UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 1, 2013
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ________ to _________

Commission file number   1-7898

LOWE'SCOMPANIES,  INC.

(Exact name of registrant as specified in its charter)

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

1000 Lowe's Blvd., Mooresville, NC	28117
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code	704-758-1000

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

Title of each class	Name of each exchange on which registered
Common Stock, $0.50 Par Value	New York Stock Exchange (NYSE)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

x Yes o  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

o Yes x  No

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.

x Yes o  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes o  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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

Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x  No

As of August 3, 2012, the last business day of the Company's most recent second quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $29.3 billion based on the closing sale price as reported on the New York Stock Exchange.

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

CLASS	OUTSTANDING AT MARCH 28, 2013
Common Stock, $0.50 par value	1,088,511,808

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts Into Which Incorporated
Portions of the Proxy Statement for Lowe’s 2013 Annual Meeting of Shareholders	Part III

 LOWE’S COMPANIES, INC.

- TABLE OF CONTENTS -

			Page No.
PART I
	Item 1.	Business	4-10
	Item 1A.	Risk Factors	10-14
	Item 1B.	Unresolved Staff Comments	14
	Item 2.	Properties	14
	Item 3.	Legal Proceedings	14
	Item 4.	Mine Safety Disclosures	14
		Executive Officers and Certain Significant Employees of the Registrant	15
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16-17
	Item 6.	Selected Financial Data	17
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18-33
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	34
	Item 8.	Financial Statements and Supplementary Data	35-66
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	67
	Item 9A.	Controls and Procedures	67
	Item 9B.	Other Information	67
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	68
	Item 11.	Executive Compensation	68
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	68
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	68
	Item 14.	Principal Accountant Fees and Services	68
PART IV
	Item 15.	Exhibits and Financial Statement Schedules	69-75
		Signatures	76-77

Part I

Item 1 - Business

General Information

Lowe’s Companies, Inc. and subsidiaries (the Company or Lowe’s) is a Fortune® 100 company and the world’s second largest home improvement retailer.  As of February 1, 2013, we operated 1,754 stores, comprised of 1,715 stores across 50 U.S. states, 34 stores in Canada and five stores in Mexico.  These stores represent approximately 197 million square feet of retail selling space.  In 2013, we expect to open approximately 10 stores.

Lowe’s was incorporated in North Carolina in 1952 and has been publicly held since 1961. The Company’s common stock is listed on the New York Stock Exchange - ticker symbol “LOW”.

See Item 6, “Selected Financial Data”, of this Annual Report on Form 10-K, for historical revenues, profits and identifiable assets.  For additional information about the Company’s performance and financial condition, see also Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, of this Annual Report on Form 10-K.

Our Promise

We strive to be customers’ first choice for home improvement.  Customers expect that we will not only sell the products they need and want, but also deliver a full solution by being a partner through each step of the home improvement process, from inspiration and planning to completion and enjoyment.  Our goal is to make the process of home improvement as seamless and simple as possible, while ensuring we remain relevant to our customers.  We have several initiatives designed to deliver seamless and simple experiences, which include evolving our sales culture across all selling channels, upgrading and continuously enhancing our information technology infrastructure, and allowing access to customers’ project and product status at all relevant touch points.

Customers, Market and Competition

Our Customers

We serve homeowners, renters and commercial business customers (Pro customer).  Individual homeowners and renters complete a wide array of projects and vary along the spectrum of do-it-yourself (DIY) and do-it-for-me (DIFM).  The Pro customer consists of two broad categories, construction trade and maintenance & repair organizations.

Based on our analysis of the market we have identified various types of home improvement customer mindsets.  Our target customer mindset is the “creator”, whether they are a homeowner, renter, or Pro customer.  Creators seek quality tailored experiences, and are on the lookout for new ideas to improve homes.  The creator is the most active in the home improvement category in terms of visits and amount of spend.  We believe that if we focus on the needs of these more discerning customers we will meet or exceed the needs of other customers.

Our Market

We are among the many businesses, including home centers, paint stores, hardware stores, lumber yards and garden centers, whose revenues are included in the Building Material and Garden Equipment and Supplies Dealers Subsector (444) of the Retail Trade Sector of the North American Industry Classification System (NAICS), the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.  The total annual revenue reported for businesses included in NAICS 444 in 2012 was $294 billion, which represented an increase of 5.4% from the total amount reported in 2011.  The total annual revenue reported for businesses included in NAICS 444 in 2011 was $279 billion, which represented an increase of 4.1% over the amount reported for 2010.

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NAICS 444 represents less than half of what we consider the total market for our products and services.  The broader market in which Lowe’s operates includes home-related sales through a variety of companies beyond those in NAICS 444.  These include other companies in the retail sector, including mass retailers, home furnishings stores, and online retailers, as well as wholesalers that provide home-related products and services to homeowners, businesses, and the government.  Based on our analysis of the most recent comprehensive data available, we estimate the size of the U.S. home improvement market at $645 billion in 2012, comprised of $499 billion of product sales and $146 billion of installed labor sales.

There are many variables that affect consumer demand for the home improvement products and services Lowe’s offers.  Key indicators we monitor include real disposable personal income, employment, home prices, housing turnover, and home ownership levels.  We also monitor demographic and societal trends that shape home improvement industry growth. 

·   Real disposable personal income is projected to grow at a slower pace in 2013 than in 2012, pulled lower by tax increases and the acceleration of dividend and bonus payments into 2012 that were made to allow recipients to avoid higher tax rates in 2013.  Real disposable personal income is forecasted to increase 0.9% in calendar 2013, down from the 1.5% gain recorded in 2012, based on the March 2013 Blue Chip Economic Indicators®. *

·   The average unemployment rate for 2013 is forecasted to decline to 7.7% in 2013, according to the March 2013 Blue Chip Economic Indicators.  While it is an improvement from the 8.1% average recorded in 2012, the rate remains elevated, suggesting that Americans will continue to face challenging employment prospects this year.

·   Recent evidence suggests that home prices are stabilizing.  In 2012, home prices recorded their first year-to-year gains since 2007, according to the Federal Home Finance Agency purchase-only index.  The gains were driven by strengthening demand and lower inventories of homes for sale.  Economists generally expect home prices to continue to increase at a modest single-digit pace in 2013, but remain well below their peak level reached in 2007.

·   Housing turnover increased 8.9% in 2012 from low levels, according to The National Association of Realtors and U.S. Census Bureau, but remains 40% below its peak in 2005.  Turnover is generally expected to continue to increase in 2013, though at a more moderate rate.

·   According to the U.S. Census Bureau, U.S. homeownership rates leveled off at approximately 65.5% in 2012, cushioned by the increase in home buying.  That compares with a peak of about 69% in 2004.  However, homeownership rates are expected to remain under downward pressure in the coming years as lending standards remain tight and delinquency and foreclosure activity remains elevated.

These indicators are important to our business because they impact income available to purchase our products and services, or define a key customer base for home maintenance, repair, and upgrade projects.  Currently, these indicators suggest moderately improving consumer demand for the home improvement products and services we sell.  However, in this uncertain economic environment, we continue to balance implementation of our long-term growth plans with our near-term focus on improving performance and maintaining adequate liquidity.

Our Competition

The home improvement retailing business includes many competitors.  We compete with other home improvement warehouse chains and lumberyards in most of our trade areas.  We also compete with traditional hardware, plumbing, electrical and home supply retailers.  In addition, we compete, with respect to some of our products, with general merchandise retailers, mail order firms, warehouse clubs, online and other specialty retailers.  Our customers value reputation, customer experience, quality and price of merchandise, and range and availability of products and services.  Location of stores also continues to be a key competitive factor in our industry. However, the increasing use of technology and the simplicity of online shopping also underline the importance of multi-channel presence as a competitive factor.  See further discussion of competition in Item 1A, “Risk Factors”, of this Annual Report on Form 10-K.

*Blue Chip Economic Indicators® (ISSN: 0193-4600) is published monthly by Aspen Publishers, 76 Ninth Avenue, New York, NY 10011, a division of Wolters Kluwer Law and Business.   Printed in the U.S.A.

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Products and Services

Our Products

Product Selection

To meet customers’ varying home improvement needs, we offer a complete line of products for maintenance, repair, remodeling, and home decorating.  We offer home improvement products in the following categories: Plumbing; Appliances; Tools & Outdoor Power Equipment; Lawn & Garden; Fashion Electrical; Lumber; Seasonal Living; Paint; Home Fashions, Storage & Cleaning; Flooring; Millwork; Building Materials; Hardware; and Cabinets & Countertops.  A typical Lowe's store stocks approximately 40,000 items, with hundreds of thousands of items available through our Special Order Sales system, Lowes.com, Lowes.ca and ATGstores.com.  In 2012, Lowe’s implemented flexible fulfillment, which allows the customer to order parcel post eligible products that are stocked in a regional distribution center (RDC), a store, or in a vendor's distribution center, and have them shipped directly to a home or place of business.  Most items can be ordered and delivered within two days.  See Note 16 of the Notes to Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data”, of this Annual Report on Form 10-K for historical revenues by product category for each of the last three fiscal years.

We are committed to offering a wide selection of national brand name merchandise, as well as building long-term value for Lowe’s through the development of private brands.  In addition, we are dedicated to ensuring product is sourced in a responsible, efficient, and cost effective manner through our supply chain.

National Brand Name Merchandise

In many product categories, customers look for a brand they know and trust to instill confidence in their purchase.  Each Lowe’s store carries a wide selection of national brand-name merchandise such as Whirlpool® appliances and water heaters, GE® and Samsung® appliances, Stainmaster® carpets, Valspar® paints and stains, Pella® windows and doors, Sylvania® light bulbs, Dewalt® power tools, Owens Corning® roofing, Johns Manville® insulation, James Hardie® fiber cement siding, Husqvarna® outdoor power equipment, Werner® ladders and many more.  Our merchandise selection provides the DIY, DIFM and Pro customer a one-stop shop for a wide variety of national brand name merchandise needed to complete home improvement, repair, maintenance or construction projects.

Private Brands

Private brands are an important element of our overall portfolio, helping to differentiate us from the competition with unique innovations and designs and providing a value alternative to national brands.  We sell private brands throughout our stores including Tools, Seasonal Living, Home Fashions, Storage & Cleaning, Paint, Fashion Plumbing, Flooring, Millwork, Hardware, Fashion Electrical and Lumber.  Some of Lowe’s most important private brands include Kobalt® tools, allen+roth® home décor products, Blue Hawk® home improvement products, Portfolio® lighting products, Garden Treasures® lawn and patio products, Utilitech® electrical and utility products, Reliabilt® doors and windows, Aquasource® faucets, sinks and toilets, Harbor Breeze® ceiling fans, Top Choice® lumber products and Iris® home automation and management products.

Supply Chain

We source our products from over 7,000 vendors worldwide with no single vendor accounting for more than 7% of total purchases.  We believe that alternative and competitive suppliers are available for virtually all of our products.  Whenever possible, we purchase directly from manufacturers to provide savings for customers and improve our gross margin.

To efficiently move product from our vendors to our stores and maintain in-stock levels, we own and operate 14 highly-automated RDCs in the United States, with a fifteenth RDC expected to open in the first quarter of 2013.  On average, each domestic RDC currently serves approximately 120 stores.  In addition, we lease and operate a distribution facility to serve our Canadian stores.

We also operate 15 flatbed distribution centers to distribute merchandise that requires special handling due to size or type of packaging such as lumber, boards, panel products, pipe, siding, ladders and building materials.  Additionally, we

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operate four facilities to support our import business and flexible fulfillment capabilities.  We also utilize three third-party transload facilities, which are the first point of receipt for imported products.  The transload facilities sort and allocate products to RDCs based on individual store demand and forecasts.

On average, in fiscal 2012, approximately 75% of the total dollar amount of stock merchandise we purchased was shipped through our distribution network, while the remaining portion was shipped directly to our stores from vendors.

Our Services

Installed Sales

We offer installation services through independent contractors in many of our product categories, with Flooring, Millwork and Cabinets & Countertops accounting for the majority of installed sales.  Our Installed Sales model, which separates selling and project administration tasks, allows our sales associates to maintain their focus on project selling, while project managers ensure that the details related to installing the products are efficiently executed.  Installed Sales, which includes both product and labor, accounted for approximately 7% of total sales in fiscal 2012.

Pro Services

During 2012, we rebranded our commercial business program as Pro Services with the intent of re-energizing our focus on the Pro customer.  Pro Services employees are a dedicated team that supports the Pro customer.  To meet the needs of our Pro customer, we provide job lot quantities in categories such as Building Materials, Plumbing, Electrical, Hardware, Paint, and Tools & Outdoor Power Equipment that are critical to the success of the Pro customer.  In addition, we provide Pro customers 5% off their purchases every day when they use Lowe's proprietary credit.

Extended Protection Plans and Repair Services

We offer extended protection plans in Appliances and Tools & Outdoor Power Equipment.  Lowe’s extended protection plans provide customers with product protection that enhances or extends the manufacturer’s warranty.  We provide in-warranty and out-of-warranty repair services for major appliances, outdoor power equipment and tools through our stores or in the home through our Lowe’s Authorized Service Repair Network.  Our contact center takes the calls, diagnoses the problems, and facilitates the resolutions making after-sales service simpler for customers because we manage the entire process.

Credit Financing

We offer a proprietary consumer credit card for retail customers under an agreement with GE Capital Retail Bank.  This program provides Lowe's consumer credit cardholders with 5% off their purchases every day.  For purchases above $299, customers have their choice of short-term no-interest financing or the 5% off value.  For purchases above $3,500, customers have their choice of 5.99% interest for 84 months or the 5% off value.

We also offer proprietary credit programs for Pro customers.  They include a Lowe’s Business Account, which is ideal for small to medium size businesses and offers minimum monthly payments, and Lowe’s Accounts Receivable, which is ideal for medium to large size businesses that pay in full each month.  These programs provide a 5% discount to Pro customers when they use their Lowe’s commercial credit account.  We also offer the Lowe’s Business Rewards Card from American Express®, which also offers 5% off everyday purchases.

For additional information regarding our credit programs, see the summary of our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data”, of this Annual Report on Form 10-K.

MyLowes

In 2011, we introduced MyLowes, a new online tool that is unique in the home improvement industry and makes managing, maintaining and improving homes simpler and more intuitive.  Using the capabilities provided by MyLowes, customers can create home profiles, save room dimensions and paint colors, organize owners' manuals and product warranties, create shopping, to-do and wish lists for projects on the horizon, set recurring reminders for common

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maintenance items and store purchase history from across all Lowe's channels.  Since the introduction in 2011, there have been over 18 million unique key fob swipes, and over 5 million registered users on MyLowes.

Selling Channels

We have multiple channels through which we engage customers and sell our products and services, including in-store, online, on-site and contact centers.  Although we sell through all of these channels, our primary channel to fulfill customer orders continues to be our retail home improvement stores.  Regardless of the channel through which customers choose to engage with us, we strive to provide them with a seamless experience and an endless aisle of products, enabled by our flexible fulfillment capabilities.

In-Store

Our 1,754 retail home improvement stores are generally open seven days per week and average approximately 113,000 square feet of retail selling space, plus approximately 32,000 square feet of outdoor garden center selling space.  Our stores offer similar products and services, with certain variations based on local market factors.  We continue to develop and implement tools to make our sales associates more efficient and to integrate our order management and fulfillment processes.  Our stores now have Wi-Fi capabilities that provide customers with internet access, making information available quickly to further simplify the shopping experience.

Online

Through Lowes.com, Lowes.ca, ATGstores.com and mobile applications, we seek to empower consumers by providing a 24/7 shopping experience and helping reduce the complexity of product decisions and home improvement projects by providing online product information, customer ratings and reviews, online buying guides and how-to videos and information.  These tools help consumers make more informed purchasing decisions and give them confidence as they undertake home improvement projects.  Providing mobile technology and applications to customers and to our associates is an important first step towards seamless and simple experiences, and allows us to participate in the evolution to mobile technology.  Lowes.com accounted for approximately 1.5% of our total sales, and our consumer facing mobile properties have grown to represent 20% of overall Lowes.com traffic.  We also enable customers to choose from a variety of fulfillment options, including buying online and picking up in-store as well as parcel shipment to their homes.

On-Site

We have on-site specialists available to retail and Pro customers to assist them in selecting products and services for their projects.  Account Executives ProServices meet with Pro customers in their place of business or on a job site and leverage stores within the area to ensure we meet customer needs for products and resources.  Our Project Specialist Exteriors (PSE) program is available in most Lowe’s stores to discuss exterior projects such as roofing, siding, fencing, and windows, whose characteristics lend themselves to an in-home consultative sales approach.  In addition, our Project Specialist Interiors (PSI) program, launched in 2012, is available in certain locations to provide similar consultative services on interior projects such as kitchens and bathrooms.  PSE and PSI employees take the measurements, produce a quote, and tender the sale in the customer's home.

Contact Centers

Lowe’s has two contact centers which are located in Wilkesboro, NC, and Albuquerque, NM.  These contact centers provide direct support, including sales tendering, to customers who contact them via phone, e-mail or letter.  They also provide store support, online sales support, and facilitate repair services.

Employees

As of February 1, 2013, we employed approximately 160,000 full-time and 85,000 part-time employees.  No employees in the U.S. or Canada are subject to collective bargaining agreements.  Certain employees in Mexico are subject to collective bargaining agreements.  Management considers its relations with employees to be good.

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Seasonality and Working Capital

The retail business in general is subject to seasonal influences, and our business is, to some extent, seasonal.  Historically, we have realized the highest volume of sales during our second fiscal quarter (May, June and July) and the lowest volume of sales during our fourth fiscal quarter (November, December and January).  Accordingly, our working capital requirements have historically been greater during our fourth fiscal quarter as we build inventory in anticipation of the spring selling season and as we experience lower fourth fiscal quarter sales volumes.  We fund our working capital requirements primarily through cash flows generated from operations, but also with short-term borrowings, as needed.  For more detailed information, see the Financial Condition, Liquidity and Capital Resources section in Item 7,  “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, of this Annual Report on Form 10-K.

Intellectual Property

The name “Lowe’s” is a registered service mark of one of our wholly-owned subsidiaries.  We consider this mark and the accompanying name recognition to be valuable to our business.  This subsidiary has various additional trademarks, trade names and service marks, many of which are used in our private brand program.  The subsidiary also maintains various Internet domain names that are important to our business.  We also own registered and unregistered copyrights, and maintain patent portfolios related to some of our products and services and seek to patent or otherwise protect certain innovations that we incorporate into our products, services, or business operations.

Environmental Stewardship

Lowe’s environmental stewardship has been defined by addressing our company’s environmental footprint and helping our customers do the same.

Lowe’s recognizes how efficient operations can help protect the environment and our bottom line.  We examine our operations to deliver efficiencies in energy and water use, fuel consumption, and waste and recycling.  We annually track our carbon footprint and participate in the Carbon Disclosure Project, an independent nonprofit organization hosting the largest database of primary corporate climate change information in the world. To further reduce our footprint, we design energy-efficient features (energy-efficient lighting, white membrane cool roofs and HVAC units that meet or exceed ENERGY STAR® qualifications) into new stores and during retrofits of existing stores and participate in demand response programs where we voluntarily reduce our lighting and HVAC loads during peak electrical demand periods.

We also strive to deliver products to our stores in an environmentally responsible manner.  We achieve that through participation in the SmartWay® Transport Partnership, an innovative program launched by the EPA in 2004 that promotes environmentally cleaner, more fuel-efficient transportation options.  Lowe’s received a 2012 SmartWay Excellence Award, our fourth consecutive SmartWay honor, for initiatives that resulted in reduced emissions, greater fuel efficiency and less overall highway congestion.  Our efforts included increasing shipping by rail, increasing efficiency of truckload shipments and continuing to use a higher percentage of SmartWay carriers.

We are also focused on helping consumers reduce their energy and water use and their environmental footprint while saving money through our products and services.  We offer a wide selection of environmentally responsible and energy-efficient products for the home, including ENERGY STAR appliances, WaterSense® labeled toilets, paint with no volatile organic compounds (VOC), indoor and outdoor LED lighting, and, in certain states, electric vehicle charging stations.  Through our in-home sales specialists we offer customers installation of insulation and energy efficient windows.   Additionally, we offer in-store customer recycling for plastic bags, CFLs, plastic plant containers and rechargeable batteries.  

Our role in helping consumers with their conservation was recognized by the U.S. Environmental Protection Agency (EPA) with our third consecutive ENERGY STAR Sustained Excellence Award (2010-2012), which honors our long-standing leadership as a retailer of energy-efficient products.  Lowe’s has received 10 consecutive ENERGY STAR awards (2003-2012), including four ENERGY STAR Partner of the Year awards for educating consumers about the

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benefits of energy efficiency.  In 2012, the EPA WaterSense program also honored Lowe’s with our fourth consecutive award for employee training, consumer education and national efforts to promote water conservation.

For more information on Lowe’s environmental leadership efforts, please visit Lowes.com/SocialResponsibility.

Compliance with Environmental Matters

Our operations are subject to numerous federal, state and local laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment.  These laws and regulations may increase our costs of doing business in a variety of ways, including indirectly through increased energy costs, as utilities, refineries, and other major emitters of greenhouse gases are subjected to additional regulation or legislation that results in greater control over greenhouse gas emissions.  We do not anticipate any material capital expenditures during fiscal 2013 for environmental control facilities or other costs of compliance with such laws or regulations.

Reaching Out / Our Community

Lowe’s has a long and proud history of supporting local communities through public education and community improvement projects. In 2012, Lowe's and Lowe's Charitable and Educational Foundation (LCEF) contributed more than $30 million to schools and community organizations in the United States, Canada and Mexico.  LCEF was created in 1957 to assist communities through financial contributions while also encouraging employees to become involved through volunteerism.  In 2012, Lowe’s and LCEF supported more than 8,000 community and education projects.  LCEF funds our signature education grant program, Lowe’s Toolbox for Education®, and national partnerships such as SkillsUSA® and the Boys & Girls Clubs of America.  Lowe’s Toolbox for Education grants totaling more than $34 million have benefited approximately 4 millionschoolchildren since 2006.  Lowe’s has worked with Habitat for Humanity® since 2003 to combat substandard housing.  Our commitment through 2013 will bring Lowe's Habitat contributions to nearly $40 million since the partnership began.  We also partner with customers to support the American Red Cross, contributing more than $24 million since 1999.  Lowe’s encourages employee volunteerism through the Lowe’s Heroes program, a companywide initiative.  Lowe's Heroes participated in more than 1,300 projects across North America in 2012.  For more information on our community involvement, please see the Lowe’s Social Responsibility Report at Lowes.com/SocialResponsibility.

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available free of charge through our internet website at www.Lowes.com/investor, as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the Securities and Exchange Commission (SEC).  The public may also read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.  Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.  The SEC maintains an Internet site, www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Item 1A - Risk Factors

We have developed a risk management process using periodic surveys, external research, planning processes, risk mapping, analytics and other tools to identify and evaluate the operational, financial, environmental, reputational, strategic and other risks that could adversely affect our business.  For more information about our risk management process, which is administered by our Chief Risk Officer and includes developing risk mitigation controls and procedures for the material risks we identify, see the description included in the proxy statement for our annual meeting of shareholders (as defined in Item 10 of Part III of this Annual Report on Form 10-K) under “Board’s Role in the Risk Management Process”.

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We describe below all known material risks that could adversely affect our results of operations, financial condition or business prospects.  These risk factors may change from time to time and may be amended, supplemented or superseded by updates to the risk factors contained in our future periodic reports on Form 10-K, Form 10-Q and reports on other forms we file with the Securities and Exchange Commission.  All forward-looking statements about our future results of operations or other matters made by us in this Annual Report on Form 10-K, in our Annual Report to Lowe’s Shareholders and in our subsequently filed reports to the Securities and Exchange Commission, as well as in our press releases and other public communications, are qualified by the risks described below.

Our sales are dependent upon the health and stability of the general economy.

General economic factors and other conditions, both domestically and internationally, may adversely affect the U.S. economy, the global economy and our financial performance.  These include, but are not limited to, periods of slow economic growth or recession, volatility and/or lack of liquidity from time to time in U.S. and world financial markets and the consequent reduced availability and/or higher cost of borrowing to Lowe’s and its customers, the “sequester” and related governmental spending and budget matters, slower rates of growth in real disposable personal income, sustained high rates of unemployment, high consumer debt levels, increasing fuel and energy costs, inflation or deflation of commodity prices, natural disasters, acts of terrorism and developments in the war against terrorism in Asia, the Middle East and other parts of the world.  The continuing sluggish pace of the recovery from the deep global recession could continue to have an adverse effect on the rate of growth of discretionary spending by consumers and the share of such discretionary spending on home improvement products and services.

Adverse changes in economic factors specific to the home improvement industry may negatively impact the rate of growth of our total sales and comparable sales.

Sales of many of our product categories and services are driven by the activity level of home improvement projects.  Slowly recovering home prices, the large number of households that continue to have little or negative equity, slowly declining mortgage delinquency and foreclosure rates, restrictions on the availability of mortgage financing, slower household formation growth rates, and lower housing turnover through existing home sales, have limited, and may continue to limit, consumers’ discretionary spending, particularly on larger home improvement projects that are important to our business.

Changes in existing or new laws and regulations or regulatory enforcement priorities could adversely affect our business.

Laws and regulations at the local, regional, state, federal and international levels change frequently and the changes can impose significant costs and other burdens of compliance on our business and our vendors.  Any changes in regulations, the imposition of additional regulations, or the enactment of any new legislation that affect employment/labor, trade, product safety, transportation/logistics, energy costs, health care, cyber-security, tax or environmental issues, could have an adverse impact, directly or indirectly, on our financial condition and results of operations.  Changes in enforcement priorities by governmental agencies charged with enforcing existing laws and regulations can increase our cost of doing business. In addition, we are subject to various procurement regulations applicable to our contracts for sales to the U.S Government and could be adversely affected by changes in those regulations or any negative findings from an audit or investigation.

We have many competitors who could take sales and market share from us if we fail to execute our merchandising, marketing and distribution strategies effectively.

We operate in a highly competitive market for home improvement products and services and have numerous large and small, direct and indirect competitors.  The competitive environment in which we operate is particularly challenging during periods of slow economic growth and high unemployment with heavy promotions, particularly of discretionary items. The principal competitive factors in our industry include location of stores, customer service, quality and price of merchandise and services, in-stock levels, and merchandise assortment and presentation.  Our failure to respond effectively to competitive pressures and changes in the markets for home improvement products and services could affect our financial performance.  Moreover, changes in the promotional pricing and other practices of our competitors, including the effects of competitor liquidation activities, may impact our expected results.

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Our inability to effectively manage our relationships with selected suppliers of brand name products could negatively impact our ability to differentiate ourselves from competitors.

Part of our strategy includes continued differentiation from competitors.  To better distinguish our product offering, we form strategic relationships with selected suppliers to market and develop products under a variety of recognized and respected national brand names.  The inability to effectively and efficiently manage and maintain the relationships with these suppliers could negatively impact our business plan and financial results.

Operating internationally presents unique challenges that have required us to adapt our store operations, merchandising, marketing and distribution functions to serve customers in Canada and Mexico and to work effectively with our joint venture partner in Australia.

A significant portion of our anticipated store growth over the next five years will be in Canada and Mexico.  We are also in a joint venture with Australia’s largest retailer, Woolworths Limited, to develop a network of home improvement stores for consumers in Australia.  Expanding internationally presents unique challenges that may increase the anticipated costs and risks, and slow the anticipated rate, of such expansion.

If the domestic or international supply chain for our products is disrupted, our sales and gross margin would be adversely impacted.

We source, stock, and sell products from over 7,000 domestic and international vendors.  We source a large number of those products from foreign manufacturers with China being the largest source.  Financial instability among key vendors, political instability or labor unrest in source countries, retaliatory trade restrictions imposed by either the United States or a major source country, tariffs, currency exchange rates and transport 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.

If we are unable to secure or develop and implement sufficiently robust new technologies to deliver business process solutions within the appropriate time frame, cost and functionality, our strategic initiatives that are dependent upon these technologies may not be successful.

The success of our strategic initiatives designed to increase our sales and capture a greater percentage of our customers’ expenditures on home improvement projects is dependent in varying degrees on the timely delivery and the functionality of information technology systems to support them.  Extended delays or cost overruns in securing, developing and otherwise implementing technology solutions to support the new business initiatives we are developing now, and will be developing in the future, would delay and possibly even prevent us from realizing the projected benefits of those initiatives.

We may not be able to achieve the objectives of the strategic initiatives we have underway if our organization is unable to make the transformational changes we are undertaking in our business model.

We are adapting our business model to meet our customers’ changing expectations that we will not only sell them the products and services they need and want, but also deliver, using new tools, skills and processes, a full service experience by being a part of their home improvement projects from start to finish.  Our strategies require transformational changes to our business model and will require new competencies in some positions, and our employees and independent contractors, such as third-party installers and repair technicians, will not only have to understand non-traditional selling platforms but also commit to fundamental changes in Lowe’s culture and the processes through which they have traditionally interacted with customers.  To the extent they are unable or unwilling to make these transformational changes, our strategic initiatives designed to increase our sales and capture a greater percentage of our customers’ expenditures on home improvement projects may not be as successful as we expect them to be.  The many challenges our management faces in effectively managing our business as we adapt our business model also increase the risk that we may not achieve our objectives.

Our financial performance could suffer if we fail to properly maintain our critical information systems or if those systems are seriously disrupted.

An important part of our efforts to achieve efficiencies, cost reductions, and sales and cash flow growth is the maintenance and ongoing improvements of our existing management information systems that support operations such as inventory replenishment, merchandise ordering, transportation, receipt processing and product delivery.  Our financial

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performance could be adversely affected if our management information systems are seriously disrupted or we are unable to maintain, improve, upgrade, and expand our systems.

As customer-facing technology systems become an increasingly important part of our multi-channel sales and marketing strategy, the failure of those systems to perform effectively and reliably could keep us from delivering positive customer experiences.

Access to the internet from computers, smart phones and other mobile communication devices has empowered our customers and changed the way they shop and how we interact with them.  Our website, Lowes.com, is a sales channel for our products, and is also a method of making product, project and other relevant information available to them that influences our in-store sales.  In addition to Lowes.com, we have multiple affiliated websites and mobile apps through which we seek to inspire, inform, cross-sell, establish online communities among and otherwise interact with our customers.  Performance issues with these customer-facing technology systems, including temporary outages caused by distributed denial of service or other cyber-attacks, or a complete failure of one or more of them without a disaster recovery plan that can be quickly implemented could quickly destroy the positive benefits they provide to our home improvement business and negatively affect our customers’ perceptions of Lowe’s as a reliable online vendor and source of information about home improvement products and services.

Our business and our reputation could be adversely affected by the failure to protect sensitive customer, employee or vendor data or to comply with evolving regulations relating to our obligation to protect our systems and assets and such data from the threat of cyber-attacks.

Cyber-attacks designed to gain access to sensitive information by breaching mission critical systems of large organizations are constantly evolving, and high profile electronic security breaches leading to unauthorized release of confidential information have occurred recently at a number of major U.S. companies despite widespread recognition of the cyber-attack threat and improved data protection methods.  While we have invested in the protection of our information technology and maintain what we believe are adequate security procedures and controls over financial and other individually identifiable customer, employee and vendor data provided to us, a breach in our systems that results in the unauthorized release of individually identifiable customer or other sensitive data could nonetheless occur and have a material adverse effect on our reputation and lead to financial losses from remedial actions, loss of business or potential liability, including for possible punitive damages.  An electronic security breach resulting in the unauthorized release of sensitive data from our information systems could also materially increase the costs we already incur to protect against such risks.  In addition, as the regulatory environment relating to retailers and other company’s obligation to protect such sensitive data becomes stricter, a material failure on our part to comply with applicable regulations could subject us to fines or other regulatory sanctions and potentially to lawsuits.

If we fail to hire, train, manage and retain qualified sales associates and specialists, or contract with qualified installers and repair technicians, with expanded skill sets who can work effectively and collaboratively in an increasingly culturally diverse environment, we could lose sales to our competitors.

Our customers, whether they are homeowners or commercial businesses, expect our sales associates and specialists to be well trained and knowledgeable about the products we sell and the home improvement services we provide.  Our customers also expect the independent contractors who install products they purchase from us to perform the installation in a timely and capable manner.  Increasingly, our sales associates and specialists must have expanded skill sets, including in some instances the ability to do in-home or telephone sales. In addition, in many of our stores our employees and third-party contractors must be able to serve customers whose primary language and cultural traditions are different from their own.  Also, as our employees become increasingly culturally diverse, our managers and sales associates must be able to manage and work collaboratively with employees whose primary language and cultural traditions are different from their own. 

Failure of a key vendor or service provider that we cannot quickly replace could disrupt our operations and negatively impact our business.

No single vendor of the products we sell accounts for more than 7% of our total purchases, but we rely upon a number of vendors as the sole or primary source of some of the products we sell.  We also rely upon many independent service providers for technology solutions and other services that are important to many aspects of our business.   If these vendors

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or service providers fail or are unable to perform as expected and we are unable to replace them quickly, our business could be adversely affected at least temporarily until we are able to do so and potentially, in some cases, permanently.

Failure to achieve and maintain a high level of product and service quality could damage our image with customers and negatively impact our sales, profitability, cash flows and financial condition.

Product and service quality issues could result in a negative impact on customer confidence in Lowe’s and the Company’s brand image.  As a result, Lowe’s reputation as a retailer of high quality products and services, including both national and Lowe’s private brands, could suffer and impact customer loyalty. Additionally, a decline in product and service quality could result in product recalls, product liability and warranty claims.

Future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements.

We are, and in the future will become, involved in lawsuits, regulatory inquiries, and governmental and other legal proceedings arising out of the ordinary course of our business. Some of these proceedings may raise difficult and complicated factual and legal issues and can be subject to uncertainties and complexities. The timing of the final resolutions to lawsuits, regulatory inquiries, and governmental and other legal proceedings is typically uncertain. Additionally, the possible outcomes of, or resolutions to, these proceedings could include adverse judgments or settlements, either of which could require substantial payments. None of the legal proceedings in which we are currently involved, individually or collectively, is considered material.

Item 1B - Unresolved Staff Comments

None.

Item 2 - Properties

At February 1, 2013, our properties consisted of 1,754 stores in the U.S., Canada and Mexico with a total of approximately 197 million square feet of selling space.  Of the total stores operating at February 1, 2013, approximately 89% are owned, which includes stores on leased land, with the remainder being leased from third parties.  We also operate regional distribution centers and other facilities to support distribution and fulfillment, as well as data centers and various support offices.  Our executive offices are located in Mooresville, North Carolina.

Item 3 - Legal Proceedings

In April 2012, one of the Company’s principal operating subsidiaries, Lowe’s HIW, Inc., received a subpoena from the District Attorney of the County of Alameda, along with other environmental prosecutorial offices in the state of California, seeking documents and information relating to the handling, storage and disposal of hazardous waste.  The subsidiary is cooperating fully with the request. 

In addition to these matters, we are also a defendant in legal proceedings considered to be in the normal course of business, none of which, individually or collectively, is considered material.

Item 4 - Mine Safety Disclosures

Not applicable.

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EXECUTIVE OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES OF THE REGISTRANT

Set forth below is a list of names and ages of the executive officers and certain significant employees of the registrant indicating all positions and offices with the registrant held by each such person and each person's principal occupations or employment during the past five years. Each executive officer of the registrant is elected by the board of directors at its first meeting after the annual meeting of shareholders and thereafter as appropriate. Each executive officer of the registrant holds office from the date of election until the first meeting of the directors held after the next annual meeting of shareholders or until a successor is elected.

Name	Age	Title
Robert A. Niblock	50	Chairman of the Board, President and Chief Executive Officer since 2011; Chairman of the Board and Chief Executive Officer, 2006 – 2011; Chairman of the Board, President and Chief Executive Officer, 2005 – 2006.
Maureen K. Ausura	57	Chief Human Resources Officer since 2012; Executive Vice President, Human Resources, 2011 – 2012; Senior Vice President, Human Resources, 2005 – 2011.
Gregory M. Bridgeford	58	Chief Customer Officer since 2012, Executive Vice President, Business Development, 2004 – 2012.
Marshall A. Croom	52	Chief Risk Officer since 2012; Senior Vice President and Chief Risk Officer, 2009 – 2012; Senior Vice President, Merchandising and Store Support, 2006 – 2009.
Rick D. Damron	50	Chief Operating Officer since 2012; Executive Vice President, Store Operations, 2011 – 2012; Senior Vice President, Logistics, 2009 – 2011; Senior Vice President, Store Operations – North Central Division, 2008 – 2009.
Matthew V. Hollifield	46	Senior Vice President and Chief Accounting Officer since 2005.
Robert F. Hull, Jr.	48	Chief Financial Officer since 2012; Executive Vice President and Chief Financial Officer since 2004.
Gaither M. Keener, Jr.	63	Chief Legal Officer, Chief Compliance Officer and Secretary since 2012; Executive Vice President, General Counsel, Secretary and Chief Compliance Officer, 2011 – 2012; Senior Vice President, General Counsel, Secretary and Chief Compliance Officer, 2006 – 2011.
Richard D. Maltsbarger	37	Business Development Executive since 2012; Senior Vice President, Strategy, 2011– 2012; Vice President, Strategic Planning 2010 – 2011; Vice President, Research, 2006 – 2010.
N. Brian Peace	47	Corporate Administration Executive since 2012; Senior Vice President, Corporate Affairs, 2006 – 2012.
William D. Robinson	53	Head of International Operations and Development since 2012; Senior Vice President, International Operations and Customer Support Services, 2011 – 2012; Vice President, Store Operations and Special Projects, 2008 – 2010.
Kevin V. Summers	43	Chief Information Officer since 2012; Senior Vice President and Global Chief Information Officer, Whirlpool Corporation, 2007 – 2012.

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Part II

Item 5 - Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Lowe's common stock is traded on the New York Stock Exchange (NYSE). The ticker symbol for Lowe's is “LOW”.  As of March 28, 2013, there were 27,259 holders of record of Lowe's common stock. The following table sets forth, for the periods indicated, the high and low sales prices per share of the common stock as reported by the NYSE Composite Tape and the dividends per share declared on the common stock during such periods.

	Fiscal 2012						Fiscal 2011
	High		Low		Dividend		High		Low		Dividend
1st Quarter	$	32.29	$	26.58	$	0.14	$	27.45	$	24.13	$	0.11
2nd Quarter		31.37		24.76		0.16		26.60		21.31		0.14
3rd Quarter		33.63		25.34		0.16		22.48		18.07		0.14
4th Quarter	$	39.26	$	31.23	$	0.16	$	27.57	$	20.34	$	0.14

Total Return to Shareholders

The following information in Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate it by reference into such a filing.

The following table and graph compare the total returns (assuming reinvestment of dividends) of the Company's common stock, the S&P 500 Index and the S&P Retailing Industry Group Index (S&P Retail Index).  The graph assumes $100 invested on February 1, 2008 in the Company's common stock and each of the indices.

		2/1/2008		1/30/2009		1/29/2010		1/28/2011		2/3/2012		2/1/2013
Lowe’s	$	100.00	$	72.71	$	87.62	$	104.10	$	114.68	$	165.83
S&P 500		100.00		60.63		80.72		97.88		105.38		121.25
S&P Retail Index	$	100.00	$	62.28	$	96.88	$	123.20	$	141.07	$	177.59

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Issuer Purchases of Equity Securities

The following table sets forth information with respect to purchases of the Company’s common stock made during the fourth quarter of 2012:

(In millions, except average price paid per share)	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		Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 2
November 3, 2012 –  November 30, 2012	4.3	$	35.15		4.3	$	750
December 1, 2012 –  January 4, 2013	17.0		35.20		17.0		150
January 5, 2013 –  February 1, 2013	-		-		-		5,000
As of February 1, 2013	21.3	$	35.19		21.3	$	5,000

1 During the fourth quarter of fiscal 2012, the Company repurchased an aggregate of 21.3 million shares of its common stock. The total number of shares purchased also includes an insignificant number of shares withheld from employees to satisfy either the exercise price of stock options or the statutory withholding tax liability upon the vesting of restricted stock awards.

2 Authorization for up to $5.0 billion of share repurchases with no expiration was approved on August 19, 2011 by the Company's Board of Directors. On February 1, 2013, the Company’s Board of Directors authorized an additional $5.0 billion of share repurchases with no expiration. The remaining prior authorization of $150 million was simultaneously terminated.  Although the repurchase authorization has no expiration, the Company expects to execute the program by the end of fiscal 2014 through purchases made from time to time either in the open market or through private off market transactions in accordance with SEC regulations.

Item 6 - Selected Financial Data

Selected Statement of Earnings Data
(In millions, except per share data)	2012			2011	1		2010		2009		2008
Net sales	$	50,521	$	50,208		$	48,815	$	47,220	$	48,230
Gross margin		17,327		17,350			17,152		16,463		16,501
Net earnings		1,959		1,839			2,010		1,783		2,195
Basic earnings per common share		1.69		1.43			1.42		1.21		1.50
Diluted earnings per common share		1.69		1.43			1.42		1.21		1.49
Dividends per share	$	0.620	$	0.530		$	0.420	$	0.355	$	0.335
Selected Balance Sheet Data
Total assets	$	32,666	$	33,559		$	33,699	$	33,005	$	32,625
Long-term debt, excluding current maturities	$	9,030	$	7,035		$	6,537	$	4,528	$	5,039

1 Fiscal 2011 contained 53 weeks, while all other years contained 52 weeks.

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Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and capital resources during the three-year period ended February 1, 2013 (our fiscal years 2012, 2011 and 2010).  Fiscal year 2011 contains 53 weeks of operating results compared to fiscal years 2012 and 2010 which contain 52 weeks.  Unless otherwise noted, all references herein for the years 2012, 2011 and 2010 represent the fiscal years ended February 1, 2013, February 3, 2012 and January 28, 2011, respectively.  We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements included in this Annual Report on Form 10-K that have been prepared in accordance with accounting principles generally accepted in the United States of America.  This discussion and analysis is presented in seven sections:

·   Executive Overview

·   Operations

·   Lowe’s Business Outlook

·   Financial Condition, Liquidity and Capital Resources

·   Off-Balance Sheet Arrangements

·   Contractual Obligations and Commercial Commitments

·   Critical Accounting Policies and Estimates

EXECUTIVE OVERVIEW

During 2012, we made progress on our key initiatives, continuing our journey to become the customer’s first choice in home improvement.  The economic environment showed signs of improvement as fiscal 2012 represented the first year of growth across all of the core housing metrics: housing turnover, single-family starts, and median home prices.  These recent positive trends helped consumers regain confidence in both the local housing markets and their home values.  Consequently, we were able to deliver solid results for the year.  Net earnings for 2012 increased 6.5% to $2.0 billion and diluted earnings per share increased 18.2% to $1.69.  Net sales for 2012 increased 0.6% to $50.5 billion.  Fiscal 2011 contained an extra week which contributed $766 million to 2011 net sales or $0.05 to diluted earnings per share. Comparable sales were 1.4%, driven by a 0.9% increase in comparable average ticket and a 0.5% increase in comparable transactions.

For 2012, cash flows from operating activities were approximately $3.8 billion, with $1.2 billion used for capital expenditures.  Our strong financial position and positive cash flows provided us with the ability to make strategic investments in our core business and to return cash to shareholders through both dividends and share repurchases.  During fiscal 2012, we paid $704 million in dividends and repurchased approximately 146 million shares of common stock for a total of $4.35 billion under our share repurchase program.

Continuing our journey

In 2012, we continued to deliver on our commitment to retail excellence by building on our core strengths, while developing capabilities to provide seamless support across channels and a simplified home improvement experience.

To further deliver a seamless and simple experience, we continued to upgrade our IT infrastructure and gave customers and associates greater access to information and products through enhanced mobile technology, MyLowes, and flexible fulfillment.  In 2012, we made additional improvements to our associates’ iPhone® capabilities to enable them to deliver better customer experiences in the aisle by giving them immediate access to the information they need, such as the ability to identify available rebates.  Our MyLowes customer base also continues to grow.  Since the launch of MyLowes in late

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2011, there have been over 18 million unique key fob swipes and over 5 million cardholders have registered their cards on MyLowes.  We also experienced strong customer response to our iPhone® and AndroidTM mobile applications which have grown to represent approximately 20% of overall Lowes.com traffic.  In addition, flexible fulfillment now allows us to deliver in-stock Lowes.com parcel orders to customers in over 90% of US markets within 24 hours at standard shipping rates.

As we redefine our business to become more seamless and simple, we must also continue to protect retail relevance.  In 2012, our focus was on two key initiatives: Value Improvement and Product Differentiation.  Value Improvement is designed to enhance our ability to offer compelling products and value while Product Differentiation is designed to help us drive excitement and flexibility in our stores by highlighting innovative products through better display techniques.  These strategic initiatives build on Lowe’s core strengths and are expected to deliver comparable transaction growth, better gross margins, and greater inventory productivity by localizing assortments and driving excitement in our stores.

Value Improvement enhances our ability to offer compelling products and value by having the right product, at the right quantity, at the right place, at the right time.  In 2012, we leveraged our Integrated Planning and Execution tool to create clusters of stores, based on specific differences and customer buying preferences, which enhanced the assortment strategy that was used to guide the line review process.  For each cluster, the product assortments were designed to reduce duplication of features and functions within price points to improve the customer experience.  We are also working to reduce unit costs by negotiating lower first costs from vendors by eliminating funds set aside for promotional and marketing support.  The result is a more localized assortment of products and simpler price point progression within the category.  As SKUs are rationalized, the teams are reinvesting the inventory dollars in greater depth of high volume SKUs.  In addition, we are increasing our in-stock targets for these new lines to ensure items are available when needed by customers.  By the end of 2012, we completed product line reviews and product line resets of approximately 80% and 30% of our business, respectively.

Through our Product Differentiation initiative, we revised many of our end-cap locations to highlight innovative products, significant values, or to showcase specific private or national brands.  In addition, we redesigned promotional spaces to better promote seasonally relevant, high value items to drive sales and to provide more open sight lines to navigate and shop at our stores.  During 2012, our product differentiation resets were rolled out to approximately 1,250 stores, and we expect to roll the resets out to an additional 160 stores in 2013.

In conjunction with our progress on Value Improvement and Product Differentiation, in 2012 we also initiated sales training programs for store and contact center employees to further develop our sales culture and pave the way for the next phase of our transformation.

Where we go from here – 2013 and beyond

While the housing market is slowly improving, consumers are still coping with the lingering effects of the recession as mortgage delinquency rates remain at historic highs.  While we are optimistic about a housing recovery and near-term personal consumption expenditures are expected to grow faster than personal income, employment and income are expected to continue to grow slowly.  Consumers will need to continue to prioritize how and where they spend their discretionary income and therefore our outlook for 2013 assumes modest growth in the home improvement market.  However we have confidence in our vision and have laid the foundation to continue improving our core business as we move into fiscal year 2013.

In 2013, our Value Improvement initiative will remain the primary focus of the organization.  As we improve our product offerings by localizing assortments we expect to drive improved close rates.  We also have an opportunity to improve close rates through additional labor in our stores.  We expect to add approximately 150 hours per store per week to the staffing model for nearly two-thirds of our stores to help reduce the gap between our weekend versus weekday close rate.  Our goal is to better serve customers and close more sales during peak weekday hours by increasing assistance available in the aisles.  We believe the increased labor hours and higher in-stock service levels will help us further capitalize on traffic during the week which will result in an improvement in close rates.

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In 2013 and beyond, we will further develop our flexible fulfillment capability by deploying Central Dispatch (CDO) and Central Production Offices (CPO).  The CDO will allow for centralized delivery scheduling and better route planning, resulting in lower fuel cost, greater fleet utilization, and more productive overall delivery.  The CPO will provide operational efficiencies through the consolidation of labor.  Today each store has its own installed sales office, whereas, in the future, that labor will be consolidated into our contact centers resulting in a significant reduction of labor hours.  The customer’s experience will be enhanced through better coordination and consistency.

We will also build trust by partnering with customers to recommend solutions that fit their needs and to help them make the right decisions based on their individual home improvement goals.  Beyond 2013, we will further enhance our sales culture by providing our associates the ability to sell seamlessly across channels and to introduce improved project management tools that expand fulfillment capabilities to cultivate personal and simple connections with customers.  Associates across selling channels will be provided with a single-view of the customer; one record per customer, from lead capture to project completion.  These changes will enable us to improve close rates and capitalize on the momentum of the improving economy and increases in consumer discretionary spending.

By building on core strengths, we have laid the foundation to deliver on our commitment to retail excellence, and will continue to focus on developing the capabilities to provide our customers a seamless and simple home improvement experience going forward.

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OPERATIONS

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

							Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Year 1			Percentage Increase / (Decrease) in Dollar Amounts from Prior Year 1
	2012			2011			2012 vs. 2011			2012 vs. 2011
Net sales		100.00	%		100.00	%		N/A			0.6	%
Gross margin		34.30			34.56			(26	)		(0.1	)
Expenses:
Selling, general and administrative		24.24			25.08			(84	)		(2.8	)
Depreciation		3.01			2.95			6			2.9
Interest - net		0.84			0.74			10			13.9
Total expenses		28.09			28.77			(68	)		(1.8	)
Pre-tax earnings		6.21			5.79			42			7.9
Income tax provision		2.33			2.13			20			10.4
Net earnings		3.88	%		3.66	%		22			6.5	%
EBIT margin 2		7.05	%		6.53	%		52			8.6	%
							Basis Point Increase / (Decrease) in  Percentage of Net Sales from Prior Year 1			Percentage Increase / (Decrease) in Dollar Amounts from Prior Year 1
		2011			2010		2011 vs. 2010			2011 vs. 2010
Net sales		100.00	%		100.00	%		N/A			2.9	%
Gross margin		34.56			35.14			(58	)		1.2
Expenses:
Selling, general and administrative		25.08			24.60			48			4.9
Depreciation		2.95			3.25			(30	)		(6.7	)
Interest - net		0.74			0.68			6			11.7
Total expenses		28.77			28.53			24			3.7
Pre-tax earnings		5.79			6.61			(82	)		(10.0	)
Income tax provision		2.13			2.49			(36	)		(12.4	)
Net earnings		3.66	%		4.12	%		(46	)		(8.5	) %
EBIT margin 2		6.53	%		7.29	%		(76	)		(7.9	) %

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Other Metrics	2012			2011			2010
Comparable sales increase 3, 4		1.4	%		0.0	%		1.3	%
Total customer transactions (in millions) 1		804			810			786
Average ticket 5	$	62.82		$	62.00		$	62.07
At end of year:
Number of stores		1,754			1,745			1,749
Sales floor square feet (in millions)		197			197			197
Average store size selling square feet (in thousands) 6		113			113			113
Return on average assets 7		5.7	%		5.4	%		5.8	%
Return on average shareholders' equity 8		13.1	%		10.7	%		10.7	%
Return on invested capital 9		9.3	%		8.7	%		9.0	%

1 Fiscal year ended 2011 had 53 weeks.  Fiscal years 2012 and 2010 had 52 weeks.

2 EBIT margin, also referred to as operating margin, is defined as earnings before interest and taxes as a percentage of sales.

3 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 one month prior to 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.

4 Comparable sales are based on comparable 52-week periods for 2012 and 2010 and comparable 53-week periods for 2011.

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

6 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.

7 Return on average assets is defined as net earnings divided by average total assets for the last five quarters.

8 Return on average shareholders’ equity is defined as net earnings divided by average shareholders’ equity for the last five quarters.

9 Return on invested capital is a non-GAAP financial measure. See below for additional information.

Return on Invested Capital

Return on Invested Capital (ROIC) is considered a non-GAAP financial measure.  We believe ROIC is a meaningful metric for investors because it measures how effectively the Company uses capital to generate profits.

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

We consider return on average debt and equity to be the financial measure computed in accordance with generally accepted accounting principles that is the most directly comparable GAAP financial measure to ROIC.  The difference between these two measures is that ROIC adjusts net earnings to exclude tax adjusted interest expense.

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

(In millions, except percentage data)
Calculation of Return on Invested Capital	2012			2011			2010
Numerator
Net earnings	$	1,959		$	1,839		$	2,010
Plus:
Interest expense - net		423			371			332
Provision for income taxes		1,178			1,067			1,218
Earnings before interest and taxes		3,560			3,277			3,560
Less:
Income tax adjustment 1		1,337			1,203			1,343
Net operating profit after tax	$	2,223		$	2,074		$	2,217
Effective tax rate		37.6	%		36.7	%		37.7	%
Denominator
Average debt and equity 2	$	23,921		$	23,940		$	24,634
Return on invested capital		9.3	%		8.7	%		9.0	%
Calculation of Return on Average Debt and Equity
Numerator
Net earnings	$	1,959		$	1,839		$	2,010
Denominator
Average debt and equity 2	$	23,921		$	23,940		$	24,634
Return on average debt and equity		8.2	%		7.7	%		8.2	%

1 Income tax adjustment is defined as earnings before interest and taxes multiplied by the effective tax rate.

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

Fiscal 2012 Compared to Fiscal 2011

For the purpose of the following discussion, comparable sales, comparable average ticket and comparable customer transactions are based on comparable 52-week periods.

Net sales – Net sales increased 0.6% to $50.5 billion in 2012.  The additional week in 2011 and resulting week shift in 2012 negatively impacted sales comparisons by $692 million, or 1.4%.  Comparable sales increased 1.4% in 2012, driven by a 0.9% increase in comparable average ticket and a 0.5% increase in comparable customer transactions.  Our key initiatives, Value Improvement and Product Differentiation, drove 40 basis points of the increase in sales.  In addition, our proprietary credit value proposition, which offers customers the choice of 5% off every day or promotional financing, contributed 65 basis points to the increase in sales.  Geographically, all operating divisions in the U.S. delivered positive comparable sales for the year as sales performance was well balanced in 2012.  Furthermore, we continued to see strength in our Pro Services business, which outperformed the company average.

We experienced comparable sales above the company average in the following product categories during 2012:  Lumber, Tools & Outdoor Power Equipment, Paint, Seasonal Living, Cabinets & Countertops, and Home Fashions, Storage & Cleaning.  In addition, Fashion Electrical, Hardware, Flooring and Plumbing performed at approximately the overall company average.  Inflation aided comparable sales throughout the year in both the Lumber and Paint categories.

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Comparable sales for Paint also benefited from new product offerings.  Hurricane Sandy also contributed to comparable sale increases for Lumber, as a result of storm response efforts, and for Tools & Outdoor Power Equipment, due to increased generator sales.  In addition, Tools & Outdoor Power Equipment comparable sales were also positively impacted by favorable weather in the first half of the year combined with effective promotions.

Comparable sales were below the company average in Building Materials, Millwork, Appliances, and Lawn & Garden. The timing of storm recovery and repair efforts in 2012 as compared to 2011 resulted in decreased comparable sales in Building Materials.  In addition, difficult comparisons to prior year promotional activity led to decreased comparable sales in Millwork and Appliances.  Lawn & Garden was impacted by extreme heat and drought conditions in the first half of the year, slightly offset by improved inventory planning and attachment rates in the second half of the year.

Gross margin – Gross margin of 34.3% for 2012 represented a 26 basis point decrease from 2011, primarily driven by an unfavorable 19 basis point impact related to our proprietary credit value proposition.  In addition, we experienced a seven basis point unfavorable impact to margin related to pricing and promotional activity.

SG&A – The 84 basis point decrease in SG&A expense as a percentage of sales from 2011 to 2012 was primarily driven by 81 basis points of leverage due to long-lived asset impairment and other costs associated with the 27 store closures and discontinued projects in 2011.  We also experienced approximately 35 basis points of leverage associated with our proprietary credit program, which was driven by increased portfolio income as a result of continued growth in the program.  These were partially offset by deleverage of approximately 15 basis points associated with incentive compensation, due to higher attainment levels compared to targets for store-based employees relative to last year.  In addition, we experienced nine basis points of deleverage in contract labor associated with information technology projects to improve customer experiences.

Depreciation – Depreciation expense deleveraged six basis points for 2012 compared to 2011 primarily due to higher depreciation associated with IT capital investments made to improve customer experiences, which have shorter average useful lives.  Property, less accumulated depreciation, decreased to $21.5 billion at February 1, 2013 compared to $22.0 billion at February 3, 2012.  At February 1, 2013 and February 3, 2012, we owned 89% of our stores, which included stores on leased land.

Interest – Net – Net interest expense is comprised of the following:

(In millions)	2012			2011
Interest expense, net of amount capitalized	$	427		$	379
Amortization of original issue discount and loan costs		5			4
Interest income		(9	)		(12	)
Interest - net	$	423		$	371

Net interest expense increased primarily as a result of the issuance of $1.0 billion and $2.0 billion of unsecured notes in November 2011 and April 2012, respectively, partially offset by favorable tax settlements that resulted in a reduced interest accrual during 2012.

Income tax provision – Oureffective income tax rate was 37.6% in 2012 compared to 36.7% in 2011.  The lower effective tax rate in 2011 was the result of the recognition of one-time federal employee retention benefits from the federal HIRE (Hiring Incentives to Restore Employment) retention tax credit, as well as the favorable settlement of certain state tax matters in the third quarter of 2011.

Fiscal 2011 Compared to Fiscal 2010

For the purpose of the following discussion, comparable sales, comparable average ticket and comparable customer transactions are based on comparable 53-week periods.

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Net sales – Net sales increased 2.9% to $50.2 billion in 2011, while comparable sales were flat.  The additional week in 2011 contributed 1.6% to the increase in net sales.  Comparable customer transactions increased approximately 0.4% and comparable average ticket decreased 0.4% versus 2010.

While comparable sales were flat in 2011, we saw sequential improvement each quarter, with comparable sales of negative 3.3% in the first quarter, negative 0.3% in the second quarter, positive 0.7% in the third quarter and positive 3.4% in the fourth quarter.  Unseasonably cold, wet weather, severe storms and flooding during the first quarter as well as comparisons to the 2010 Cash for Appliances government incentive program led to lower performance during the first half of the year.  However, as comparisons to the Cash for Appliances program eased and storm recovery efforts were underway, we saw improvement in comparable sales.  In addition, strong customer response to our 5% off every-day offer to Lowe’s credit cardholders, launched in the first half of 2011, aided comparable sales for the balance of the year.

We experienced comparable sales above the company average in the following product categories during 2011: Building Materials, Fashion Electrical, Paint, Hardware, Plumbing, and Tools & Outdoor Power Equipment.  In addition, Seasonal Living, Home Fashions, Storage & Cleaning, Flooring, Lawn & Garden and Lumber performed at approximately the overall company average.  Although unfavorable weather in the early part of the year negatively impacted outdoor categories such as Building Materials, recovery efforts after severe spring storms that hit many regions of the country and hurricane Irene positively impacted comparable sales in Building Materials, with particularly strong sales of roofing products and installation services.  Plumbing also benefited from the wet weather and storm recovery efforts, with strong sales of pumps & tanks and dehumidifiers.  In addition, Tools & Outdoor Power Equipment experienced favorable comparable sales primarily driven by holiday promotions and strong customer response to new products, such as our new line of Kobalt mechanics tools.  Fashion Electrical also performed above the company average during 2011, driven by increased customer demand for energy-saving light bulbs, outdoor lighting and electrical cable.

However, difficult comparisons to prior year energy tax credits negatively impacted comparable sales in Millwork.  In addition, while we experienced strong market share gains in Cabinets & Countertops, they were not enough to offset the impact of the contracting market, leading to comparable sales below the company average for the year.  Appliances also experienced negative comparable sales for the year driven by comparisons to the prior year Cash for Appliances program, which primarily impacted the first half of the year.

Gross margin – Gross margin of 34.56% for 2011 represented a 58 basis point decrease from 2010, primarily driven by margin rate.  Strong customer response to our 5% off every-day offer to Lowe’s credit cardholders, targeted promotional activity and pricing changes associated with our move to every-day low prices negatively impacted margin for the year.  Margin was also negatively impacted by 19 basis points associated with distribution expenses, primarily related to higher fuel costs.  In addition, lower of cost or market inventory adjustments, primarily related to the 27 stores that closed in the second half of the year, negatively impacted margin by six basis points.  These were partially offset by 15 basis points of favorable impact associated with the mix of products sold across product categories.

SG&A – The increase in SG&A expense as a percentage of sales from 2010 to 2011 was primarily driven by de-leverage of 83 basis points related to charges for store closings, discontinued projects and long-lived asset impairments.  We also experienced approximately 15 basis points of de-leverage related to investments made to improve customer experiences, including expenses associated with additional internal and external staffing and technology expenditures.  In addition, we experienced de-leverage in payroll taxes and fleet expense.  These increases were partially offset by leverage of approximately 40 basis points associated with our proprietary credit program due to reduced program costs associated with lower losses and lower promotional financing as more customers took advantage of the 5% off every day offer.  In addition, bonus expense leveraged 30 basis points due to lower attainment levels for the year relative to plan.

Depreciation – Depreciation expense leveraged 30 basis points for 2011 compared to 2010 primarily due to a lower asset base resulting from decreased capital spending and assets becoming fully depreciated or impaired.  Property, less accumulated depreciation, decreased to $22.0 billion at February 3, 2012 compared to $22.1 billion at January 28, 2011.  At February 3, 2012 and January 28, 2011, we owned 89% of our stores, which included stores on leased land.

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Interest – Net interest expense is comprised of the following:

(In millions)	2011			2010
Interest expense, net of amount capitalized	$	379		$	340
Amortization of original issue discount and loan costs		4			4
Interest income		(12	)		(12	)
Interest - net	$	371		$	332

Net interest expense increased primarily as a result of the issuance of $2.0 billion of notes during 2010 and $1.0 billion of notes during 2011, offset by the repayment of $500 million of notes during 2010.

Income tax provision – Oureffective income tax rate was 36.7% in 2011 compared to 37.7% in 2010.  The reduction in the effective tax rate was predominantly due to the recognition of benefits from the federal HIRE (Hiring Incentives to Restore Employment) retention tax credit as well as various state tax credit programs.

LOWE’S BUSINESS OUTLOOK

As of February 25, 2013, the date of our fourth quarter 2012 earnings release, we expected total sales in 2013 to increase approximately 4% and comparable sales to increase approximately 3.5%.  We expected to open approximately 10 stores during 2013.  In addition, earnings before interest and taxes as a percentage of sales (operating margin) were expected to increase approximately 60 basis points and the effective tax rate was expected to be approximately 38.1%.  Diluted earnings per share of $2.05 were expected for the fiscal year ending January 31, 2014.  Our guidance assumed approximately $4 billion in share repurchases during 2013, spread evenly across the four quarters.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Cash flows from operating activities continued to provide the primary source of our liquidity.  The decrease in net cash provided by operating activities for 2012 versus 2011 was primarily driven by changes in working capital.  The change in working capital was primarily driven by the timing of tax payments during the periods.  The decrease in net cash used in investing activities for 2012 versus 2011 was primarily driven by a decrease in capital expenditures in addition to an increase in proceeds received from the sale of property and other long-term assets, partially offset by lower proceeds from the sale/maturity of investments.  The increase in net cash used in financing activities for 2012 was primarily driven by an increase in cash used to repurchase shares, which included shares repurchased under our share repurchase program and shares withheld from employees to satisfy statutory tax withholding liabilities upon vesting of restricted stock awards. This was partially offset by the net change in long-term debt and an increase in proceeds from the issuance of common stock due to options exercised.

Sources of Liquidity

In addition to our cash flows from operations, liquidity is provided by our short-term borrowing facilities.  We have a $1.75 billion senior credit facility that expires in October 2016.  The senior credit facility supports our commercial paper program and has a $500 million letter of credit sublimit.  Letters of credit issued pursuant to the senior credit facility reduce the amount available for borrowing under its terms.  Borrowings made are unsecured and are priced at fixed rates based upon market conditions at the time of funding in accordance with the terms of the senior credit facility.  The senior credit facility contains certain restrictive covenants, which include maintenance of a debt leverage ratio as defined by the senior credit facility.  We were in compliance with those covenants at February 1, 2013.  Thirteen banking institutions are participating in the senior credit facility.  There were no outstanding borrowings or letters of credit under the senior credit facility and no outstanding borrowings under our commercial paper program at February 1, 2013.

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We expect to continue to have access to the capital markets on both short-term and long-term bases when needed for liquidity purposes by issuing commercial paper or new long-term debt. The availability and the borrowing costs of these funds could be adversely affected, however, by a downgrade of our debt ratings or a deterioration of certain financial ratios.  The table below reflects our debt ratings by Standard & Poor’s (S&P) and Moody’s as of April 1, 2013, which we are disclosing to enhance understanding of our sources of liquidity and the effect of our ratings on our cost of funds.  Although we currently do not expect a downgrade in our debt ratings, our commercial paper and senior debt ratings may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating.

Debt Ratings	S&P	Moody’s
Commercial Paper	A-2	P-2
Senior Debt	A-	A3
Outlook	Negative	Stable

We believe that net cash provided by operating and financing activities will be adequate not only for our operating requirements, but also for investments in information technology, investments in our existing stores, expansion plans and acquisitions, if any, and to return cash to shareholders through both dividends and share repurchases over the next 12 months.  There are no provisions in any agreements that would require early cash settlement of existing debt or leases as a result of a downgrade in our debt rating or a decrease in our stock price.  In addition, we do not have a significant amount of cash held in foreign affiliates that would not be available to fund domestic operations.

Cash Requirements

Capital expenditures

Our fiscal 2013 capital budget is approximately $1.25 billion, inclusive of approximately $50 million of lease commitments, resulting in a planned net cash outflow of $1.2 billion.  Approximately 40% of the planned net cash outflow is for investments to enhance the customer experience, including enhancements in information technology.  Investments in our existing stores are expected to account for approximately 35% of net cash outflow including investments in store equipment, resets and remerchandising.  Our expansion plans for 2013 consist of approximately 10 new stores, all of which are expected to be owned, and which will account for approximately 15% of the planned net cash outflow.  Approximately 30% of these new stores are expected to be on leased land.  Other planned capital expenditures, accounting for 10% of planned net cash outflow, are for investments in our distribution network, including one additional regional distribution center.

Debt and capital

In April 2012, we issued $2.0 billion of unsecured notes in three tranches: $500 million of 1.625% notes maturing in April 2017, $750 million of 3.12% notes maturing in April 2022 and $750 million of 4.65% notes maturing in April 2042.  Net proceeds from the 2017, 2022 and 2042 notes were approximately $498 million, $746 million, and $740 million, respectively. 

During 2012, $550 million of unsecured debt matured and was re-paid with cash from operations and investing activities.

Dividends declared during fiscal 2012 totaled $708 million.  Our dividend payment dates are established such that dividends are paid in the quarter immediately following the quarter in which they are declared.  The dividend declared in the fourth quarter of 2012 was paid in fiscal 2013 and totaled $178 million.

We have an ongoing share repurchase program that is executed through purchases made from time to time in the open market or through private off-market transactions.  Shares purchased under the share repurchase program are returned to authorized and unissued status. On February 1, 2013, the Company’s Board of Directors authorized an additional $5.0 billion of share repurchases with no expiration, simultaneously terminating the remaining previous balance of $150 million under the prior authorization.  This share repurchase authorization is expected to be used by the end of fiscal 2014.

Our ratio of debt to equity plus debt was 39.6% and 31.6% as of February 1, 2013, and February 3, 2012, respectively.

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OFF-BALANCE SHEET ARRANGEMENTS

Other than in connection with executing operating leases, we do not have any off-balance sheet financing that has, or is reasonably likely to have, a material, current or future effect on our financial condition, cash flows, results of operations, liquidity, capital expenditures or capital resources.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table summarizes our significant contractual obligations at February 1, 2013:

	Payments Due by Period
Contractual Obligations			Less Than			1-3		4-5	After 5
(In millions)	Total		1 Year		Years		Years		Years
Long-term debt (principal amounts,
excluding discount)	$	8,702	$	2	$	510	$	1,778	$	6,412
Long-term debt (interest payments)		6,806		414		828		729		4,835
Capitalized lease obligations 1		708		79		144		102		383
Operating leases 1		5,520		420		821		801		3,478
Purchase obligations 2		945		477		449		19		-
Total contractual obligations	$	22,681	$	1,392	$	2,752	$	3,429	$	15,108
			Amount of Commitment Expiration by Period
Commercial Commitments				Less Than		1-3		4-5	After 5
(in millions)	Total		1 Year		Years		Years		Years
Letters of Credit 3	$	74	$	74	$	-	$	-	$	-

1Amounts do not include taxes, common area maintenance, insurance or contingent rent because these amounts have historically been insignificant.

2 Represents commitments related to certain marketing and information technology programs, and purchases of merchandise inventory.

3 Letters of credit are issued primarily for insurance and construction contracts.

At February 1, 2013, our reserve for uncertain tax positions (including penalties and interest) was $75 million, of which $11 million was classified as a current liability and $64 million was classified as a noncurrent liability.  At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years beyond 12 months due to uncertainties in the timing of the effective settlement of tax positions.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the consolidated financial statements and notes to consolidated financial statements presented in this Form 10-K requires us to make estimates that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosures of contingent assets and liabilities.  We base these estimates on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources.  Actual results may differ from these estimates.

Our significant accounting policies are described in Note 1 to the consolidated financial statements.  We believe that the following accounting policies affect the most significant estimates and management judgments used in preparing the consolidated financial statements.

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Merchandise Inventory

Description

We record an obsolete inventory reserve for the anticipated loss associated with selling inventories below cost.  This reserve is based on our current knowledge with respect to inventory levels, sales trends and historical experience.  During 2012, our reserve increased approximately $10 million to $57 million as of February 1, 2013.

We also record an inventory reserve for the estimated shrinkage between physical inventories.  This reserve is based primarily on actual shrinkage results from previous physical inventories.  During 2012, the inventory shrinkage reserve increased approximately $1 million to $142 million as of February 1, 2013.

In addition, we receive funds from vendors in the normal course of business, principally as a result of purchase volumes, sales, early payments or promotions of vendors’ products.  Generally, these vendor funds do not represent the reimbursement of specific, incremental and identifiable costs that we incurred to sell the vendor’s product.  Therefore, we treat these funds as a reduction in the cost of inventory as the amounts are accrued, and recognize these funds as a reduction of cost of sales when the inventory is sold.  Funds that are determined to be reimbursements of specific, incremental and identifiable costs incurred to sell vendors’ products are recorded as an offset to the related expense.

Judgments and uncertainties involved in the estimate

We do not believe that our merchandise inventories are subject to significant risk of obsolescence in the near term, and we have the ability to adjust purchasing practices based on anticipated sales trends and general economic conditions. However, changes in consumer purchasing patterns or a deterioration in product quality could result in the need for additional reserves.  Likewise, changes in the estimated shrink reserve may be necessary, based on the timing and results of physical inventories.  We also apply judgment in the determination of levels of non-productive inventory and assumptions about net realizable value.

For vendor funds, we develop accrual rates based on the provisions of the agreements in place.  Due to the complexity and diversity of the individual vendor agreements, we perform analyses and review historical purchase trends and volumes throughout the year, adjust accrual rates as appropriate and confirm actual amounts with select vendors to ensure the amounts earned are appropriately recorded.  Amounts accrued throughout the year could be impacted if actual purchase volumes differ from projected purchase volumes, especially in the case of programs that provide for increased funding when graduated purchase volumes are met.

Effect if actual results differ from assumptions

We have not made any material changes in the methodology used to establish our inventory valuation or the related reserves for obsolete inventory or inventory shrinkage during the past three fiscal years.  We believe that we have sufficient current and historical knowledge to record reasonable estimates for both of these inventory reserves.  However, it is possible that actual results could differ from recorded reserves.  A 10% change in either the amount of products considered obsolete or the weighted average estimated loss rate used in the calculation of our obsolete inventory reserve would have affected net earnings by approximately $3 million for 2012.  A 10% change in the estimated shrinkage rate included in the calculation of our inventory shrinkage reserve would have affected net earnings by approximately $9 million for 2012.

We have not made any material changes in the methodology used to recognize vendor funds during the past three fiscal years.  If actual results are not consistent with the assumptions and estimates used, we could be exposed to additional adjustments that could positively or negatively impact gross margin and inventory.  However, substantially all receivables associated with these activities do not require subjective long-term estimates because they are collected within the following fiscal year.  Adjustments to gross margin and inventory in the following fiscal year have historically not been material.

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Long-Lived Asset Impairment

Description

We review the carrying amounts of locations whenever certain events or changes in circumstances indicate that the carrying amounts may not be recoverable.  When evaluating locations for impairment, our asset group is at an individual location level, as that is the lowest level for which cash flows are identifiable.  Cash flows for individual locations do not include an allocation of corporate overhead.

We evaluate locations for triggering events relating to long-lived asset impairment on a quarterly basis to determine when a location’s asset carrying values may not be recoverable.  For operating locations, our primary indicator that asset carrying values may not be recoverable is consistently negative cash flow for a 12-month period for those locations that have been open in the same location for a sufficient period of time to allow for meaningful analysis of ongoing operating results.  Management also monitors other factors when evaluating operating locations for impairment, including individual locations’ execution of their operating plans and local market conditions, including incursion, which is the opening of either other Lowe’s locations or those of a direct competitor within the same market.  We also consider there to be a triggering event when there is a current expectation that it is more likely than not that a given location will be closed significantly before the end of its previously estimated useful life.

A potential impairment has occurred if projected future undiscounted cash flows expected to result from the use and eventual disposition of the location’s assets are less than the carrying amount of the assets.  When determining the stream of projected future cash flows associated with an individual operating location, management makes assumptions, incorporating local market conditions, about key store variables including sales growth rates, gross margin and controllable expenses, such as store payroll and occupancy expense, as well as asset residual values or lease rates.  An impairment loss is recognized when the carrying amount of the operating location is not recoverable and exceeds its fair value.

We use an income approach to determine the fair value of our individual operating locations, which requires discounting projected future cash flows.  This involves making assumptions regarding both a location’s future cash flows, as described above, and an appropriate discount rate to determine the present value of those future cash flows.  We discount our cash flow estimates at a rate commensurate with the risk that selected market participants would assign to the cash flows.  The selected market participants represent a group of other retailers with a market footprint similar in size to ours.

We use a market approach to determine the fair value of our individual locations identified for closure.  This involves making assumptions regarding the estimated selling prices or estimated lease rates by obtaining information from property brokers or appraisers in the specific markets being evaluated.  The information includes comparable sales of similar assets and assumptions about demand in the market for purchase or lease of these assets.

Judgments and uncertainties involved in the estimate

Our impairment evaluations require us to apply judgment in determining whether a triggering event has occurred, including the evaluation of whether it is more likely than not that a location will be closed significantly before the end of its previously estimated useful life.  Our impairment loss calculations require us to apply judgment in estimating expected future cash flows, including estimated sales, margin and controllable expenses, and assumptions about market performance for operating locations and estimated selling prices or lease rates for locations identified for closure.  We also apply judgment in estimating asset fair values, including the selection of an appropriate discount rate for fair values determined using an income approach.

Effect if actual results differ from assumptions

During 2012, 12 operating locations experienced a triggering event and were evaluated for recoverability.  Five of the 12 operating locations were determined to be impaired.  We recorded impairment losses related to these five operating locations of $55 million during 2012, compared to impairment losses on operating locations and locations identified for closure of $309 million during 2011.

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We have not made any material changes in the methodology used to estimate the future cash flows of operating locations or locations identified for closure during the past three fiscal years.  If the actual results are not consistent with the assumptions and judgments we have made in determining whether it is more likely than not that a location will be closed significantly before the end of its useful life or in estimating future cash flows and determining asset fair values, our actual impairment losses could vary positively or negatively from our estimated impairment losses.

Seven of the 12 operating locations that experienced a triggering event during 2012 were determined to be recoverable and therefore were not impaired.  For these seven locations, the expected undiscounted cash flows substantially exceeded the net book value of the location’s assets.  A 10% reduction in projected sales used to estimate future cash flows at the latest date that these seven operating locations were evaluated for impairment would have resulted in the impairment of four of these locations and increased recognized impairment losses by approximately $47 million.

We analyzed other assumptions made in estimating the future cash flows of the operating locations evaluated for impairment, but the sensitivity of those assumptions was not significant to the estimates.

Store Closing Lease Obligations

Description

When locations under operating leases are closed, we recognize a liability for the fair value of future contractual obligations associated with the leased location.  The fair value of the store closing lease obligation is determined using an expected present value cash flow model incorporating future minimum lease payments, property taxes, utilities, common area maintenance and other ongoing expenses, net of estimated sublease income and other recoverable items, discounted at a credit-adjusted risk free rate.  The expected present value cash flow model uses a probability weighted scenario approach that assigns varying cash flows to certain scenarios based on the expected likelihood of outcomes.  Estimating the fair value involves making assumptions regarding estimated sublease income by obtaining information from property brokers or appraisers in the specific markets being evaluated.  The information includes comparable lease rates of similar assets and assumptions about demand in the market for leasing these assets.  Subsequent changes to the liability, including a change resulting from a revision to either the timing or the amount of estimated cash flows, are recognized in the period of the change.

Judgments and uncertainties involved in the estimate

Our store closing lease liability calculations require us to apply judgment in estimating expected future cash flows, primarily related to estimated sublease income, and the selection of an appropriate discount rate.

Effect if actual results differ from assumptions

During 2012, the Company relocated one store subject to an operating lease.  During 2011, 13 stores under operating lease were closed, which includes one store that was relocated.  We recorded $11 million and $76 million of expense for store closing lease obligations during 2012 and 2011, respectively.  For 2012, these charges included $9 million related to locations closed or relocated during 2012 and $2 million of adjustments related to previously closed or relocated locations.

We have not made any material changes in the methodology used to estimate the expected future cash flows of closed locations under operating leases during the past three fiscal years.  If the actual results are not consistent with the assumptions and judgments we have made in estimating expected future cash flows, our store closing lease obligation losses could vary positively or negatively from our estimated losses.  A 10% change in the store closing lease liability would have affected net earnings by approximately $5 million for 2012.

Self-Insurance

Description

We are self-insured for certain losses relating to workers’ compensation; automobile; general and product liability; extended protection plan; and certain medical and dental claims.  Our self-insured retention or deductible, as applicable, is limited to $2 million per occurrence involving workers’ compensation and $3 million per occurrence involving

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automobile, general or product liability.  Additionally, a corridor retention of $2 million per occurrence applies to commercial general liability and product liability claims, subject to a $6 million maximum over a three-year period. We do not have any stop loss limits for self-insured extended protection plan or medical and dental claims.  Self-insurance claims filed and claims incurred but not reported are accrued based upon our estimates of the discounted ultimate cost for self-insured claims incurred using actuarial assumptions followed in the insurance industry and historical experience.  During 2012, our self-insurance liability increased approximately $35 million to $899 million as of February 1, 2013.  During 2012, we reduced the discount rate applied to self-insurance claims by 100 basis points, which resulted in a $20 million unfavorable impact to net earnings.

Judgments and uncertainties involved in the estimate

These estimates are subject to changes in the regulatory environment; utilized discount rate; projected exposures including payroll, sales and vehicle units; as well as the frequency, lag and severity of claims.

Effect if actual results differ from assumptions

We have not made any material changes in the methodology used to establish our self-insurance liability during the past three fiscal years.  Although we believe that we have the ability to reasonably estimate losses related to claims, it is possible that actual results could differ from recorded self-insurance liabilities.  A 10% change in our self-insurance liability would have affected net earnings by approximately $56 million for 2012.  A 100 basis point change in our discount rate would have affected net earnings by approximately $23 million for 2012.

Revenue Recognition

Description

See Note 1 to the consolidated financial statements for a discussion of our revenue recognition policies.  The following accounting estimates relating to revenue recognition require management to make assumptions and apply judgment regarding the effects of future events that cannot be determined with certainty.

We sell separately-priced extended protection plan contracts under a Lowe’s-branded program for which the Company is ultimately self-insured.  The Company recognizes revenues from extended protection plan sales on a straight-line basis over the respective contract term.  Extended protection plan contract terms primarily range from one to four years from the date of purchase or the end of the manufacturer’s warranty, as applicable.  The Company consistently groups and evaluates extended protection plan contracts based on the characteristics of the underlying products and the coverage provided in order to monitor for expected losses.  A loss on the overall contract would be recognized if the expected costs of performing services under the contracts exceeded the amount of unamortized acquisition costs and related deferred revenue associated with the contracts.  Deferred revenues associated with the extended protection plan contracts increased $11 million to $715 million as of February 1, 2013.

We defer revenue and cost of sales associated with settled transactions for which customers have not yet taken possession of merchandise or for which installation has not yet been completed.  Revenue is deferred based on the actual amounts received.  We use historical gross margin rates to estimate the adjustment to cost of sales for these transactions.  During 2012, deferred revenues associated with these transactions increased $11 million to $441 million as of February 1, 2013.

Judgments and uncertainties involved in the estimate

For extended protection plans, there is judgment inherent in our evaluation of expected losses as a result of our methodology for grouping and evaluating extended protection plan contracts and from the actuarial determination of the estimated cost of the contracts.  There is also judgment inherent in our determination of the recognition pattern of costs of performing services under these contracts.

For the deferral of revenue and cost of sales associated with transactions for which customers have not yet taken possession of merchandise or for which installation has not yet been completed, there is judgment inherent in our estimates of gross margin rates.

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Effect if actual results differ from assumptions

We have not made any material changes in the methodology used to recognize revenue on our extended protection plan contracts during the past three fiscal years.  We currently do not anticipate incurring any overall contract losses on our extended protection plan contracts.  Although we believe that we have the ability to adequately monitor and estimate expected losses under the extended protection plan contracts, it is possible that actual results could differ from our estimates.  In addition, if future evidence indicates that the costs of performing services under these contracts are incurred on other than a straight-line basis, the timing of revenue recognition under these contracts could change.  A 10% change in the amount of revenue recognized in 2012 under these contracts would have affected net earnings by approximately $15 million.

We have not made any material changes in the methodology used to reverse net sales and cost of sales related to amounts received for which customers have not yet taken possession of merchandise or for which installation has not yet been completed.  We believe we have sufficient current and historical knowledge to record reasonable estimates related to the impact to cost of sales for these transactions.  However, if actual results are not consistent with our estimates or assumptions, we may incur additional income or expense.  A 10% change in the estimate of the gross margin rates applied to these transactions would have affected net earnings by approximately $7 million in 2012.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

We speak throughout this Annual Report on Form 10-K in forward-looking statements about our future, but particularly in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.  The words “believe,” “expect,” “will,” “should,” and other similar expressions are intended to identify those forward-looking statements.  While we believe our expectations are reasonable, they are not guarantees of future performance.  Our actual results could differ substantially from our expectations.

For a detailed description of the risks and uncertainties that we are exposed to, you should read the “Risk Factors” included elsewhere in this Annual Report on Form 10-K to the United States Securities and Exchange Commission.  All forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document.  All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section and in the “Risk Factors” included elsewhere in this Annual Report on Form 10-K.  We do not undertake any obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report.

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Item 7A - Quantitative and Qualitative Disclosures about Market Risk

In addition to the risks inherent in our operations, we are exposed to certain market risks, including changes in interest rates, commodity prices and foreign currency exchange rates.

Interest Rate Risk

Fluctuations in interest rates do not have a material impact on our financial condition and results of operations because our long-term debt is carried at amortized cost and consists of fixed-rate instruments.  Therefore, providing quantitative information about interest rate risk is not meaningful for financial instruments.

Commodity Price Risk

We purchase certain commodity products that are subject to price volatility caused by factors beyond our control.  We believe that the price volatility of these products is partially mitigated by our ability to adjust selling prices.  The selling prices of these commodity products are influenced, in part, by the market price we pay, which is determined by industry supply and demand.

Foreign Currency Exchange Rate Risk

Although we have international operating entities, our exposure to foreign currency exchange rate fluctuations is not material to our financial condition and results of operations.

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Item 8 - Financial Statements and Supplementary Data

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Lowe’s Companies, Inc. and its subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting (Internal Control) as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended.  Our Internal Control was designed to provide reasonable assurance to our management and the Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention or overriding of controls.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to the reliability of financial reporting and financial statement preparation and presentation.  Further, because of changes in conditions, the effectiveness may vary over time.

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our Internal Control as of February 1, 2013.  In evaluating our Internal Control, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on our management’s assessment, we have concluded that, as of February 1, 2013, our Internal Control is effective.

Deloitte & Touche LLP, the independent registered public accounting firm that audited the financial statements contained in this report, was engaged to audit our Internal Control. Their report appears on page 37.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Mooresville, North Carolina

We have audited the accompanying consolidated balance sheets of Lowe's Companies, Inc. and subsidiaries (the "Company") as of February 1, 2013 and February 3, 2012, and the related consolidated statements of earnings, comprehensive income, shareholders' equity, and cash flows for each of the three fiscal years in the period ended February 1, 2013. Our audits also included the financial statement schedule listed in the Table of Contents at Item 15.  These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at February 1, 2013 and February 3, 2012, and the results of its operations and its cash flows for each of the three fiscal years in the period ended February 1, 2013, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of February 1, 2013, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 1, 2013 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

April 1, 2013

36

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Mooresville, North Carolina

We have audited the internal control over financial reporting of Lowe’s Companies, Inc. and subsidiaries (the "Company") as of  February 1, 2013, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 1,2013, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the fiscal year ended February 1, 2013 of the Company and our report dated April 1, 2013 expressed an unqualified opinion on those financial statements and financial statement schedule.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

April 1, 2013

37

Lowe's Companies, Inc.
Consolidated Statements of Earnings
(In millions, except per share and percentage data)	February 1, 2013			%		February 3, 2012				%		January 28, 2011				%
Fiscal years ended on				Sales						Sales						Sales
Net sales		$	50,521	100.00	%		$	50,208		100.00	%		$	48,815		100.00	%
Cost of sales			33,194	65.70				32,858		65.44				31,663		64.86
Gross margin			17,327	34.30				17,350		34.56				17,152		35.14
Expenses:
Selling, general and administrative			12,244	24.24				12,593		25.08				12,006		24.60
Depreciation			1,523	3.01				1,480		2.95				1,586		3.25
Interest - net			423	0.84				371		0.74				332		0.68
Total expenses			14,190	28.09				14,444		28.77				13,924		28.53
Pre-tax earnings			3,137	6.21				2,906		5.79				3,228		6.61
Income tax provision			1,178	2.33				1,067		2.13				1,218		2.49
Net earnings		$	1,959	3.88	%		$	1,839		3.66	%		$	2,010		4.12	%
Basic earnings per common share		$	1.69				$	1.43					$	1.42
Diluted earnings per common share		$	1.69				$	1.43					$	1.42
Cash dividends per share		$	0.62				$	0.53					$	0.42
Lowe's Companies, Inc.
Consolidated Statements of Comprehensive Income
(In millions, except percentage data)	February 1, 2013			%		February 3, 2012				%		January 28, 2011				%
Fiscal years ended on				Sales						Sales						Sales
Net earnings		$	1,959	3.88	%		$	1,839		3.66	%		$	2,010		4.12	%
Foreign currency translation adjustments - net of tax			6	0.01				(8	)	(0.02	)			28		0.06
Net unrealized investment gains/(losses) - net of tax			-	-				1		-				(2	)	-
Other comprehensive income/(loss)			6	0.01				(7	)	(0.02	)			26		0.06
Comprehensive income		$	1,965	3.89	%		$	1,832		3.64	%		$	2,036		4.18	%
See accompanying notes to consolidated financial statements.

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Lowe's Companies, Inc.
Consolidated Balance Sheets
		February 1, 2013		%		February 3, 2012		%
(In millions, except par value and percentage data)				Total				Total
Assets
Current assets:
Cash and cash equivalents		$	541	1.7	%	$	1,014	3.0	%
Short-term investments			125	0.4			286	0.9
Merchandise inventory - net			8,600	26.3			8,355	24.9
Deferred income taxes - net			217	0.7			183	0.5
Other current assets			301	0.9			234	0.7
Total current assets			9,784	30.0			10,072	30.0
Property, less accumulated depreciation			21,477	65.7			21,970	65.5
Long-term investments			271	0.8			504	1.5
Other assets			1,134	3.5			1,013	3.0
Total assets		$	32,666	100.0	%	$	33,559	100.0	%
Liabilities and shareholders' equity
Current liabilities:
Current maturities of long-term debt		$	47	0.1	%	$	592	1.8	%
Accounts payable			4,657	14.3			4,352	13.0
Accrued compensation and employee benefits			670	2.1			613	1.8
Deferred revenue			824	2.5			801	2.4
Other current liabilities			1,510	4.6			1,533	4.5
Total current liabilities			7,708	23.6			7,891	23.5
Long-term debt, excluding current maturities			9,030	27.6			7,035	21.0
Deferred income taxes - net			455	1.4			531	1.6
Deferred revenue - extended protection plans			715	2.2			704	2.1
Other liabilities			901	2.8			865	2.5
Total liabilities			18,809	57.6			17,026	50.7
Commitments and contingencies
Shareholders' equity:
Preferred stock - $5 par value, none issued			-	-			-	-
Common stock - $.50 par value;
Shares issued and outstanding
February 1, 2013	1,110
February 3, 2012	1,241		555	1.7			621	1.9
Capital in excess of par value			26	0.1			14	-
Retained earnings			13,224	40.4			15,852	47.2
Accumulated other comprehensive income			52	0.2			46	0.2
Total shareholders' equity			13,857	42.4			16,533	49.3
Total liabilities and shareholders' equity		$	32,666	100.0	%	$	33,559	100.0	%
See accompanying notes to consolidated financial statements.

39

Lowe's Companies, Inc.
Consolidated Statements of Shareholders' Equity
							Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income/(Loss)			Total Shareholders' Equity
	Common Stock
(In millions)	Shares			Amount
Balance January 29, 2010		1,459		$	729		$	6		$	18,307		$	27		$	19,069
Comprehensive income:
Net earnings											2,010
Other comprehensive income														26
Total comprehensive income																	2,036
Tax effect of non-qualified stock options exercised and restricted stock vested								(6	)								(6	)
Cash dividends declared, $0.42 per share											(588	)					(588	)
Share-based payment expense								115									115
Repurchase of common stock		(113	)		(56	)		(204	)		(2,358	)					(2,618	)
Issuance of common stock under share-based payment plans		8			4			100									104
Balance January 28, 2011		1,354		$	677		$	11		$	17,371		$	53		$	18,112
Comprehensive income:
Net earnings											1,839
Other comprehensive loss														(7	)
Total comprehensive income																	1,832
Tax effect of non-qualified stock options exercised and restricted stock vested								(8	)								(8	)
Cash dividends declared, $0.53 per share											(672	)					(672	)
Share-based payment expense								106									106
Repurchase of common stock		(120	)		(60	)		(193	)		(2,686	)					(2,939	)
Issuance of common stock under share-based payment plans		7			4			98									102
Balance February 3, 2012		1,241		$	621		$	14		$	15,852		$	46		$	16,533
Comprehensive income:
Net earnings											1,959
Other comprehensive income														6
Total comprehensive income																	1,965
Tax effect of non-qualified stock options exercised and restricted stock vested								12									12
Cash dividends declared, $0.62 per share											(708	)					(708	)
Share-based payment expense								97									97
Repurchase of common stock		(147	)		(74	)		(440	)		(3,879	)					(4,393	)
Issuance of common stock under share-based payment plans		16			8			343									351
Balance February 1, 2013		1,110		$	555		$	26		$	13,224		$	52		$	13,857
See accompanying notes to consolidated financial statements.

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Lowe's Companies, Inc.
Consolidated Statements of Cash Flows
(In millions)	February 1,  2013			February 3,  2012		January 28,  2011
Fiscal years ended on
Cash flows from operating activities:
Net earnings	$	1,959		$	1,839	$	2,010
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		1,623			1,579		1,684
Deferred income taxes		(140	)		54		(133	)
Loss on property and other assets –  net		83			456		103
Loss on equity method investments		48			12		4
Share-based payment expense