fiscal 2020, primarily due to significant inventory purchases in 2020 due to high customer demand as compared to 2019. Other operating liabilities increased $1.8 billion for the first six months of 2020 compared to an ~~earlier spring demand caused by COVID-19 related product purchasing and favorable weather. Additionally, accounts payable and~~increase of $36 million in the first six months of 2019. The increase in other operating liabilities in the current year is primarily driven by increases in deferred revenue and income taxes payable related to higher sales in the current year, increased accrued compensation and employee benefits driven by higher bonus attainment as well as additional COVID-related accrued bonuses for employees, and increased accrued payroll taxes due to the deferral of the employer portion of social security tax in accordance with the CARES Act. Inventory decreased operating cash flow for the first ~~three~~six months of 2020 by approximately ~~$3.9 billion,~~$670 million, compared to ~~an increase~~a decrease of approximately ~~$3.5~~$1.2 billion for the first ~~three~~six months of 2019, primarily due to an earlier spring inventory build in 2020 compared to 2019.

Cash Flows Used in Investing Activities


	Six Months Ended
(In millions)	July 31, 2020		August 2, 2019
Net cash used in investing activities	$	(1,560)	$	(458)

Three Months Ended
(In millions) May 1, 2020 May 3, 2019
Net cash used in investing activities $ (288 ) $ (131 )

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

Capital expenditures

Our capital expenditures generally consist of investments in our strategic initiatives to enhance our ability to serve customers, improve existing stores, and support expansion plans. The following table provides our capital expenditures for the ~~three~~six months ended ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019:


	Six Months Ended
(In millions)	July 31, 2020		August 2, 2019
Existing store investments ¹	$	587	$	369
Strategic initiatives ²	78		86
New stores, new corporate facilities and international ³	45		71
Total capital expenditures	$	710	$	526

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

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

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

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Three Months Ended
(In millions) May 1, 2020 May 3, 2019
Existing store investments ¹
$ 266
$ 147
Strategic initiatives ²
40
17
New stores, new corporate facilities and international ³
22
41
Total capital expenditures $ 328
$ 205


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


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


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

Our 2020 capital expenditures forecast is approximately $1.6 billion.

Cash Flows ~~Used in~~Provided by Financing Activities


	Six Months Ended
(In millions)	July 31, 2020		August 2, 2019
Net cash provided by (used in) financing activities	$	729	$	(1,851)

Three Months Ended
(In millions) May 1, 2020 May 3, 2019
Net cash provided by financing activities $ 1,092
$ 446

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

Short-term Borrowing Facilities

In January 2020, we entered into a $1.0 billion unsecured 364-day term loan facility (the Term Loan), which has a maturity date of December 31, 2020. Outstanding borrowings under the Term Loan were $1.0 billion, with an interest rate of ~~1.86%~~1.42%, as of ~~May 1,~~July 31, 2020.

In March 2020, we entered into a $1.02 billion five year unsecured revolving credit agreement (the 2020 Credit Agreement) with a syndicate of banks. The 2020 Credit Agreement has a maturity date of March 2025. In connection with the 2020 Credit Agreement, the Company refinanced the $250 million 364-Day Credit Agreement (2019 Credit Agreement), dated as of September 9, 2019, and terminated any commitments under the 2019 Credit Agreement as of March 23, 2020. Subject to obtaining commitments from the lenders and satisfying other conditions specified in the Second Amended and Restated Credit Agreement, the Company may increase the aggregate availability of the 2020 Credit Agreement by an additional $250 million.

In addition, we have a $1.98 billion five year unsecured revolving second amended and restated credit agreement (the Second Amended and Restated Credit Agreement) with a syndicate of banks. ~~The Second Amended and Restated Credit Agreement has a maturity date of September 2023.~~ Subject to obtaining commitments from the lenders and satisfying other conditions specified in the 2020 Credit Agreement and the Second Amended and Restated Credit Agreement, the Company may increase the combined aggregate availability of both agreements by an additional ~~$270~~$520 million.

The 2020 Credit Agreement and the Second Amended and Restated Credit Agreement support our commercial paper program. The amount available to be drawn under the 2020 Credit Agreement and the Second Amended and Restated Credit Agreement is reduced by the amount of borrowings under our commercial paper program. There were no outstanding borrowings under the Company’s commercial paper program, ~~as of May 1, 2020, and May 3, 2019. There were no outstanding borrowings under~~ the 2020 Credit Agreement, or the Second Amended and Restated Credit Agreement as of ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019. Total combined availability under the 2020 Credit Agreement and the Second Amended and Restated Credit Agreement as of ~~May 1,~~July 31, 2020, was $3.0 billion.

The following table includes additional information related to our short-term borrowings for the ~~three~~six months ended ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019:


	Six Months Ended
(In millions, except for interest rate data)	July 31, 2020			August 2, 2019
Net change in commercial paper	$	(941)		$	(722)
Maximum commercial paper outstanding at any month-end	$	1,858		$	1,189
Short-term borrowings outstanding at quarter-end	$	1,000		$	—
Weighted-average interest rate of short-term borrowings outstanding	1.42		%	—		%

Three Months Ended
(In millions, except for interest rate data) May 1, 2020 May 3, 2019
Net change in commercial paper $ (941 ) $ (722 )
Maximum commercial paper outstanding at any month-end $ 1,858
$ 1,189
Short-term borrowings outstanding at quarter-end $ 1,000
$ —
Weighted-average interest rate of short-term borrowings outstanding 1.86 % — %

The 2020 Credit Agreement and the Second Amended and Restated Credit Agreement contains customary representations, warranties, and covenants. We were in compliance with those covenants at ~~May 1,~~July 31, 2020.

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Long-Term Debt

The following table includes additional information related to the Company’s long-term debt for the ~~three~~six months ended ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019:


	Six Months Ended
(In millions)	July 31, 2020		August 2, 2019
Net proceeds from issuance of debt	$	3,961	$	2,972
Repayment of long-term debt	$	(568)	$	(629)

Three Months Ended
(In millions) May 1, 2020 May 3, 2019
Net proceeds from issuance of debt $ 3,961
$ 2,972
Repayment of debt $ (543 ) $ (616 )

During the ~~three~~six months ended ~~May 1,~~July 31, 2020, we issued $4.0 billion of unsecured notes to finance current year maturities and for other general corporate purposes. During the ~~three~~six months ended ~~May 1,~~July 31, 2020, we also paid $500 million to retire scheduled debts at maturity.

Share Repurchases

We have an ongoing share repurchase program, authorized by the Company’s Board of Directors, that is executed through purchases made from time to time either in the open market or through private off-market transactions. We also withhold shares from employees to satisfy tax withholding liabilities. Shares repurchased are retired and returned to authorized and unissued status. Due to the uncertainty caused by the COVID-19 pandemic, we suspended our share repurchases during the first quarter of fiscal 2020. 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~~six months ended ~~May 1,~~July 31, 2020, and ~~May 3,~~August 2, 2019:

Three Months Ended
(In millions, except per share data) May 1, 2020 May 3, 2019
Total amount paid for share repurchases $ 966
$ 826
Total number of shares repurchased 9.8
8.1
Average price paid per share $ 98.78
$ 102.35


	Six Months Ended
(In millions, except per share data)	July 31, 2020		August 2, 2019
Total amount paid for share repurchases	$	966	$	2,770
Total number of shares repurchased	9.8		27.4
Average price paid per share	$	98.78	$	100.98

As of ~~May 1,~~July 31, 2020, we had $8.7 billion remaining available under our share repurchase program with no expiration date. ~~During the quarter, we suspended share repurchases and at this time do not anticipate any additional share repurchases this year beyond what we executed during the first quarter. See~~ ~~Note 9~~ ~~to the consolidated financial statements included herein for additional information regarding share repurchases.~~

Dividends

Dividends are paid in the quarter immediately following the quarter in which they are declared. ~~The following table provides additional information related to our dividend payments~~Dividends paid per share increased from $0.96 per share for the ~~three~~six months ended ~~May 1, 2020, and May 3, 2019:~~August 2, 2019, to $1.10 per share for the six months ended July 31, 2020.

Three Months Ended
(In millions, except per share data) May 1, 2020 May 3, 2019
Total cash dividend payments $ 420
$ 385
Dividends paid per share $ 0.55
$ 0.48

Capital Resources

We expect to continue to have access to the capital markets on both a short-term and long-term ~~bases~~basis when needed for liquidity purposes by issuing commercial paper or new long-term debt. The availability and the borrowing costs of these funds could be adversely affected, however, by a downgrade of our debt ratings or a deterioration of certain financial ratios. The table below reflects our debt ratings by Standard & Poor’s (S&P) and Moody’s as of ~~May 28,~~August 26, 2020, which we are disclosing to enhance understanding of our sources of liquidity and the effect of our ratings on our cost of funds. Our debt ratings have enabled, and should continue to enable, us to refinance our debt as it becomes due at favorable rates in capital markets. Our commercial paper and senior debt ratings may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating.



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

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

OFF-BALANCE SHEET ARRANGEMENTS

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

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

~~During the first quarter of~~In March 2020, we issued $4.0 billion of unsecured notes in the ordinary course of business and used a portion of the net proceeds from the sale of the notes for the repayment of $500 million aggregate principal amount due April 2020. The table below summarizes our contractual obligations relating to long-term debt, excluding operating and finance lease obligations, at ~~May 1,~~July 31, 2020. The unsecured notes issued in the first quarter of fiscal 2020 are further described in Note 76 to the consolidated financial statements included herein.


	Payments Due by Period
			Less Than		1-3		4-5		After 5
(In millions)	Total		1 Year		Years		Years		Years
Long-term debt (principal amounts, excluding discounts and debt issuance costs)	$	20,313	$	525	$	1,268	$	1,701	$	16,819
Long-term debt (interest payments)	13,729		853		1,594		1,523		9,759
Total	$	34,042	$	1,378	$	2,862	$	3,224	$	26,578

Payments Due by Period
Less Than 1-3 4-5 After 5
(In millions) Total 1 Year Years Years Years
Long-term debt (principal amounts, excluding discounts and debt issuance costs) $ 20,312
$ 525
$ 1,266
$ 1,702
$ 16,819
Long-term debt (interest payments) 13,796
853
1,603
1,523
9,817
Total $ 34,108
$ 1,378
$ 2,869
$ 3,225
$ 26,636

As of ~~May 1,~~July 31, 2020, there were no other material changes to our contractual obligations and commercial commitments outside the ordinary course of business since the end of 2019. Refer to the Annual Report on Form 10-K for additional information regarding our contractual obligations and commercial commitments.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

Item 3. - Quantitative and Qualitative Disclosures about Market Risk

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

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 ~~May 1,~~July 31, 2020, 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 ~~May 1,~~July 31, 2020, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Although most of our corporate employees are working remotely due to the COVID-19 global health crisis, we have

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not experienced a material impact to our internal control over financial reporting. We continue to monitor the pandemic and its effects on the design and operating effectiveness of our internal controls.

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Part II – OTHER INFORMATION

Item 1. - Legal Proceedings

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

Item 1A. - Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors described in Part I, “Item 1A. Risk Factors” in our Annual Report filed with the SEC on March 23, 2020, and as updated in Item 1A in our first quarter report on Form 10-Q filed with the SEC on May 28, 2020, which could materially affect our business, financial condition and/or operating ~~results, as well as the following:~~

~~The effects of the COVID-19 pandemic may have a negative impact on our net sales, results of operations, financial position, and earnings.~~

The global spread of COVID-19 has created significant volatility, uncertainty and economic disruption. In response to the COVID-19 pandemic, many state, local, and foreign governments have put in place travel restrictions, quarantines, “shelter-in-place” orders, and similar government orders and restrictions, in an attempt to control the spread of the disease. Such restrictions or orders have resulted in, and will continue to result in, business closures, work stoppages, slowdowns and delays, among other effects that could negatively impact our operations, as well as the operations of our customers and business partners.

The Company's business has been deemed essential during the COVID-19 pandemic, and the Company is committed to maintaining a safe work and shopping environment. In response to the COVID-19 pandemic, we implemented a number of measures to facilitate a safer store environment for our associates and customers, such as reducing store operating hours, adding signage and floor markers, adding social distancing ambassadors to monitor customer traffic flow, implementing more stringent cleaning procedures, installing plexiglass shields at the point-of-sale areas, and distributing gloves and masks to our store associates to wear during their shifts. In addition, we are providing hourly wage increases and special payments to our store associates. The measures we have implemented to slow and/or reduce the impact of COVID-19 have increased our operating expenses and impacted sales. The extent to which the COVID-19 pandemic further impacts our business, operations, financial results and financial condition will depend on numerous evolving factors which are uncertain and cannot be predicted, including:

~~the duration and scope of the pandemic and associated disruptions;~~

~~the effects of current and future governmental and public responses to changing conditions;~~

~~the financial condition and purchasing power of our customers; and~~

the ability of the third parties on which we rely, including our suppliers and other external business partners, to meet their obligations to the company, or significant disruptions in their ability to do so which may be caused by their own financial or operational difficulties.

Any of the foregoing factors, or other effects of the COVID-19 pandemic or another disease pandemic could materially increase our costs, negatively impact our sales, suppliers or customers, and damage our financial condition, results of operations, cash flows and our liquidity position, possibly to a significant degree.

If our domestic or international supply chain or our fulfillment network for our products is ineffective or disrupted for any reason, including the COVID-19 pandemic, or if these operations are subject to trade policy changes, our results of operations could be adversely affected.results.

Circumstances surrounding and related to the COVID-19 pandemic have created unprecedented impacts on the global supply chain. We source, stock and sell products from domestic and international vendors, and their ability to reliably and efficiently fulfill our orders is critical to our business success. Impacts related to the COVID-19 pandemic are placing strains on the domestic and international supply chain that may negatively affect the flow or availability of our products. This can result in higher out-of-stock inventory positions due to difficulties in timely obtaining products from the manufacturers and suppliers of our products as well as transportation of those products to our distribution centers and stores, which could negatively affect our business and financial results. Even if we are able to find alternate sources for such products, they may cost more, which could adversely impact our profitability and financial condition.

We source a large number of our products from foreign manufacturers, with China being the dominant import source. The current United States administration has enacted, and signaled the possibility of additional, changes in certain tax and trade policies, tariffs and other regulations affecting trade between the United States and other countries, such as the imposition of additional tariffs or duties on imported products and the exit or renegotiation of certain trade agreements and the rules of the World Trade Organization. While it is not possible to predict the long term impacts such changes may have, because we source a large percentage of our merchandise from outside the United States, future changes in tax or trade policies, tariffs or trade relations could adversely affect our business, results of operations, effective income tax rate, liquidity and net income. In addition, other countries may change their business and trade policies in anticipation of or in response to increased import tariffs and other changes in United States trade policy and regulations. The degree of our exposure is dependent on, among other things, the type of goods, rates imposed, and timing of tariffs. The impact to our business, including net sales and gross margin, will be influenced in part by merchandising and pricing strategies in response to potential costs increases by us and our competitors. While these potential impacts are uncertain, they could have an adverse impact on our financial results.

Financial instability among key vendors, political instability and labor unrest in source countries or elsewhere in our supply chain, changes in the total costs in our supply chain (fuel, labor and currency exchange rates), port labor disputes and security, the outbreak of pandemics, weather-related events, natural disasters, work stoppages, shipping capacity restraints, changes in trade policy, retaliatory trade restrictions imposed by either the United States or a major source country, tariffs or duties, fluctuations in currency exchange rates and transport availability, capacity and costs are beyond our control and could negatively impact our business if they seriously disrupted the movement of products through our supply chain or increased their costs. Additionally, as we add fulfillment capabilities or pursue strategies with different fulfillment requirements, our fulfillment network becomes increasingly complex and operating it becomes more challenging. If our fulfillment network does not operate properly or if a vendor fails to deliver on its commitments, we could experience delays in inventory, increased delivery costs or merchandise out-of-stocks that could lead to lost sales and decreased customer confidence, and adversely affect our results of operations.

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 ~~first~~second quarter of fiscal 2020:


	Total Number of Shares Purchased ¹	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ²	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ²
May 2, 2020 - May 29, 2020	252	$	112.98	—	$	8,717,610,699
May 30, 2020 - July 3, 2020	10	104.46		—	8,717,610,699
July 4, 2020 - July 31, 2020	108	144.39		—	8,717,610,699
As of July 31, 2020	370	$	121.92	—	$	8,717,610,699

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

²On December 12, 2018, the Company’s Board of Directors authorized an additional $10.0 billion share repurchase program with no expiration, which was announced on the same day.

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 1, 2020 - February 28, 2020 ³
6,035,344
$ 99.90
6,033,518
$ 8,911,781,233
February 29, 2020 - April 3, 2020 2,002,107
100.39
1,917,339
8,717,610,699
April 4, 2020 - May 1, 2020 ³
1,580,320
90.43
1,580,175
8,717,610,699
As of May 1, 2020 9,617,771
$ 98.45
9,531,032
$ 8,717,610,699


¹ Table of Contents	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 December 12, 2018, the Company’s Board of Directors authorized an additional $10.0 billion share repurchase program with no expiration, which was announced on the same day.~~

In February 2020, the Company entered into an Accelerated Share Repurchase (ASR) agreement with a third-party financial institution to repurchase the Company’s common stock. At inception, pursuant to the agreement, the Company paid $500 million to the financial institution and received an initial delivery of 3.9 million shares. In May, prior to the end of the first quarter, the Company finalized the transaction and received an additional 1.6 million shares. The average price paid per share in settlement of the ASR agreement included in the table above was determined with reference to the volume-weighted average price of the Company’s common stock over the term of the ASR agreement. See ~~Note 9~~ ~~to the consolidated financial statements included herein for additional information regarding share repurchases.~~

Item 6. - Exhibits

Exhibit
Number

Incorporated by Reference

Exhibit Description

Form

File No.

Exhibit

Filing Date

3.1

Restated Charter of Lowe’s Companies, Inc.

10-Q

001-07898

3.1

September 1, 2009

3.2

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

8-K

001-07898

3.1

June 2, 2020

10.1

Lowe ’s Compa nies, In c. Severance Plan for Senior Officers as amended and restated May 29, 2020. * ‡

15.1

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

31.1

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

31.2

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

32.1

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

32.2

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

99.1

T enth Ame ndment to the Lowe ’s 401(k) Plan , effective as of June 16, 2020 (filed to include this amendment as an exhibit to the Registration Statement on Form S-8, Registration No. 033-29772. ‡

101.INS

XBRL Instance Document.‡

101.SCH

XBRL Taxonomy Extension Schema Document.‡

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.‡

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.‡

101.LAB

XBRL Taxonomy Extension Label Linkbase Document.‡

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.‡

104

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

Indicates a management contract or compensatory plan or arrangement.

‡

Filed herewith.

†

Furnished herewith.

Exhibit
Number
Incorporated by Reference
Exhibit Description Form File No. Exhibit Filing Date

3.1
Restated Charter of Lowe’s Companies, Inc.
10-Q 001-07898 3.1 September 1, 2009

3.2
Bylaws of Lowe’s Companies, Inc., as amended and restated April 29, 2020.
8-K 001-07898 3.1 May 4, 2020

4.1
Sixteenth Supplemental Indenture, dated as of March 26, 2020, between Lowe’s Companies, Inc. and U.S. Bank National Association (as successor trustee).
8-K 001-07898 4.2 March 27, 2020

10.1
Credit Agreement, dated as of March 23, 2020, by and among Lowe’s Companies, Inc., Bank of America, N.A., as administrative agent, swing-line lender, and a letter of credit issuer, U.S. Bank National Association, as syndication agent and a letter of credit issuer, Citibank, N.A., Goldman Sachs Bank USA, JPMorgan Chase Bank, N.A., and Wells Fargo Bank, National Association, as co-documentation agents, and the other lenders party thereto.
8-K 001-07898 10.1 March 24, 2020

10.2
Form of Lowe’s Companies, Inc. Non-Qualified Stock Option Agreement.* ‡

10.3
Release and Separation Agreement between Lowe’s Companies, Inc. and Jennifer L. Weber entered into on April 6, 2020*‡

15.1
Deloitte & Touche LLP Letter re Unaudited Interim Financial Information.‡

31.1
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.‡

31.2
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.‡

32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.†

32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.†

101.INS XBRL Instance Document.‡

101.SCH XBRL Taxonomy Extension Schema Document.‡

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.‡

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~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document.‡~~

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document.‡~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document.‡~~

~~104~~		~~Cover Page Interactive Data File (formatted as Inline XBRL document and included in Exhibit 101).‡~~


*		~~Indicates a management contract or compensatory plan or arrangement.~~
‡		~~Filed herewith.~~
†		~~Furnished herewith.~~

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)

August 26, 2020		~~LOWE’S COMPANIES, INC.~~
	~~(Registrant)~~

~~May 28, 2020~~	By: /s/ David M. Denton
Date		David M. Denton Executive Vice President, Chief Financial Officer

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