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 January 29, 2016 and January 30, 2015, 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 January 29, 2016. Our audits also
included the financial statement schedule listed in the Index 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 the 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 January 29, 2016 and January 30, 2015, and the results of its operations and its cash flows for each of the three
fiscal years in the period ended January 29, 2016, 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 January 29, 2016, based on the criteria established in Internal
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated March 28, 2016 expressed an unqualified opinion on the Company’s internal control over financial
reporting.
/s/ DELOITTE & TOUCHE LLP
Charlotte, North Carolina
March 28, 2016 32 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 January 29, 2016, based on criteria established in Internal Control - Integrated Framework (2013) 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
January 29, 2016, based on the criteria established in Internal Control - Integrated Framework (2013) 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 January 29, 2016 of
the Company and our report dated March 28, 2016 expressed an unqualified opinion on those financial statements and financial
statement schedule.
/s/ DELOITTE & TOUCHE LLP
Charlotte, North Carolina
March 28, 2016 33 Lowe’s Companies, Inc.
Consolidated Statements of Earnings
(In millions, except per share and percentage data)
Fiscal years ended on
Net sales
Cost of sales January 29,
2016
$
59,074
38,504 January 30,
2015
100.00 % $
56,223
65.18
36,665
% Sales January 31,
2014
100.00 % $
53,417
65.21
34,941
% Sales % Sales
100.00%
65.41 Gross margin
Expenses: 20,570 34.82 19,558 34.79 18,476 34.59 Selling, general and administrative 14,115 23.90 13,281 23.62 12,865 24.08 Depreciation 1,484 2.51 1,485 2.64 1,462 2.74 Interest - net 552 0.93 516 0.92 476 0.89 16,151 27.34 15,282 27.18 14,803 27.71 4,419
1,873 7.48
3.17 4,276
1,578 7.61
2.81 3,673
1,387 6.88
2.60
4.28 % Total expenses
Pre-tax earnings
Income tax provision
Net earnings $ 2,546 4.31 % $ 2,698 4.80 % $ 2,286 Basic earnings per common share $ 2.73 $ 2.71 $ 2.14 Diluted earnings per common share $ 2.73 $ 2.71 $ 2.14 Cash dividends per share $ 1.07 $ 0.87 $ 0.70 Lowe’s Companies, Inc.
Consolidated Statements of Comprehensive Income
(In millions, except percentage data)
Fiscal years ended on
Net earnings
Foreign currency translation adjustments net of tax
Net unrealized investment losses - net of tax January 29,
2016
$
2,546
(291) (0.49) — Other comprehensive loss
Comprehensive income January 30,
2015
4.31 % $
2,698 % Sales — (291)
$ (0.49) 2,255 3.82 % $ See accompanying notes to consolidated financial statements. 34 (86)
—
(86)
2,612 January 31,
2014
4.80 % $
2,286 % Sales (0.15)
—
(0.15)
4.65 % $ (68)
(1)
(69)
2,217 % Sales
4.28 %
(0.13)
—
(0.13)
4.15 % Lowe’s Companies, Inc.
Consolidated Balance Sheets
(In millions, except par value and percentage data)
January 29,
2016 % Total January 30,
2015 % Total Assets
Current assets:
Cash and cash equivalents $ 405 1.3 % $ 466 1.5 % 307 1.0 125 0.4 9,458 30.3 8,911 28.1 391 1.3 349 1.1 10,561
19,577 33.9
62.6 9,851
20,034 31.1
63.2 Long-term investments 222 0.7 354 1.1 Deferred income taxes - net 241 0.8 133 0.4 Other assets 665 2.0 1,349 4.2 Short-term investments
Merchandise inventory - net
Other current assets
Total current assets
Property, less accumulated depreciation Total assets $ 31,266 100.0 % $ 31,721 100.0 % $ 43 0.1 % $ — —% Liabilities and shareholders’ equity
Current liabilities:
Short-term borrowings
Current maturities of long-term debt 1,061 3.4 552 1.7 Accounts payable 5,633 18.0 5,124 16.2 820 2.6 773 2.4 1,078 3.4 979 3.1 Accrued compensation and employee benefits
Deferred revenue
Other current liabilities 1,857 6.1 1,920 6.1 Total current liabilities
Long-term debt, excluding current maturities 10,492
11,545 33.6
36.9 9,348
10,806 29.5
34.1 Deferred revenue - extended protection plans 729 2.3 730 2.3 Other liabilities
Total liabilities 846 2.7 869 2.7 23,612 75.5 21,753 68.6 — — — — 455 1.5 480 1.5 — — — — 7,593 24.3 9,591 30.2 Commitments and contingencies
Shareholders’ equity:
Preferred stock - $5 par value, none issued
Common stock - $.50 par value;
Shares issued and outstanding
January 29, 2016 910 January 30, 2015 960 Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss (394) Total shareholders’ equity 7,654 Total liabilities and shareholders’ equity $ See accompanying notes to consolidated financial statements. 35 31,266 (1.3)
24.5
100.0 % $ (103) (0.3) 9,968 31.4 31,721 100.0 % Lowe’s Companies, Inc.
Consolidated Statements of Shareholders’ Equity
(In millions)
Common Stock
Shares
Balance February 1, 2013
Comprehensive income: Amount 1,110 $ Accumulated
Total
Other
Retained Comprehensive Shareholders’
Earnings
Equity
Income/(Loss)
26 $ 13,224 $
52 $
13,857 Capital in
Excess
of Par Value 555 $ Net earnings 2,286 Other comprehensive loss (69) Total comprehensive income
Tax effect of non-qualified stock
options exercised and restricted
stock vested
Cash dividends declared, $0.70 per
share
Share-based payment expense
Repurchase of common stock
Issuance of common stock under
share-based payment plans
Balance January 31, 2014
Comprehensive income: 2,217
25 25
(741) (741) 102
(88) (44) (312) 8 4 159 1,030 $ 515 $ — $ Net earnings 102
(3,414) (3,770)
163 11,355 $ (17) $ 11,853 2,698 Other comprehensive loss (86) Total comprehensive income
Tax effect of non-qualified stock
options exercised and restricted
stock vested
Cash dividends declared, $0.87 per
share
Share-based payment expense 2,612
41 41
(858) (858) 111 Repurchase of common stock
Issuance of common stock under
share-based payment plans (75) (37) (286) Balance January 30, 2015
Comprehensive income: 5 2 134 960 $ 480 $ — $ Net earnings 111
(3,604) (3,927)
136 9,591 $ (103) $ 9,968 2,546 Other comprehensive loss (291) Total comprehensive income
Tax effect of non-qualified stock
options exercised and restricted
stock vested
Cash dividends declared, $1.07 per
share 2,255
61 Share-based payment expense 61
(991) (991) (3,553) (3,878) 112 Repurchase of common stock
Issuance of common stock under
share-based payment plans (54) (27) (298) 4 2 125 Balance January 29, 2016 910 $ 455 $ — $ See accompanying notes to consolidated financial statements. 36 112 127
7,593 $ (394) $ 7,654 Lowe’s Companies, Inc.
Consolidated Statements of Cash Flows
(In millions)
January 29,
2016 Fiscal years ended on
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating
activities: $ Depreciation and amortization
Deferred income taxes
Loss on property and other assets – net January 30,
2015 January 31,
2014 2,546 $ 2,698 $ 2,286 1,587 1,586 1,562 (68) (124) (162) 33 25 64 Loss on equity method investments 591 57 52 Share-based payment expense 117 119 100 Changes in operating assets and liabilities:
Merchandise inventory – net (582) 170 (396) Other operating assets (34) 83 (5) Accounts payable 524 127 291 70 188 319 4,784 4,929 4,111 Other operating liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of investments (934) Proceeds from sale/maturity of investments 884 Capital expenditures
Contributions to equity method investments – net
Proceeds from sale of property and other long-term assets
Acquisition of business - net
Other – net
Net cash used in investing activities
Cash flows from financing activities:
Net change in short-term borrowings 805 709 (880) (940) (125) (241) (173) 57 52 75
(203) — — (28) (4) (1,343) (1,088) 1,718 Repayment of long-term debt (552) Proceeds from issuance of common stock under share-based payment plans
Cash dividend payments
Repurchase of common stock
Other – net (759) (1,197) 43 Net proceeds from issuance of long-term debt (820) (386)
1,239
(48) 5
(1,286) 386
985
(47) 125 137 165 (957) (822) (733) (3,925) (3,905) (3,710) 55 24 (15) Net cash used in financing activities (3,493) (3,761) (2,969) Effect of exchange rate changes on cash (9) (5) (6) Net increase/(decrease) in cash and cash equivalents (61) 75 (150) Cash and cash equivalents, beginning of year 466 391 541 405 $ 466 $ 391 Cash and cash equivalents, end of year $ See accompanying notes to consolidated financial statements.
37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 29, 2016, JANUARY 30, 2015 AND JANUARY 31, 2014
NOTE 1: Summary of Significant Accounting Policies
Lowe’s Companies, Inc. and subsidiaries (the Company) is the world’s second-largest home improvement retailer and operated
1,857 stores in the United States, Canada, and Mexico at January 29, 2016. Below are those accounting policies considered by
the Company to be significant.
Fiscal Year - The Company’s fiscal year ends on the Friday nearest the end of January. Each of the fiscal years presented
contained 52 weeks. All references herein for the years 2015, 2014, and 2013 represent the fiscal years ended January 29,
2016, January 30, 2015, and January 31, 2014, respectively.
Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its whollyowned or controlled operating subsidiaries. All intercompany accounts and transactions have been eliminated.
Foreign Currency - The functional currencies of the Company’s international subsidiaries are generally the local currencies of
the countries in which the subsidiaries are located. Foreign currency denominated assets and liabilities are translated into U.S.
dollars using the exchange rates in effect at the consolidated balance sheet date. Results of operations and cash flows are
translated using the average exchange rates throughout the period. The effect of exchange rate fluctuations on translation of
assets and liabilities is included as a component of shareholders’ equity in accumulated other comprehensive loss. Gains and
losses from foreign currency transactions, which are included in selling, general and administrative (SG&A) expense, have not
been significant.
Use of Estimates - The preparation of the Company’s financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make estimates that affect the reported amounts of assets,
liabilities, sales and expenses, and related disclosures of contingent assets and liabilities. The Company bases 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.
Cash and Cash Equivalents - Cash and cash equivalents include cash on hand, demand deposits, and short-term investments
with original maturities of three months or less when purchased. Cash and cash equivalents are carried at amortized cost on the
consolidated balance sheets. The majority of payments due from financial institutions for the settlement of credit card and
debit card transactions process within two business days and are, therefore, classified as cash and cash equivalents.
Investments - As of January 29, 2016, investments consisted primarily of money market funds, municipal obligations,
certificates of deposit, and municipal floating rate obligations, all of which are classified as available-for-sale. Available-forsale securities are recorded at fair value, and unrealized gains and losses are recorded, net of tax, as a component of
accumulated other comprehensive income. Gross unrealized gains and losses were insignificant at January 29, 2016 and
January 30, 2015.
The proceeds from sales of available-for-sale securities were $394 million, $283 million, and $276 million for 2015, 2014, and
2013, respectively. Gross realized gains and losses on the sale of available-for-sale securities were not significant for any of the
periods presented.
Investments with a stated maturity date of one year or less from the balance sheet date or that are expected to be used in current
operations are classified as short-term investments. All other investments are classified as long-term. Investments classified as
long-term at January 29, 2016, will mature in one to 34 years, based on stated maturity dates.
The Company classifies as investments restricted balances primarily pledged as collateral for the Company’s extended
protection plan program. Restricted balances included in short-term investments were $234 million at January 29, 2016, and
$99 million at January 30, 2015. Restricted balances included in long-term investments were $202 million at January 29, 2016,
and $305 million at January 30, 2015.
Merchandise Inventory - Inventory is stated at the lower of cost or market using the first-in, first-out method of inventory
accounting. The cost of inventory also includes certain costs associated with the preparation of inventory for resale, including
distribution center costs, and is net of vendor funds.
38 The Company records an inventory reserve for the anticipated loss associated with selling inventories below cost. This reserve
is based on management’s current knowledge with respect to inventory levels, sales trends, and historical
experience. Management does not believe the Company’s merchandise inventories are subject to significant risk of
obsolescence in the near term, and management has the ability to adjust purchasing practices based on anticipated sales trends
and general economic conditions. However, changes in consumer purchasing patterns could result in the need for additional
reserves. The Company also records an inventory reserve for the estimated shrinkage between physical inventories. This
reserve is based primarily on actual shrink results from previous physical inventories. Changes in the estimated shrink reserve
are made based on the timing and results of physical inventories.
The Company receives 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 incurred by the Company to sell the vendor’s product. Therefore, the Company
treats these funds as a reduction in the cost of inventory as the amounts are accrued, and are recognized 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. The Company develops accrual rates
for vendor funds based on the provisions of the agreements in place. Due to the complexity and diversity of the individual
vendor agreements, the Company performs analyses and reviews historical trends throughout the year and confirms 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 annual purchase volumes, especially in the case of
programs that provide for increased funding when graduated purchase volumes are met.
Derivative Financial Instruments - The Company occasionally utilizes derivative financial instruments to manage certain
business risks. However, the amounts were not material to the Company’s consolidated financial statements in any of the years
presented. The Company does not use derivative financial instruments for trading purposes.
Credit Programs - The majority of the Company’s accounts receivable arises from sales of goods and services to commercial
business customers. The Company has an agreement with Synchrony Bank (Synchrony), formerly GE Capital Retail, under
which Synchrony purchases at face value commercial business accounts receivable originated by the Company and services
these accounts. This agreement expires in December 2023, unless terminated sooner by the parties. The Company primarily
accounts for these transfers as sales of the accounts receivable. When the Company transfers its commercial business accounts
receivable, it retains certain interests in those receivables, including the funding of a loss reserve and its obligation related to
Synchrony’s ongoing servicing of the receivables sold. Any gain or loss on the sale is determined based on the previous
carrying amounts of the transferred assets allocated at fair value between the receivables sold and the interests retained. Fair
value is based on the present value of expected future cash flows, taking into account the key assumptions of anticipated credit
losses, payment rates, late fee rates, Synchrony’s servicing costs, and the discount rate commensurate with the uncertainty
involved. Due to the short-term nature of the receivables sold, changes to the key assumptions would not materially impact the
recorded gain or loss on the sales of receivables or the fair value of the retained interests in the receivables.
Total commercial business accounts receivable sold to Synchrony were $2.6 billion in 2015, $2.4 billion in 2014, and $2.2
billion in 2013. The Company recognized losses of $36 million in 2015, $38 million in 2014, and $38 million in 2013 on these
receivable sales as SG&A expense, which primarily relates to the fair value of obligations related to servicing costs that are
remitted to Synchrony monthly. At January 29, 2016 and January 30, 2015, the fair value of the retained interests was
determined based on the present value of expected future cash flows and was insignificant.
Sales generated through the Company’s proprietary credit cards are not reflected in receivables. Under an agreement with
Synchrony, credit is extended directly to customers by Synchrony. All credit program-related services are performed and
controlled directly by Synchrony. The Company has the option, but no obligation, to purchase the receivables at the end of the
agreement in December 2023. Tender costs, including amounts associated with accepting the Company’s proprietary credit
cards, are included in SG&A expense in the consolidated statements of earnings.
The total portfolio of receivables held by Synchrony, including both receivables originated by Synchrony from the Company’s
proprietary credit cards and commercial business accounts receivable originated by the Company and sold to Synchrony,
approximated $8.8 billion at January 29, 2016, and $7.9 billion at January 30, 2015.
Property and Depreciation - Property is recorded at cost. Costs associated with major additions are capitalized and
depreciated. Capital assets are expected to yield future benefits and have original useful lives which exceed one year. The total
cost of a capital asset generally includes all applicable sales taxes, delivery costs, installation costs, and other appropriate costs
incurred by the Company, including interest in the case of self-constructed assets. Upon disposal, the cost of properties and
39 related accumulated depreciation is removed from the accounts, with gains and losses reflected in SG&A expense in the
consolidated statements of earnings.
Property consists of land, buildings and building improvements, equipment, and construc...

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