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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 3, 2023
or 
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
lowesgraphicimage01.jpg
LOWE’S COMPANIES, INC.
(Exact name of registrant as specified in its charter)
North Carolina56-0578072
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1000 Lowes Blvd., Mooresville, North Carolina
28117
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code:
(704) 758-1000
Former name, former address and former fiscal year, if changed since last report: Not Applicable
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.50 per shareLOWNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
CLASSOUTSTANDING AT 11/27/2023
Common Stock, $0.50 par value575,112,600



LOWE’S COMPANIES, INC.
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Table of Contents
FORWARD-LOOKING STATEMENTS

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

A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by these forward-looking statements including, but not limited to, changes in general economic conditions, such as 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, slower rates of growth in real disposable personal income that could affect the rate of growth in consumer spending, inflation and its impacts on discretionary spending and on our costs, shortages, and other disruptions in the labor supply, interest rate and currency fluctuations, home price appreciation or decreasing housing turnover, age of housing stock, the availability of consumer credit and of mortgage financing, trade policy changes or additional tariffs, outbreaks of pandemics, fluctuations in fuel and energy costs, inflation or deflation of commodity prices, natural disasters, armed conflicts, acts of both domestic and international terrorism, and other factors that can negatively affect our customers.

Investors and others should carefully consider the foregoing factors and other uncertainties, risks and potential events including, but not limited to, those described in “Item 1A - Risk Factors” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in our most recent Annual Report on Form 10-K and as may be updated from time to time in our quarterly reports on Form 10-Q or other subsequent filings with the SEC. All such forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update these statements other than as required by law.

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Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Lowe’s Companies, Inc.
Consolidated Statements of Earnings (Unaudited)
In Millions, Except Per Share and Percentage Data
 Three Months EndedNine Months Ended
 November 3, 2023October 28, 2022November 3, 2023October 28, 2022
Current EarningsAmount% SalesAmount% SalesAmount% SalesAmount% Sales
Net sales$20,471 100.00 %$23,479 100.00 %$67,775 100.00 %$74,614 100.00 %
Cost of sales13,580 66.34 15,661 66.70 44,958 66.33 49,614 66.49 
Gross margin6,891 33.66 7,818 33.30 22,817 33.67 25,000 33.51 
Expenses:
Selling, general and administrative3,761 18.37 6,443 27.45 11,673 17.23 15,200 20.38 
Depreciation and amortization434 2.12 451 1.92 1,275 1.88 1,345 1.80 
Operating income2,696 13.17 924 3.93 9,869 14.56 8,455 11.33 
Interest – net345 1.68 295 1.25 1,033 1.52 802 1.07 
Pre-tax earnings2,351 11.49 629 2.68 8,836 13.04 7,653 10.26 
Income tax provision 578 2.83 475 2.02 2,130 3.14 2,174 2.92 
Net earnings$1,773 8.66 %$154 0.66 %$6,706 9.90 %$5,479 7.34 %
Weighted average common shares outstanding – basic576 618 585 638 
Basic earnings per common share$3.07 $0.25 $11.43 $8.56 
Weighted average common shares outstanding – diluted577 620 587 640 
Diluted earnings per common share$3.06 $0.25 $11.40 $8.53 
See accompanying notes to the consolidated financial statements (unaudited).



Lowe’s Companies, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
In Millions, Except Percentage Data
 Three Months EndedNine Months Ended
 November 3, 2023October 28, 2022November 3, 2023October 28, 2022
 Amount% SalesAmount% SalesAmount% SalesAmount% Sales
Net earnings$1,773 8.66 %$154 0.66 %$6,706 9.90 %$5,479 7.34 %
Foreign currency translation adjustments – net of tax  (168)(0.72)5 0.01 (173)(0.23)
Cash flow hedges – net of tax(4)(0.01)170 0.72 (10)(0.02)352 0.47 
Other  1    (3) 
Other comprehensive (loss)/income(4)(0.01)3  (5)(0.01)176 0.24 
Comprehensive income$1,769 8.65 %$157 0.66 %$6,701 9.89 %$5,655 7.58 %
See accompanying notes to the consolidated financial statements (unaudited).
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Lowe’s Companies, Inc.
Consolidated Balance Sheets (Unaudited)
In Millions, Except Par Value Data
November 3,
2023
October 28,
2022
February 3,
2023
Assets
Current assets:
Cash and cash equivalents$1,210 $3,192 $1,348 
Short-term investments 321 464 384 
Merchandise inventory – net17,530 19,817 18,532 
Other current assets907 1,518 1,178 
Total current assets19,968 24,991 21,442 
Property, less accumulated depreciation17,527 17,275 17,567 
Operating lease right-of-use assets3,647 3,512 3,518 
Long-term investments 238 63 121 
Deferred income taxes – net280 301 250 
Other assets859 831 810 
Total assets$42,519 $46,973 $43,708 
Liabilities and shareholders' deficit
Current liabilities:
Short-term borrowings$ $ $499 
Current maturities of long-term debt544 609 585 
Current operating lease liabilities533 651 522 
Accounts payable9,914 12,249 10,524 
Accrued compensation and employee benefits 750 1,405 1,109 
Deferred revenue1,499 1,736 1,603 
Income taxes payable121 913 1,181 
Other current liabilities3,135 3,313 3,488 
Total current liabilities16,496 20,876 19,511 
Long-term debt, excluding current maturities 35,374 32,904 32,876 
Noncurrent operating lease liabilities3,602 4,048 3,512 
Deferred revenue – Lowe's protection plans1,228 1,184 1,201 
Other liabilities 966 829 862 
Total liabilities57,666 59,841 57,962 
Shareholders' deficit:
Preferred stock, $5 par value: Authorized – 5.0 million shares; Issued and outstanding – none
   
Common stock, $0.50 par value: Authorized – 5.6 billion shares; Issued and outstanding – 575 million, 611 million, and 601 million shares, respectively
288 305 301 
Capital in excess of par value7   
Accumulated deficit(15,744)(13,313)(14,862)
Accumulated other comprehensive income302 140 307 
Total shareholders' deficit(15,147)(12,868)(14,254)
Total liabilities and shareholders' deficit$42,519 $46,973 $43,708 
See accompanying notes to the consolidated financial statements (unaudited).
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Lowe’s Companies, Inc.
Consolidated Statements of Shareholders’ Deficit (Unaudited)
In Millions
Three Months Ended November 3, 2023
Common StockCapital in Excess
of Par Value
Accumulated DeficitAccumulated Other
Comprehensive Income
Total
SharesAmount
Balance August 4, 2023582 $291 $12 $(15,341)$306 $(14,732)
Net earnings— — — 1,773 — 1,773 
Other comprehensive loss— — — — (4)(4)
Cash dividends declared, $1.10 per share
— — — (633)— (633)
Share-based payment expense — — 42 — — 42 
Repurchases of common stock (7)(3)(50)(1,543)— (1,596)
Issuance of common stock under share-based payment plans— — 3 — — 3 
Balance November 3, 2023575 $288 $7 $(15,744)$302 $(15,147)
Nine Months Ended November 3, 2023
Common StockCapital in Excess
of Par Value
Accumulated DeficitAccumulated Other
Comprehensive Income
Total
SharesAmount
Balance February 3, 2023601 $301 $ $(14,862)$307 $(14,254)
Net earnings— — — 6,706 — 6,706 
Other comprehensive loss— — — — (5)(5)
Cash dividends declared, $3.25 per share
— — — (1,898)— (1,898)
Share-based payment expense— — 155 — — 155 
Repurchases of common stock(28)(14)(226)(5,690)— (5,930)
Issuance of common stock under share-based payment plans2 1 78 — — 79 
Balance November 3, 2023575 $288 $7 $(15,744)$302 $(15,147)
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Three Months Ended October 28, 2022
Common StockCapital in Excess
of Par Value
Accumulated DeficitAccumulated Other
Comprehensive Income
Total
SharesAmount
Balance July 29, 2022631 $316 $ $(8,895)$137 $(8,442)
Net earnings— — — 154 — 154 
Other comprehensive income— — — — 3 3 
Cash dividends declared, $1.05 per share
— — — (643)— (643)
Share-based payment expense— — 51 — — 51 
Repurchases of common stock(20)(11)(64)(3,929)— (4,004)
Issuance of common stock under share-based payment plans— — 13 — — 13 
Balance October 28, 2022611 $305 $ $(13,313)$140 $(12,868)
Nine Months Ended October 28, 2022
Common StockCapital in Excess
of Par Value
Accumulated DeficitAccumulated Other
Comprehensive (Loss)/Income
Total
SharesAmount
Balance January 28, 2022670 $335 $ $(5,115)$(36)$(4,816)
Net earnings— — — 5,479 — 5,479 
Other comprehensive income— — — — 176 176 
Cash dividends declared, $2.90 per share
— — — (1,833)— (1,833)
Share-based payment expense— — 161 — — 161 
Repurchases of common stock(61)(31)(247)(11,844)— (12,122)
Issuance of common stock under share-based payment plans2 1 86 — — 87 
Balance October 28, 2022611 $305 $ $(13,313)$140 $(12,868)
See accompanying notes to the consolidated financial statements (unaudited).

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Lowe’s Companies, Inc.
Consolidated Statements of Cash Flows (Unaudited)
In Millions
Nine Months Ended
November 3, 2023October 28, 2022
Cash flows from operating activities:
Net earnings $6,706 $5,479 
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization1,427 1,509 
Noncash lease expense370 403 
Deferred income taxes(27)(252)
Asset impairment and loss on property – net50 2,113 
Gain on sale of business(79) 
Share-based payment expense160 165 
Changes in operating assets and liabilities:
Merchandise inventory – net1,002 (2,308)
Other operating assets236 20 
Accounts payable (610)921 
Deferred revenue(77)(117)
Other operating liabilities(2,126)205 
Net cash provided by operating activities7,032 8,138 
Cash flows from investing activities:
Purchases of investments(1,283)(659)
Proceeds from sale/maturity of investments1,215 597 
Capital expenditures(1,344)(1,090)
Proceeds from sale of property and other long-term assets29 37 
Proceeds from sale of business100  
Other – net(23) 
Net cash used in investing activities(1,306)(1,115)
Cash flows from financing activities:
Net change in commercial paper(499) 
Net proceeds from issuance of debt2,983 9,667 
Repayment of debt(576)(831)
Proceeds from issuance of common stock under share-based payment plans79 86 
Cash dividend payments(1,899)(1,727)
Repurchases of common stock(5,937)(12,127)
Other – net(15) 
Net cash used in financing activities(5,864)(4,932)
Effect of exchange rate changes on cash (32)
Net (decrease)/increase in cash and cash equivalents(138)2,059 
Cash and cash equivalents, beginning of period1,348 1,133 
Cash and cash equivalents, end of period$1,210 $3,192 
See accompanying notes to the consolidated financial statements (unaudited).
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Lowe’s Companies, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Note 1: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements (unaudited) and notes to the condensed consolidated financial statements (unaudited) are presented in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The condensed consolidated financial statements (unaudited), in the opinion of management, contain all normal recurring adjustments necessary to present fairly the consolidated balance sheets as of November 3, 2023, and October 28, 2022, and the statements of earnings, comprehensive income, and shareholders’ deficit for the three and nine months ended November 3, 2023, and October 28, 2022, and cash flows for the nine months ended November 3, 2023, and October 28, 2022. The February 3, 2023, consolidated balance sheet was derived from the audited financial statements.

These interim condensed consolidated financial statements (unaudited) should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Lowe’s Companies, Inc. (the Company) Annual Report on Form 10-K for the fiscal year ended February 3, 2023 (the Annual Report). The financial results for the interim periods may not be indicative of the financial results for the entire fiscal year.

Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. The ASU is effective for the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2025, and subsequent interim periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

Recent accounting pronouncements pending adoption not discussed in this Form 10-Q or in the 2022 Form 10-K are either not applicable to the Company or are not expected to have a material impact on the Company.

Note 2: Revenue

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

The following table presents the Company’s sources of revenue:
(In millions)Three Months EndedNine Months Ended
November 3, 2023October 28, 2022November 3, 2023October 28, 2022
Products $19,599 $22,511 $65,204 $71,872 
Services517 568 1,623 1,692 
Other355 400 948 1,050 
Net sales$20,471 $23,479 $67,775 $74,614 

A provision for anticipated merchandise returns is provided through a reduction of sales and cost of sales in the period that the related sales are recorded.  The merchandise return reserve is presented on a gross basis, with a separate asset and liability included in the consolidated balance sheets. The balances and classification within the consolidated balance sheets for anticipated sales returns and the associated right of return assets are as follows:
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(In millions)ClassificationNovember 3,
2023
October 28,
2022
February 3,
2023
Anticipated sales returnsOther current liabilities$241 $302 $234 
Right of return assetsOther current assets140 183 139 

Deferred revenue - retail and stored-value cards
Retail deferred revenue consists of amounts received for which customers have not yet taken possession of the merchandise or for which installation has not yet been completed. The majority of revenue for goods and services is recognized in the quarter following revenue deferral. Stored-value cards deferred revenue includes outstanding stored-value cards such as gift cards and returned merchandise credits that have not yet been redeemed. Deferred revenue for retail and stored-value cards are as follows:
(In millions)November 3,
2023
October 28,
2022
February 3,
2023
Retail deferred revenue$984 $1,168 $933 
Stored-value cards deferred revenue515 568 670 
Deferred revenue$1,499 $1,736 $1,603 

Deferred revenue - Lowe’s protection plans
The Company defers revenues for its separately-priced long-term extended protection plan contracts (Lowe’s protection plans) and recognizes revenue on a straight-line basis over the respective contract term. Expenses for claims are recognized in cost of sales when incurred.
(In millions)November 3,
2023
October 28,
2022
February 3,
2023
Deferred revenue - Lowe’s protection plans$1,228 $1,184 $1,201 

Three Months EndedNine Months Ended
(In millions)November 3, 2023October 28, 2022November 3, 2023October 28, 2022
Lowe’s protection plans deferred revenue recognized into sales$139 $133 $411 $389 
Lowe’s protection plans claim expenses64 40 171 134 

Disaggregation of Revenues

The following table presents the Company’s net sales disaggregated by merchandise division:
Three Months EndedNine Months Ended
November 3, 2023October 28, 2022November 3, 2023October 28, 2022
(In millions)Net Sales%Net Sales%Net Sales%Net Sales%
Home Décor 1
$7,799 38.1 %$9,019 38.4 %$24,763 36.5 %$27,227 36.5 %
Building Products 2
6,812 33.3 7,854 33.4 20,990 31.0 24,135 32.3 
Hardlines 3
5,230 25.5 5,905 25.1 20,249 29.9 21,351 28.6 
Other630 3.1 702 3.1 1,773 2.6 1,901 2.6 
Total$20,471 100.0 %$23,479 100.0 %$67,775 100.0 %$74,614 100.0 %
Note: Merchandise division net sales for the prior period have been reclassified to conform to the current period presentation.
1    Home Décor includes the following product categories: Appliances, Décor, Flooring, Kitchens & Bath, and Paint.
2    Building Products includes the following product categories: Building Materials, Electrical, Lumber, Millwork, and Rough Plumbing.
3    Hardlines includes the following product categories: Hardware, Lawn & Garden, Seasonal & Outdoor Living, and Tools.
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The following table presents the Company’s net sales disaggregated by geographical area:
(In millions)Three Months EndedNine Months Ended
November 3, 2023October 28, 2022November 3, 2023October 28, 2022
United States$20,471 $22,280 $67,775 $70,524 
Canada1
 1,200  4,090 
Net sales$20,471 $23,479 $67,775 $74,614 
1 The Canadian retail business was sold on February 3, 2023.

Note 3: Restricted Investments

Short-term and long-term investments include restricted balances pledged as collateral primarily for the Lowe’s protection plans program and are as follows:
(In millions)November 3, 2023October 28, 2022February 3, 2023
Short-term restricted investments$321 $464 $384 
Long-term restricted investments238 63 100 
Total restricted investments$559 $527 $484 

Note 4: Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the hierarchy are defined as follows:
Level 1 - inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities
Level 2 - inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly
Level 3 - inputs to the valuation techniques that are unobservable for the assets or liabilities

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

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of November 3, 2023, October 28, 2022, and February 3, 2023:
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Fair Value Measurements at
(In millions)ClassificationMeasurement LevelNovember 3,
2023
October 28,
2022
February 3,
2023
Available-for-sale debt securities:
U.S. Treasury securitiesShort-term investmentsLevel 1$143 $216 $157 
Corporate debt securitiesShort-term investmentsLevel 262 51 78 
Money market fundsShort-term investmentsLevel 149 133 43 
Certificates of depositShort-term investmentsLevel 1 35 7 40 
Commercial paperShort-term investmentsLevel 230 43 52 
Municipal obligationsShort-term investmentsLevel 22   
Foreign government debt securitiesShort-term investmentsLevel 2 14 14 
U.S. Treasury securitiesLong-term investmentsLevel 1215 31 86 
Corporate debt securitiesLong-term investmentsLevel 223 30 12 
Municipal obligationsLong-term investmentsLevel 2 2 2 
Derivative instruments:
Forward interest rate swapsOther current assetsLevel 2$ $303 $251 
Fixed-to-floating interest rate swapsOther liabilitiesLevel 292 98 88 
Other financial instruments:
Contingent considerationLong-term investmentsLevel 3$ $ $21 

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

When available, quoted prices were used to determine fair value.  When quoted prices in active markets were available, financial assets were classified within Level 1 of the fair value hierarchy.  When quoted prices in active markets were not available, fair values for financial assets and liabilities classified within Level 2 were determined using pricing models, and the inputs to those pricing models were based on observable market inputs.  The inputs to the pricing models were typically benchmark yields, reported trades, broker-dealer quotes, issuer spreads and benchmark securities, among others.

The performance-based contingent consideration is related to the fiscal 2022 sale of the Canadian retail business and is classified as a Level 3 long-term investment. The Company determined the initial fair value of contingent consideration as of February 3, 2023, based on an income approach using an option pricing model, calculated using significant unobservable inputs such as total equity value, volatility, and expected term. Subsequent measurements of fair value of the contingent consideration are based on an income approach, which requires certain assumptions considering operating performance of the business and a risk-adjusted discount rate. Changes in the estimated fair value of the contingent consideration are recognized as gain or loss included within selling, general and administrative expenses (SG&A) in the consolidated statements of earnings.

The rollforward of the fair value of contingent consideration for the three and nine months ended November 3, 2023, is as follows:
Three Months EndedNine Months Ended
(In millions)November 3, 2023November 3, 2023
Beginning balance$ $21 
Change in fair value 102 
Proceeds received (123)
Ending balance$ $ 

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

During the three and nine months ended November 3, 2023, the Company had no material measurements of assets and liabilities at fair value on a nonrecurring basis subsequent to their initial recognition. During the three and nine months ended October 28, 2022, the Company’s only significant assets measured at fair value on a nonrecurring basis subsequent to their initial recognition were certain long-lived assets as further described below.

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The Company reviews the carrying amounts of long-lived assets whenever certain events or changes in circumstances indicate that the carrying amounts may not be recoverable. When evaluating long-lived assets for impairment, the asset group is generally 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. The Company evaluates long-lived assets for triggering events on a quarterly basis to determine when assets may not be recoverable. An impairment loss is recognized when the carrying amount of the asset (disposal) group is not recoverable and exceeds its fair value. The Company estimates the fair values of assets subject to long-lived asset impairment based on the Company’s own judgments about the assumptions that market participants would use in pricing the assets and on observable market data, when available. The Company classifies these fair value measurements as Level 3.

During the three months ended October 28, 2022, the Company determined it was more likely than not that the assets within the Canadian retail business would be sold or otherwise disposed of significantly before the end of their previously estimated useful lives, and these assets were evaluated for recoverability. Based on the proposed transaction, the Company reconsidered the appropriate asset grouping of long-lived assets attributable to the Company’s Canadian locations given the change in the Company’s expectations regarding use and disposition of its associated assets. The Company determined the total Canadian retail business (Canada asset group) to be the appropriate asset group for which the long-lived assets should be evaluated, as this represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The carrying value of the Canada asset group includes substantially all assets and liabilities of the Canadian retail business, including accounts receivable, inventory, property, operating and finance lease right-of-use assets, definite-lived intangible assets, operating liabilities including accounts payable and accrued compensation, and operating and finance lease liabilities. A market approach of an orderly transaction under current market conditions was used in determining the estimated fair value of the Canada asset group, which was based on the proposed transaction price, inclusive of performance-based contingent consideration. The estimated fair value of the Canada asset group was determined to be $421 million. As a result, the Company recorded $2.1 billion of long-lived asset impairment within SG&A in the consolidated statements of earnings, which reflected the full carrying value of the long-lived assets of the Canada asset group as of October 28, 2022.

The following table presents the Company’s impairment losses resulting from non-financial assets measured at estimated fair value on a nonrecurring basis included in earnings for the three and nine months ended October 28, 2022:
Three Months EndedNine Months Ended
(In millions)October 28, 2022October 28, 2022
Canada asset group:
Property, less accumulated depreciation$1,258$1,258
Operating lease right-of-use assets621621
Other assets182182
Other735
Total$2,068 $2,096 

Other Fair Value Disclosures

The Company’s financial assets and liabilities not measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable, and long-term debt and are reflected in the financial statements at cost. With the exception of long-term debt, cost approximates fair value for these items due to their short-term nature. As further described in Note 7, certain long-term debt is associated with a fair value hedge and the changes in fair value of the hedged debt is included in the carrying value of long-term debt in the consolidated balance sheets. The fair values of the Company’s unsecured notes were estimated using quoted market prices. The fair values of the Company’s mortgage notes were estimated using discounted cash flow analyses, based on the future cash outflows associated with these arrangements and discounted using the applicable incremental borrowing rate.

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Carrying amounts and the related estimated fair value of the Company’s long-term debt, excluding finance lease obligations, are as follows:
November 3, 2023October 28, 2022February 3, 2023
(In millions)Carrying AmountFair ValueCarrying AmountFair ValueCarrying AmountFair Value
Unsecured notes (Level 1)$35,387 $30,207 $32,886 $27,879 $32,897 $30,190 
Mortgage notes (Level 2)2 2 4 4 2 2 
Long-term debt (excluding finance lease obligations)
$35,389 $30,209 $32,890 $27,883 $32,899 $30,192 

Note 5: Accounts Payable
The Company has agreements with third parties to provide supplier finance programs which facilitate participating suppliers’ ability to finance payment obligations from the Company with designated third-party financial institutions. Participating suppliers may, at their sole discretion, make offers to finance one or more payment obligations of the Company prior to their scheduled due dates at a discounted price to participating financial institutions. The Company’s outstanding payment obligations that suppliers financed to participating financial institutions, which are included in accounts payable on the consolidated balance sheets, are as follows:
(In millions)November 3, 2023October 28, 2022February 3, 2023
Financed payment obligations$1,640 $2,635 $2,257 

Note 6: Debt
Commercial Paper Program
In September 2023, the Company entered into an amended and restated $2.0 billion five-year unsecured revolving credit agreement (2023 Credit Agreement), which amended and restated the Company’s $2.0 billion five-year unsecured revolving credit agreement entered into in March 2020, and as amended (2020 Credit Agreement), to extend the term until September 2028. The 2023 Credit Agreement, along with the $2.0 billion five-year unsecured third amended and restated credit agreement entered into in December 2021, and as amended (Third Amended and Restated Credit Agreement), support the Company’s commercial paper program.  The amounts available to be drawn under the 2023 Credit Agreement and the Third Amended and Restated Credit Agreement are reduced by the amount of borrowings under the commercial paper program. As of November 3, 2023, there were no outstanding borrowings under the Company’s commercial paper program, the 2023 Credit Agreement, or the Third Amended and Restated Credit Agreement. As of October 28, 2022, there were no outstanding borrowings under the Company’s commercial paper program, the 2020 Credit Agreement, or the Third Amended and Restated Credit Agreement. As of February 3, 2023, there were $499 million of outstanding borrowings under the Company’s commercial paper program with a weighted average interest rate of 4.78%. There were no outstanding borrowings under the Company’s 2020 Credit Agreement or the Third Amended and Restated Credit Agreement as of February 3, 2023. Total combined availability under the 2023 Credit Agreement and the Third Amended and Restated Credit Agreement was $4.0 billion as of November 3, 2023.
Long-Term Debt
On March 30, 2023, the Company issued $3.0 billion of unsecured fixed rate notes (March 2023 Notes) as follows:
Principal Amount
(in millions)
Maturity DateInterest RateDiscount
(in millions)
$1,000 April 20264.800%$3 
$1,000 July 20335.150%$4 
$500 July 20535.750%$5 
$500 April 20635.850%$5 

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

The indenture governing the March 2023 Notes contains a provision that allows the Company to redeem these notes at any time, in whole or in part, at specified redemption prices, plus accrued and unpaid interest, if any, up to, but excluding, the date
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of redemption. The indenture also contains a provision that allows the holders of the notes to require the Company to repurchase all or any part of their notes if a change of control triggering event occurs. If elected under the change of control provisions, the repurchase of the notes will occur at a purchase price of 101% of the principal amount, plus accrued and unpaid interest, if any, on such notes up to, but excluding, the date of purchase. The indenture governing the March 2023 Notes does not limit the aggregate principal amount of debt securities that the Company may issue and does not require the Company to maintain specified financial ratios or levels of net worth or liquidity.

Note 7: Derivative Instruments

The Company utilizes forward interest rate swap agreements to hedge its exposure to changes in benchmark interest rates on forecasted debt issuances. The Company also utilizes fixed-to-floating interest rate swap agreements as fair value hedges on certain debt. The notional amounts for the Company’s material derivative instruments are as follows:

(In millions)November 3,
2023
October 28,
2022
February 3,
2023
Cash flow hedges:
Forward interest rate swap agreement notional amounts$ $1,210 $1,290 
Fair value hedges:
Fixed-to-floating interest rate swap agreement notional amounts$850 $850 $850 

See Note 4 for the gross fair values of the Company’s outstanding derivative financial instruments and corresponding fair value classifications. The cash flows related to settlement of the Company’s hedging derivative financial instruments are classified in the consolidated statements of cash flows based on the nature of the underlying hedged items.

Cash Flow Hedges

The Company accounts for the forward interest rate swap contracts as cash flow hedges, thus the effective portion of gains and losses resulting from changes in fair value are recognized in other comprehensive (loss)/income, net of tax effects, in the consolidated statements of comprehensive income and is amortized to interest expense over the term of the respective debt. In connection with the issuance of our March 2023 Notes, we settled forward interest rate swap contracts with a combined notional amount of $2.0 billion and received a payment of $247 million. The (loss)/gain from forward interest rate swap agreements, both settled and outstanding, designated as cash flow hedges recorded in other comprehensive (loss)/income and net earnings for the three and nine months ended November 3, 2023, and October 28, 2022, including its line item in the financial statements, is as follows:
(In millions)Three Months EndedNine Months Ended
November 3, 2023October 28, 2022November 3, 2023October 28, 2022
Other comprehensive (loss)/income:
Cash flow hedges – net of tax benefit/(expense) of $1 million, ($55) million, $4 million, and ($116) million, respectively
$(4)$166 $(10)$350 
Net earnings:
Interest – net$4 $1 $11 $ 

Fair Value Hedges

The Company accounts for the fixed-to-floating interest rate swap agreements as fair value hedges using the shortcut method of accounting under which the hedges are assumed to be perfectly effective. Thus, the change in fair value of the derivative instruments offsets the change in fair value on the hedged debt, and there is no net impact in the consolidated statements of earnings from the fair value of the derivatives.

Note 8: Shareholders’ Deficit

The Company has a share repurchase program that is executed through purchases made from time to time either in the open market, which may be made under pre-set trading plans meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934, or through private off-market transactions. Shares purchased under the repurchase program are returned to
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authorized and unissued status. Any excess of cost over par value is charged to additional paid-in capital to the extent that a balance is present. Once additional paid-in capital is fully depleted, remaining excess of cost over par value is charged to accumulated deficit. As of November 3, 2023, the Company had $15.0 billion remaining in its share repurchase program.

During the nine months ended November 3, 2023, the Company entered into Accelerated Share Repurchase (ASR) agreements with third-party financial institutions to repurchase a total of 15.4 million shares of the Company’s common stock for $3.3 billion. The terms of the ASR agreements entered into during the nine months ended November 3, 2023, are as follows (in millions):
Agreement Execution
Date
Agreement Settlement
Date
ASR
Agreement Amount
Initial Shares Delivered at InceptionAdditional Shares Delivered at SettlementTotal Shares Delivered
Q1 2023Q1 2023$750 3.1 0.7 3.8
Q2 2023Q2 20231,000 3.9 0.7 4.6
Q3 2023Q3 20231,500 5.3 1.7 7.0

In addition, the Company repurchased shares of its common stock through the open market as follows:
Three Months EndedNine Months Ended
November 3, 2023November 3, 2023
(In millions)SharesCostSharesCost
Open market share repurchases0.3$95 11.9 $2,545 

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

Total shares repurchased for the three and nine months ended November 3, 2023, and October 28, 2022, were as follows:
Three Months Ended
November 3, 2023October 28, 2022
(In millions)SharesCostSharesCost
Share repurchase program 1
7.3 $1,595 20.5 $4,000 
Shares withheld from employees 1  3 
Total share repurchases7.3 $1,596 20.5 $4,003 
Nine Months Ended
November 3, 2023October 28, 2022
(In millions)SharesCostSharesCost
Share repurchase program 1
27.3 $5,795 60.6 $12,000 
Shares withheld from employees0.7 135 0.6 122 
Total share repurchases28.0 $5,930 61.2 $12,122 
1 Beginning January 1, 2023, share repurchases in excess of issuances are subject to a 1% excise tax, which is included as part of the cost basis of the shares acquired.

Note 9: Earnings Per Share

The Company calculates basic and diluted earnings per common share using the two-class method. The following table reconciles earnings per common share for the three and nine months ended November 3, 2023, and October 28, 2022:
Three Months EndedNine Months Ended
(In millions, except per share data)November 3, 2023October 28, 2022November 3, 2023October 28, 2022
Basic earnings per common share:
Net earnings
$1,773 $154 $6,706 $5,479 
Less: Net earnings allocable to participating securities
(4)(2)(18)(17)
Net earnings allocable to common shares, basic
$1,769 $152 $6,688 $5,462 
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Three Months EndedNine Months Ended
(In millions, except per share data)November 3, 2023October 28, 2022November 3, 2023October 28, 2022
Weighted-average common shares outstanding
576 618 585 638 
Basic earnings per common share
$3.07 $0.25 $11.43 $8.56 
Diluted earnings per common share:
  
Net earnings
$1,773 $154 $6,706 $5,479 
Less: Net earnings allocable to participating securities
(4)(2)(18)(17)
Net earnings allocable to common shares, diluted
$1,769 $152 $6,688 $5,462 
Weighted-average common shares outstanding
576 618 585 638 
Dilutive effect of non-participating share-based awards
1 2 2 2 
Weighted-average common shares, as adjusted
577 620 587 640 
Diluted earnings per common share$3.06 $0.25 $11.40 $8.53 
Anti-dilutive securities excluded from diluted weighted-average common shares0.6 0.6 0.5 0.5 

Note 10: Income Taxes

The Company’s effective income tax rates were 24.6% and 24.1% for the three and nine months ended November 3, 2023, respectively, and 75.5% and 28.4% for the three and nine months ended October 28, 2022, respectively. The decrease in the effective tax rate for the three months ended November 3, 2023, is primarily due to the prior year impact of the increase in the valuation allowance for deferred taxes related to the long-lived asset impairment associated with RONA inc.

Income Tax Relief

On October 5, 2022, the Internal Revenue Service announced that businesses in certain states, including North Carolina, affected by Hurricane Ian would receive tax relief by postponing certain tax-payment deadlines. Under this relief, the Company’s quarterly federal estimated income tax payments originally due by October 15, 2022 and January 15, 2023, were deferred until February 15, 2023. As of October 28, 2022, and February 3, 2023, the Company deferred $600 million and $1.2 billion, respectively, of federal income taxes payable, which are included in income taxes payable in the consolidated balance sheet.

Note 11: Supplemental Disclosure

Net interest expense is comprised of the following:
Three Months EndedNine Months Ended
(In millions)November 3, 2023October 28, 2022November 3, 2023October 28, 2022
Long-term debt$365 $295 $1,075 $782 
Short-term borrowings 4 15 5 
Lease obligations6 7 19 21 
Interest income(27)(14)(78)(21)
Interest capitalized(1)(1)(4)(3)
Interest on tax uncertainties   3 
Other2 4 6 15 
Interest – net$345 $295 $1,033 $802 
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Supplemental disclosures of cash flow information:
Nine Months Ended
(In millions)November 3, 2023October 28, 2022
Cash paid for interest, net of amount capitalized$1,415 $909 
Cash paid for income taxes – net3,163 1,540 
Non-cash investing and financing activities:
Leased assets obtained in exchange for new finance lease liabilities$46 $46 
Leased assets obtained in exchange for new operating lease liabilities 1
497 465 
Cash dividends declared but not paid633