x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended July 31, 2009
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from ______ to ______
|
Commission file number
1-7898
|
LOWE'S
COMPANIES, INC.
|
(Exact name of registrant as specified in its charter)
|
NORTH CAROLINA
|
56-0578072
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
1000 Lowe's Blvd., Mooresville, NC
|
28117
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant's telephone number, including area code
|
(704) 758-1000
|
Large accelerated filer
x
|
Accelerated filer
o
|
Non-accelerated filer
o
|
Smaller reporting company
o
|
CLASS
|
OUTSTANDING AT AUGUST 28, 2009
|
|
Common Stock, $.50 par value
|
1,477,558,822
|
|
•
|
Level 1
-
inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities
|
•
|
Level 2
-
inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly
|
•
|
Level 3
-
inputs to the valuation techniques that are unobservable for the assets or liabilities
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||||||
Quoted Prices in Active Markets for Identical Assets
|
Significant Other Observable Inputs
|
Significant Unobservable Inputs
|
||||||||||||||
(In millions)
|
July 31, 2009
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Cash equivalents
|
||||||||||||||||
Available-for-sale securities
|
$ | 37 | $ | - | $ | 37 | $ | - | ||||||||
Short-term investments
|
||||||||||||||||
Available-for-sale securities
|
388 | 68 | 320 | - | ||||||||||||
Trading securities
|
36 | 36 | - | - | ||||||||||||
Long-term investments
|
||||||||||||||||
Available-for-sale securities
|
900 | - | 900 | - |
Fair Value Measurements at Reporting Date Using
|
||||||||||||||||
Quoted Prices in Active Markets for Identical Assets
|
Significant Other Observable Inputs
|
Significant Unobservable Inputs
|
||||||||||||||
(In millions)
|
August 1, 2008
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Short-term investments
|
||||||||||||||||
Available-for-sale securities
|
$ | 338 | $ | 109 | $ | 229 | $ | - | ||||||||
Trading securities
|
39 | 39 | - | - | ||||||||||||
Long-term investments
|
||||||||||||||||
Available-for-sale securities
|
798 | - | 798 | - |
Fair Value Measurements at Reporting Date Using
|
||||||||||||||||
Quoted Prices in Active Markets for Identical Assets
|
Significant Other Observable Inputs
|
Significant Unobservable Inputs
|
||||||||||||||
(In millions)
|
January 30, 2009
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Short-term investments
|
||||||||||||||||
Available-for-sale securities
|
$ | 385 | $ | 81 | $ | 304 | $ | - | ||||||||
Trading securities
|
31 | 31 | - | - | ||||||||||||
Long-term investments
|
||||||||||||||||
Available-for-sale securities
|
253 | - | 253 | - |
Fair Value Measurements Using
|
||||||||||||||||||||
Quarter Ended
|
Quoted Prices in Active Markets for Identical Assets
|
Significant Other Observable Inputs
|
Significant Unobservable Inputs
|
Total Gains
|
||||||||||||||||
(In millions)
|
July 31, 2009
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
(Losses)
|
|||||||||||||||
Long-lived assets held-for-use
|
$ | 44 | $ | - | $ | - | $ | 44 | $ | (25 | ) |
July 31, 2009
|
||||||||
Carrying
|
Fair
|
|||||||
(In millions)
|
Amount
|
Value
|
||||||
Long-term debt (excluding capital leases and other)
|
$ | 4,736 | $ | 5,133 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions)
|
July 31, 2009
|
August 1, 2008
|
July 31, 2009
|
August 1, 2008
|
||||||||||||
Extended warranty deferred revenue, beginning of period
|
$ | 496 | $ | 430 | $ | 479 | $ | 407 | ||||||||
Additions to deferred revenue
|
62 | 56 | 114 | 105 | ||||||||||||
Deferred revenue recognized
|
(37 | ) | (30 | ) | (72 | ) | (56 | ) | ||||||||
Extended warranty deferred revenue, end of period
|
$ | 521 | $ | 456 | $ | 521 | $ | 456 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions)
|
July 31, 2009
|
August 1, 2008
|
July 31, 2009
|
August 1, 2008
|
||||||||||||
Liability for extended warranty claims, beginning of period
|
$ | 18 | $ | 12 | $ | 17 | $ | 14 | ||||||||
Accrual for claims incurred
|
17 | 13 | 30 | 25 | ||||||||||||
Claim payments
|
(14 | ) | (8 | ) | (26 | ) | (22 | ) | ||||||||
Liability for extended warranty claims, end of period
|
$ | 21 | $ | 17 | $ | 21 | $ | 17 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions)
|
July 31, 2009
|
August 1, 2008
|
July 31, 2009
|
August 1, 2008
|
||||||||||||
Net earnings
|
$ | 759 | $ | 938 | $ | 1,235 | $ | 1,545 | ||||||||
Foreign currency translation adjustments
|
39 | 1 | 50 | 1 | ||||||||||||
Net unrealized investment gains (losses)
|
2 | 2 | 2 | (1 | ) | |||||||||||
Comprehensive income
|
$ | 800 | $ | 941 | $ | 1,287 | $ | 1,545 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions, except per share data)
|
July 31, 2009
|
August 1, 2008
|
July 31, 2009
|
August 1, 2008
|
||||||||||||
Basic earnings per common share:
|
||||||||||||||||
Net earnings
|
$ | 759 | $ | 938 | $ | 1,235 | $ | 1,545 | ||||||||
Less: Net earnings allocable to participating securities
|
(6 | ) | (5 | ) | (10 | ) | (8 | ) | ||||||||
Net earnings allocable to common shares
|
$ | 753 | $ | 933 | $ | 1,225 | $ | 1,537 | ||||||||
Weighted-average common shares outstanding
|
1,464 | 1,455 | 1,463 | 1,454 | ||||||||||||
Basic earnings per common share
|
$ | 0.51 | $ | 0.64 | $ | 0.84 | $ | 1.06 | ||||||||
Diluted earnings per common share:
|
||||||||||||||||
Net earnings
|
$ | 759 | $ | 938 | $ | 1,235 | $ | 1,545 | ||||||||
Net earnings adjustment for interest on convertible notes, net of tax
|
- | - | - | 1 | ||||||||||||
Net earnings, as adjusted
|
759 | 938 | 1,235 | 1,546 | ||||||||||||
Less: Net earnings allocable to participating securities
|
(6 | ) | (5 | ) | (10 | ) | (8 | ) | ||||||||
Net earnings allocable to common shares
|
$ | 753 | $ | 933 | $ | 1,225 | $ | 1,538 | ||||||||
Weighted-average common shares outstanding
|
1,464 | 1,455 | 1,463 | 1,454 | ||||||||||||
Dilutive effect of non-participating share-based awards
|
2 | 2 | 2 | 2 | ||||||||||||
Dilutive effect of convertible notes
|
- | 13 | - | 17 | ||||||||||||
Weighted-average common shares, as adjusted
|
1,466 | 1,470 | 1,465 | 1,473 | ||||||||||||
Diluted earnings per common share
|
$ | 0.51 | $ | 0.63 | $ | 0.84 | $ | 1.04 |
Net interest expense is comprised of the following:
|
||||||||||||||||
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions)
|
July 31, 2009
|
August 1, 2008
|
July 31, 2009
|
August 1, 2008
|
||||||||||||
Long-term debt
|
$ | 73 | $ | 73 | $ | 146 | $ | 146 | ||||||||
Short-term borrowings
|
- | 2 | 2 | 7 | ||||||||||||
Capitalized leases
|
7 | 7 | 14 | 16 | ||||||||||||
Interest income
|
(5 | ) | (12 | ) | (10 | ) | (21 | ) | ||||||||
Interest capitalized
|
(4 | ) | (7 | ) | (8 | ) | (15 | ) | ||||||||
Other
|
5 | 6 | 10 | 12 | ||||||||||||
Interest - net
|
$ | 76 | $ | 69 | $ | 154 | $ | 145 |
Three Months Ended
|
Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Period
|
Percentage Increase / (Decrease) in Dollar Amounts from Prior Period
|
||||||
July 31, 2009
|
August 1, 2008
|
2009 vs. 2008
|
2009 vs. 2008
|
|||||
Net sales
|
100.00
|
%
|
100.00
|
%
|
N/A
|
(4.6)
|
%
|
|
Gross margin
|
34.84
|
34.34
|
50
|
(3.2)
|
||||
Expenses:
|
||||||||
Selling, general and administrative
|
22.45
|
20.78
|
167
|
3.1
|
||||
Store opening costs
|
0.10
|
0.14
|
(4)
|
(32.5)
|
||||
Depreciation
|
2.95
|
2.63
|
32
|
7.0
|
||||
Interest - net
|
0.55
|
0.47
|
8
|
10.6
|
||||
Total expenses
|
26.05
|
24.02
|
203
|
3.5
|
||||
Pre-tax earnings
|
8.79
|
10.32
|
(153)
|
(18.8)
|
||||
Income tax provision
|
3.31
|
3.86
|
(55)
|
(18.3)
|
||||
Net earnings
|
5.48
|
%
|
6.46
|
%
|
(98)
|
(19.0)
|
%
|
|
EBIT margin
(1)
|
9.34
|
%
|
10.80
|
%
|
(146)
|
(17.5)
|
%
|
Six Months Ended
|
Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Period
|
Percentage Increase / (Decrease) in Dollar Amounts from Prior Period
|
||||||
July 31, 2009
|
August 1, 2008
|
2009 vs. 2008
|
2009 vs. 2008
|
|||||
Net sales
|
100.00
|
%
|
100.00
|
%
|
N/A
|
(3.2)
|
%
|
|
Gross margin
|
35.12
|
34.50
|
62
|
(1.4)
|
||||
Expenses:
|
||||||||
Selling, general and administrative
|
23.56
|
21.65
|
191
|
5.5
|
||||
Store opening costs
|
0.11
|
0.14
|
(3)
|
(29.4)
|
||||
Depreciation
|
3.15
|
2.85
|
30
|
6.9
|
||||
Interest - net
|
0.60
|
0.55
|
5
|
6.3
|
||||
Total expenses
|
27.42
|
25.19
|
223
|
5.4
|
||||
Pre-tax earnings
|
7.70
|
9.31
|
(161)
|
(20.0)
|
||||
Income tax provision
|
2.89
|
3.49
|
(60)
|
(19.9)
|
||||
Net earnings
|
4.81
|
%
|
5.82
|
%
|
(101)
|
(20.1)
|
%
|
|
EBIT margin
(1)
|
8.30
|
%
|
9.86
|
%
|
(156)
|
(18.5)
|
%
|
Three Months Ended
|
Six Months Ended
|
||||||||||||
Other metrics:
|
July 31, 2009
|
August 1, 2008
|
July 31, 2009
|
August 1, 2008
|
|||||||||
Comparable store sales changes
(2)
|
(9.5) |
%
|
(5.3) |
%
|
(8.2) |
%
|
(6.7) | % | |||||
Total customer transactions (in millions)
|
225 | 217 | 411 | 398 | |||||||||
Average ticket (3) | $ | 61.43 | $ | 66.95 | $ | 62.46 | $ | 66.62 | |||||
At end of period:
|
|||||||||||||
Number of stores
|
1,688 | 1,577 | |||||||||||
Sales floor square feet (in millions)
|
191 | 179 | |||||||||||
Average store size selling square feet (in thousands)
(4)
|
113 | 113 |
|
(1)
We define EBIT margin as earnings before interest and taxes as a percentage of sales (operating margin).
|
|
(2)
We define a comparable store as a store that has been open longer than 13 months. A store that is identified for relocation is no longer considered comparable one month prior to its relocation. The relocated store is considered comparable
once it has been open longer than 13 months.
|
|
(3)
We define average ticket as net sales divided by the total number of customer transactions.
|
|
(4)
We define average store size selling square feet as sales floor square feet divided by the number of stores open at the end of the period.
|
Current Debt Ratings
|
S&P
|
Moody’s
|
Fitch
|
Commercial Paper
|
A1
|
P1
|
F1
|
Senior Debt
|
A+
|
A1
|
A+
|
Outlook
|
Negative
|
Stable
|
Negative
|
(a)
|
The annual meeting of shareholders was held on May 29, 2009.
|
(b)
|
Directors elected at the meeting were: Peter C. Browning, Marshall O. Larsen, Stephen F. Page, and O. Temple Sloan, Jr.
|
(c)
|
The matters voted upon at the meeting and the results of the voting were as follows:
|
(1)
|
Election of Directors:
|
(2)
|
Approval of the Amendment to the Lowe’s Companies, Inc. 2006 Long-Term Incentive Plan:
|
FOR
|
AGAINST
|
ABSTAIN
|
BROKER NON VOTE
|
1,047,977,617
|
97,415,525
|
2,877,713
|
184,544,330
|
(3)
|
Ratification of Appointment of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm for the 2009 Fiscal Year:
|
FOR
|
AGAINST
|
ABSTAIN
|
1,318,624,058
|
12,926,500
|
1,264,627
|
(4)
|
Approval of the Amendment to the Lowe’s Companies, Inc. Articles of Incorporation Eliminating All Remaining Supermajority Vote Requirements:
|
FOR
|
AGAINST
|
ABSTAIN
|
1,314,827,585
|
9,324,929
|
5,692,304
|
(5)
|
Shareholder Proposal Entitled “Reincorporating in North Dakota”:
|
FOR
|
AGAINST
|
ABSTAIN
|
BROKER NON VOTE
|
33,377,596
|
1,106,728,363
|
8,166,295
|
184,542,931
|
(6)
|
Shareholder Proposal Entitled “Healthcare Reform Principles”:
|
FOR
|
AGAINST
|
ABSTAIN
|
BROKER NON VOTE
|
42,558,235
|
928,301,593
|
177,412,027
|
184,543,330
|
(7)
|
Shareholder Proposal Entitled “Separating the Roles of Chairman and CEO”:
|
FOR
|
AGAINST
|
ABSTAIN
|
BROKER NON VOTE
|
154,401,582
|
969,784,864
|
24,084,208
|
184,544,531
|
LOWE'S COMPANIES, INC.
|
||
September 1, 2009
Date
|
/s/ Matthew V. Hollifield
Matthew V. Hollifield
Senior Vice President and Chief Accounting Officer
|
Exhibit No.
|
Description
|
|
3.1
|
Restated and Amended Charter
|
|
12.1
|
Statement Re Computation of Ratio of Earnings to Fixed Charges
|
|
15.1
|
Deloitte & Touche LLP Letter Re Unaudited Interim Financial Information
|
|
31.1
|
Certification Pursuant to Rules 13a-14(a) and 15d-14(a) Under the Securities Exchange Act of 1934, as Amended
|
|
31.2
|
Certification Pursuant to Rules 13a-14(a) and 15d-14(a) Under the Securities Exchange Act of 1934, as Amended
|
|
32.1
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
32.2
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101.INS
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
Fiscal Years Ended On
|
Six Months Ended
|
|||||||||||||||||||
January 28,
|
February 3,
|
February 2,
|
February 1,
|
January 30,
|
August 1,
|
July 31,
|
||||||||||||||
2005
|
2006
|
2007
|
2008
|
2009
|
2008
|
2009
|
||||||||||||||
Earnings:
|
||||||||||||||||||||
Earnings Before Income Taxes
|
$ | 3,520 | $ | 4,496 | $ | 4,998 | $ | 4,511 | $ | 3,506 | $ | 2,470 | $ | 1,976 | ||||||
Add: Fixed Charges
|
310 | 340 | 344 | 424 | 479 | 245 | 234 | |||||||||||||
Less: Capitalized Interest
|
(28) | (28) | (32) | (65) | (36) | (15) | (8) | |||||||||||||
Adjusted Earnings
|
$ | 3,802 | $ | 4,808 | $ | 5,310 | $ | 4,870 | $ | 3,949 | $ | 2,700 | $ | 2,202 | ||||||
Fixed Charges:
|
||||||||||||||||||||
Interest Expense
(1)
|
$ | 220 | $ | 231 | $ | 238 | $ | 301 | $ | 346 | $ | 178 | $ | 166 | ||||||
Rental Expense
(2)
|
90 | 109 | 106 | 123 | 133 | 67 | 68 | |||||||||||||
Total Fixed Charges
|
$ | 310 | $ | 340 | $ | 344 | $ | 424 | $ | 479 | $ | 245 | $ | 234 |
Ratio of Earnings to Fixed Charges
|
12.3
|
14.1
|
15.4
|
11.5
|
8.2
|
11.0
|
9.4
|
• Registration Statement No. 33-29772 on Form S-8,
|
• Registration Statement No. 33-54499 on Form S-8,
|
• Registration Statement No. 333-34631 on Form S-8,
|
• Registration Statement No. 333-89471 on Form S-8,
|
• Registration Statement No. 333-73408 on Form S-8,
|
• Registration Statement No. 333-97811 on Form S-8,
|
• Registration Statement No. 333-114435 on Form S-8,
|
• Registration Statement No. 333-137750 on Form S-3ASR,
|
• Registration Statement No. 333-138031 on Form S-8,
|
• Registration Statement No. 333-143266 on Form S-8, and
|
• Registration Statement No. 333-155748 on Form S-3ASR.
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
September 1, 2009
|
/s/ Robert A. Niblock
|
|
Date
|
Robert A. Niblock
Chairman of the Board and Chief Executive Officer
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
September 1, 2009
|
/s/ Robert F. Hull, Jr.
|
|
Date
|
Robert F. Hull, Jr.,
Executive Vice President and Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|