Item 8. Financial Statements and Supplementary Data.

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Report of Independent Registered Public Accounting Firm						35
Consolidated Balance Sheets						37
Consolidated Statements of Earnings						38
Consolidated Statements of Comprehensive Income						39
Consolidated Statements of Stockholders' Equity						40
Consolidated Statements of Cash Flows						41
Notes to Consolidated Financial Statements						42
Note 1. Summary of Significant Accounting Policies						42
Note 2. Net Sales and Segment Reporting						49
Note 3. Property and Leases						51
Note 4. Debt and Derivative Instruments						53
Note 5. Income Taxes						56
Note 6. Stockholders' Equity						60
Note 7. Fair Value Measurements						61
Note 8. Stock-Based Compensation						61
Note 9. Employee Benefit Plans						64
Note 10. Weighted Average Common Shares						64
Note 11. Commitments and Contingencies						64
Note 12. HD Supply Acquisition						65

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors

The Home Depot, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of The Home Depot, Inc. and subsidiaries (the Company) as of January 30, 2022 and January 31, 2021, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended January 30, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 30, 2022 and January 31, 2021, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended January 30, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 23, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Estimation of store shrink

As discussed in Note 1 to the consolidated financial statements, the majority of the Company’s U.S. merchandise inventories are stated at the lower of cost (first-in, first out) or market as determined by the retail inventory method, which is based on a number of factors such as markups, markdowns, and inventory losses (or shrink). Shrink is the difference between the recorded amount of inventory and the physical inventory count. The Company calculates shrink based on actual inventory losses identified as a result of physical inventory counts during each fiscal period and estimated inventory losses occurring between physical inventory counts. The estimate for shrink occurring in the interim period between physical inventory counts is calculated on a store-specific basis and is primarily based on recent shrink results.

We identified the evaluation of the estimation of store shrink occurring in the period between physical inventory counts and fiscal year-end as a critical audit matter. Evaluating the Company’s estimation of shrink at the end of the fiscal year using interim inventory loss experience in U.S. retail stores involved auditor judgment.

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The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the process of developing the estimate of store shrink. We evaluated the appropriateness of the Company using interim physical inventory counts to estimate inventory losses in U.S. retail stores at the end of the fiscal year by:

• Evaluating the method and certain assumptions used;

• Testing the application of the method and certain assumptions used;

• Performing a current year trend analysis; and

• Performing a sensitivity analysis over the shrink reserve estimate.

/s/ KPMG LLP

We have served as the Company’s auditor since 1979.

Atlanta, Georgia

March 23, 2022

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THE HOME DEPOT, INC.

CONSOLIDATED BALANCE SHEETS

in millions, except per share data			January 30, 2022						January 31, 2021
Assets
Current assets:
Cash and cash equivalents			$	2,343					$	7,895
Receivables, net			3,426						2,992
Merchandise inventories			22,068						16,627
Other current assets			1,218						963
Total current assets			29,055						28,477
Net property and equipment			25,199						24,705
Operating lease right-of-use assets			5,968						5,962
Goodwill			7,449						7,126
Other assets			4,205						4,311
Total assets			$	71,876					$	70,581
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term debt			$	1,035					$	—
Accounts payable			13,462						11,606
Accrued salaries and related expenses			2,426						2,463
Sales taxes payable			848						774
Deferred revenue			3,596						2,823
Income taxes payable			158						193
Current installments of long-term debt			2,447						1,416
Current operating lease liabilities			830						828
Other accrued expenses			3,891						3,063
Total current liabilities			28,693						23,166
Long-term debt, excluding current installments			36,604						35,822
Long-term operating lease liabilities			5,353						5,356
Deferred income taxes			909						1,131
Other long-term liabilities			2,013						1,807
Total liabilities			73,572						67,282
Common stock, par value $0.05; authorized: 10,000 shares; issued: 1,792 shares at January 30, 2022 and 1,789 shares at January 31, 2021; outstanding: 1,035 shares at January 30, 2022 and 1,077 shares at January 31, 2021			90						89
Paid-in capital			12,132						11,540
Retained earnings			67,580						58,134
Accumulated other comprehensive loss			(704)						(671)
Treasury stock, at cost, 757 shares at January 30, 2022 and 712 shares at January 31, 2021			(80,794)						(65,793)
Total stockholders’ (deficit) equity			(1,696)						3,299
Total liabilities and stockholders’ equity			$	71,876					$	70,581

—————

See accompanying notes to consolidated financial statements.

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THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

in millions, except per share data			Fiscal						Fiscal						Fiscal
2021						2020						2019
Net sales			$	151,157					$	132,110					$	110,225
Cost of sales			100,325						87,257						72,653
Gross profit			50,832						44,853						37,572
Operating expenses:
Selling, general and administrative			25,406						24,447						19,740
Depreciation and amortization			2,386						2,128						1,989
Total operating expenses			27,792						26,575						21,729
Operating income			23,040						18,278						15,843
Interest and other (income) expense:
Interest and investment income			(44)						(47)						(73)
Interest expense			1,347						1,347						1,201
Interest and other, net			1,303						1,300						1,128
Earnings before provision for income taxes			21,737						16,978						14,715
Provision for income taxes			5,304						4,112						3,473
Net earnings			$	16,433					$	12,866					$	11,242
Basic weighted average common shares			1,054						1,074						1,093
Basic earnings per share			$	15.59					$	11.98					$	10.29
Diluted weighted average common shares			1,058						1,078						1,097
Diluted earnings per share			$	15.53					$	11.94					$	10.25

—————

See accompanying notes to consolidated financial statements.

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THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

			Fiscal						Fiscal						Fiscal
in millions			2021						2020						2019
Net earnings			$	16,433					$	12,866					$	11,242
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments			(77)						60						53
Cash flow hedges			9						8						8
Other			35						—						3
Total other comprehensive (loss) income, net of tax			(33)						68						64
Comprehensive income			$	16,400					$	12,934					$	11,306

—————

See accompanying notes to consolidated financial statements.

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THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

in millions			Fiscal						Fiscal						Fiscal
2021						2020						2019
Common Stock:
Balance at beginning of year			$	89					$	89					$	89
Shares issued under employee stock plans			1						—						—
Balance at end of year			90						89						89
Paid-in Capital:
Balance at beginning of year			11,540						11,001						10,578
Shares issued under employee stock plans			194						229						172
Stock-based compensation expense			398						310						251
Balance at end of year			12,132						11,540						11,001
Retained Earnings:
Balance at beginning of year			58,134						51,729						46,423
Cumulative effect of accounting changes			—						—						26
Net earnings			16,433						12,866						11,242
Cash dividends			(6,985)						(6,451)						(5,958)
Other			(2)						(10)						(4)
Balance at end of year			67,580						58,134						51,729
Accumulated Other Comprehensive Loss:
Balance at beginning of year			(671)						(739)						(772)
Cumulative effect of accounting changes			—						—						(31)
Foreign currency translation adjustments, net of tax			(77)						60						53
Cash flow hedges, net of tax			9						8						8
Other, net of tax			35						—						3
Balance at end of year			(704)						(671)						(739)
Treasury Stock:
Balance at beginning of year			(65,793)						(65,196)						(58,196)
Repurchases of common stock			(15,001)						(597)						(7,000)
Balance at end of year			(80,794)						(65,793)						(65,196)
Total stockholders’ (deficit) equity			$	(1,696)					$	3,299					$	(3,116)

—————

See accompanying notes to consolidated financial statements.

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THE HOME DEPOT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

			Fiscal						Fiscal						Fiscal
in millions			2021						2020						2019
Cash Flows from Operating Activities:
Net earnings			$	16,433					$	12,866					$	11,242
Reconciliation of net earnings to net cash provided by operating activities:
Depreciation and amortization			2,862						2,519						2,296
Stock-based compensation expense			399						310						251
Changes in receivables, net			(435)						(465)						(170)
Changes in merchandise inventories			(5,403)						(1,657)						(593)
Changes in other current assets			(330)						43						(135)
Changes in accounts payable and accrued expenses			2,401						5,118						32
Changes in deferred revenue			775						702						334
Changes in income taxes payable			(51)						(149)						44
Changes in deferred income taxes			(276)						(569)						202
Other operating activities			196						121						184
Net cash provided by operating activities			16,571						18,839						13,687
Cash Flows from Investing Activities:
Capital expenditures			(2,566)						(2,463)						(2,678)
Payments for businesses acquired, net			(421)						(7,780)						—
Other investing activities			18						73						25
Net cash used in investing activities			(2,969)						(10,170)						(2,653)
Cash Flows from Financing Activities:
Proceeds from (repayments of) short-term debt, net			1,035						(974)						(365)
Proceeds from long-term debt, net of discounts and premiums			2,979						7,933						3,420
Repayments of long-term debt			(1,532)						(2,872)						(1,070)
Repurchases of common stock			(14,809)						(791)						(6,965)
Proceeds from sales of common stock			337						326						280
Cash dividends			(6,985)						(6,451)						(5,958)
Other financing activities			(145)						(154)						(140)
Net cash used in financing activities			(19,120)						(2,983)						(10,798)
Change in cash and cash equivalents			(5,518)						5,686						236
Effect of exchange rate changes on cash and cash equivalents			(34)						76						119
Cash and cash equivalents at beginning of year			7,895						2,133						1,778
Cash and cash equivalents at end of year			$	2,343					$	7,895					$	2,133
Supplemental Disclosures:
Cash paid for income taxes			$	5,504					$	4,654					$	3,220
Cash paid for interest, net of interest capitalized			1,269						1,241						1,112
Non-cash capital expenditures			421						274						136

—————

See accompanying notes to consolidated financial statements.

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THE HOME DEPOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**1.**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

The Home Depot, Inc., together with its subsidiaries (the “Company,” “Home Depot,” “we,” “our” or “us”), is a home improvement retailer that sells a wide assortment of building materials, home improvement products, lawn and garden products, décor items, and facilities maintenance, repair and operations products, and provides a number of services, in stores and online. We operate in the U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam), Canada, and Mexico.

Consolidation and Presentation

Our consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. Intercompany transactions are eliminated in consolidation. Our fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31st. All periods presented include 52 weeks.

Use of Estimates

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses in preparing these financial statements in conformity with GAAP. While we believe these estimates and assumptions are reasonable, actual results could differ from these estimates, including changes due to uncertainty in the current economic environment resulting from the COVID-19 pandemic.

Cash Equivalents

We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Our cash equivalents are carried at fair market value and consist primarily of money market funds.

Receivables

The following table presents components of receivables, net:

in millions			January 30, 2022						January 31, 2021
Card receivables			$	1,028					$	992
Rebate receivables			1,170						987
Customer receivables			703						571
Other receivables			525						442
Receivables, net			$	3,426					$	2,992

Card receivables consist of payments due from financial institutions for the settlement of credit card and debit card transactions. Rebate receivables represent amounts due from vendors for volume and co-op advertising rebates. Customer receivables relate to credit extended directly to certain customers in the ordinary course of business. The valuation allowance related to these receivables was not material to our consolidated financial statements at the end of fiscal 2021 or fiscal 2020.

Merchandise Inventories

Inventory cost includes the amount we pay to acquire inventory, including freight and import costs, as well as operating costs associated with our sourcing and distribution network, and is net of certain vendor allowances. The majority of our merchandise inventories are stated at the lower of cost (first-in, first-out) or market, as determined by the retail inventory method, which is based on a number of factors such as markups, markdowns, and inventory losses (or shrink). As the inventory retail value is adjusted regularly to reflect market conditions, inventory valued using the retail method approximates the lower of cost or market. Certain subsidiaries, including retail operations in Canada and Mexico, and distribution centers, record merchandise inventories at the lower of cost or net realizable value, as determined by a cost method. These merchandise inventories represent approximately 43% of the total merchandise inventories balance. We evaluate the inventory valued using a cost method at the end of each quarter to ensure that it is carried at the lower of cost or net realizable value, and the adjustments recorded to merchandise inventories valued under a cost method were not material to our consolidated financial statements at the end of fiscal 2021 or fiscal 2020.

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Physical inventory counts or cycle counts are taken on a regular basis in each store and distribution center to ensure that amounts reflected in merchandise inventories are properly stated. Shrink (or in the case of excess inventory, swell) is the difference between the recorded amount of inventory and the physical inventory count. We calculate shrink based on actual inventory losses identified as a result of physical inventory counts during each fiscal period and estimated inventory losses between physical inventory counts. The estimate for shrink occurring in the interim period between physical inventory counts is calculated on a store-specific basis and is primarily based on recent shrink results. Historically, the difference between estimated shrink and actual inventory losses has not been material to our annual financial results.

Due to changes in operating conditions during fiscal 2020 as a result of the COVID-19 pandemic, we used the results from a sample of stores that were able to conduct physical inventories as a basis for estimating shrink for those stores at which physical inventory counts were temporarily suspended during fiscal 2020. We believe the sample of stores that were selected for inventory counts in fiscal 2020 provided a reasonable basis for estimating shrink where a physical inventory count was not performed in fiscal 2020. During fiscal 2021, we performed all regularly scheduled physical inventory counts, including store locations where physical inventory counts were suspended during fiscal 2020, and the difference between estimated shrink and actual inventory losses was not material.

Property and Equipment

Buildings and related improvements, furniture, fixtures, and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives. Leasehold improvements and assets held under finance leases are amortized using the straight-line method over the original term of the lease or the useful life of the asset, whichever is shorter.

The following table presents the estimated useful lives of our property and equipment:

			Life
Buildings and improvements			5 – 45 years
Furniture, fixtures and equipment			2 – 20 years
Leasehold improvements			5 – 45 years

We capitalize certain costs, including interest, related to construction in progress and the acquisition and development of software. Costs associated with the acquisition and development of software are amortized using the straight-line method over the estimated useful life of the software, which is three to seven years. Certain development costs not meeting the criteria for capitalization are expensed as incurred.

We evaluate our long-lived assets each quarter for indicators of potential impairment. Indicators of impairment include current period losses combined with a history of losses, our decision to relocate or close a store or other location before the end of its previously estimated useful life, or when changes in other circumstances indicate the carrying amount of an asset may not be recoverable. The evaluation for long-lived assets is performed at the lowest level of identifiable cash flows, which is generally the individual store level. The assets of a store with indicators of impairment are evaluated for recoverability by comparing their undiscounted future cash flows with their carrying value. If the carrying value is greater than the undiscounted future cash flows, we then measure the asset’s fair value to determine whether an impairment loss should be recognized. If the resulting fair value is less than the carrying value, an impairment loss is recognized for the difference between the carrying value and the estimated fair value. Impairment losses on property and equipment are recorded as a component of SG&A. Impairment charges for long-lived assets were not material to our consolidated financial statements in fiscal 2021, fiscal 2020, or fiscal 2019.

Leases

We enter into contractual arrangements for the utilization of certain non-owned assets which are evaluated as finance or operating leases upon commencement, and are accounted for accordingly. Specifically, a contract is or contains a lease when (1) the contract contains an explicitly or implicitly identified asset and (2) we obtain substantially all of the economic benefits from the use of that underlying asset and direct how and for what purpose the asset is used during the term of the contract in exchange for consideration. We assess whether an arrangement is or contains a lease at inception of the contract.

We lease certain retail locations, warehouse and distribution space, office space, equipment, and vehicles. A substantial majority of our leases have remaining lease terms of one to 20 years, typically with the option to extend the leases for five-year terms. Some of our leases may include the option to terminate in less than five years. The

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lease term used to calculate the right-of-use asset and lease liability at commencement includes the impacts of options to extend or terminate the lease when it is reasonably certain that we will exercise that option. When determining whether it is reasonably certain that we will exercise an option at commencement, we consider various existing economic factors, including market conditions, real estate strategies, the nature, length, and terms of the agreement, as well as the uncertainty of the condition of leased equipment at the end of the lease term. Based on these determinations, we generally conclude that the exercise of renewal options would not be reasonably certain in determining the lease term at commencement.

The discount rate used to calculate the present value of lease payments is the rate implicit in the lease, when readily determinable. As the rate implicit in the lease is rarely readily determinable, we use a secured incremental borrowing rate, which is updated on a quarterly basis, as the discount rate for the present value of lease payments.

Real estate taxes, insurance, maintenance, and operating expenses applicable to the leased property are generally our obligations under our lease agreements. In instances where these payments are fixed, they are included in the measurement of our lease liabilities, and when variable, are excluded and recognized in the period in which the obligation for those payments is incurred. Certain of our lease agreements also include rental payments based on an index or rate and others include rental payments based on a percentage of sales. For variable payments dependent upon an index or rate, we apply the active index or rate as of the lease commencement date. Variable lease payments not based on an index or rate are not included in the measurement of our lease liabilities as they cannot be reasonably estimated, and are recognized in the period in which the obligation for those payments is incurred.

Leases that have a term of twelve months or less upon commencement are considered short-term in nature. Short-term leases are not included on the consolidated balance sheets and are expensed on a straight-line basis over the lease term. We have also elected to not separate lease and non-lease components for certain classes of assets including real estate and certain equipment.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Business Combinations

The assets and liabilities of acquired businesses are recorded at their fair values at the date of acquisition. The excess of the purchase price over the fair values of the identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill

Goodwill represents the excess of purchase price over the fair value of net assets acquired. We do not amortize goodwill, but assess the recoverability of goodwill in the third quarter of each fiscal year, or more often if indicators warrant, by determining whether the fair value of each reporting unit supports its carrying value. Each fiscal year, we may assess qualitative factors to determine whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining whether it is necessary to complete quantitative impairment assessments, with a quantitative assessment completed periodically as facts and circumstances warrant. We completed our last quantitative assessment in fiscal 2019 and concluded that the fair value of our reporting units substantially exceeded their respective carrying values, including goodwill.

During the third quarter of fiscal 2021, we completed our annual assessment of the recoverability of goodwill for our U.S., Canada, and Mexico reporting units based on qualitative factors. We performed a qualitative assessment to determine if there were any indicators of impairment and concluded that while there have been events and circumstances in the macro-environment that have impacted us, we have not experienced any entity-specific indicators that would indicate that it is more likely than not that the fair value of any of our reporting units were less than their carrying amounts. There were no impairment charges related to goodwill for fiscal 2021, fiscal 2020, or fiscal 2019.

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The following table presents the changes in the carrying amount of our goodwill:

in millions			Fiscal						Fiscal
2021						2020
Goodwill, balance at beginning of year			$	7,126					$	2,254
Acquisitions (1)			323						4,870
Other (2)			—						2
Goodwill, balance at end of year			$	7,449					$	7,126

—————

(1) Fiscal 2021 includes goodwill from a small acquisition completed during the second quarter. Fiscal 2020 includes goodwill related to the acquisition of HD Supply. See Note 12 for details regarding the HD Supply acquisition.

(2) Primarily reflects the net impact of foreign currency translation and immaterial acquisition-related measurement period adjustments.

Other Intangible Assets

Intangible assets other than goodwill are included in other assets on the consolidated balance sheets. We amortize the cost of definite-lived intangible assets over their estimated useful lives, which range up to 20 years. Intangible assets with indefinite lives are tested in the third quarter of each fiscal year for impairment, or more often if indicators warrant. During the third quarter of fiscal 2021, we completed our annual assessment of the recoverability of our indefinite-lived intangible assets based on quantitative factors and concluded no impairment losses should be recognized. There were no impairment losses related to intangible assets for fiscal 2021, fiscal 2020, and fiscal 2019.

The following table presents the gross carrying amount and accumulated amortization relating to intangible assets:

			January 30, 2022												January 31, 2021
in millions			Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Definite-Lived Intangible Assets:
Customer relationships			$	3,034					$	(326)					$	2,965					$	(157)
Trade names			151						(8)						151						(1)
Other			12						(9)						16						(11)
Indefinite-Lived Intangible Assets:
Trade names			649												649
Total Intangible Assets			$	3,846					$	(343)					$	3,781					$	(169)

Our intangible asset amortization expense was immaterial for fiscal 2021, fiscal 2020, and fiscal 2019.

The following table presents the estimated future amortization expense related to definite-lived intangible assets as of January 30, 2022:

in millions			Amortization Expense
Fiscal 2022			$	180
Fiscal 2023			178
Fiscal 2024			178
Fiscal 2025			178
Fiscal 2026			178
Thereafter			1,962
Total			$	2,854

Debt

We record any premiums or discounts associated with an issuance of long-term debt as a direct addition or deduction to the carrying value of the related senior notes. We also record debt issuance costs associated with an issuance of long-term debt as a direct deduction to the carrying value of the related senior notes. Premium, discount, and debt issuance costs are amortized over the term of the respective notes using the effective interest rate method.

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Derivative Instruments and Hedging Activities

We use derivative instruments in the management of our interest rate exposure on long-term debt and our exposure to foreign currency fluctuations. We enter into derivative instruments for risk management purposes only; we do not enter into derivative instruments for trading or speculative purposes. All derivative instruments are recognized at their fair values in either assets or liabilities at the balance sheet date and are classified as either current or non-current based on each contract’s respective maturity. While we enter into master netting arrangements, our policy is to present the fair value of derivative instruments gross in our consolidated balance sheets.

Changes in the fair values for derivative instruments designated as cash flow or net investment hedges are recognized in accumulated other comprehensive income (loss) until the hedged item is recognized in earnings, which for net investment hedges is upon sale or substantial liquidation of the underlying net investment. Changes in fair value of outstanding fair value hedges and the offsetting changes in fair values of the hedged item are recognized in earnings. We record realized gains and losses from derivative instruments in the same financial statement line item as the hedged item.

Derivative instruments that are not designated as hedges, if any, are recorded at fair value with unrealized gains or losses reported in earnings each period in the same financial statement line item as the hedged item. Cash flows from the settlement of derivative instruments appear in the consolidated statements of cash flows in the same categories as the cash flows of the hedged item.

Insurance

We are self-insured for certain losses related to general liability (including product liability), workers’ compensation, employee group medical, and automobile claims. We recognize the expected ultimate cost for claims incurred (undiscounted) at the balance sheet date as a liability. The expected ultimate cost for claims incurred is estimated based upon analysis of historical data and actuarial estimates.

Our self-insurance liabilities, which are included in accrued salaries and related expenses, other accrued expenses and other long-term liabilities in the consolidated balance sheets, were $1.3 billion at January 30, 2022 and January 31, 2021.

We also maintain network security and privacy liability insurance coverage to limit our exposure to losses such as those that may be caused by a significant compromise or breach of our data security. Insurance-related expenses are included in SG&A.

Treasury Stock

Treasury stock is reflected as a reduction of stockholders’ equity at cost. We use the weighted-average purchase cost to determine the cost of treasury stock that is reissued, if any.

Net Sales

We recognize revenue, net of expected returns and sales tax, at the time the customer takes possession of merchandise or when a service is performed. Our liability for sales returns is estimated based on historical return levels and our expectation of future returns. We also recognize a return asset, and corresponding adjustment to cost of sales, for our right to recover the goods returned by the customer, measured at the former carrying amount of the goods, less any expected recovery cost. At each financial reporting date, we assess our estimates of expected returns, refund liabilities, and return assets. Adjustments related to changes in return estimates were immaterial in fiscal 2021, fiscal 2020, and fiscal 2019.

Net sales include services revenue generated through a variety of installation, home maintenance, and professional service programs. In these programs, the customer selects and purchases material for a project, and we provide or arrange for professional installation. These programs are offered through our stores, online, and in-home sales programs. Under certain programs, when we provide or arrange for the installation of a project and the subcontractor provides material as part of the installation, both the material and labor are included in services revenue. We recognize this revenue when the service for the customer is complete, which is not materially different from recognizing the revenue over the service period as the substantial majority of our services are completed within one week.

For products and services sold in stores or online, payment is typically due at the point of sale. When we receive payment from customers before the customer has taken possession of the merchandise or the service has been performed, the amount received is recorded as deferred revenue until the sale or service is complete. Such performance obligations are part of contracts with expected original durations of typically three months or less. As of

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January 30, 2022 and January 31, 2021, deferred revenue for products and services was $2.6 billion and $1.9 billion, respectively.

We further record deferred revenue for the sale of gift cards and recognize the associated revenue upon the redemption of those gift cards, which generally occurs within six months of gift card issuance. As of January 30, 2022 and January 31, 2021, our performance obligations for unredeemed gift cards were $1.0 billion and $839 million, respectively. Gift card breakage income, which is our estimate of the portion of our gift card balance not expected to be redeemed, is recognized in net sales and was immaterial in fiscal 2021, fiscal 2020, and fiscal 2019.

We also have agreements with third-party service providers who directly extend credit to customers, manage our PLCC program, and own the related receivables. We have evaluated the third-party entities holding the receivables under the program and concluded that they should not be consolidated. The agreement with the primary third-party service provider for our PLCC program expires in 2028, with us having the option, but no obligation, to purchase the existing receivables at the end of the agreement. Deferred interest charges incurred for our deferred financing programs offered to these customers, interchange fees charged to us for their use of the cards, and any profit sharing with the third-party service providers are included in net sales.

Cost of Sales

Cost of sales includes the actual cost of merchandise sold and services performed; the cost of transportation of merchandise from vendors to our distribution network, stores, or customers; shipping and handling costs from our stores or distribution network to customers; and the operating cost and depreciation of our sourcing and distribution network. Vendor allowances that are not reimbursement of specific, incremental, and identifiable costs are also included within cost of sales.

Vendor Allowances

Vendor allowances primarily consist of volume rebates that are earned as a result of attaining certain purchase levels and co-op advertising allowances for the promotion of vendors’ products that are typically based on guaranteed minimum amounts with additional amounts being earned for attaining certain purchase levels. These vendor allowances are accrued as earned, with those allowances received as a result of attaining certain purchase levels accrued over the incentive period based on estimates of purchases. Volume rebates and certain co-op advertising allowances reduce the carrying cost of inventory and are recognized in cost of sales when the related inventory is sold.

Selling, General and Administrative

Selling, general and administrative expenses include compensation and benefits for retail and store support center associates, occupancy and operating costs of retail locations and store support centers, insurance-related expenses, advertising costs, credit and debit card processing fees, and other administrative costs.

Advertising Expense

Advertising costs, including digital, television, radio and print, are expensed when the advertisement first appears. Certain co-op advertising allowances that are reimbursements of specific, incremental, and identifiable costs incurred to promote vendors’ products are recorded as an offset against advertising expense. The following table presents net advertising expense included in SG&A:

in millions			Fiscal						Fiscal						Fiscal
2021						2020						2019
Net advertising expense			$	1,044					$	909					$	904

Stock-Based Compensation

We are currently authorized to issue incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and deferred shares to certain of our associates and non-employee directors under certain stock incentive plans. We measure and recognize compensation expense for all stock-based payment awards made to associates and non-employee directors based on estimated fair values. The value of the portion of the award that is ultimately expected to vest is recognized as stock-based compensation expense, on a straight-line basis, over the requisite service period or as restrictions lapse. We include estimated forfeitures expected to occur when calculating stock-based compensation expense. Additional information on our stock-based payment awards is included in Note 8.

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Income Taxes

Income taxes are accounted for under the asset and liability method. We provide for federal, state, and foreign income taxes currently payable, as well as for those deferred due to timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates is recognized as income or expense in the period that includes the enactment date. We routinely evaluate the likelihood of realizing the benefit of our deferred tax assets and may record a valuation allowance if, based on all available evidence, we determine that it is more likely than not that some portion of the tax benefit will not be realized.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

We file a consolidated U.S. federal income tax return which includes certain eligible subsidiaries. Non-U.S. subsidiaries and certain U.S. subsidiaries, which are consolidated for financial reporting purposes, are not eligible to be included in our consolidated U.S. federal income tax return. Separate provisions for income taxes have been determined for these entities. For unremitted earnings of our non-U.S. subsidiaries, we are required to make an assertion regarding reinvestment or repatriation for tax purposes. For any earnings that we do not make a permanent reinvestment assertion, we recognize a provision for deferred income taxes. For earnings where we have made a permanent reinvestment assertion, no provision is recognized. See Note 5 for further discussion.

We recognize interest and penalties related to income tax matters in interest expense and SG&A, respectively, on our consolidated statements of earnings. Accrued interest and penalties related to income tax matters are recognized in other accrued expenses and other long-term liabilities on our consolidated balance sheets.

We are subject to global intangible low-taxed income (“GILTI”) tax, an incremental tax on foreign income. We have made an accounting election to record this tax in the period the tax arises.

Comprehensive Income

Comprehensive income includes net earnings adjusted for certain gains and losses that are excluded from net earnings and recognized within accumulated other comprehensive loss as a component of equity, which consist primarily of foreign currency translation adjustments. Accumulated other comprehensive loss also includes net losses on cash flow hedges that were immaterial as of January 30, 2022 and January 31, 2021. Reclassifications from accumulated other comprehensive loss into earnings were immaterial in fiscal 2021, fiscal 2020, and fiscal 2019.

Foreign Currency Translation

Assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current rate of exchange on the last day of the reporting period. Revenues and expenses are translated using average exchange rates for the period and equity transactions are translated using the actual rate on the day of the transaction. Cumulative foreign currency translation adjustments recorded in accumulated other comprehensive loss as of January 30, 2022 and January 31, 2021 were losses of $575 million and $498 million, respectively.

Recently Adopted Accounting Pronouncements

ASU No. 2019-12. In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Amendments include removal of certain exceptions to the general principles of Topic 740, “Income Taxes,” and simplification in several other areas. On February 1, 2021, we adopted ASU No. 2019-12 with no material impact to our consolidated financial condition, results of operations or cash flows.

Recently Issued Accounting Pronouncements

ASU 2021-10. In November 2021, the FASB issued ASU No. 2021-10, “Government Assistance (Topic 832),” to improve the transparency of government assistance received by business entities that are accounted for by applying either the International Accounting Standards 20 grant model or Accounting Standards Codification

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958-605 contribution model by analogy. Topic 832 requires disclosure of the nature of the transactions and the related accounting policy used, the line items on the balance sheet and income statement that are affected and the amounts applicable to each financial statement line item, and significant terms of the transactions. This standard is effective for fiscal years beginning after December 15, 2021 and should be applied either prospectively or retrospectively. Early adoption is permitted. We are currently evaluating the impact of ASU 2021-10 on our consolidated financial statements and related disclosures.

ASU 2020-04. In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform. These amendments are not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. ASU No. 2020-04 is effective as of March 12, 2020 through December 31, 2022 and may be applied to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020. While the discontinuance of LIBOR will impact our interest rate swap agreements and certain of our credit arrangements, we do not anticipate the transition to a new reference rate and adoption of this standard will have a material impact on our consolidated financial condition, results of operations, or cash flows.

Recent accounting pronouncements adopted or pending adoption not discussed above are either not applicable or are not expected to have a material impact on our consolidated financial condition, results of operations, or cash flows.

**2.**NET SALES AND SEGMENT REPORTING

We currently conduct our retail operations in the U.S., Canada, and Mexico, each of which represents one of our three operating segments. Our operating segments reflect the way in which internally-reported financial information is used to make decisions and allocate resources. For disclosure purposes, we aggregate these three operating segments into one reportable segment due to their similar operating and financial characteristics.

The following table presents net property and equipment, classified by geography:

in millions			January 30, 2022						January 31, 2021						February 2, 2020
Net property and equipment – in the U.S.			$	22,696					$	22,205					$	20,302
Net property and equipment – outside the U.S.			2,503						2,500						2,468
Net property and equipment			$	25,199					$	24,705					$	22,770

No sales to an individual customer accounted for more than 10% of revenue during any of the last three fiscal years.

The following table presents net sales, classified by geography:

			Fiscal						Fiscal						Fiscal
in millions			2021						2020						2019
Net sales – in the U.S.			$	138,920					$	122,158					$	101,333
Net sales – outside the U.S.			12,237						9,952						8,892
Net sales			$	151,157					$	132,110					$	110,225

The following table presents net sales by products and services:

			Fiscal						Fiscal						Fiscal
in millions			2021						2020						2019
Net sales – products			$	145,745					$	127,671					$	105,194
Net sales – services			5,412						4,439						5,031
Net sales			$	151,157					$	132,110					$	110,225

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The following table presents major product lines and the related merchandising departments (and related services):

Major Product Line						Merchandising Departments
Building Materials						Building Materials, Electrical/Lighting, Lumber, Millwork, and Plumbing
Décor						Appliances, Décor/Storage, Flooring, Kitchen and Bath, and Paint
Hardlines						Hardware, Indoor Garden, Outdoor Garden, and Tools

The following table presents net sales by major product lines (and related services):

			Fiscal						Fiscal						Fiscal
in millions			2021						2020						2019
Building Materials			$	54,990					$	46,521					$	39,337
Décor			50,437						43,415						37,386
Hardlines			45,730						42,174						33,502
Net sales			$	151,157					$	132,110					$	110,225

—————

Note: Net sales for certain merchandising departments were reclassified in fiscal 2021. As a result, prior year amounts have been reclassified to conform with the current year presentation.

The following table presents net sales by merchandising department (and related services):

			Fiscal												Fiscal												Fiscal
			2021												2020												2019
dollars in millions			Net Sales						% of Net Sales						Net Sales						% of Net Sales						Net Sales						% of Net Sales
Appliances			$	14,232					9.4		%				$	11,865					9.0		%				$	9,850					8.9		%
Building Materials			9,823						6.5						8,656						6.6						7,712						7.0
Décor/Storage			6,095						4.0						4,959						3.8						3,845						3.5
Electrical/Lighting			13,473						8.9						11,178						8.5						9,843						8.9
Flooring			9,225						6.1						8,156						6.2						7,443						6.8
Hardware			7,873						5.2						7,312						5.5						6,083						5.5
Indoor Garden			15,546						10.3						14,649						11.1						11,261						10.2
Kitchen and Bath			10,432						6.9						8,383						6.3						7,633						6.9
Lumber			13,344						8.8						11,309						8.6						7,894						7.2
Millwork			7,412						4.9						6,460						4.9						5,757						5.2
Outdoor Garden			10,317						6.8						9,602						7.3						7,595						6.9
Paint			10,453						6.9						10,052						7.6						8,615						7.8
Plumbing			10,938						7.2						8,918						6.8						8,131						7.4
Tools			11,994						7.9						10,611						8.0						8,563						7.8
Total			$	151,157					100.0		%				$	132,110					100.0		%				$	110,225					100.0		%

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Note: Certain percentages may not sum to totals due to rounding. Net sales for certain merchandising departments were reclassified in fiscal 2021. As a result, prior year net sales have been reclassified to conform with the current year presentation. Prior year percent of net sales data also reflects the new classifications.

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**3.**PROPERTY AND LEASES

Net Property and Equipment

The following table presents components of net property and equipment:

in millions			January 30, 2022						January 31, 2021
Land			$	8,617					$	8,543
Buildings and improvements			19,173						18,838
Furniture, fixtures, and equipment			16,441						15,119
Leasehold improvements			2,016						1,925
Construction in progress			1,139						1,068
Finance leases			3,943						3,308
Property and equipment, at cost			51,329						48,801
Less accumulated depreciation and finance lease amortization			26,130						24,096
Net property and equipment			$	25,199					$	24,705

The following table presents depreciation and finance lease amortization expense, including depreciation and finance lease amortization expense included in cost of sales:

in millions			Fiscal						Fiscal						Fiscal
2021						2020						2019
Depreciation and finance lease amortization expense			$	2,650					$	2,425					$	2,223

Leases

The following table presents the consolidated balance sheet location of assets and liabilities related to operating and finance leases:

in millions			Consolidated Balance Sheet Caption			January 30, 2022						January 31, 2021
Assets:
Operating lease assets			Operating lease right-of-use assets			$	5,968					$	5,962
Finance lease assets (1)			Net property and equipment			2,896						2,493
Total lease assets						$	8,864					$	8,455
Liabilities:
Current:
Operating lease liabilities			Current operating lease liabilities			$	830					$	828
Finance lease liabilities			Current installments of long-term debt			198						66
Long-term:
Operating lease liabilities			Long-term operating lease liabilities			5,353						5,356
Finance lease liabilities			Long-term debt, excluding current installments			3,038						2,700
Total lease liabilities						$	9,419					$	8,950

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(1) Finance lease assets are recorded net of accumulated amortization of $1.0 billion as of January 30, 2022 and $815 million as of January 31, 2021.

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The following table presents components of lease cost, excluding short-term lease cost and sublease income which are immaterial:

			Consolidated Statement of Earnings Caption (1)			Fiscal						Fiscal						Fiscal
in millions			2021						2020						2019
Operating lease cost			Selling, general and administrative			$	1,084					$	782					$	827
Finance lease cost:
Amortization of leased assets			Depreciation and amortization			250						167						86
Interest on lease liabilities			Interest expense			127						112						92
Variable lease cost			Selling, general and administrative			425						277						241
Net lease cost						$	1,886					$	1,338					$	1,246

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*(1)*Costs associated with our sourcing and distribution network are recorded in cost of sales, with the exception of interest on finance lease liabilities.

The following table presents weighted average remaining lease terms and discount rates:

			January 30, 2022						January 31, 2021
Weighted Average Remaining Lease Term (Years):
Operating leases			9						10
Finance leases			15						15
Weighted Average Discount Rate:
Operating leases			2.7		%				2.9		%
Finance leases			4.7		%				5.6		%

The following table presents approximate future minimum lease payments under operating and finance leases at January 30, 2022:

in millions			Operating Leases						Finance Leases
Fiscal 2022			$	1,005					$	328
Fiscal 2023			1,023						333
Fiscal 2024			902						326
Fiscal 2025			755						367
Fiscal 2026			646						259
Thereafter			2,764						2,585
Total lease payments			7,095						4,198
Less: imputed interest			912						962
Present value of lease liabilities			$	6,183					$	3,236

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Note: We have excluded approximately $1.3 billion of leases (undiscounted basis) that have not yet commenced. These leases will commence primarily between fiscal 2022 and 2023 with lease terms of up to 20 years.

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The following table presents supplemental cash flow information related to leases:

			Fiscal						Fiscal						Fiscal
in millions			2021						2020						2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – operating leases			$	1,090					$	1,022					$	1,003
Operating cash flows – finance leases			127						112						92
Financing cash flows – finance leases			182						122						70
Supplemental non-cash information:
Lease assets obtained in exchange for new operating lease liabilities			964						969						748
Lease assets obtained in exchange for new finance lease liabilities			672						1,730						186

**4.**DEBT AND DERIVATIVE INSTRUMENTS

Short-Term Debt

At January 30, 2022, we had commercial paper programs that allowed for borrowings up to $3.0 billion. All of our short-term borrowings in fiscal 2021 and fiscal 2020 were under these commercial paper programs. In connection with these programs, we had back-up credit facilities with a consortium of banks for borrowings up to $3.0 billion at January 30, 2022, which consisted of a five-year $2.0 billion credit facility scheduled to expire in December 2023 and a 364-day $1.0 billion credit facility scheduled to expire in December 2022. In December 2021, we completed the renewal of our 364-day $1.0 billion credit facility, extending the maturity from December 2021 to December 2022. At January 30, 2022, we had $1.0 billion of outstanding borrowings under our commercial paper programs. At January 31, 2021, there were no outstanding borrowings under our commercial paper programs.

The following table presents certain information on our commercial paper programs:

dollars in millions			January 30, 2022						January 31, 2021
Weighted average interest rate			0.1		%				—		%
Maximum amount outstanding during the period			$	1,368					$	899
Average daily short-term borrowings			$	45					$	11

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Long-Term Debt

The following table presents details of the components of our long-term debt:

															Carrying Amount (1)
in millions			Interest Payable						Principal Amount						January 30, 2022						January 31, 2021
2.00% Senior notes due April 2021			Semi-annually						—						—						1,350
Floating rate senior notes due March 2022			Quarterly						300						300						300
3.25% Senior notes due March 2022			Semi-annually						700						700						699
2.625% Senior notes due June 2022			Semi-annually						1,250						1,249						1,248
2.70% Senior notes due April 2023			Semi-annually						1,000						999						998
3.75% Senior notes due February 2024			Semi-annually						1,100						1,098						1,096
3.35% Senior notes due September 2025			Semi-annually						1,000						998						997
3.00% Senior notes due April 2026			Semi-annually						1,300						1,293						1,291
2.125% Senior notes due September 2026			Semi-annually						1,000						992						990
2.50% Senior notes due April 2027			Semi-annually						750						744						743
2.80% Senior notes due September 2027			Semi-annually						1,000						1,001						1,017
0.90% Senior notes due March 2028			Semi-annually						500						495						494
1.50% Senior notes due September 2028			Semi-annually						1,000						992						—
3.90% Senior notes due December 2028			Semi-annually						1,000						1,035						1,075
2.95% Senior notes due June 2029			Semi-annually						1,750						1,768						1,828
2.70% Senior notes due April 2030			Semi-annually						1,500						1,422						1,464
1.375% Senior notes due March 2031			Semi-annually						1,250						1,210						1,229
1.875% Senior notes due September 2031			Semi-annually						1,000						981						—
5.875% Senior notes due December 2036			Semi-annually						3,000						2,916						2,935
3.30% Senior notes due April 2040			Semi-annually						1,250						1,164						1,207
5.40% Senior notes due September 2040			Semi-annually						500						496						496
5.95% Senior notes due April 2041			Semi-annually						1,000						990						990
4.20% Senior notes due April 2043			Semi-annually						1,000						977						989
4.875% Senior notes due February 2044			Semi-annually						1,000						981						980
4.40% Senior notes due March 2045			Semi-annually						1,000						979						979
4.25% Senior notes due April 2046			Semi-annually						1,600						1,586						1,585
3.90% Senior notes due June 2047			Semi-annually						1,150						1,144						1,144
4.50% Senior notes due December 2048			Semi-annually						1,500						1,464						1,463
3.125% Senior notes due December 2049			Semi-annually						1,250						1,214						1,222
3.35% Senior notes due April 2050			Semi-annually						1,500						1,471						1,470
2.375% Senior notes due March 2051			Semi-annually						1,250						1,201						1,220
2.75% Senior notes due September 2051			Semi-annually						1,000						982						—
3.50% Senior notes due September 2056			Semi-annually						1,000						973						973
Total senior notes									$	36,400					$	35,815					$	34,472
Finance lease obligations; payable in varying installments through January 31, 2055															3,236						2,766
Total long-term debt															39,051						37,238
Less current installments of long-term debt															2,447						1,416
Long-term debt, excluding current installments															$	36,604					$	35,822

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(1) Includes unamortized discounts, premiums, debt issuance costs, and the effects of fair value hedges.

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September 2021 Issuance

In September 2021, we issued three tranches of senior notes.

• The first tranche consisted of $1.0 billion of 1.50% senior notes due September 15, 2028 (the “2028 notes”) at a discount of $4 million. Interest on the 2028 notes is due semi-annually on March 15 and September 15 of each year, beginning March 15, 2022.

• The second tranche consisted of $1.0 billion of 1.875% senior notes due September 15, 2031 (the “2031 notes”) at a discount of $6 million. Interest on the 2031 notes is due semi-annually on March 15 and September 15 of each year, beginning March 15, 2022.

• The third tranche consisted of $1.0 billion of 2.75% senior notes due September 15, 2051 (the “2051 notes”) at a discount of $11 million (together with the 2028 notes and the 2031 notes, the “September 2021 issuance”). Interest on the 2051 notes is due semi-annually on March 15 and September 15 of each year, beginning March 15, 2022.

• Issuance costs for the September 2021 issuance totaled $17 million.

Redemption

All of our senior notes, other than our outstanding floating rate notes, may be redeemed by us at any time, in whole or in part, at the redemption price plus accrued interest up to the redemption date. With respect to the 3.25% 2022 notes and the 5.875% 2036 notes, the redemption price is equal to the greater of (1) 100% of the principal amount of the notes to be redeemed, or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the notes to be redeemed that would be due after the related redemption date. With respect to all other notes, the redemption price is equal to the greater of (1) 100% of the principal amount of the notes to be redeemed, or (2) the sum of the present values of the remaining scheduled payments of principal and interest to the Par Call Date, as defined in the respective notes. Additionally, if a Change in Control Triggering Event occurs, as defined in the notes, holders of all notes have the right to require us to redeem those notes at 101% of the aggregate principal amount of the notes plus accrued interest up to the redemption date.

In March 2021, we repaid our $1.35 billion 2.00% senior notes that had a maturity date of April 2021.

The indentures governing the notes do not generally limit our ability to incur additional indebtedness or require us to maintain financial ratios or specified levels of net worth or liquidity. The indentures governing the notes contain various customary covenants; however, none are expected to impact our liquidity or capital resources.

Maturities of Long-Term Debt

The following table presents our long-term debt maturities, excluding finance leases, as of January 30, 2022:

in millions			Principal
Fiscal 2022			$	2,250
Fiscal 2023			1,000
Fiscal 2024			1,100
Fiscal 2025			1,000
Fiscal 2026			2,300
Thereafter			28,750
Total			$	36,400

Derivative Instruments and Hedging Activities

We use derivative and nonderivative instruments as part of our normal business operations in the management of our exposure to fluctuations in foreign currency exchange rates and interest rates on certain debt. Our objective in managing these exposures is to decrease the volatility of cash flows affected by changes in the underlying rates and minimize the risk of changes in the fair value of our senior notes.

Fair Value Hedges

We had outstanding interest rate swap agreements with combined notional amounts of $5.4 billion at January 30, 2022 and $4.4 billion at January 31, 2021. These agreements were accounted for as fair value hedges that swap fixed for variable rate interest to hedge changes in the fair values of certain senior notes. At January 30, 2022, the fair values of these agreements totaled $191 million, with $58 million recognized in other assets and $249 million

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recognized in other long-term liabilities on the consolidated balance sheet. At January 31, 2021, the fair values of these agreements totaled $101 million, with $172 million recognized in other assets and $71 million recognized in other long-term liabilities on the consolidated balance sheet. All of our interest rate swap agreements designated as fair value hedges meet the shortcut method requirements under GAAP. Accordingly, the changes in the fair values of these agreements offset the changes in the fair value of the hedged long-term debt.

Cash Flow Hedges

At January 30, 2022 and January 31, 2021, we had outstanding foreign currency forward contracts accounted for as cash flow hedges, which hedge the variability of forecasted cash flows associated with certain payments made in our foreign operations. At January 30, 2022 and January 31, 2021, the notional amounts and the fair values of these contracts were not material.

During fiscal 2019, we settled our outstanding cross currency swap agreements accounted for as cash flow hedges, which hedged foreign currency fluctuations on certain intercompany debt, resulting in a gain of $118 million.

We also settled forward-starting interest rate swap agreements in prior years, which were used to hedge the variability in future interest payments attributable to changing interest rates on forecasted debt issuances. Unamortized losses on these forward-starting swaps, which were designated as cash flow hedges, are being amortized to interest expense over the life of the respective notes. Unamortized losses recognized on these swaps remaining in accumulated other comprehensive loss were immaterial as of January 30, 2022 and January 31, 2021, as were the losses recognized within interest expense for fiscal 2021, fiscal 2020, and fiscal 2019.

We expect an immaterial amount recorded in accumulated other comprehensive loss as of January 30, 2022 to be reclassified into earnings within the next 12 months.

Net Investment Hedges

We had outstanding foreign currency forward contracts as well as certain nonderivative instruments accounted for as net investment hedges, which were immaterial at January 31, 2021. These agreements hedged against foreign currency exposure on our net investment in certain subsidiaries. During fiscal 2021, we settled all outstanding net investment hedges and the related foreign currency translation adjustment amounts recorded in accumulated other comprehensive loss upon settlement were immaterial. There were no arrangements accounted for as net investment hedges outstanding as of January 30, 2022.

Collateral

We generally enter into master netting arrangements, which are designed to reduce credit risk by permitting net settlement of transactions with the same counterparty. To further limit our credit risk, we enter into collateral security arrangements that provide for collateral to be received or posted when the net fair value of certain derivative instruments exceeds or falls below contractually established thresholds. The cash collateral both held and posted by the Company related to derivative instruments under our collateral security arrangements was immaterial as of January 30, 2022 and January 31, 2021.

**5.**INCOME TAXES

Provision for Income Taxes

The following table presents our earnings before the provision for income taxes:

in millions			Fiscal						Fiscal						Fiscal
2021						2020						2019
United States			$	20,320					$	16,013					$	13,770
Foreign			1,417						965						945
Total			$	21,737					$	16,978					$	14,715

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The following table presents our provision for income taxes:

in millions			Fiscal						Fiscal						Fiscal
2021						2020						2019
Current:
Federal			$	4,066					$	3,462					$	2,370
State			981						928						572
Foreign			511						329						340
Total current			5,558						4,719						3,282
Deferred:
Federal			(155)						(404)						259
State			(11)						(209)						(72)
Foreign			(88)						6						4
Total deferred			(254)						(607)						191
Provision for income taxes			$	5,304					$	4,112					$	3,473

The following table presents our combined federal, state, and foreign effective tax rates:

			Fiscal						Fiscal						Fiscal
			2021						2020						2019
Combined federal, state, and foreign effective tax rates			24.4		%				24.2		%				23.6		%

The following table presents the reconciliation of our provision for income taxes at the federal statutory rate of 21% to the actual tax expense:

in millions			Fiscal						Fiscal						Fiscal
2021						2020						2019
Income taxes at federal statutory rate			$	4,565					$	3,565					$	3,090
State income taxes, net of federal income tax benefit			766						568						395
Other, net			(27)						(21)						(12)
Total			$	5,304					$	4,112					$	3,473

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Deferred Taxes

The following table presents the tax effects of temporary differences that give rise to significant portions of our deferred tax assets and deferred tax liabilities:

in millions			January 30, 2022						January 31, 2021
Assets:
Deferred compensation			$	471					$	472
Accrued self-insurance liabilities			272						291
State income taxes			138						117
Merchandise inventories			—						41
Non-deductible reserves			250						199
Net operating losses			150						144
Lease liabilities			1,528						1,605
Deferred revenue			121						51
Other			67						104
Total deferred tax assets			2,997						3,024
Valuation allowance			(10)						(8)
Total deferred tax assets, net of valuation allowance			2,987						3,016
Liabilities:
Merchandise inventories			(14)						—
Property and equipment			(902)						(1,061)
Goodwill and other intangibles			(985)						(1,030)
Lease right-of-use assets			(1,473)						(1,555)
Tax on unremitted earnings			(74)						(119)
Other			(104)						(77)
Total deferred tax liabilities			(3,552)						(3,842)
Net deferred tax liabilities			$	(565)					$	(826)

The following table presents our noncurrent deferred tax assets and noncurrent deferred tax liabilities, netted by tax jurisdiction, as presented on the consolidated balance sheets:

in millions			January 30, 2022						January 31, 2021
Other assets			$	344					$	305
Deferred income taxes			(909)						(1,131)
Net deferred tax liabilities			$	(565)					$	(826)

As of January 30, 2022, we recorded deferred tax assets of $150 million for net operating losses, primarily related to state jurisdictions. These losses expire at various dates beginning in 2022. We have concluded that it is more likely than not that tax benefits related to substantially all net operating losses will be realized based upon the expectation that we will generate the necessary taxable income in future periods.

Reinvestment of Unremitted Earnings

Substantially all of our current year foreign cash earnings in excess of working capital and cash needed for strategic investments are not intended to be indefinitely reinvested offshore. Therefore, the tax effects of repatriation (including applicable state and local taxes and foreign withholding taxes) of such cash earnings have been provided for in the accompanying consolidated statements of earnings. We have the intent and ability to reinvest substantially all of the $3.4 billion of non-cash unremitted earnings of our non-U.S. subsidiaries indefinitely. Accordingly, no provision for state and local taxes or foreign withholding taxes was recorded on these unremitted earnings in the accompanying consolidated statements of earnings. It is impracticable for us to determine the amount of

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unrecognized deferred tax liabilities on these indefinitely reinvested earnings due to the complexities associated with the hypothetical calculation.

Tax Return Examination Status

Our income tax returns are routinely examined by U.S. federal, state and local, and foreign tax authorities. As of January 30, 2022, the Company is no longer subject to U.S. federal examinations by tax authorities for years before fiscal 2010. Our U.S. federal tax returns for fiscal years 2010 through 2018, with the exception of 2015, are currently under examination by the IRS. With respect to the fiscal years 2010 to 2014, the IRS has issued a proposed adjustment relating to transfer pricing between our entities in the U.S. and China. We are defending our position using all available remedies. There are also ongoing U.S. state and local audits and other foreign audits covering fiscal years 2012 through 2019. We do not expect the results from any ongoing income tax audit to have a material impact on our consolidated financial condition, results of operations, or cash flows.

Over the next twelve months, it is reasonably possible that the resolution of federal and state tax examinations, as well as the expiration of statutes of limitations, could reduce our unrecognized tax benefits by an immaterial amount. We do not anticipate the resolution of these matters will result in a material change to our consolidated financial condition or results of operations.

Unrecognized Tax Benefits

The following table presents reconciliations of the beginning and ending amount of our gross unrecognized tax benefits:

in millions			Fiscal						Fiscal						Fiscal
2021						2020						2019
Unrecognized tax benefits balance at beginning of fiscal year			$	540					$	473					$	494
Additions based on tax positions related to the current year			80						75						96
Additions for tax positions of prior years			24						72						82
Reductions for tax positions of prior years			(40)						(53)						(147)
Reductions due to settlements			(29)						(22)						(13)
Reductions due to lapse of statute of limitations			(5)						(5)						(39)
Unrecognized tax benefits balance at end of fiscal year			$	570					$	540					$	473

Unrecognized tax benefits that if recognized would affect our annual effective income tax rate on net earnings were $479 million, $458 million, and $407 million at January 30, 2022, January 31, 2021, and February 2, 2020, respectively.

Interest and Penalties

Net adjustments to accruals for interest and penalties associated with uncertain tax positions were immaterial in fiscal 2021, fiscal 2020, and fiscal 2019. Our total accrued interest and penalties associated with uncertain tax positions were immaterial as of January 30, 2022 and January 31, 2021.

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**6.**STOCKHOLDERS’ EQUITY

Stock Rollforward

The following table presents a reconciliation of the number of shares of our common stock and cash dividends per share:

shares in millions			Fiscal						Fiscal						Fiscal
2021						2020						2019
Common stock:
Balance at beginning of year			1,789						1,786						1,782
Shares issued under employee stock plans			3						3						4
Balance at end of year			1,792						1,789						1,786
Treasury stock:
Balance at beginning of year			(712)						(709)						(677)
Repurchases of common stock			(45)						(3)						(32)
Balance at end of year			(757)						(712)						(709)
Shares outstanding at end of year			1,035						1,077						1,077
Cash dividends per share			$	6.60					$	6.00					$	5.44

Share Repurchases

In May 2021, our Board of Directors approved a $20.0 billion share repurchase authorization. This new authorization replaced the previous authorization of $15.0 billion, which was approved February 2019, and does not have a prescribed expiration date. As of January 30, 2022, approximately $9.6 billion of the $20.0 billion share repurchase authorization remained available.

In March 2020, we suspended our share repurchases to enhance our liquidity position during the COVID-19 pandemic. We resumed share repurchases in the first quarter of fiscal 2021.

The following table presents information about our repurchases of common stock, all of which were completed through open market purchases, with the exception of the shares repurchased during fiscal 2019 through ASR agreements noted below:

			Fiscal						Fiscal						Fiscal
in millions			2021						2020						2019
Total number of shares repurchased			45						3						32
Total cost of shares repurchased			$	15,001					$	597					$	7,000

These amounts may differ from the repurchases of common stock amounts in the consolidated statements of cash flows due to unsettled share repurchases at the end of a period.

Accelerated Share Repurchase Agreements

We enter into ASR agreements from time to time with third-party financial institutions to repurchase shares of our common stock. Under an ASR agreement, we pay a specified amount to the financial institution and receive an initial delivery of shares. This initial delivery of shares represents the minimum number of shares that we may receive under the agreement. Upon settlement of the ASR agreement, the financial institution delivers additional shares, with the final number of shares delivered determined with reference to the volume weighted average price per share of our common stock over the term of the agreement, less a negotiated discount. The transactions are accounted for as equity transactions and are included in treasury stock when the shares are received, at which time there is an immediate reduction in the weighted average common shares calculation for basic and diluted earnings per share.

The following table presents the terms of each ASR agreement entered into during the last three fiscal years, structured as outlined above (in millions):

Agreement Date						Settlement Date						Agreement Amount						Initial Shares Delivered						Additional Shares Delivered						Total Shares Delivered
Q3 2019						Q4 2019						820						3.2						0.4						3.6

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**7.**FAIR VALUE MEASUREMENTS

The fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, rather than the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the assets and liabilities that are measured at fair value on a recurring basis:

			Fair Value at January 30, 2022 Using																		Fair Value at January 31, 2021 Using
in millions			Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Derivative agreements – assets			$	—					$	58					$	—					$	—					$	172					$	—
Derivative agreements – liabilities			—						(249)						—						—						(71)						—
Total			$	—					$	(191)					$	—					$	—					$	101					$	—

The fair values of our derivative instruments are determined using an income approach and Level 2 inputs, which include the respective interest rate or foreign currency forward curves and discount rates.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Long-lived assets, goodwill, and other intangible assets are subject to nonrecurring fair value measurement for the assessment of impairment. We did not have any material assets or liabilities that were measured at fair value on a nonrecurring basis during fiscal 2021, fiscal 2020, or fiscal 2019.

Other Fair Value Disclosures

The carrying amounts of cash and cash equivalents, receivables, short-term debt, and accounts payable approximate fair value due to their short-term nature.

The following table presents the aggregate fair values and carrying values of our senior notes:

			January 30, 2022												January 31, 2021
in millions			Fair Value (Level 1)						Carrying Value						Fair Value (Level 1)						Carrying Value
Senior notes			$	39,397					$	35,815					$	41,289					$	34,472

**8.**STOCK-BASED COMPENSATION

Omnibus Stock Incentive Plans

The Home Depot, Inc. Amended and Restated 2005 Omnibus Stock Incentive Plan (the “2005 Plan”) and The Home Depot, Inc. 1997 Omnibus Stock Incentive Plan (the “1997 Plan” and collectively with the 2005 Plan, the “Plans”) provide that incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, deferred shares, and other stock-based awards may be issued to certain of our associates and non-employee directors. Under the 2005 Plan, the maximum number of shares of our common stock authorized for issuance is 255 million shares, with any award other than a stock option or stock appreciation right reducing the number of shares available for issuance by 2.11 shares. At January 30, 2022, there were approximately 117 million shares available for future grants under the 2005 Plan. No additional equity awards could be issued from the 1997 Plan after the adoption of the 2005 Plan on May 26, 2005.

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The following table presents total stock-based compensation expense, net of estimated forfeitures, including expense related to our ESPPs, and related income tax benefit:

in millions			Fiscal						Fiscal						Fiscal
2021						2020						2019
Pre-tax stock-based compensation expense			$	403					$	310					$	251
Income tax benefit			(86)						(58)						(49)
After-tax stock-based compensation expense			$	317					$	252					$	202

At January 30, 2022, there was $496 million of unamortized stock-based compensation expense, which is expected to be recognized over a weighted average period of two years.

The award types issued under the Plans are as follows:

Stock Options. Under the terms of the Plans, incentive stock options and nonqualified stock options must have an exercise price at or above the fair market value of our stock on the date of the grant. Typically, nonqualified stock options vest at the rate of 25% per year commencing on the second anniversary date of the grant and expire on the tenth anniversary date of the grant. Additionally, a majority of our stock options may become non-forfeitable upon the associate reaching age 60, provided the associate has had five years of continuous service. No incentive stock options have been issued under the 2005 Plan.

We estimate the fair value of stock option awards on the date of grant using the Black-Scholes option-pricing model. Our determination of fair value of stock option awards on the date of grant using the Black-Scholes option-pricing model is affected by our stock price as well as assumptions regarding a number of variables.

The following table presents the per share weighted average fair value of stock options granted and the assumptions used in determining fair value at the date of grant using the Black-Scholes option-pricing model:

			Fiscal						Fiscal						Fiscal
			2021						2020						2019
Per share weighted average fair value			$	57.71					$	36.77					$	27.33
Risk-free interest rate			1.0		%				0.6		%				2.2		%
Assumed volatility			26.5		%				29.9		%				19.8		%
Assumed dividend yield			2.2		%				3.1		%				2.9		%
Assumed lives of options			6 years						6 years						5 years

The following table presents the total intrinsic value of stock options exercised:

in millions			Fiscal						Fiscal						Fiscal
2021						2020						2019
Total intrinsic value of stock options exercised			$	237					$	217					$	241

The following table presents a summary of stock option activity by number of shares and weighted average exercise price during fiscal 2021:

shares in thousands			Number of Shares						Weighted Average Exercise Price
Outstanding at beginning of year			4,350						$	129.50
Granted			277						295.92
Exercised			(955)						96.10
Forfeited			(31)						202.23
Outstanding at end of year			3,641						150.30

Shares of common stock issued from stock option exercises may be issued from authorized and unissued common stock or treasury stock.

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The following table presents details regarding outstanding and exercisable stock options at January 30, 2022:

shares in thousands, dollars in millions, except for per share amounts			Number of Shares						Intrinsic Value						Weighted Average Remaining Life						Weighted Average Exercise Price
Outstanding			3,641						$	787					5.0 years						$	150.30
Exercisable			2,291						572						3.6 years						116.78

Restricted Stock and Performance Share Awards. Restrictions on the restricted stock issued under the Plans generally lapse over various periods up to five years. At the grant date of the award, recipients of restricted stock are granted voting rights and generally receive dividends on unvested shares, paid in the form of cash on each dividend payment date. Dividends paid on unvested shares were immaterial for fiscal 2021, fiscal 2020, and fiscal 2019. Additionally, the majority of our restricted stock awards may become non-forfeitable upon the associate’s attainment of age 60, provided the associate has had five years of continuous service.

We have also granted performance share awards under the Plans. These awards provide for the issuance of shares of our common stock at the end of the three-year performance cycle based upon our performance against target average ROIC and operating profit over that performance cycle. Additionally, the awards become non-forfeitable upon the associate’s attainment of age 60, provided the associate has had five years of continuous service and minimum performance targets are achieved. Recipients of performance share awards have no voting rights until the shares are issued following completion of the performance period. Dividend equivalents accrue on the performance shares (as reinvested shares) and are paid upon the payout of the award based upon the actual number of shares earned.

The fair value of the restricted stock and performance shares is based on the closing stock price on the date of grant and is expensed over the period during which the restrictions lapse.

Restricted Stock Units. Each restricted stock unit entitles the associate to one share of common stock to be received upon vesting up to five years after the grant date. Additionally, the majority of these awards may become non-forfeitable upon the associate reaching age 60, provided the associate has had five years of continuous service. Recipients of restricted stock units have no voting rights until the vesting of the award. Recipients receive dividend equivalents that accrue on unvested units and are paid out in the form of additional shares of stock on the vesting date. The fair value of the restricted stock units is based on the closing stock price on the date of grant and is expensed over the period during which the units vest.

The following table presents a summary of restricted stock, performance shares, and restricted stock unit activity during fiscal 2021:

shares in thousands			Number of Shares						Weighted Average Grant Date Fair Value
Nonvested at beginning of year			4,098						$	180.87
Granted			1,264						293.63
Vested			(1,380)						176.00
Forfeited			(273)						214.98
Nonvested at end of year			3,709						218.60

The following table presents the total fair value of restricted stock, performance shares, and restricted stock units vested:

in millions			Fiscal						Fiscal						Fiscal
2021						2020						2019
Total fair value vested			$	405					$	271					$	303

Deferred Shares. We grant awards of deferred shares to non-employee directors under the Plans. Each deferred share entitles the non-employee director to one share of common stock to be received following termination of Board service. Recipients of deferred shares have no voting rights and receive dividend equivalents that accrue and are paid out in the form of additional shares of stock upon payout of the underlying shares following termination of

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service. The fair value of the deferred shares is based on the closing stock price on the date of grant and is expensed immediately upon grant.

The following table presents deferred shares granted to non-employee directors:

			Fiscal						Fiscal						Fiscal
2021						2020						2019
Deferred shares granted to non-employee directors			15,000						18,000						22,000

Employee Stock Purchase Plans

We maintain two ESPPs (a U.S. and a non-U.S. plan). The plan for U.S. associates is a tax-qualified plan under Section 423 of the Internal Revenue Code. The non-U.S. plan is not a Section 423 plan. At January 30, 2022, there were approximately 17 million shares available under the U.S. plan and approximately 19 million shares available under the non-U.S. plan. The purchase price of shares under the ESPPs is equal to 85% of the stock’s fair market value on the last day of the purchase period, which is a six-month period ending on December 31 and June 30 of each year. During fiscal 2021, there were approximately one million shares purchased under the ESPPs at an average price of $305.14. Under the outstanding ESPPs at January 30, 2022, associates have contributed $22 million to purchase shares at 85% of the stock’s fair market value on the last day of the current purchase period, June 30, 2022.

**9.**EMPLOYEE BENEFIT PLANS

We maintain active defined contribution retirement plans for our associates (the “Benefit Plans”). All associates satisfying certain service requirements are eligible to participate in the Benefit Plans. We make cash contributions each payroll period up to specified percentages of associates’ contributions as approved by our Board of Directors.

We also maintain the Restoration Plan to provide certain associates deferred compensation that they would have received under the Benefit Plans as a matching contribution if not for the maximum compensation limits under the Internal Revenue Code. We fund the Restoration Plan through contributions made to a grantor trust, which are then used to purchase shares of our common stock in the open market.

The following table presents our contributions to the Benefit Plans and the Restoration Plan:

in millions			Fiscal						Fiscal						Fiscal
2021						2020						2019
Contributions to the Benefit Plans and the Restoration Plan			$	278					$	267					$	213

At January 30, 2022, the Benefit Plans and the Restoration Plan held a total of 5.5 million shares of our common stock in trust for plan participants.

**10.**WEIGHTED AVERAGE COMMON SHARES

The following table presents the reconciliation of our basic to diluted weighted average common shares:

in millions			Fiscal						Fiscal						Fiscal
2021						2020						2019
Basic weighted average common shares			1,054						1,074						1,093
Effect of potentially dilutive securities (1)			4						4						4
Diluted weighted average common shares			1,058						1,078						1,097

Anti-dilutive securities excluded from diluted weighted average common shares			—						—						—

—————

(1) Represents the dilutive impact of stock-based awards.

**11.**COMMITMENTS AND CONTINGENCIES

At January 30, 2022, we had outstanding letters of credit totaling $362 million, primarily related to certain business transactions, including insurance programs, trade contracts, and construction contracts.

We are involved in litigation arising in the normal course of business. In management’s opinion, any such litigation is not expected to have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

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12. HD SUPPLY ACQUISITION

On November 16, 2020, we announced that we entered into a definitive agreement to acquire HD Supply, a leading national distributor of MRO products to multifamily, hospitality, healthcare, and government housing facilities, among others. We believe the acquisition of HD Supply will help position the Company to accelerate sales growth by better serving both existing and new MRO customers. Under the terms of the merger agreement, a subsidiary of Home Depot made a cash tender offer to purchase all outstanding shares of HD Supply common stock for $56 per share. All of the conditions of the offer were satisfied, and the acquisition was completed on December 24, 2020. The acquisition was funded through cash on hand, a portion of which was replaced with the proceeds from our issuance of $3.0 billion of senior notes in January 2021.

The acquisition was accounted for in accordance with Accounting Standards Codification Topic 805 "Business Combinations" and, accordingly, HD Supply’s results of operations have been consolidated in the Company’s financial statements since December 24, 2020, the date of acquisition. We recorded a preliminary allocation of the purchase price to assets acquired and liabilities assumed based on their estimated fair values as of December 24, 2020. Adjustments to our preliminary purchase price allocation recognized in fiscal 2021 were immaterial, and our purchase price allocation is now finalized. Acquisition-related costs were expensed as incurred and totaled $110 million in fiscal 2020, including the $56 million charge related to the settlement of stock-based awards noted below.

The following table summarizes total purchase consideration:

in millions
Total cash consideration for outstanding shares			$	8,637
Value of stock-based awards attributed to services already rendered (1)			55
Total purchase consideration			$	8,692

—————

(1) In connection with the completion of the acquisition, all HD Supply stock-based awards were cash settled for an aggregate value of $111 million. As the settlement of the awards was at the discretion of the Company, the portion of the fair value of the awards attributed to services previously provided of $55 million was included as part of purchase consideration, with the remaining $56 million recognized as post-combination expense within SG&A in our consolidated statement of earnings for fiscal 2020.

The following table summarizes the recorded fair values of the assets acquired and liabilities assumed:

in millions			Fair Value
Cash			$	912
Other current assets			879
Goodwill			4,872
Other assets (1)			3,936
Total assets acquired			$	10,599
Current liabilities			$	817
Long-term liabilities (2)			1,090
Total liabilities assumed			$	1,907

—————

(1) Includes identifiable intangible assets of $3.3 billion.

(2) Includes deferred tax liabilities of $815 million primarily resulting from the difference in book and tax basis related to identifiable intangible assets.

The fair value of identifiable intangible assets was determined by using certain estimates and assumptions that are not observable in the market. The fair values were determined using an income based approach, which included significant assumptions such as the amount and timing of projected cash flows, growth rates, customer attrition

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rates, discount rates, and the assessment of the asset’s life cycle. The fair value and estimated useful lives of identifiable intangible assets follows:

in millions			Useful Life (Years)						Fair Value
Customer relationships			19						$	2,630
Trade name – indefinite lived			Indefinite						520
Trade names – definite lived			20						150
Total identifiable intangible assets									$	3,300

The goodwill arising from the acquisition is primarily attributable to operational synergies and acceleration of growth strategy, as well as the assembled workforce. The goodwill generated in the acquisition is not expected to be deductible for U.S. federal and state tax purposes.

Net sales and net earnings for fiscal 2020 attributable to HD Supply after the completion of the acquisition were immaterial. Pro forma results of operations would not be materially different as a result of the acquisition and therefore are not presented.