Our MD&A includes the following sections:
•  Executive Summary
•  Results of Operations and Non-GAAP Financial Measures
•  Liquidity and Capital Resources
•  Critical Accounting Policies
                               Executive Summary
Quarter to date and year to date highlights of our financial performance follow:
                                                          Three Months Ended                          Nine Months Ended
                                                  November 1,           November 3,           November 1,           November 3,
dollars in millions, except per share data            2020                 2019                  2020                  2019
Net sales                                        $    33,536          $     27,223          $     99,849          $     84,443
Net earnings                                           3,432                 2,769                10,009                 8,761

Diluted earnings per share                       $      3.18          $       2.53          $       9.28          $       7.96

Net cash provided by operating activities                                                   $     17,415          $     10,793
Proceeds from long-term debt, net of discounts
and premiums                                                                                       4,960                 1,404
Repayments of long-term debt                                                                       1,836                 1,046
Repurchases of common stock                                                                          791                 3,909


We reported net sales of $33.5 billion in the third quarter of fiscal 2020. Net
earnings were $3.4 billion, or $3.18 per diluted share. For the first nine
months of fiscal 2020, net sales were $99.8 billion and net earnings were $10.0
billion, or $9.28 per diluted share.
We opened one store in the U.S. and one store in Mexico during the third quarter
of fiscal 2020, resulting in a total store count of 2,295 at the end of the
quarter. As of November 1, 2020, a total of 309 of our stores, or 13.5%, were
located in Canada and Mexico. For the third quarter of fiscal 2020, total sales
per retail square foot were $552.85. Our inventory turnover ratio was 5.9 times,
up from 5.0 times last year, driven by a significant increase in customer demand
across all of our merchandising departments.
We generated $17.4 billion of cash flow from operations and issued $5.0 billion
of long-term debt, net of discounts, during the first nine months of fiscal
2020. These funds, together with cash on hand, were used to pay $4.8 billion of
dividends, repay an aggregate of $1.8 billion of senior notes that matured in
June 2020 and that were scheduled to mature in September 2020, fund $1.5 billion
in capital expenditures, repay $974 million of net short-term borrowings, and
fund cash payments of $791 million for share repurchases before we suspended
share repurchases in March 2020. In February 2020, we announced a 10% increase
in our quarterly cash dividend to $1.50 per share.
Our ROIC for the trailing twelve-month period was 41.6% at the end of the third
quarter of fiscal 2020 and 45.1% at the end of the third quarter of fiscal 2019.
See the "  Non-GAAP Financial Measures  " section below for our definition and
calculation of ROIC, as well as a reconciliation of NOPAT, a non-GAAP financial
measure, to net earnings (the most comparable GAAP financial measure). The
decrease in ROIC from the third quarter of fiscal 2019 primarily reflects our
decision to temporarily enhance our liquidity position, including the suspension
of share repurchases.
On November 16, 2020, we announced that we have entered into a definitive
agreement to acquire HD Supply, a leading national distributor of MRO products
in the multi-family and hospitality sectors. Under the terms of the merger
agreement, a subsidiary of Home Depot will commence a cash tender offer to
purchase all outstanding shares of HD Supply common stock for $56 per share, for
a total enterprise value (including net cash) of approximately $8 billion. The
completion of the acquisition is subject to customary closing conditions,
including regulatory approvals and the tender of a majority of the shares of HD
Supply common stock then outstanding (on a fully diluted basis), and is expected
to be completed during our fiscal fourth quarter, which ends on January 31,
2021. The transaction is expected to be funded through cash on hand and debt.
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COVID-19
The outbreak of the novel coronavirus COVID-19, which was declared a global
pandemic by the World Health Organization on March 11, 2020, has led to adverse
impacts on the U.S. and global economies and has impacted and continues to
impact our supply chain, operations, and customer demand. Even though the
Company has taken measures to adapt to operating in this challenging
environment, the pandemic could further affect our operations and the operations
of our suppliers and vendors as a result of additional shelter-in-place or other
governmental orders; restrictions and limitations on travel, logistics and other
business activities; potential product and labor shortages; limitations on store
or facility operations up to and including closures; and other governmental,
business or consumer actions. As circumstances have evolved, our focus has been
and continues to be on two key priorities: the safety and well-being of our
associates and customers, and providing our customers and communities with the
products and services that they need.
As we adapted to operations in a COVID-19 environment during fiscal 2020, we
took a number of actions to promote social and physical distancing. At the
beginning of the pandemic, we implemented a change to store operating hours, and
we took measures to limit the number of customers in stores, which included
canceling or modifying certain annual merchandising events and rolling out
curbside pickup at our stores. We also shifted store support operations to
remote or virtual. As we have continued to adapt and refine our approach, we
have adjusted our response to reduce constriction and better manage growing
demand in the stores, including adopting a more localized approach on limits to
the number of customers in stores and expanding store hours while still focusing
on promoting a safe shopping environment. In addition, masks or facial coverings
are now required for all associates and customers in our U.S. stores and other
facilities.
The impact of COVID-19 and the actions we have taken in response to it had
varying effects on our results of operations throughout the first nine months of
fiscal 2020. Overall we saw a significant acceleration in sales with strong
performance across most of our departments during the first nine months of
fiscal 2020. This acceleration in sales growth was due to customers' focus on
home improvement projects and repairs, which continued during the third quarter
of fiscal 2020. As our customers continued to seek alternative methods for
obtaining the products they needed, online sales grew by approximately 80% in
the third quarter of fiscal 2020, and approximately 87% in the first nine months
of fiscal 2020.
The increase in customer demand for certain products together with the impact of
COVID-19 on our supply chain has put pressure on our ability to maintain
inventory in-stock levels, particularly for certain high demand products. We
have been able to mitigate some of the impact, however, due to the benefits from
our strategic investments as well as through such actions as working
cross-functionally and partnering with our suppliers to make real-time
adjustments to our product assortments, introducing alternative products or
reducing assortments to the most popular selections in certain product
categories.
Given these ongoing demands and the complexity of the current environment, we
have continued to focus on taking care of our associates by investing in
additional pay and benefits, including expanded paid time off for all hourly
associates to use at their discretion and the implementation of a temporary
weekly bonus program. These enhanced pay and benefits resulted in additional
expense of $354 million for the third quarter of fiscal 2020, and $1.7 billion
for the first nine months of fiscal 2020, which increased SG&A in fiscal 2020
compared to fiscal 2019. To continue to support our associates we have announced
that we have transitioned away from these temporary programs, and we are
implementing permanent compensation enhancements for frontline, hourly
associates. This will result in approximately $1 billion of incremental
compensation expense on an annualized basis.
Although we cannot estimate the future impact of COVID-19, we believe our
existing liquidity will be sufficient to continue to run our business
effectively. We also believe that the investments we have made in recent years
in our stores, interconnected and digital assets, associates, supply chain, and
merchandising organization have allowed us to quickly adapt to shifts in
customer needs and behaviors and the fluid circumstances created by COVID-19. We
continue to actively monitor our business and operations and may take further
actions as may be required by federal, state or local authorities or that we
determine are in the best interests of our associates, customers, suppliers,
vendors and shareholders.


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             Results of Operations and Non-GAAP Financial Measures
The tables and discussion below should be read in conjunction with our
consolidated financial statements and related notes included in this report and
in the 2019 Form 10-K and with our MD&A included in the 2019 Form 10-K. The
following table displays the percentage relationship between net sales and major
categories in our Consolidated Statements of Earnings, as well as the percentage
change in the associated dollar amounts.
Fiscal 2020 and Fiscal 2019 Three Month Comparisons
                                                                               Three Months Ended
                                                           November 1,                                    November 3,
                                                               2020                                           2019
                                                                         % of                                           % of
dollars in millions                                $                   Net Sales                  $                   Net Sales
Net sales                                    $    33,536                                    $    27,223
Gross profit                                      11,456                      34.2  %             9,387                      34.5  %
Operating expenses:
Selling, general and administrative                6,076                      18.1                4,942                      18.2
Depreciation and amortization                        528                       1.6                  498                       1.8
Total operating expenses                           6,604                      19.7                5,440                      20.0
Operating income                                   4,852                      14.5                3,947                      14.5
Interest and other (income) expense:
Interest and investment income                       (11)                        -                  (22)                     (0.1)
Interest expense                                     340                       1.0                  302                       1.1
Interest and other, net                              329                       1.0                  280                       1.0
Earnings before provision for income taxes         4,523                      13.5                3,667                      13.5
Provision for income taxes                         1,091                       3.3                  898                       3.3
Net earnings                                 $     3,432                      10.2  %       $     2,769                      10.2  %


-----

Note: Certain percentages may not sum to totals due to rounding.


                                                                      Three 

Months Ended


                                                               November 1,          November 3,
Selected financial and sales data:                                 2020                 2019                 % Change
Comparable sales (% change)                                          24.1  %               3.6  %                      N/A
Comparable customer transactions (%
change) (1)                                                          13.0  %               1.8  %                      N/A
Comparable average ticket (% change) (1)                             10.0  %               1.8  %                      N/A
Customer transactions (in millions) (1)                             453.2                400.9                     13.0  %
Average ticket (1) (2)                                        $     72.98          $     66.36                     10.0  %
Sales per retail square foot (1) (3)                          $    552.85          $    449.17                     23.1  %
Diluted earnings per share                                    $      3.18          $      2.53                     25.7  %


-----
(1)Does not include results for the legacy Interline Brands business, now
operating as a part of The Home Depot Pro.
(2)Average ticket represents the average price paid per transaction and is used
by management to monitor the performance of the Company, as it represents a
primary driver in measuring sales performance.
(3)Sales per retail square foot represents sales divided by the retail store
square footage. Sales per retail square foot is a measure of the efficiency of
sales based on the total square footage of our stores and is used by management
to monitor the performance of the Company as an indicator of the productivity of
owned and leased square footage for retail operations.
Sales. We assess our sales performance by evaluating both net sales and
comparable sales.
Net Sales. Net sales for the third quarter of fiscal 2020 increased 23.2% to
$33.5 billion from $27.2 billion for the third quarter of fiscal 2019. The
increase in net sales for the third quarter of fiscal 2020 primarily reflected
the impact of positive comparable sales driven by an increase in comparable
customer transactions and comparable average ticket. Online sales, which consist
of sales generated online through our websites for products picked up at our
stores or delivered to customer locations, represented 13.0% of net sales and
grew by approximately 80% during
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the third quarter of fiscal 2020. The increase in online sales for the third
quarter of fiscal 2020 was driven in large part by the impact of COVID-19, with
customers continuing to turn online for their shopping needs. A stronger U.S.
dollar negatively impacted sales growth by $99 million in the third quarter of
fiscal 2020.
Comparable Sales. Comparable sales is a measure that highlights the performance
of our existing locations and websites by measuring the change in net sales for
a period over the comparable prior-period of equivalent length. Comparable sales
includes sales at all locations, physical and online, open greater than 52 weeks
(including remodels and relocations) and excludes permanently closed stores.
Retail stores become comparable on the Monday following their 52nd week of
operation. Acquisitions, digital or otherwise, are included in comparable sales
after they are owned for more than 52 weeks. Comparable sales is intended only
as supplemental information and is not a substitute for net sales presented in
accordance with GAAP.
Total comparable sales increased 24.1% for the third quarter of fiscal 2020,
reflecting a 10.0% increase in comparable average ticket and a 13.0% increase in
comparable customer transactions. The increase in comparable sales reflected a
number of factors, including increased consumer demand across our core
categories and the execution of our strategic efforts to drive an enhanced
interconnected experience in both the physical and digital worlds. The increase
in comparable average ticket and comparable customer transactions was driven by
strong customer traffic both physically and digitally, commodity price inflation
primarily from lumber, and mix of product sold.
All of our merchandising departments posted double-digit positive comparable
sales in the third quarter of fiscal 2020.
Gross Profit. Gross profit for the third quarter of fiscal 2020 increased 22.0%
to $11.5 billion from $9.4 billion for the third quarter of fiscal 2019. Gross
profit as a percentage of net sales, or gross profit margin, was 34.2% for the
third quarter of fiscal 2020 compared to 34.5% for the third quarter of fiscal
2019. The decrease in gross profit margin was primarily driven by changes in the
mix of products sold and pressure from shrink, offset slightly by the benefit of
reduced promotional events during the quarter.
Operating Expenses. Our operating expenses are composed of SG&A and depreciation
and amortization.
Selling, General & Administrative. SG&A for the third quarter of fiscal 2020
increased 22.9% to $6.1 billion from $4.9 billion for the third quarter of
fiscal 2019. As a percentage of net sales, SG&A was 18.1% for the third quarter
of fiscal 2020 compared to 18.2% for the third quarter of fiscal 2019. The
decrease in SG&A as a percentage of sales was primarily driven by leverage
resulting from a positive comparable sales environment, partially offset by an
additional $354 million of expense related to the expansion of our associate pay
and benefits as part of our COVID-19 response to support our associates and an
additional $59 million of operational COVID-related expenses.
Depreciation and Amortization. Depreciation and amortization increased 6.0% to
$528 million for the third quarter of fiscal 2020 from $498 million for the
third quarter of fiscal 2019. As a percentage of net sales, depreciation and
amortization was 1.6% for the third quarter of fiscal 2020 compared to 1.8% for
the third quarter of fiscal 2019. The decrease in depreciation and amortization
as a percentage of net sales primarily reflected leverage resulting from a
positive comparable sales environment and timing of asset additions, partially
offset by strategic investments in the business.
Interest and Other, net. Interest and other, net, was $329 million for the third
quarter of fiscal 2020 compared to $280 million for the third quarter of fiscal
2019. Interest and other, net, as a percentage of net sales was 1.0% for the
third quarter of both fiscal 2020 and fiscal 2019, and primarily reflected
higher interest expense resulting from higher debt balances offset by leverage
resulting from a positive comparable sales environment.
Provision for Income Taxes. Our combined effective income tax rate was 24.1% for
the third quarter of fiscal 2020 compared to 24.5% for the third quarter of
fiscal 2019.
Diluted Earnings per Share. Diluted earnings per share were $3.18 for the third
quarter of fiscal 2020 compared to $2.53 for the third quarter of fiscal 2019.
The increase in diluted earnings per share for the third quarter of fiscal 2020
reflected the impact of a positive comparable sales environment, partially
offset by the additional expenses incurred in response to COVID-19.
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Fiscal 2020 and Fiscal 2019 Nine Month Comparisons
                                                                                Nine Months Ended
                                                           November 1,                                    November 3,
                                                               2020                                           2019
                                                                         % of                                           % of
dollars in millions                                $                   Net Sales                  $                   Net Sales
Net sales                                    $    99,849                                    $    84,443
Gross profit                                      34,022                      34.1  %            28,836                      34.1  %
Operating expenses:
Selling, general and administrative               18,260                      18.3               14,926                      17.7
Depreciation and amortization                      1,567                       1.6                1,470                       1.7
Total operating expenses                          19,827                      19.9               16,396                      19.4
Operating income                                  14,195                      14.2               12,440                      14.7
Interest and other (income) expense:
Interest and investment income                       (37)                        -                  (56)                     (0.1)
Interest expense                                   1,010                       1.0                  892                       1.1
Interest and other, net                              973                       1.0                  836                       1.0
Earnings before provision for income taxes        13,222                      13.2               11,604                      13.7
Provision for income taxes                         3,213                       3.2                2,843                       3.4
Net earnings                                 $    10,009                      10.0  %       $     8,761                      10.4  %


-----

Note: Certain percentages may not sum to totals due to rounding.

Nine Months Ended


                                                                                          November 3,
Selected financial and sales data:                              November 1, 2020             2019                % Change
Comparable sales (% change)                                                  18.3%                3.0%                    N/A
Comparable customer transactions (%
change) (1)                                                                   7.4%                1.1%                    N/A
Comparable average ticket (% change) (1)                                     10.3%                1.9%                    N/A
Customer transactions (in millions) (1)                                    1,339.5             1,246.4                   7.5%
Average ticket (1) (2)                                        $           73.90          $    67.00                     10.3%
Sales per retail square foot (1) (3)                          $          549.26          $   464.68                     18.2%
Diluted earnings per share                                    $            9.28          $     7.96                     16.6%


-----
(1)Does not include results for the legacy Interline Brands business, now
operating as a part of The Home Depot Pro.
(2)Average ticket represents the average price paid per transaction and is used
by management to monitor the performance of the Company, as it represents a
primary driver in measuring sales performance.
(3)Sales per retail square foot represents sales divided by the retail store
square footage. Sales per retail square foot is a measure of the efficiency of
sales based on the total square footage of our stores and is used by management
to monitor the performance of the Company as an indicator of the productivity of
owned and leased square footage for retail operations.
Sales. We assess our sales performance by evaluating both net sales and
comparable sales.
Net Sales. For the first nine months of fiscal 2020, net sales increased 18.2%
to $99.8 billion from $84.4 billion for the first nine months of fiscal 2019.
The increase in net sales for the first nine months of fiscal 2020 primarily
reflected the impact of positive comparable sales driven by an increase in
comparable average ticket and comparable customer transactions. Online sales,
which consist of sales generated online through our websites for products picked
up in our stores or delivered to customer locations, represented 14.0% of net
sales and grew 87.0% during the first nine months of fiscal 2020. The increase
in online sales for the first nine months of fiscal 2020 was driven in large
part by the impact of COVID-19, with customers turning online for their shopping
needs. A stronger U.S. dollar negatively impacted sales growth by $356 million
for the first nine months of fiscal 2020.
Comparable Sales. For the first nine months of fiscal 2020, total comparable
sales increased 18.3%, consisting of a 10.3% increase in comparable average
ticket and a 7.4% increase in comparable customer transactions. This
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increase reflected a number of factors, including increased consumer demand
across our core categories and the execution of our strategic efforts to drive
an enhanced interconnected experience in both the physical and digital worlds.
The increase in comparable average ticket and comparable customer transactions
for the first nine months of fiscal 2020 was primarily driven by an increase in
the number of products sold per transaction and stronger online customer
engagement.
During the first nine months of fiscal 2020, 11 of our 14 merchandising
departments posted double-digit positive comparable sales, while Kitchen and
Bath, Plumbing, and Flooring posted mid-to-high single-digit positive comparable
sales when compared to last year.
Gross Profit. For the first nine months of fiscal 2020, gross profit increased
18.0% to $34.0 billion from $28.8 billion for the first nine months of fiscal
2019. Gross profit as a percentage of net sales, or gross profit margin, was
34.1% for the first nine months of both fiscal 2020 and fiscal 2019, reflecting
the benefit from lower promotional activity as we cancelled or modified certain
annual merchandising events in response to COVID-19; this benefit was partially
offset by higher shrink, supply chain expense and a change in product mix.
Operating Expenses. Our operating expenses are composed of SG&A and depreciation
and amortization.
Selling, General & Administrative. SG&A increased 22.3% to $18.3 billion for the
first nine months of fiscal 2020 from $14.9 billion for the first nine months of
fiscal 2019. As a percentage of net sales, SG&A was 18.3% for the first nine
months of fiscal 2020 compared to 17.7% for the first nine months of fiscal
2019. The increase in SG&A as a percentage of net sales for the first nine
months of fiscal 2020 was primarily driven by an additional $1.7 billion of
expense related to expanded associate pay and benefits offered in response to
COVID-19 and an additional $183 million of operational expense related to
COVID-19, partially offset by leverage resulting from a positive comparable
sales environment.
Depreciation and Amortization. Depreciation and amortization increased 6.6% to
$1.6 billion for the first nine months of fiscal 2020 from $1.5 billion for the
first nine months of fiscal 2019. As a percentage of net sales, depreciation and
amortization was 1.6% for the first nine months of fiscal 2020 compared to 1.7%
for the first nine months of fiscal 2019. The decrease in depreciation and
amortization as a percentage of net sales primarily reflected leverage resulting
from a positive comparable sales environment and timing of asset additions,
partially offset by strategic investments in the business.
Interest and Other, net. Interest and other, net was $973 million for the first
nine months of fiscal 2020, compared to $836 million for the first nine months
of fiscal 2019. As a percentage of net sales, interest and other, net was 1.0%
for the first nine months of both fiscal 2020 and fiscal 2019, primarily
reflecting increased interest expense resulting from higher debt balances offset
by leverage resulting from a positive comparable sales environment.
Provision for Income Taxes. Our combined effective income tax rate was 24.3% for
the first nine months of fiscal 2020 compared to 24.5% for the first nine months
of fiscal 2019.
Diluted Earnings per Share. Diluted earnings per share were $9.28 for the first
nine months of fiscal 2020, compared to $7.96 for the first nine months of
fiscal 2019. The increase in diluted earnings per share for the first nine
months of fiscal 2020 reflected the impact of a positive comparable sales
environment, partially offset by the additional expenses incurred in response to
COVID-19.
Non-GAAP Financial Measures
To provide clarity, internally and externally, about our operating performance,
we supplement our reporting with certain non-GAAP financial measures. However,
this supplemental information should not be considered in isolation or as a
substitute for the related GAAP measures. Non-GAAP financial measures presented
herein may differ from similar measures used by other companies.
Return on Invested Capital. We believe ROIC is meaningful for investors and
management because it measures how effectively we deploy our capital base. We
define ROIC as NOPAT, a non-GAAP financial measure, for the most recent
twelve-month period, divided by average debt and equity. We define average debt
and equity as the average of beginning and ending long-term debt (including
current installments) and equity for the most recent twelve-month period.
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The calculation of ROIC, together with a reconciliation of NOPAT to net earnings
(the most comparable GAAP measure), follows:
                                      Twelve Months Ended
                                 November 1,      November 3,
dollars in millions                 2020              2019
Net earnings                    $   12,490       $    11,105
Interest and other, net              1,265             1,101
Provision for income taxes           3,843             3,612
Operating income                    17,598            15,818
Income tax adjustment (1)           (4,252)           (3,845)
NOPAT                           $   13,346       $    11,973

Average debt and equity         $   32,095       $    26,520

ROIC                                  41.6  %           45.1  %


-----
(1)Income tax adjustment is defined as operating income multiplied by our
effective tax rate for the trailing twelve months.
Additional Information
For information on accounting pronouncements that have impacted or are expected
to materially impact our consolidated financial position, results of operations
or cash flows, see   Note 1   to our consolidated financial statements.

                        Liquidity and Capital Resources
Cash and Cash Equivalents
At November 1, 2020, we had $14.7 billion in cash and cash equivalents, of which
$1.5 billion was held by our foreign subsidiaries. We currently believe that our
current cash position, access to the long-term debt capital markets, cash flow
generated from operations, and funds available under our commercial paper
programs should be sufficient not only for our operating requirements but also
to enable us to complete our capital expenditure programs, fund dividend
payments and any required long-term debt payments through the next several
fiscal years, and complete the acquisition of HD Supply. In addition, we believe
that we have the ability to obtain alternative sources of financing, if
necessary.
We remain committed to our strategic investment program. However, given the
current uncertainty related to COVID-19 and the priority around safety, as well
as the complexities of the current operating environment, we have decided to
postpone some of our in-store investments. As a result, we now expect that our
capital expenditures for fiscal 2020 will be less than initially planned and
that some spending originally planned for fiscal 2020 will move to fiscal 2021.
In addition, we may further adjust our capital expenditures as necessary or
appropriate to support the operations of the business.
Debt and Derivatives
In March 2020, we expanded our commercial paper programs from $3.0 billion to
$6.0 billion. All of our short-term borrowings in the first nine months of
fiscal 2020 were under these commercial paper programs, and the maximum amount
outstanding at any time was $1.0 billion. In connection with these programs, we
have back-up credit facilities with a consortium of banks for borrowings up to
$6.5 billion, which consist of (1) a 364-day $3.5 billion credit facility that
we entered into in March 2020 in connection with the expanded commercial paper
program and is scheduled to expire in March 2021, (2) a five-year $2.0 billion
credit facility scheduled to expire in December 2022, and (3) a 364-day
$1.0 billion credit facility scheduled to expire in December 2020. We may enter
into additional credit facilities or other debt financing.
At November 1, 2020, we were in compliance with all of the covenants contained
in the credit facilities, and none of these covenants are expected to impact our
liquidity or capital resources. At November 1, 2020, there were no outstanding
borrowings under our commercial paper programs. We also issued $5.0 billion of
senior notes in March 2020. See   Note 4   to our consolidated financial
statements for further discussion of our senior notes issuances. We issue senior
notes from time to time as part of our capital management strategy.
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We use derivative and nonderivative financial instruments in the management of
our exposure to fluctuations in foreign currency exchange rates and interest
rates on certain long-term debt. See   Note 4   to our consolidated financial
statements for further discussion of these financial instruments.
Share Repurchases
In February 2019, our Board of Directors authorized $15.0 billion in share
repurchases, of which approximately $7.7 billion remained available as of
November 1, 2020. In the first nine months of fiscal 2020, we had cash payments
of $791 million for repurchases of our common stock through open market
purchases. On March 13, 2020, we suspended our share repurchases until such time
as we deem appropriate. We currently expect to resume share repurchases in
fiscal 2021.
Cash Flows Summary
Operating Activities. Cash flow generated from operations provides us with a
significant source of liquidity. Our operating cash flows result primarily from
cash received from our customers, offset by cash payments we make for products
and services, associate compensation, operations, and occupancy costs.
Cash provided by or used in operating activities is also subject to changes in
working capital. Working capital at any point in time is subject to many
variables, including seasonality, inventory management and category expansion,
the timing of cash receipts and payments, vendor payment terms, and fluctuations
in foreign exchange rates.
Net cash provided by operating activities increased by $6.6 billion in the first
nine months of fiscal 2020 compared to the first nine months of fiscal 2019 and
was primarily driven by an increase in net earnings and changes in working
capital associated with accounts payable and accrued expenses and merchandise
inventories.
Investing Activities. Cash used in investing activities decreased by $429
million in the first nine months of fiscal 2020 compared to the first nine
months of fiscal 2019, primarily as the result of decreased capital expenditures
given the current uncertainty related to COVID-19 and our decision to postpone
certain of our strategic investments.

Financing Activities. Cash used in financing activities in the first nine months
of fiscal 2020 primarily reflected $5.0 billion of net proceeds from long-term
debt, offset by $4.8 billion of cash dividends paid, $1.8 billion of repayments
of long-term debt, $974 million of net repayments of short-term debt, and $791
million of share repurchases prior to our suspension of share repurchases in
March 2020.
Cash used in financing activities in the first nine months of fiscal 2019
primarily reflected $4.5 billion of cash dividends paid, $3.9 billion of share
repurchases, $1.0 billion of net repayments of long-term debt, and $644 million
of net repayments of short-term debt, partially offset by $1.4 billion of net
proceeds from long-term debt.

                          Critical Accounting Policies
There were no changes during the first nine months of fiscal 2020 to our
critical accounting policies as disclosed in the 2019 Form 10-K. Our significant
accounting policies are disclosed in   Note 1   to our consolidated financial
statements.

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