UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 16, 2018
LOWES COMPANIES, INC.
(Exact Name of Registrant as Specified in Charter)
North Carolina | 1-7898 | 56-0578072 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
1000 Lowes Blvd., Mooresville, NC |
28117 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (704) 758-1000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 |
Results of Operations and Financial Condition. |
On August 22, 2018, Lowes Companies, Inc. (the Company) issued a press release and related infographic, furnished as Exhibits 99.1 and 99.2, respectively, and incorporated herein by reference, announcing the Companys financial results for its second quarter ended August 3, 2018.
The information provided pursuant to Item 2.02, including the exhibits attached hereto, is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.
Item 2.05 |
Costs Associated with Exit or Disposal Activities. |
As part of a strategic reassessment, on August 17, 2018, the Company committed to exit its Orchard Supply Hardware (Orchard) operations in order to focus on its core home improvement business. The Company acquired Orchard, a retail hardware and backyard company, in 2013. The company expects to close all 99 Orchard stores, which are located in California, Oregon and Florida, as well as the distribution facility that services the Orchard stores, by the end of fiscal 2018. To facilitate an orderly wind-down, the Company intends to conduct store closing sales and has partnered with Hilco Merchant Services to help manage the process and provide a seamless experience for customers.
During the quarter ended August 3, 2018, the Company recorded $230 million of non-cash pre-tax charges associated with its Orchard operations, related to long-lived asset impairments and discontinued projects. In the second half of fiscal 2018, the Company expects to recognize additional pre-tax costs related to the planned store closings of $390 to $475 million, including costs associated with lease obligations, accelerated depreciation and amortization, and severance obligations. Pre-tax charges associated with lease obligations, net of estimated sublease income, are estimated to range from $280 to $360 million. Pre-tax charges associated with accelerated depreciation and amortization are expected to be approximately $100 million. Pre-tax charges associated with severance obligations are estimated to range from $10 to $15 million. In addition, the Company estimates that the net cash outflow associated with the store closures, consisting of net payments on the lease and severance obligations prior to any associated tax benefits, to be approximately $290 to $375 million. All estimated amounts are subject to change until finalized.
Item 2.06 |
Material Impairments. |
The information contained in Item 2.05 relating to the asset impairments is incorporated into this Item 2.06 by reference.
Item 5.02 |
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Appointment of New Chief Financial Officer
On August 22, 2018, the Company announced the appointment of David M. Denton as Executive Vice President, Chief Financial Officer. Mr. Denton currently serves as Executive Vice President and Chief Financial Officer of CVS Health Corporation and will join the Company shortly after the closing of the CVS acquisition of Aetna, which is expected in the second half of 2018.
Mr. Denton, 53, has served as Executive Vice President and Chief Financial Officer of CVS Health Corporation, a pharmacy innovation company, since January 2010; Senior Vice President and Controller and Chief Accounting Officer of CVS Health Corporation from March 2008 until December 2009; Senior Vice President, Financial Administration of CVS Health Corporation and CVS Pharmacy, Inc. from April 2007 to March 2008. Mr. Denton is also a member of the Board of Directors of Tapestry, Inc. (formerly known as Coach, Inc.), a leading retailer of premium bags and luxury accessories.
On August 20, 2018, the Company and Mr. Denton entered into an offer letter (the Offer Letter). Pursuant to the Offer Letter, during the term of his employment with the Company, Mr. Denton will receive (i) an annual base salary of $925,000, (ii) eligibility for an annual cash incentive bonus with a target payout of 125% of Mr. Dentons annual base salary, provided that Mr. Dentons annual cash incentive bonus for the current fiscal year will be pro-rated, (iii) eligibility for an annual equity incentive award grant (consisting of a mixture of performance-based restricted share units, time-based restricted shares, stock appreciation rights, stock awards and/or stock options) with a target award value equal to $4,162,500, provided that Mr. Dentons annual equity incentive award grant for the current fiscal year will be prorated in value and will consist of (a) time-based restricted shares with an award value of $890,500, which such grant will vest in full on the third anniversary of the grant date, and (b) nonqualified stock options with an award value of $890,500, which such grant will vest in equal annual installments on the first three anniversaries of the grant date, in each case generally subject to Mr. Dentons continued employment with the Company through the applicable vesting date, (iv) a sign-on cash bonus in the amount of $1,000,000, payable on or about February 1, 2019, subject to repayment in the event Mr. Denton resigns prior to the first anniversary of his start date, (v) reimbursement for and/or payment of certain expenses incurred by Mr. Denton in connection with his relocation to the Charlotte, North Carolina area, (vi) reimbursement of up to $12,000 annually for costs incurred by Mr. Denton for his personal tax and financial planning, (vii) four weeks of vacation per year and (viii) an annual executive physical exam. Mr. Denton is also eligible to participate in those change in control, severance, retirement, welfare and fringe benefits programs available to senior executives of the Company generally. Pursuant to the Companys Confidentiality and Non-Competition Agreement, which is attached to the Offer Letter, Mr. Denton is subject to certain non-competition restrictions that apply from the date of his separation from service until the later of (x) twenty-four (24) months thereafter and (y) the last date of vesting of his unvested equity awards, certain non-solicitation restrictions that apply from the date of his separation from service until twenty-four (24) months thereafter and certain confidentiality restrictions that apply indefinitely.
The foregoing summary of Mr. Dentons compensation and terms of employment generally is not complete and is qualified in its entirety by the Offer Letter, a copy of which will be filed as an exhibit to the Companys Quarterly Report on Form 10-Q for the current fiscal quarter.
There are no family relationships between Mr. Denton and any director or executive officer of the Company, and Mr. Denton has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Approval of a Severance Plan for Senior Officers
On August 16, 2018, the Compensation Committee of the Board of Directors (the Board) of the Company approved a severance plan for senior officers of the Company (the Severance Plan for Senior Officers). All named executive officers of the Company other than Marvin R. Ellison, the Companys current Chief Executive Officer, Marshall A. Croom, the Companys current Chief Financial Officer, and Michael P. McDermott, the Companys current Chief Customer Officer, have been designated by the Compensation Committee of the Company to be participants in the Severance Plan for Senior Officers. In the event a named executive officers employment with the Company is terminated by the Company without Cause (as defined in the Severance Plan for Senior Officers) prior to the occurrence of a Change in Control (as defined in the Severance Plan for Senior Officers), subject to such named executive officer executing and not revoking a release of claims and restrictive covenant agreement, the Severance Plan for Senior Officers provides that the named executive officer will be eligible for (1) severance payments in an aggregate amount equal to the product of (x) two (2) and (y) the sum of the named executive officers annual base salary and target annual bonus, to be paid in equal installments over twenty-four (24) months in accordance with the Companys normal payroll practices, (2) continued participation in the employee health care plan maintained by the Company upon the same terms and conditions in effect from time to time for active employees of the Company until the earlier of (x) the second anniversary of such termination of employment and (y) the date the named executive officer becomes covered under another employers health care plan and (3) up to one (1) year of Company-paid outplacement services. Severance benefits may be forfeited or reduced in certain circumstances, including in connection with a named executive officers breach of the release of claims and restrictive covenant agreement or a named executive officers receipt of certain compensation from a third party during the twenty-four (24) month severance period. In the event a named executive officer would otherwise incur any excise tax liability as a result of any payments or benefits provided to the named executive officer that classify as excess parachute payments under Section 280G of the Internal Revenue Code of 1986, the named executive officer will either receive the payments and benefits in full or will have such payments and benefits reduced to the minimum extent necessary to avoid such excise tax liability, whichever of the foregoing results in the named executive officers receipt on an after-tax basis of the greatest amount of payments and benefits.
The Severance Plan for Senior Officers will be filed as an exhibit to the Companys Quarterly Report on Form 10-Q for the current fiscal quarter, and the description thereof set forth herein is qualified by and subject, in all respects, to the terms of the Severance Plan for Senior Officers to be filed as an exhibit to the Companys Quarterly Report on Form 10-Q for the current fiscal quarter.
Item 5.03 |
Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
At a meeting of the Companys Board held on August 17, 2018, the Board approved and adopted effective immediately amendments (the Amendments) to the Bylaws of the Company (the Bylaws) to reflect current legal requirements and corporate governance best practices, including but not limited to amendments that, among other things, (i) remove the requirement that the annual meeting of shareholders be held in May or June, (ii) require that a shareholders notice of nomination of a person for election to the Board be accompanied by certain questionnaires and representations, (iii) require that a shareholders notice of any business to be presented at any shareholder meeting be accompanied by a written questionnaire, (iv) provide that the chairman of any shareholder meeting or any other person entitled to preside or to act as secretary at such meeting shall have the power to adjourn or postpone the meeting to any other time, (v) require a shareholder nominees written confirmation of his or her intention to serve as director for the full term, (vi) clarify that the quorum requirements for the transaction of business at any meeting of the Board shall be a majority of the number of directors fixed by or pursuant to the Bylaws, or if no number is so fixed, a majority of directors in office immediately before the meeting begins, (vii) require that notice of any special meeting of the Board or any committee thereof be given at least twenty-four (24) hours before such meeting and (viii) remove the requirement that officers be elected annually just after the annual meeting of shareholders. The Bylaws were also amended to generally reflect internal consistency and clarity, as well as to avoid duplication.
The foregoing description of the Amendments does not purport to be complete and is qualified in its entirety by reference to the full text of the Bylaws, attached hereto as Exhibit 3.1 and incorporated herein by reference.
Item 5.05 |
Amendments to the Registrants Code of Ethics, or Waiver of a Provision of the Code of Ethics. |
On August 17, 2018, the Companys Board approved amendments to its Code of Business Conduct and Ethics (the Code) to, among other things, improve clarity and readability and to update and conform the Code to current governance best practices. The revised Code strengthens and updates provisions including those covering compliance with laws, conflicts of interest, fair dealing and competition, corporate opportunities and loyalty and compliance with the Code. The Code applies to (i) all employees of the Company and its affiliates, subsidiaries and its allied businesses around the world, including the principal executive officer, principal financial officer, and principal accounting officer and (ii) non-executive members the Companys Board of Directors when acting as members of the Companys Board of Directors or in any other matter related to the Company.
This summary is qualified in its entirety by reference to the full text of the Code, which can be found on the Companys website at www.lowes.com under Investor Relations Governance Code of Business Conduct and Ethics. The contents of the Companys website are not incorporated by reference in this report or made a part hereof for any purpose.
Item 7.01 |
Regulation FD Disclosure. |
On August 22, 2018, the Company issued a press release announcing the appointment of David M. Denton as Executive Vice President, Chief Financial Officer. A copy of the Companys press release is attached as Exhibit 99.3 to this Current Report on Form 8-K and is incorporated by reference into this Item 7.01.
This information, including Exhibit 99.3, is being furnished and shall not be deemed filed for purposes of Section 18 of the Exchange Act, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 |
Financial Statements and Exhibits. |
(d) Exhibits:
Forward-Looking Statements
This Current Report on Form 8-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements including words such as expects, intends, will and similar expressions are forward-looking statements. Forward-looking statements include, but are not limited to, statements about Lowes plans, objectives, priorities, expectations and intentions, and any statement of an assumption underlying any of the foregoing and other statements that are not historical facts. Although we believe that the expectations, opinions and comments reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and we can give no assurance that such statements will prove to be correct. Actual results may differ materially from those expressed or implied in such statements.
A wide variety of potential risks, uncertainties and other factors could materially affect our ability to achieve the results either expressed or implied by these forward-looking statements including, but not limited to our ability to successfully execute on our strategy and implement our strategic initiatives. For more information about these and other risks and uncertainties that we are exposed to, you should read the Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of OperationsCritical Accounting Policies and Estimates included in our most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the SEC) and the description of material changes thereto, if any, included in our Quarterly Reports on Form 10-Q or subsequent filings with the SEC.
The foregoing list of important factors that may affect future results is not exhaustive. We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, change in circumstances, future events or otherwise, except as may be required by law.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: August 22, 2018 | LOWES COMPANIES, INC. | |||||
By: |
/s/ Ross W. McCanless |
|||||
Name: | Ross W. McCanless | |||||
Title: Executive Vice President, General Counsel and Corporate Secretary |
Exhibit 3.1
BYLAWS
OF
LOWES COMPANIES, INC.
As Amended and Restated August 17, 2018
INDEX
ARTICLE I. OFFICES |
1 | |||||
ARTICLE II. SHAREHOLDERS |
1 | |||||
SECTION 1. |
ANNUAL MEETING | 1 | ||||
SECTION 2. |
SPECIAL MEETINGS | 1 | ||||
SECTION 3. |
PLACE OF MEETING | 2 | ||||
SECTION 4. |
NOTICE OF MEETING | 3 | ||||
SECTION 5. |
CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE | 3 | ||||
SECTION 6. |
VOTING LISTS | 3 | ||||
SECTION 7. |
QUORUM | 4 | ||||
SECTION 8. |
PROXIES; ELECTRONIC AUTHORIZATION | 4 | ||||
SECTION 9. |
VOTING OF SHARES | 5 | ||||
SECTION 10. |
CONDUCT OF MEETINGS | 5 | ||||
SECTION 11. |
NOMINATION OF DIRECTORS | 5 | ||||
SECTION 12. |
NOTICE OF BUSINESS | 9 | ||||
SECTION 13. |
ADJOURNED OR POSTPONED MEETING | 11 | ||||
SECTION 14. |
PROXY ACCESS | 11 | ||||
ARTICLE III. BOARD OF DIRECTORS | 16 | |||||
SECTION 1. |
GENERAL POWERS | 16 | ||||
SECTION 2. |
NUMBER, TENURE AND QUALIFICATIONS | 17 | ||||
SECTION 3. |
REGULAR MEETINGS | 17 | ||||
SECTION 4. |
SPECIAL MEETINGS | 17 | ||||
SECTION 5. |
NOTICE | 17 | ||||
SECTION 6. |
QUORUM | 18 | ||||
SECTION 7. |
MANNER OF ACTING | 18 | ||||
SECTION 8. |
VACANCIES | 18 | ||||
SECTION 9. |
COMPENSATION | 18 | ||||
SECTION 10. |
PRESUMPTION OF ASSENT | 18 | ||||
SECTION 11. |
ACTION WITHOUT MEETING | 18 | ||||
SECTION 12. |
COMMITTEES GENERALLY | 19 |
ARTICLE IV. INDEMNIFICATION |
19 | |||||
SECTION 1. |
INDEMNIFICATION | 19 | ||||
SECTION 2. |
LIMITATION ON INDEMNIFICATION | 19 | ||||
SECTION 3. |
BOARD DETERMINATION | 19 | ||||
SECTION 4. |
RELIANCE | 20 | ||||
SECTION 5. |
AGENTS AND EMPLOYEES | 20 | ||||
SECTION 6. |
EXPENSES | 20 | ||||
SECTION 7. |
INSURANCE | 20 | ||||
SECTION 8. |
VESTING | 20 | ||||
ARTICLE V. OFFICERS |
20 | |||||
SECTION 1. |
TITLES | 20 | ||||
SECTION 2. |
APPOINTMENT AND TERM OF OFFICE | 21 | ||||
SECTION 3. |
REMOVAL | 21 | ||||
SECTION 4. |
CHIEF EXECUTIVE OFFICER | 21 | ||||
SECTION 5. |
PRESIDENT | 21 | ||||
SECTION 6. |
VICE PRESIDENTS | 21 | ||||
SECTION 7. |
SECRETARY | 21 | ||||
SECTION 8. |
TREASURER | 21 | ||||
SECTION 9. |
CONTROLLER | 21 | ||||
ARTICLE VI. DEPARTMENTAL DESIGNATIONS |
22 | |||||
ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER |
22 | |||||
SECTION 1. |
CERTIFICATES FOR SHARES; NON-CERTIFICATED SHARES | 22 | ||||
SECTION 2. |
TRANSFER OF SHARES | 22 | ||||
SECTION 3. |
LOST CERTIFICATES | 23 | ||||
ARTICLE VIII. FISCAL YEAR |
23 | |||||
ARTICLE IX. DIVIDENDS |
23 | |||||
ARTICLE X. SEAL |
23 | |||||
ARTICLE XI. WAIVER OF NOTICE |
23 | |||||
ARTICLE XII. AMENDMENTS |
24 | |||||
ARTICLE XIII. CONSTRUCTION OF BYLAWS |
24 |
BYLAWS
OF
LOWES COMPANIES, INC.
As Amended and Restated August 17, 2018
ARTICLE I. OFFICES
The principal office of the corporation in the State of North Carolina shall be located in the County of Iredell. The registered office of the corporation, required by law to be continuously maintained in the State of North Carolina, may be, but need not be, identical with the principal office and shall be maintained at that location identified as the address of the business office of the registered agent with the North Carolina Secretary of State. The corporation may have such other offices either within or without the State of North Carolina, as the Board of Directors may designate or the business of the corporation may require from time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. ANNUAL MEETING . The annual meeting of shareholders shall be held each year on a day to be designated by the Board of Directors, at an hour to be designated by the Chairman of the Board, for the purpose of electing directors and for the transaction of such other business (other than director nominations, which are subject to the requirements of Section 11 or Section 14, as applicable, of this Article II) as may properly come before the meeting in accordance with Section 12 of this Article II. If the annual meeting shall not be held on the day designated by this Section 1, a substitute annual meeting shall be called in accordance with the provisions of Section 2 of this Article II. A meeting so called shall be designated and treated for all purposes as the annual meeting.
SECTION 2. SPECIAL MEETINGS .
(a) Special meetings of the shareholders for any purpose or purposes may be called by the Chief Executive Officer, Chairman of the Board or by a majority of the Board of Directors, and shall be called by the Secretary upon the written request of shareholders owning in the aggregate not less than twenty-five percent (25%) of the total number of shares of capital stock of the corporation outstanding and entitled to vote on the matter or matters to be brought before the proposed special meeting.
(b) A request to the Secretary of the corporation shall be signed by each shareholder, or a duly authorized agent of such shareholder, requesting the special meeting and shall set forth: (i) a statement of the specific proposal or proposals to be brought before the special meeting, the reasons for conducting such business at the special meeting and any material interest in such business of each shareholder requesting the special meeting and any
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Shareholder Associated Person (as defined in Section 11(g) of this Article II); and (ii) any other information that would be required to be set forth in a shareholders notice required to be delivered pursuant to Section 11 or Section 14 (with respect to director nominations) or Section 12 (with respect to other business) of this Article II, if such provisions were applicable; provided, however, that the provisions of Section 11, Section 12 or Section 14, as applicable, of this Article II shall continue to apply with respect to the nomination of directors and the proposal of other business to be conducted at such meeting. A request to call a special meeting shall include documentary evidence of each requesting shareholders record and beneficial ownership of the corporations shares of capital stock as of the date of such request.
(c) A special meeting requested by shareholders shall be held at such date and time as may be fixed by the Board of Directors; provided, however, that the date of any such special meeting shall be not more than 90 days after the request to call the special meeting is received by the Secretary. Notwithstanding the foregoing, a special meeting requested by shareholders shall not be held if (i) the Board of Directors calls or has called an annual or special meeting of shareholders to be held within 90 days after the Secretary receives the request for the special meeting and the Board of Directors determines in good faith that the business of such meeting includes (among any other matters properly brought before the annual meeting) the purpose or purposes specified in the request; or (ii) an annual or special meeting was held not more than 12 months before the date on which the request for a special meeting was delivered to the Secretary that included the purpose or purposes specified by the requesting shareholders in their request for a special meeting, with such determination being made in good faith by the Board of Directors.
(d) Business transacted at a special meeting requested by shareholders shall be limited to the purpose or purposes stated in the request for the special meeting; provided, however, that nothing herein shall prohibit the Board of Directors from submitting additional matters to shareholders at any such special meeting.
(e) Any shareholder may revoke a request for a special meeting at any time by written revocation delivered to the Secretary and, if, following such revocation, there are un-revoked requests from shareholders holding in the aggregate less than the requisite number of shares entitling the shareholders to request the calling of a special meeting, the Board of Directors, in its discretion, may cancel the special meeting.
SECTION 3. PLACE OF MEETING . The Board of Directors may designate any place, either within or without the State of North Carolina, as the place of meeting for any annual or special meeting of the shareholders. In the event the directors do not designate the place of meeting for either an annual or special meeting of the shareholders, the Chairman of the Board may designate the place of meeting. If the Chairman of the Board does not designate the place of meeting, the meeting shall be held at the offices of the corporation in Mooresville, North Carolina.
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SECTION 4. NOTICE OF MEETING . Written notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than 10 nor more than 60 days before the day of the meeting, by any means of communication permitted under or authorized by the North Carolina Business Corporation Act, including without limitation, in person; by electronic means; or by mail or private carrier, by or at the direction of the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. When a meeting is adjourned it shall not be necessary to give any notice of the adjourned meeting other than by announcement at the meeting at which the adjournment is taken unless a new record date for the adjourned meeting is or must be fixed, in which event notice shall be given to shareholders as of the new record date.
SECTION 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE . For the purpose of determining shareholders entitled to notice of or to vote at the meeting or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the corporation may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, 60 days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least 10 days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 70 days and, in case of a meeting of shareholders, not less than 10 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or of shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section 5, such determination shall apply to any adjournment thereof if the meeting is adjourned to a date not more than 120 days after the date fixed for the original meeting.
SECTION 6. VOTING LISTS . The officer or agent having charge of the stock transfer books for shares of the corporation shall make before each meeting of shareholders a complete list of the shareholders entitled to vote at such meeting arranged in alphabetical order and by voting group (and within each voting group by class or series of shares), with the address of and the number of shares held by each. For a period beginning two business days after notice of the meeting is given and continuing through the meeting, this list shall be available at the corporations principal office for inspection by any shareholder at any time during usual business hours. The list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders.
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SECTION 7. QUORUM . Shares entitled to vote as a separate voting group may take action on a matter at a meeting if a quorum of that voting group exists with respect to that matter. A majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of the meeting unless a new record date is or must be set for the adjourned meeting.
SECTION 8. PROXIES; ELECTRONIC AUTHORIZATION .
(a) At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his or her duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. No proxy shall be valid after 11 months from the date of its execution, unless otherwise provided in the proxy. If a proxy for the same shares confers authority upon two or more persons and does not otherwise provide a majority of them present at the meeting or if only one is present at the meeting then that one may exercise all the powers conferred by the proxy; but if the proxy holders present at the meeting are divided as to the right and manner of voting in any particular case, and there is no majority, the voting of such shares shall be prorated.
(b) The Secretary may approve procedures to enable a shareholder or a shareholders duly authorized attorney in fact to appoint another person or persons to act for him or her as proxy by transmitting or authorizing the transmission of a telegram, cablegram, internet transmission, telephone transmission or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such transmission must either set forth or be submitted with information from which the inspectors of election can determine that the transmission was authorized by the shareholder or the shareholders duly authorized attorney in fact. If it is determined that such transmissions are valid, the inspectors shall specify the information upon which they relied. Any copy, facsimile telecommunications or other reliable reproduction of the writing or transmission created pursuant to this Section 8 may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.
(c) If a shareholder intends to appoint another person to act for him or her as proxy to present a proposal at any annual or special meeting of shareholders, the shareholder shall appoint such other person and give notice of such appointment in writing to the Secretary not less than three business days before the date of the meeting, including the name and contact information for such person. For the avoidance of doubt, the advance notice requirements of this subsection (c) shall apply to the appointment of persons as proxies to present (i) proposals submitted in accordance with the eligibility and procedural requirements of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the Exchange Act) and included in the corporations proxy statement and (ii) proposals submitted by a shareholder in compliance with the notice provisions set forth in Section 12 of this Article II that are not included in the corporations proxy statement.
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SECTION 9. VOTING OF SHARES . Except as otherwise provided by law, each outstanding share of capital stock of the corporation entitled to vote shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. The vote of a majority of the shares voted on any matter (other than the election of directors) at a meeting of shareholders at which a quorum is present shall be the act of the shareholders on that matter, unless the vote of a greater number is required by law or by the Articles of Incorporation or Bylaws. The standard for electing directors shall be as set forth in the Articles of Incorporation. Voting on all substantive matters shall be by a ballot vote on that particular matter. Voting on procedural matters shall be by voice vote or by a show of hands unless the holders of one-tenth of the shares represented at the meeting shall demand a ballot vote on procedural matters.
SECTION 10. CONDUCT OF MEETINGS . At each meeting of the shareholders, the Chairman of the Board or, in his absence, the Chief Executive Officer, shall act as chairman and preside. In their absence, the Board may designate another officer or director to preside. The Secretary or an Assistant Secretary, or in their absence, a person whom the chairman of such meeting shall appoint, shall act as secretary of the meeting.
SECTION 11. NOMINATION OF DIRECTORS .
(a) Nominations of persons for election to the Board of Directors may be made at any annual or special meeting of shareholders only (i) by or at the direction of the Board of Directors, (ii) by any shareholder of the corporation who is a shareholder of record at the time of giving of notice as provided for in this Section 11, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section 11, or (iii) by any shareholder (or group of shareholders) of the corporation who meets the requirements of and complies with all of the procedures set forth in Section 14 of this Article II. In addition to any other applicable requirements, such nominations made pursuant to clause (ii) of this Section 11(a) shall be made pursuant to timely notice in proper written form to the Secretary of the corporation, as provided by this Section 11, and nominations made pursuant to clause (iii) of this Section 11(a) shall be made pursuant to the requirements and procedures set forth in Section 14 of this Article II.
(b) To be timely, a shareholders notice of any nominations of persons for election to the Board of Directors to be presented by a shareholder at any annual meeting of shareholders pursuant to clause (ii) of Section 11(a) shall be delivered to, or mailed and received at, the principal executive offices of the corporation not less than 120 days nor more than 150 days prior to the first anniversary of the preceding years annual meeting of shareholders; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, or if no annual meeting was held in the preceding year, then to be timely notice by a shareholder must be so delivered, or mailed and received, not earlier than the close of business on the
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120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first public announcement (as defined in Section 11(f) of this Article II) of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the tenth day following the day on which public announcement of the date of such meeting is first made by the corporation. To be timely, a shareholders notice of any nominations of persons for election to the Board of Directors to be presented by a shareholder at any special meeting of shareholders pursuant to clause (ii) of Section 11(a) shall be delivered to, or mailed and received at, the principal executive offices of the corporation not earlier than 150 days prior to the date of the special meeting nor later than the later of 120 days before the date of the special meeting or the tenth day following the day on which public announcement of the date of the special meeting was first made by the corporation. In no event shall any adjournment or postponement of an annual or special meeting of shareholders, or the public announcement thereof, commence a new time period for the delivery of a shareholders notice pursuant to clause (ii) of Section 11(a).
(c) To be in proper form, a shareholders notice of any nominations of persons for election to the Board of Directors to be presented by a shareholder at any meeting of shareholders pursuant to clause (ii) of Section 11(a) must include or be accompanied by the following:
(i) as to each person whom the shareholder proposes to nominate for election or reelection as a director, (1) the name, age, business address and residence address of such person, (2) the principal occupation or employment of such person, (3) the class and number of shares or other securities of the corporation which are owned of record or beneficially by such person, (4) any derivative positions held of record or beneficially by such person related to, or the value of which is derived in whole or in part from, the value of any class of the corporations shares or other securities and whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding has been made, the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such person with respect to the corporations shares or other securities, (5) a written statement executed by the person acknowledging that as a director of the corporation, the nominee will owe a fiduciary duty under North Carolina law with respect to the corporation and its shareholders, (6) such persons written and signed certification consenting to being named as a nominee and representing that such nominee intends to serve as a director for the full term if elected, (7) a completed and duly executed written questionnaire with respect to the background and qualification of such proposed nominee (which questionnaire shall be provided by the Secretary upon written request), (8) a duly executed representation that, if elected as a director of the corporation, such person shall comply with the corporations Corporate Governance Guidelines in all respects, (9) such persons written consent to provide any information that the Board of Directors reasonably requests to determine whether such person would qualify as independent under the corporations Corporate Governance Guidelines, the requirements of the Corporate Governance Rules of the New York Stock Exchange (the NYSE), any applicable rules of the Securities and Exchange Commission (the SEC) or any publicly disclosed standards used by the Board of Directors in
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determining and disclosing the independence of the corporations directors (collectively, the Independence Standards), to determine the eligibility of such person to serve as a director of the corporation, or to determine whether such person meets the requirements for serving as a member of any of the committees of the Board of Directors set forth in Article III of these Bylaws, (10) such persons written consent to provide any information that could be material to a reasonable shareholders understanding of the independence, or lack thereof, of such person, including any compensation arrangement with a third party for such persons services as a director, (11) any other information regarding such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with a contested solicitation of proxies for the election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, if Section 14 of the Exchange Act were applicable, and (12) such persons written consent to further update and supplement any information provided to the corporation or its shareholders pursuant to such persons nomination, if necessary, so that all such information shall be true and correct as of the record date for the determination of shareholders entitled to vote at the applicable meeting of shareholders, and to ensure that any such update and supplement shall be delivered to, or be mailed and received by, the Secretary at the principal executive offices of the corporation not later than five business days after the record date for the determination of shareholders entitled to vote at the applicable meeting of shareholders; and
(ii) as to the shareholder giving the notice, (1) the name and address, as they appear on the corporations books, of such shareholder and the name and address of any Shareholder Associated Person (as defined in Section 11(g) of this Article II) covered by clauses (2), (3) or (4) below, (2) the class and number of shares or other securities of the corporation which are owned of record or beneficially by such shareholder or by any Shareholder Associated Person, (3) any derivative positions held of record or beneficially by the shareholder or any Shareholder Associated Person related to, or the value of which is derived in whole or in part from, the value of any class of the corporations shares or other securities and whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding has been made, the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such shareholder or any Shareholder Associated Person with respect to the corporations shares or other securities, (4) any other information regarding such shareholder or any Shareholder Associated Person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with a contested solicitation of proxies pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, if Section 14 of the Exchange Act were applicable, (5) a written statement whether either such shareholder or any Shareholder Associated Person will deliver a proxy statement and form of proxy to holders of the corporations voting shares, (6) a completed and duly executed written questionnaire with respect to the background of the nominating shareholder and any other person or entity on whose behalf, directly or indirectly, the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and (7) such shareholders written consent to further update and supplement any information provided to the corporation or its shareholders pursuant to
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such shareholders nomination of persons for election to the Board of Directors, if necessary, so that all such information shall be true and correct as of the record date for the determination of shareholders entitled to vote at the applicable meeting of shareholders, and to ensure that any such update and supplement shall be delivered to, or be mailed and received by, the Secretary at the principal executive offices of the corporation not later than five business days after the record date for the determination of shareholders entitled to vote at the applicable meeting of shareholders. At the request of the Board of Directors, any person nominated by the Board for election as a director shall furnish to the Secretary of the corporation that information required to be set forth in a shareholders notice of nomination pursuant to this clause (ii) of Section 11(c) which pertains to the nominee.
(d) Notwithstanding the foregoing provisions of this Section 11, a shareholder nominating any person for election to the Board of Directors to be presented by a shareholder at any meeting of shareholders pursuant to clause (ii) of Section 11(a) shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder by the SEC with respect to the matters set forth in this Section 11; provided, however, that any references herein to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to shareholder nominations pursuant to clause (ii) of Section 11(a). Nothing in this Section 11 shall be deemed to affect any rights of the corporations shareholders to request inclusion of nominees in the corporations proxy materials pursuant to the rules and regulations promulgated by the SEC under the Exchange Act and the requirements and procedures set forth in Section 14 of this Article II.
(e) The chairman of any meeting of shareholders shall, if the facts warrant, determine and declare to the meeting that a nomination pursuant to clause (ii) of Section 11(a) was not made in accordance with the provisions prescribed by this Section 11 and, if the chairman should so determine, the chairman shall so declare to the meeting and the defective nomination shall be disregarded.
(f) For purposes of Section 11 and Section 12 of this Article II, public announcement shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the corporation with the SEC pursuant to Section 13, Section 14 or Section 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.
(g) For purposes of Section 2, Section 11 and Section 12 of this Article II, Shareholder Associated Person of any shareholder means (i) any person controlling, directly or indirectly, or acting in concert with, such shareholder, (ii) any beneficial owner of shares of stock of the corporation owned of record or beneficially by such shareholder and (iii) any person controlling, controlled by or under common control with such Shareholder Associated Person.
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SECTION 12. NOTICE OF BUSINESS .
(a) Only business (other than director nominations, which are subject to the requirements of Section 11 or Section 14, as applicable, of this Article II) that is submitted in accordance with the provisions set forth in this Section 12 of Article II may be presented for consideration by shareholders of the corporation at any annual or special meeting of shareholders. Business may be presented for consideration by the shareholders of the corporation at an annual or special meeting of shareholders (i) by or at the direction of the Board of Directors, or (ii) by any shareholder of the corporation (or another person authorized to act for him or her as proxy) who is a shareholder of record at the time of giving of notice as provided for in this Section 12, who shall be entitled to vote for such business at the meeting and who complies with the notice provisions set forth in this Section 12. For the avoidance of doubt, the foregoing clause (ii) of this Section 12(a) shall be the exclusive means for a shareholder to present proposals (except proposals submitted in accordance with the eligibility and procedural requirements of Rule 14a-8 under the Exchange Act and included in the corporations proxy materials) for consideration by the corporations shareholders at any annual or special meeting of shareholders. In order to be considered by the shareholders of the corporation at any annual or special meeting of shareholders, and in addition to any other applicable requirements, business submitted by a shareholder must be a proper matter for shareholder consideration and must be made pursuant to timely notice in proper written form to the Secretary of the corporation, as provided by this Section 12.
(b) To be timely, a shareholders notice of any business to be presented by a shareholder at any annual meeting of shareholders shall be delivered to, or mailed and received at, the principal executive offices of the corporation not less than 120 days nor more than 150 days prior to the first anniversary of the preceding years annual meeting of shareholders; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, or if no annual meeting was held in the preceding year, then to be timely notice by a shareholder must be so delivered, or mailed and received, not earlier than the close of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the tenth day following the day on which public announcement of the date of such meeting is first made by the corporation. To be timely, a shareholders notice of any business to be presented by a shareholder at any special meeting of shareholders shall be delivered to, or mailed and received at, the principal executive offices of the corporation not earlier than 150 days prior to the date of the special meeting nor later than the later of 120 days before the date of the special meeting or the tenth day following the day on which public announcement of the date of the special meeting was first made by the corporation. In no event shall any adjournment or postponement of an annual or special meeting of shareholders, or the public announcement thereof, commence a new time period for the delivery of a shareholders notice under this Section 12.
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(c) To be in proper form, a shareholders notice of any business to be presented at any shareholders meeting must set forth:
(i) as to each matter the shareholder proposes to bring before the meeting, (1) the text of the proposal desired to be brought before the meeting and (2) a brief written statement of the reasons for bringing such business before the meeting; and
(ii) as to the shareholder giving the notice, (1) the name and address, as they appear on the corporations books, of such shareholder and the name and address of any Shareholder Associated Person covered by clauses (2), (3), (5) and (6) below, (2) the class and number of shares or other securities of the corporation which are owned of record or beneficially by such shareholder or by any Shareholder Associated Person, (3) any derivative positions held of record or beneficially by the shareholder or any Shareholder Associated Person related to, or the value of which is derived in whole or in part from, the value of any class of the corporations shares or other securities and whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding has been made, the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such shareholder or any Shareholder Associated Person with respect to the corporations shares or other securities, (4) a representation that such shareholder is entitled to vote at such meeting and intends to appear in person or by proxy to present the proposal at such meeting, (5) a detailed description of any material interest of such shareholder or any Shareholder Associated Person in such business other than his or her interest as a shareholder of the corporation, (6) any other information regarding such shareholder or any Shareholder Associated Person or such business that would be required to be disclosed in a proxy statement or other filings required to be made in connection with a contested solicitation of proxies pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, if Section 14 of the Exchange Act were applicable, (7) a statement whether either such shareholder or any Shareholder Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of the corporations voting shares required under applicable law to carry the proposal, (8) a completed and duly executed written questionnaire with respect to the background of such shareholder and any other person or entity on whose behalf, directly or indirectly, the proposal is being made (which questionnaire shall be provided by the Secretary upon written request), and (9) such shareholders written consent to further update and supplement any information provided to the corporation or its shareholders pursuant to such shareholders submission of business for consideration by the corporations shareholders at any meeting of shareholders, if necessary, so that all such information shall be true and correct as of the record date for the determination of shareholders entitled to vote at the applicable meeting of shareholders, and to ensure that any such update and supplement shall be delivered to, or be mailed and received by, the Secretary at the principal executive offices of the corporation not later than five business days after the record date for the determination of shareholders entitled to vote at the applicable meeting of shareholders.
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(d) Notwithstanding anything in these Bylaws to the contrary, no business (other than nominations of persons for election to the Board of Directors to be presented by a shareholder at any meeting of shareholders) shall be conducted at a meeting of shareholders except in accordance with the provisions set forth in this Section 12. Notwithstanding the foregoing provisions of this Section 12, a shareholder presenting any business for consideration by the corporations shareholders at any annual or special meeting of shareholders shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder by the SEC with respect to the matters set forth in this Section 12; provided, however, that any references herein to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to shareholder proposals pursuant to this Section 12. Nothing in this Section 12 shall be deemed to affect any rights of the corporations shareholders to request inclusion of proposals in the corporations proxy statement pursuant to the rules and regulations promulgated by the SEC under the Exchange Act.
(e) The chairman of any meeting of shareholders shall, if the facts warrant, determine and declare to the meeting that any business was not properly brought before the meeting in accordance with the provisions prescribed by this Section 12. If the chairman should so determine, any such business not so properly brought before the meeting shall not be transacted.
SECTION 13. ADJOURNED OR POSTPONED MEETING . At any meeting of shareholders, whether or not there is a quorum, the chairman of the meeting or any other person entitled to preside or to act as secretary at such meeting shall have the power to adjourn or postpone the meeting to any other time and from time to time, without notice other than announcement at the meeting or as may be required by law. At such adjourned or postponed meeting, any business may be transacted which might have been transacted at the meeting as originally notified.
SECTION 14. PROXY ACCESS .
(a) The notice procedures and all other relevant provisions of Section 11 of this Article II shall apply to all nominations made pursuant to this Section 14.
(b) The corporation shall include in its proxy statement for any annual meeting of shareholders the name, together with the Required Information (as defined below), of any person nominated for election to the Board of Directors (a Shareholder Nominee) identified in a timely notice that satisfies this Section 14 delivered by one or more shareholders who at the time the request is delivered satisfy the ownership and other requirements of both Section 11 of this Article II and this Section 14 (such shareholder or shareholders, and any Shareholder Associated Person of such shareholder or shareholders, the Eligible Shareholder), and who expressly elect as a part of providing the notice required by Section 11 of this Article II (the Notice) to have its nominee included in the corporations proxy materials pursuant to this subsection (b).
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(i) For purposes of this subsection (b), the Required Information that the corporation shall include in its proxy statement is (A) the information concerning the Shareholder Nominee and the Eligible Shareholder that, as determined by the corporation, is required to be disclosed in a proxy statement prepared or filed pursuant to the proxy rules of the SEC, and (B) if the Eligible Shareholder so elects, a Statement (as defined below).
(ii) The corporation shall not be required to include a Shareholder Nominee in its proxy materials for any special meeting of shareholders or for any annual meeting of shareholders for which (A) the Secretary of the corporation receives a notice that the Eligible Shareholder has nominated a person for election to the Board of Directors pursuant to the notice requirements set forth in Section 11 of this Article II and (B) the Eligible Shareholder does not expressly elect as a part of providing the notice to have its nominee included in the corporations proxy materials pursuant to this subsection (b).
(iii) The maximum number of Shareholder Nominees appearing in the corporations proxy materials with respect to a meeting of shareholders shall not exceed the greater of (A) two Shareholder Nominees and (B) twenty percent (20%) of the number of directors in office as of the last day on which notice of a nomination may be delivered pursuant to Section 11 of this Article II, or if such amount is not a whole number, the closest whole number below twenty percent (20%); provided, however, that this maximum number shall be reduced by (1) any director candidate who had been a Shareholder Nominee at any of the preceding two annual meetings of shareholders and whose reelection at the upcoming annual meeting is being recommended by the Board of Directors and (2) any Shareholder Nominee who was submitted by an Eligible Shareholder but either is subsequently withdrawn or that the Board of Directors decides to nominate as a Board of Director nominee (a Board Nominee). In the event that the number of Shareholder Nominees submitted by Eligible Shareholders pursuant to this subsection (b) exceeds this maximum number, each Eligible Shareholder shall select one Shareholder Nominee for inclusion in the corporations proxy materials until the maximum number is reached, going in the order of the number (largest to smallest) of shares of capital stock of the corporation entitled to vote in the election of directors each Eligible Shareholder disclosed as owned in the written notice of the nomination submitted to the corporation. If the maximum number is not reached after each Eligible Shareholder has selected one Shareholder Nominee, this selection process shall continue as many times as necessary, following the same order each time, until the maximum number is reached.
(iv) An Eligible Shareholder must have owned (as defined below) three percent (3%) or more of the outstanding shares of the corporations stock entitled to vote in the election of directors continuously for at least three years (the Required Shares) as of both the date the Notice is delivered to, or mailed and received by, the corporation in accordance with Section 11 of this Article II and the record date for determining shareholders entitled to vote at the meeting and must continue to own the Required Shares through the meeting date. For purposes of satisfying the foregoing ownership requirement under this subsection (b), (A) the shares of stock of the corporation owned by one or more shareholders, or by the person or persons who own shares of the corporations stock and on whose behalf any shareholder is acting, may be aggregated, provided that the number
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of shareholders and other persons whose ownership of shares is aggregated for such purpose shall not exceed twenty (20), and further provided that the group of shareholders shall have provided to the Secretary of the corporation as a part of providing the Notice a written agreement executed by each of its members designating one of the members as the exclusive member to interact with the corporation for purposes of this Section 14 on behalf of all members, and (B) a group of funds under common management and investment control shall be treated as one shareholder or person for this purpose. Within the time period specified in Section 11 of this Article II for providing the Notice, an Eligible Shareholder must provide (or, in the case of a group of shareholders acting together as an Eligible Shareholder, each member of the group must provide) the following information in writing to the Secretary of the corporation (in addition to the information required to be provided by Section 11 of this Article II): (A) one or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the requisite three-year holding period) verifying that, as of a date within seven calendar days prior to the date the Notice is delivered to, or mailed and received by, the corporation, the Eligible Shareholder owns, and has owned continuously for the preceding three years, the Required Shares, and the Eligible Shareholders agreement to provide, within five business days after the record date for the meeting, written statements from the record holder and intermediaries verifying the Eligible Shareholders continuous ownership of the Required Shares through the record date, (B) the written consent of each Shareholder Nominee to be named in the proxy statement as a nominee and to serve as a director if elected, (C) a representation that the Eligible Shareholder (1) acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control of the corporation, and does not presently have such intent, (2) has not nominated and will not nominate for election to the Board of Directors at the meeting any person other than the Shareholder Nominee(s) being nominated pursuant to this subsection (b), (3) has not engaged in and will not engage in, and has not and will not be, a participant in, another persons solicitation within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the meeting other than its Shareholder Nominee(s) or a Board Nominee, (4) has not distributed and will not distribute to any shareholder any form of proxy for the meeting other than the form distributed by the corporation, (5) intends to continue to own the Required Shares through the date of the meeting, and (6) will provide facts, statements and other information in all communications with the corporation and its shareholders that are or will be true and correct in all material respects and has not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, (D) an undertaking that the Eligible Shareholder agrees to (1) assume all liability stemming from any legal or regulatory violation arising out of the Eligible Shareholders communications with the corporations shareholders or out of the information that the Eligible Shareholder provided to the corporation, (2) indemnify and hold harmless the corporation and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether civil, criminal, administrative or investigative, against the corporation or any of its directors, officers or employees arising out of any nomination submitted by the Eligible
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Shareholder pursuant to this subsection (b), (3) file with the SEC all soliciting and other materials as required under this subsection (b), and (4) comply with all other applicable laws, rules, regulations and listing standards with respect to any solicitation in connection with the meeting, and (E) if the Eligible Shareholder did not submit the name(s) of the Shareholder Nominee(s) for consideration to the committee of the Board of Directors that is responsible for nominating Board Nominee(s), a brief explanation why the Eligible Shareholder elected not to do so. The inspectors of election shall not give effect to the Eligible Shareholders votes with respect to the election of directors if the Eligible Shareholder does not comply with each of the representations in clause (C) above.
(v) For purposes of this subsection (b), an Eligible Shareholder shall be deemed to own only those outstanding shares of the corporations stock as to which a shareholder who is the Eligible Shareholder or is included in the group that constitutes the Eligible Shareholder possesses both (A) the full voting and investment rights pertaining to the shares and (B) the full economic interest in (including the opportunity for profit and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (A) and (B) shall not include any shares (1) sold by or on behalf of such shareholder or any of its affiliates in any transaction that has not been settled or closed, (2) borrowed by or on behalf of such shareholder or any of its affiliates for any purpose or purchased by such shareholder pursuant to an agreement to resell or (3) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by or on behalf of such shareholder or any of its affiliates whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of outstanding shares of the corporations stock, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of (x) reducing in any manner, to any extent or at any time in the future, such shareholders or its affiliates full right to vote or direct the voting of any such shares, and/or (y) hedging, offsetting or altering to any degree gain or loss arising from the full economic ownership of such shares by such shareholder or its affiliates. A shareholder shall own shares held in the name of a nominee or other intermediary so long as the shareholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A shareholders ownership of shares shall be deemed to continue during any period in which the shareholder (A) has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement that is revocable at any time by the shareholder, or (B) has loaned such shares, provided that the person has the power to recall such loaned shares on not more than three business days notice and has in fact recalled the loaned shares as of the time the notice of intent is submitted to the Secretary and does not re-loan them through the annual meeting date. The terms owned, owning and other variations of the word own shall have correlative meanings. Whether outstanding shares of the corporations stock are owned for these purposes shall be determined by the Board of Directors, which determination shall be conclusive and binding on the corporation and its shareholders.
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(vi) The Eligible Shareholder may provide to the Secretary of the corporation, within the time period specified in Section 11 of this Article II for providing the Notice, a written statement for inclusion in the corporations proxy statement for the meeting, not to exceed 500 words, in support of the Shareholder Nominees candidacy (the Statement). Notwithstanding anything to the contrary contained in this Section 14, the corporation may omit from its proxy materials any information or Statement (or portion thereof) that it believes would violate any applicable law, rule, regulation or listing standard.
(vii) The corporation shall not be required to include, pursuant to this subsection (b), a Shareholder Nominee in its proxy materials (A) for any meeting for which the Secretary of the corporation receives a notice that the Eligible Shareholder or any other shareholder has nominated a Shareholder Nominee for election to the Board of Directors pursuant to the requirements of Section 11 of this Article II and does not expressly elect as a part of providing the notice to have its nominee included in the corporations proxy materials pursuant to this subsection (b), (B) if the Eligible Shareholder who has nominated such Shareholder Nominee has engaged in or is currently engaged in, or has been or is a participant in, another persons solicitation within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the meeting other than its Shareholder Nominee(s) or a Board Nominee, (C) who is not independent under the requirements of the Corporate Governance Rules of the NYSE, any applicable rules of the SEC and any publicly disclosed standards used by the Board of Directors in determining and disclosing the independence of the corporations directors, as determined by the Board of Directors, (D) whose election as a member of the Board of Directors would cause the corporation to be in violation of these Bylaws, the corporations Articles of Incorporation, the listing standards of the NYSE, or any applicable state or federal law, rule or regulation, (E) who is or has been, within the past three years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, (F) who is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past 10 years, (G) who is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended, (H) if such Shareholder Nominee or the applicable Eligible Shareholder shall have provided information to the corporation in respect to such nomination that was untrue in any material respect or omitted to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, as determined by the Board of Directors, or (I) if the Eligible Shareholder or applicable Shareholder Nominee otherwise breaches any of its or their obligations, agreements or representations under this Section 14.
(viii) Notwithstanding anything to the contrary set forth herein, the chairman of the meeting shall declare a nomination by an Eligible Shareholder to be invalid, and such nomination shall be disregarded notwithstanding that proxies in respect of such vote may have been received by the corporation, if the Shareholder Nominee(s) and/or the applicable Eligible Shareholder shall have breached its or their obligations, agreements or representations under this Section 14, as determined by the Board of Directors or the chairman of the meeting.
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(ix) In addition to the information required to be provided by the Eligible Shareholder by Section 11 of this Article II and this subsection (b), each Shareholder Nominee and each Board Nominee shall provide to the Secretary of the corporation, within two weeks of receipt of the Secretarys written request therefor, the following information: (A) a completed copy of the corporations form of directors questionnaire; (B) the Shareholder Nominees or the Board Nominees agreement to comply with the corporations corporate governance, conflict of interest, confidentiality, stock ownership and share trading policies, as provided by the Secretary; (C) written confirmation that the Shareholder Nominee or the Board Nominee (1) does not have, and will not have, any agreement or understanding as to how he or she will vote on any matter and (2) is not a party to, and will not become a party to, any outside compensation arrangement relating to service as a director of the corporation that has not been disclosed to the Secretary of the corporation; (D) written disclosure of any transactions between the Eligible Shareholder and the Shareholder Nominee or the Board Nominee within the preceding five years; (E) the consent of the Shareholder Nominee or the Board Nominee to the corporation engaging in a background investigation of the Shareholder Nominee or the Board Nominee, including the possible use of one or more third parties to assist with the investigation; and (F) written confirmation by the Shareholder Nominee that he or she intends to serve as director for the full term for which such person is standing for election.
(x) The Eligible Shareholder shall file with the SEC any solicitation or other communication with the corporations shareholders relating to the meeting at which the Shareholder Nominee will be nominated, regardless of whether any such filing is required under Regulation 14A of the Exchange Act, or whether any exemption from filing is available for such solicitation or other communication under Regulation 14A of the Exchange Act.
(xi) No person may be a member of more than one group of persons constituting an Eligible Shareholder under this subsection (b); provided, however, that a bank, broker or fiduciary holding shares in a similar capacity as a record holder acting on behalf of one or more beneficial owners will not be counted separately as a shareholder with respect to the shares owned by beneficial owners on whose behalf such record holder has been directed in writing to act.
(xii) Any Shareholder Nominee who is included in the corporations proxy materials for a particular meeting of shareholders but either (A) withdraws from or becomes ineligible or unavailable for election at such meeting, or (B) does not receive at least twenty-five percent (25%) of the votes cast in favor of the Shareholder Nominees election, shall be ineligible to be a Shareholder Nominee pursuant to this subsection (b) for the next two annual meetings of shareholders following the meeting for which the Shareholder Nominee has been included in the corporations proxy materials.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS . The business and affairs of the corporation shall be managed by the Board of Directors except as otherwise provided by law, by the Articles of Incorporation or by the Bylaws.
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SECTION 2. NUMBER, TENURE AND QUALIFICATIONS . In accordance with the Articles of Incorporation, the Board of Directors shall each year, prior to the annual meeting of shareholders, determine by appropriate resolution the number of directors which shall constitute the Board of Directors for the ensuing year. The directors may by appropriate resolution adopted between annual meetings of shareholders increase or decrease the number of directors, but may not decrease the number of directors below the minimum number specified in the corporations Articles of Incorporation. One director shall be designated and elected by the Board as Chairman of the Board of Directors (who may, but need not, be an officer of the corporation) and shall preside at all meetings of the Board of Directors. The Board may elect a Vice Chairman from among its members (who may, but need not, be an officer of the corporation) whose only duties shall be to preside at Board meetings in the absence of the Chairman. Directors need not be residents of the State of North Carolina or shareholders of the corporation.
SECTION 3. REGULAR MEETINGS . Regular meetings of the Board of Directors shall be held with such frequency (but no less than quarterly) and at a time and place as shall be determined by the Chairman of the Board of Directors. Any one or more of the directors or members of a committee designated by the directors may participate in a meeting of the Board or committee by means of a conference telephone or similar communications device which allows all persons participating in the meeting to hear each other and such participation in a meeting will be deemed presence in person.
SECTION 4. SPECIAL MEETINGS . Special meetings of the Board of Directors may be called by or at the request of the Chief Executive Officer (if a director), Chairman of the Board of Directors or two of the directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of North Carolina, as the place for holding any special meeting of the Board of Directors called by them.
SECTION 5. NOTICE . Regular meetings of the Board of Directors, or a committee thereof, may be held without notice. Notice of any special meeting of the Board of Directors, or a committee thereof, shall be given, at least twenty-four hours before the meeting, by any usual means of communication, including without limitation, in person; by telephone, facsimile, electronic mail or other electronic transmission; or by mail or private carrier. Notice shall be deemed effective at the earliest of the following:
(a) when received, or, in the case of oral notice, when actually communicated to the director;
(b) when deposited in the United States mail, as evidenced by the postmark or postage meter date, if mailed with postage thereon prepaid and correctly addressed;
(c) if by facsimile or other electronic transmission, by acknowledgement by the director or the directors agent or representative of receipt of the electronic transmission; or
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(d) on the date shown on the confirmation of delivery issued by a private carrier, if sent by private carrier to the address of the director last known to the corporation.
Any director may waive notice of any meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special meeting of the Board of Directors, or a committee thereof, need be specified in the notice or waiver of notice of such meeting, except if required by law.
SECTION 6. QUORUM . Unless the articles of incorporation or these bylaws provide otherwise, a majority of the number of directors fixed by or pursuant to these bylaws shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, or if no number is so fixed, a majority of directors in office immediately before the meeting begins shall constitute a quorum. If less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice.
SECTION 7. MANNER OF ACTING . The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless otherwise required by the Articles of Incorporation.
SECTION 8. VACANCIES . Any vacancy occurring in the Board of Directors shall be filled as provided in the Articles of Incorporation.
SECTION 9. COMPENSATION . The directors may be paid such expenses as are incurred in connection with their duties as directors. The Board of Directors may also pay to the directors compensation for their service as directors. The compensation of non-employee directors shall be recommended to the Board of Directors by the appropriate committee thereof.
SECTION 10. PRESUMPTION OF ASSENT . A director of the corporation who is present at a meeting of the Board of Directors, or a committee thereof, at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent shall be entered in the minutes of the meeting or unless he or she shall file his or her written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.
SECTION 11. ACTION WITHOUT MEETING . Any action required or permitted to be taken by a majority of the Board, or a committee thereof, may be taken without a meeting if all of the directors, or committee members, consent to the action in question in writing or by electronic submission, and the writings or electronic submissions are filed with the minutes of the proceedings of the Board, or committee, whether done before or after the action so taken. Action taken under this Section 11 is effective when the last director signs or delivers the consent, unless the consent specifies a different effective date. A consent signed or delivered under this Section 11 has the effect of a meeting vote and may be described as such in any document.
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SECTION 12. COMMITTEES GENERALLY . The Board may designate one or more committees, each committee to consist of one or more of the directors of the corporation, to have and exercise such power and authority as the Board shall specify. Each of the committees established by the Board pursuant to this Section 12 of Article III shall establish such other rules and procedures for its operation and governance, as it shall see fit and may seek such consultation and advice as to matters within its purview as it shall require.
ARTICLE IV. INDEMNIFICATION
SECTION 1. INDEMNIFICATION . In addition to any indemnification required or permitted by law, and except as otherwise provided in these Bylaws, any person who at any time serves or has served as a director or officer of the corporation, or in such capacity at the request of the corporation for any other corporation, partnership, joint venture, trust or other enterprise, shall have a right to be indemnified by the corporation to the fullest extent permitted by law against (i) reasonable expenses, including attorneys fees, actually and necessarily and as incurred by him or her in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, seeking to hold him or her liable by reason of the fact that he or she is or was acting in such capacity; and (ii) payments made by him or her in satisfaction of any judgment, money decree, fine, penalty or reasonable settlement for which he or she may have become liable in any such action, suit or proceeding.
SECTION 2. LIMITATION ON INDEMNIFICATION . The corporation shall not indemnify any person hereunder against liability or litigation expense he or she may incur on account of his or her activities which were at the time taken known or believed by him or her to be clearly in conflict with the best interests of the corporation. The corporation shall not indemnify any director with respect to any liability arising out of N.C.G.S. § 55-8-33 (relating to unlawful declaration of dividends) or any transaction from which the director derived an improper personal benefit as provided in N.C.G.S. § 55-2-02(b)(3).
SECTION 3. BOARD DETERMINATION . If any action is necessary or appropriate to authorize the corporation to pay the indemnification required by this Bylaw, the Board of Directors shall take such action, including (i) making a good faith evaluation of the manner in which the claimant for indemnity acted and of the reasonable amount of the indemnity due him or her; (ii) giving notice to, and obtaining approval by, the shareholders of the corporation, and (iii) taking any other action.
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SECTION 4. RELIANCE . Any person who at any time after the adoption of this Bylaw serves or has served in any of the capacities indicated in this Bylaw shall be deemed to be doing or to have done so in reliance upon, and as consideration for, the right of indemnification provided herein. Such right shall inure to the benefit of the legal representatives of any such person and shall not be exclusive of any other rights to which such person may be entitled apart from the provision of this Bylaw.
SECTION 5. AGENTS AND EMPLOYEES . The provisions of this Bylaw shall not be deemed to preclude the corporation from indemnifying persons serving as agents or employees of the corporation, or in such capacity at the request of the corporation for any other corporation, partnership, joint venture, trust or other enterprise, to the extent permitted by law.
SECTION 6. EXPENSES . The corporation shall be entitled to pay the expenses incurred by a director or officer in defending a civil or criminal action, suit or proceeding in advance of final disposition upon receipt of an undertaking by or on behalf of the director or officer to repay such amount unless it shall ultimately be determined that he or she is entitled to be indemnified by the corporation against such expenses.
SECTION 7. INSURANCE . As provided by N.C.G.S. § 55-8-57, the corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or who is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a trustee or administrator under an employee benefit plan against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation has the power to indemnify him or her against such liability.
SECTION 8. VESTING . The rights to advancement of expenses and indemnification provided for in these Bylaws are contract rights and neither the amendment nor repeal of such rights, nor the adoption of any provision of the Articles of Incorporation or the Bylaws of the corporation, nor, to the fullest extent permitted under or authorized by the North Carolina Business Corporation Act, any modification of law, shall eliminate or reduce the effect of the rights to advancement of expenses and indemnification in respect of any acts or omissions occurring prior to such amendment, repeal, adoption or modification without the affected individuals express written consent.
ARTICLE V. OFFICERS
SECTION 1. TITLES . The officers of the corporation may consist of the Chief Executive Officer, President and such Vice Presidents as shall be elected as officers by the Board of Directors. There shall also be a Secretary, Treasurer, Controller and such assistants thereto as may be elected by the Board of Directors. Any one person may hold one or more offices in the corporation. No officer may act in more than one capacity where action of two or more is required.
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SECTION 2. APPOINTMENT AND TERM OF OFFICE . The officers of the corporation shall be appointed by the Board of Directors. Each officer shall hold office until his or her successor shall have been duly appointed and shall have qualified or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided.
SECTION 3. REMOVAL . Since officers serve at the pleasure of the Board, any officer may be removed at any time by the Board of Directors, with or without cause. Termination of an officers employment with the corporation by the appropriate official shall also end his or her term as an officer.
SECTION 4. CHIEF EXECUTIVE OFFICER . The Chief Executive Officer shall, subject to the oversight of the Board of Directors, have general supervision, direction and control of the business and the officers, employees and agents of the corporation. In the absence of the Chairman of the Board of Directors, the Chief Executive Officer, if such officer is a director, shall preside at all meetings of the Board of Directors, unless the Board of Directors determines otherwise. Except as otherwise required by law, the Chief Executive Officer shall have power to sign certificates for shares of the corporation and any deeds, mortgages, bonds, contracts, or any other instruments or documents which may be lawfully executed on behalf of the corporation. The Chief Executive Officer shall vote as agent for the corporation the capital stock held or owned by the corporation in any corporation. The Chief Executive Officer is authorized to delegate the authority to vote capital stock held or owned by the corporation and to execute and deliver agreements and other instruments to other officers of the corporation. The Chief Executive Officer shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time.
SECTION 5. PRESIDENT . The President shall perform such duties and have such responsibilities as are assigned by the Board of Directors or the Chief Executive Officer.
SECTION 6. VICE PRESIDENTS . The Vice Presidents shall perform such duties and have such responsibilities as are assigned by the Board of Directors or the Chief Executive Officer.
SECTION 7. SECRETARY . The Secretary shall perform such duties and have such responsibilities as are assigned by the Board of Directors or the Chief Executive Officer.
SECTION 8. TREASURER . The Treasurer shall perform such duties and have such responsibilities as are assigned by the Board of Directors or the Chief Executive Officer.
SECTION 9. CONTROLLER . The Controller shall perform such duties and have such responsibilities as are assigned by the Board of Directors or the Chief Executive Officer.
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ARTICLE VI. DEPARTMENTAL DESIGNATIONS
The Chief Executive Officer may establish such departmental or functional designations or titles pertaining to supervisory personnel as the Chief Executive Officer in his or her discretion deems wise. The designations or titles may be that of Senior Vice President, Vice President or such other term or terms as the Chief Executive Officer desires to utilize. The designation or title contemplated by this Article VI is for the purpose of administration within the department or function concerned and is not with the intent of designating those individuals bearing such titles as general officers of the corporation. These individuals bearing these titles shall be known as administrative managers of the corporation.
ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES; NON-CERTIFICATED SHARES .
(a) Certificates representing shares of the corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the Chief Executive Officer and by the Secretary, provided that where a certificate is signed by a transfer agent, assistant transfer agent or co-transfer agent of the corporation or with the duly designated transfer agent the signatures of such officers of the corporation upon the certificate may be facsimile engraved or printed. Each certificate shall be sealed with the seal of the corporation or a facsimile thereof. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and class and date of issue, shall be entered on the stock transfer books of the corporation by the transfer agent. All certificates surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the Board of Directors may prescribe.
(b) The Board of Directors may authorize the issuance of some or all of the shares of any or all of the corporations classes or series of stock without certificates. Such authorization shall not affect shares already represented by certificates until such shares are surrendered to the corporation. Within a reasonable time after the issuance or transfer of shares without certificates, the corporation shall send the shareholder a written statement with information required on certificates by N.C.G.S. § 55-6-25(b) and (c), and, if applicable, N.C.G.S. § 55-6-27, or any successor law.
SECTION 2. TRANSFER OF SHARES . Transfer of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by his or her legal representative, who shall furnish proper evidence of authority to transfer, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes. Transfer of shares
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not represented by certificates shall be made upon receipt of proper transfer instructions from the registered holder of the shares or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation and in accordance with requirements with respect to transfer of securities not represented by certificates as appear in Article 8 of the Uniform Commercial Code as in effect from time to time in the State of North Carolina.
SECTION 3. LOST CERTIFICATES . The Board of Directors may authorize the issuance of a new certificate in place of a certificate claimed to have been lost or destroyed, upon receipt of an affidavit of such fact from the person claiming the loss or destruction. In authorizing such issuance of a new certificate, the Board may require the claimant to give the corporation a bond in such sum as it may direct to indemnify the corporation against loss from any claim with respect to the certificate claimed to have been lost or destroyed; or the Board, by resolution reciting that the circumstances justify such action, may authorize the issuance of the new certificate without requiring such a bond. This function or duty on the part of the Board may be assigned by the Board to the transfer agent of the common stock of the corporation.
ARTICLE VIII. FISCAL YEAR
The fiscal year of the corporation shall end on the Friday nearest to January 31 of each year. The fiscal year shall consist of four quarterly periods, each comprising 13 weeks, with the 13-week periods divided into three periods of four weeks, five weeks and four weeks. Periodically, the fiscal year shall be a 53-week year, with the fourth period comprising four weeks, five weeks and five weeks, in order to account for the 365 th day of each year and the 29 th day of February in a leap year.
ARTICLE IX. DIVIDENDS
The Board of Directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and as provided in a resolution of the Board of Directors.
ARTICLE X. SEAL
The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation, the state of incorporation, and the word Seal.
ARTICLE XI. WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or director of the corporation under the provisions of the Articles of Incorporation or under the provisions of applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.
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ARTICLE XII. AMENDMENTS
Unless otherwise prescribed by law or the Articles of Incorporation, these Bylaws may be amended or altered at any meeting of the Board of Directors by affirmative vote of a majority of the directors. Unless otherwise prescribed by law or the Articles of Incorporation, the shareholders entitled to vote in respect of the election of directors, however, shall have the power to rescind, amend, alter or repeal any Bylaws and to enact Bylaws which, if expressly so provided, may not be amended, altered or repealed by the Board of Directors.
ARTICLE XIII. CONSTRUCTION OF BYLAWS
Unless the context requires otherwise, the general provisions, rules of construction and definitions in the North Carolina Business Corporation Act shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term person includes both an entity and a natural person. All references in these Bylaws to rules or regulations issued under the Exchange Act shall mean the then-current and effective rules or regulations promulgated by the SEC under the Exchange Act, and shall include with respect to any specified rule or regulation, any similar or successor rule or regulation that is then-current and effective.
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Exhibit 99.1
August 22, 2018
For 6:00 am ET Release
Contacts: | Shareholders/Analysts Inquiries: | Media Inquiries: | ||
Tiffany Mason 704-758-2033 tiffany.l.mason@lowes.com |
Dan Frahm 704-758-2350 daniel.frahm@lowes.com |
LOWES REPORTS SECOND QUARTER SALES AND EARNINGS RESULTS
Announces Exit of Orchard Supply Hardware
Diluted Earnings Per Share of $1.86
Adjusted Diluted Earnings Per Share 1 of $2.07
Updates Fiscal 2018 Business Outlook
MOORESVILLE, N.C. Lowes Companies, Inc. (NYSE: LOW) today reported net earnings of $1.5 billion and diluted earnings per share of $1.86 for the quarter ended Aug. 3, 2018, which included non-cash pre-tax charges of $230 million further described below, compared to net earnings of $1.4 billion and diluted earnings per share of $1.68 in the second quarter of 2017. Excluding the impact of these charges, adjusted diluted earnings per share 1 increased 31.8 percent to $2.07 from adjusted diluted earnings per share 1 of $1.57 in the second quarter of 2017.
The $230 million non-cash pre-tax charges referenced above resulted from the companys strategic reassessment of Orchard Supply Hardware, which led to long-lived asset impairments and discontinued projects during the second quarter and a decision by the company on Aug. 17, 2018, to exit these operations in order to focus on its core home improvement business. The company expects to close all 99 Orchard Supply Hardware stores, which are located in California, Oregon and Florida, as well as the distribution facility that services those stores by the end of fiscal 2018. To facilitate an orderly wind-down, the company intends to conduct store closing sales and has partnered with Hilco Merchant Services to help manage the process and ensure a seamless experience for customers. Additional pre-tax costs of $390 to $475 million related to lease obligations, accelerated depreciation and amortization, and severance obligations are expected to be incurred in the second half of fiscal 2018, and have been reflected in the companys updated business outlook.
Sales for the second quarter increased 7.1 percent to $20.9 billion over the second quarter of 2017, and comparable sales increased 5.2 percent. Comparable sales for the U.S. home improvement business increased 5.3 percent for the second quarter.
As a result of the new revenue recognition accounting standard ASU No. 2014-09 adopted in the first quarter of 2018, the company reclassified certain items within operating income. This change resulted in an increase to sales of approximately $140 million in the second quarter, driven primarily by the reclassification of the profit sharing income from the companys proprietary credit program from selling, general and administrative expense. This accounting standard has no impact on comparable sales or diluted earnings per share. It was adopted on a modified retrospective basis, therefore the prior year has not been adjusted.
1 |
Adjusted diluted earnings per share is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures Reconciliation section of this release for additional information as well as a reconciliation between the Companys GAAP and non-GAAP financial results. |
We posted solid results this quarter by capitalizing on delayed spring demand, commented Marvin R. Ellison, Lowes president and CEO. We are committed to driving even stronger performance in the future by sharpening our focus on retail fundamentals and by limiting any projects and initiatives that take us away from our core mission of being a great omni-channel home improvement retailer. I would like to thank our associates for their hard work and commitment to the company.
While it was a necessary business decision to exit Orchard Supply Hardware, decisions that impact our people are never easy. We will be providing outplacement services for impacted associates, and they will be given priority status if they choose to apply for other Lowes positions, Ellison added.
In addition to the decision to exit Orchard Supply Hardware, we are developing plans to aggressively rationalize store inventory, reducing lower-performing inventory while investing in increased depth of high velocity items. Exiting Orchard Supply Hardware and rationalizing inventory are the driving force behind the changes to Lowes Business Outlook. Ellison continued. Our strategic reassessment is ongoing as we evaluate the productivity of our real estate portfolio and non-retail business investments. We will update you on the changes to our strategy at the upcoming analyst and investor conference in December.
Delivering on its commitment to return excess cash to shareholders, the company repurchased $1.1 billion of stock under its share repurchase program and paid $338 million in dividends in the second quarter.
As of Aug. 3, 2018, Lowes operated 2,155 home improvement and hardware stores in the United States, Canada and Mexico representing 215.3 million square feet of retail selling space.
A conference call to discuss second quarter 2018 operating results is scheduled for today (Wednesday, Aug. 22) at 9:00 am ET. The conference call will be available by webcast and can be accessed by visiting Lowes website at www.Lowes.com/investor and clicking on Lowes Second Quarter 2018 Earnings Conference Call Webcast. Supplemental slides will be available fifteen minutes prior to the start of the conference call. A replay of the call will be archived on Lowes.com/investor until November 19, 2018.
Lowes Business Outlook
In addition to the decision to exit Orchard Supply Hardware, the company is developing plans to aggressively rationalize its store inventory, reducing lower-performing inventory while investing in increased depth of high velocity items. Potential impacts of these actions have been reflected in Lowes business outlook.
Fiscal Year 2018 (comparisons to fiscal year 2017; based on U.S. GAAP)
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Total sales are expected to increase approximately 4.5 percent. |
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Comparable sales are expected to increase approximately 3 percent. |
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The company expects to add approximately 9 home improvement stores. |
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Operating income as a percentage of sales (operating margin) is expected to decrease approximately 180 basis points 2 , including the $230 million non-cash charges recorded in the second quarter of fiscal 2018 and $390 to $475 million in additional costs expected to be incurred in the second half of fiscal 2018 as a result of the decision to exit Orchard Supply Hardware. |
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The effective income tax rate is expected to be approximately 25%. |
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Diluted earnings per share of $4.50 to $4.60 are expected for the fiscal year ending Feb. 1, 2019. |
2 |
Includes 4 basis point net negative impact from the gain on the sale of the companys interest in its Australian joint venture (2Q 2017) and the one-time bonus paid to eligible hourly U.S. employees (4Q 2017). |
Disclosure Regarding Forward-Looking Statements
This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements including words such as believe, expect, anticipate, plan, desire, project, estimate, intend, will, should, could, would, may, strategy, potential, opportunity and similar expressions are forward-looking statements. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties. Forward-looking statements include, but are not limited to, statements about future financial and operating results, Lowes plans, objectives, business outlook, priorities, expectations and intentions, expectations for sales growth, comparable sales, earnings and performance, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for services, share repurchases, Lowes strategic initiatives, including those relating to acquisitions and dispositions by Lowes and the expected impact of such transactions on our strategic and operational plans and financial results, and any statement of an assumption underlying any of the foregoing and other statements that are not historical facts. Although we believe that the expectations, opinions, projections and comments reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and we can give no assurance that such statements will prove to be correct. Actual results may differ materially from those expressed or implied in such statements.
A wide variety of potential risks, uncertainties and other factors could materially affect our ability to achieve the results either expressed or implied by these forward-looking statements including, but not limited to, management and key personnel change, changes in general economic conditions, such as the rate of unemployment, interest rate and currency fluctuations, fuel and other energy costs, slower growth in personal income, changes in consumer spending, changes in the rate of housing turnover, the availability of consumer credit and of mortgage financing, inflation or deflation of commodity prices, and other factors that can negatively affect our customers, as well as our ability to: (i) respond to adverse trends in the housing industry, a reduced rate of growth in household formation, and slower rates of growth in housing renovation and repair activity, as well as uneven recovery in commercial building activity; (ii) secure, develop, and otherwise implement new technologies and processes necessary to realize the benefits of our strategic initiatives focused on omni-channel sales and marketing presence and enhance our efficiency, and otherwise successfully execute on our strategy and implement our strategic initiatives, including acquisitions and dispositions; (iii) attract, train, and retain highly-qualified associates; (iv) manage our business effectively as we adapt our operating model to meet the changing expectations of our customers; (v) maintain, improve, upgrade and protect our critical information systems from data security breaches, ransomware and other cyber threats; (vi) respond to fluctuations in the prices and availability of services, supplies, and products; (vii) respond to the growth and impact of competition; (viii) address changes in existing or new laws or regulations that affect consumer credit, employment/labor, trade, product safety, transportation/logistics, energy costs, health care, tax or environmental issues; (ix) positively and effectively manage our public image and reputation and respond appropriately to unanticipated failures to maintain a high level of product and service quality that could result in a negative impact on customer confidence and adversely affect sales; and (x) effectively manage our relationships with selected suppliers of brand name products and key vendors and service providers, including third party installers. In addition, we could experience impairment losses and other charges if either the actual results of our operating stores are not consistent with the assumptions and judgments we have made in estimating future cash flows and determining asset fair values, or we are required to reduce the carrying amount of our investment in certain unconsolidated entities. With respect to acquisitions and dispositions, potential risks include the effect of such transactions on Lowes and the target companys or operating businesss strategic relationships, operating results and businesses generally; our ability to integrate or divest personnel, labor models, financial, IT and other systems successfully; disruption of our ongoing business and distraction of management; hiring additional management and other critical personnel; increasing the scope, geographic diversity and complexity of our operations; significant integration or disposition costs or unknown liabilities; and failure to realize the expected benefits of the transaction. For more information about these
and other risks and uncertainties that we are exposed to, you should read the Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of OperationsCritical Accounting Policies and Estimates included in our most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the SEC) and the description of material changes thereto, if any, included in our Quarterly Reports on Form 10-Q or subsequent filings with the SEC.
The forward-looking statements contained in this news release are expressly qualified in their entirety by the foregoing cautionary statements. The foregoing list of important factors that may affect future results is not exhaustive. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. All such forward-looking statements are based upon data available as of the date of this release or other specified date and speak only as of such date. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf about any of the matters covered in this release are qualified by these cautionary statements and in the Risk Factors included in our most recent Annual Report on Form 10-K and the description of material changes thereto, if any, included in our Quarterly Reports on Form 10-Q or subsequent filings with the SEC. We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, change in circumstances, future events or otherwise, except as may be required by law.
Lowes Companies, Inc.
Lowes Companies, Inc. (NYSE: LOW) is a FORTUNE ® 50 home improvement company serving more than 18 million customers a week in the United States, Canada and Mexico. With fiscal year 2017 sales of $68.6 billion, Lowes and its related businesses operate or service more than 2,390 home improvement and hardware stores and employ over 310,000 people. Founded in 1946 and based in Mooresville, N.C., Lowes supports the communities it serves through programs that focus on K-12 public education and community improvement projects. For more information, visit Lowes.com.
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Lowes Companies, Inc.
Consolidated Statements of Current and Retained Earnings (Unaudited)
In Millions, Except Per Share and Percentage Data
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | |||||||||||||||||||||||||||||
Current Earnings |
Amount | % Sales | Amount | % Sales | Amount | % Sales | Amount | % Sales | ||||||||||||||||||||||||
Net sales |
$ | 20,888 | 100.00 | $ | 19,495 | 100.00 | $ | 38,247 | 100.00 | $ | 36,355 | 100.00 | ||||||||||||||||||||
Cost of sales |
13,689 | 65.54 | 12,825 | 65.79 | 25,036 | 65.46 | 23,885 | 65.70 | ||||||||||||||||||||||||
Gross margin |
7,199 | 34.46 | 6,670 | 34.21 | 13,211 | 34.54 | 12,470 | 34.30 | ||||||||||||||||||||||||
Expenses: |
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Selling, general and administrative |
4,691 | 22.45 | 3,931 | 20.16 | 8,878 | 23.21 | 7,807 | 21.47 | ||||||||||||||||||||||||
Depreciation and amortization |
345 | 1.65 | 357 | 1.83 | 705 | 1.84 | 722 | 1.99 | ||||||||||||||||||||||||
Operating income |
2,163 | 10.36 | 2,382 | 12.22 | 3,628 | 9.49 | 3,941 | 10.84 | ||||||||||||||||||||||||
Interestnet |
153 | 0.74 | 159 | 0.81 | 313 | 0.82 | 319 | 0.87 | ||||||||||||||||||||||||
Loss on extinguishment of debt |
| | | | | | 464 | 1.28 | ||||||||||||||||||||||||
Pre-tax earnings |
2,010 | 9.62 | 2,223 | 11.41 | 3,315 | 8.67 | 3,158 | 8.69 | ||||||||||||||||||||||||
Income tax provision |
490 | 2.34 | 804 | 4.13 | 806 | 2.11 | 1,137 | 3.13 | ||||||||||||||||||||||||
Net earnings |
$ | 1,520 | 7.28 | $ | 1,419 | 7.28 | $ | 2,509 | 6.56 | $ | 2,021 | 5.56 | ||||||||||||||||||||
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Weighted average common shares outstanding - basic |
813 | 841 | 819 | 849 | ||||||||||||||||||||||||||||
Basic earnings per common share (1) |
$ | 1.86 | $ | 1.68 | $ | 3.05 | $ | 2.37 | ||||||||||||||||||||||||
Weighted average common shares outstanding - diluted |
814 | 842 | 820 | 850 | ||||||||||||||||||||||||||||
Diluted earnings per common share (1) |
$ | 1.86 | $ | 1.68 | $ | 3.05 | $ | 2.37 | ||||||||||||||||||||||||
Cash dividends per share |
$ | 0.48 | $ | 0.41 | $ | 0.89 | $ | 0.76 | ||||||||||||||||||||||||
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Retained Earnings |
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Balance at beginning of period |
$ | 5,405 | $ | 5,346 | $ | 5,425 | $ | 6,241 | ||||||||||||||||||||||||
Cumulative effect of accounting change |
| | 33 | | ||||||||||||||||||||||||||||
Net earnings |
1,520 | 1,419 | 2,509 | 2,021 | ||||||||||||||||||||||||||||
Cash dividends declared |
(390 | ) | (344 | ) | (728 | ) | (643 | ) | ||||||||||||||||||||||||
Share repurchases |
(1,018 | ) | (1,168 | ) | (1,722 | ) | (2,366 | ) | ||||||||||||||||||||||||
Balance at end of period |
$ | 5,517 | $ | 5,253 | $ | 5,517 | $ | 5,253 | ||||||||||||||||||||||||
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(1) |
Under the two-class method, earnings per share is calculated using net earnings allocable to common shares, which is derived by reducing net earnings by the earnings allocable to participating securities. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $1,515 million for the three months ended August 3, 2018 and $1,413 million for the three months ended August 4, 2017. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $2,500 million for the six months ended August 3, 2018 and $2,013 million for the six months ended August 4, 2017. |
Lowes Companies, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
In Millions, Except Percentage Data
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | |||||||||||||||||||||||||||||
Amount | % Sales | Amount | % Sales | Amount | % Sales | Amount | % Sales | |||||||||||||||||||||||||
Net earnings |
$ | 1,520 | 7.28 | $ | 1,419 | 7.28 | $ | 2,509 | 6.56 | $ | 2,021 | 5.56 | ||||||||||||||||||||
Foreign currency translation adjustmentsnet of tax |
(70 | ) | (0.34 | ) | 106 | 0.54 | (154 | ) | (0.40 | ) | 105 | 0.29 | ||||||||||||||||||||
Other comprehensive income/(loss) |
(70 | ) | (0.34 | ) | 106 | 0.54 | (154 | ) | (0.40 | ) | 105 | 0.29 | ||||||||||||||||||||
Comprehensive income |
$ | 1,450 | 6.94 | $ | 1,525 | 7.82 | $ | 2,355 | 6.16 | $ | 2,126 | 5.85 | ||||||||||||||||||||
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Lowes Companies, Inc.
Consolidated Balance Sheets
In Millions, Except Par Value Data
(Unaudited) | (Unaudited) | |||||||||||||||
August 3, 2018 | August 4, 2017 | February 2, 2018 | ||||||||||||||
Assets |
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Current assets: |
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Cash and cash equivalents |
$ | 2,251 | $ | 1,696 | $ | 588 | ||||||||||
Short-term investments |
391 | 119 | 102 | |||||||||||||
Merchandise inventorynet |
11,885 | 11,407 | 11,393 | |||||||||||||
Other current assets |
956 | 811 | 689 | |||||||||||||
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Total current assets |
15,483 | 14,033 | 12,772 | |||||||||||||
Property, less accumulated depreciation |
19,172 | 19,762 | 19,721 | |||||||||||||
Long-term investments |
87 | 360 | 408 | |||||||||||||
Deferred income taxesnet |
249 | 328 | 168 | |||||||||||||
Goodwill |
1,271 | 1,255 | 1,307 | |||||||||||||
Other assets |
843 | 930 | 915 | |||||||||||||
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Total assets |
$ | 37,105 | $ | 36,668 | $ | 35,291 | ||||||||||
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Liabilities and shareholders equity |
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Current liabilities: |
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Short-term borrowings |
$ | | $ | | $ | 1,137 | ||||||||||
Current maturities of long-term debt |
894 | 296 | 294 | |||||||||||||
Accounts payable |
8,984 | 8,649 | 6,590 | |||||||||||||
Accrued compensation and employee benefits |
671 | 665 | 747 | |||||||||||||
Deferred revenue |
1,449 | 1,450 | 1,378 | |||||||||||||
Other current liabilities |
2,583 | 2,565 | 1,950 | |||||||||||||
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Total current liabilities |
14,581 | 13,625 | 12,096 | |||||||||||||
Long-term debt, excluding current maturities |
14,937 | 15,788 | 15,564 | |||||||||||||
Deferred revenueextended protection plans |
828 | 790 | 803 | |||||||||||||
Other liabilities |
978 | 929 | 955 | |||||||||||||
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Total liabilities |
31,324 | 31,132 | 29,418 | |||||||||||||
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Shareholders equity: |
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Preferred stock$5 par value, none issued |
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Common stock$0.50 par value; |
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Shares issued and outstanding |
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August 3, 2018 |
811 | |||||||||||||||
August 4, 2017 |
837 | |||||||||||||||
February 2, 2018 |
830 | 406 | 419 | 415 | ||||||||||||
Capital in excess of par value |
| | 22 | |||||||||||||
Retained earnings |
5,517 | 5,253 | 5,425 | |||||||||||||
Accumulated other comprehensive income/(loss) |
(142 | ) | (136 | ) | 11 | |||||||||||
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Total shareholders equity |
5,781 | 5,536 | 5,873 | |||||||||||||
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Total liabilities and shareholders equity |
$ | 37,105 | $ | 36,668 | $ | 35,291 | ||||||||||
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Lowes Companies, Inc.
Consolidated Statements of Cash Flows (Unaudited)
In Millions
Six Months Ended | ||||||||
August 3, 2018 | August 4, 2017 | |||||||
Cash flows from operating activities: |
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Net earnings |
$ | 2,509 | $ | 2,021 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: |
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Depreciation and amortization |
751 | 768 | ||||||
Deferred income taxes |
(75 | ) | (87 | ) | ||||
Loss on property and other assetsnet |
261 | 13 | ||||||
Loss on extinguishment of debt |
| 464 | ||||||
(Gain) loss on cost method and equity method investments |
3 | (87 | ) | |||||
Share-based payment expense |
62 | 55 | ||||||
Changes in operating assets and liabilities: |
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Merchandise inventorynet |
(549 | ) | (850 | ) | ||||
Other operating assets |
(140 | ) | 166 | |||||
Accounts payable |
2,408 | 2,031 | ||||||
Other operating liabilities |
557 | 580 | ||||||
Net cash provided by operating activities |
5,787 | 5,074 | ||||||
Cash flows from investing activities: |
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Purchases of investments |
(980 | ) | (624 | ) | ||||
Proceeds from sale/maturity of investments |
1,012 | 789 | ||||||
Capital expenditures |
(543 | ) | (476 | ) | ||||
Proceeds from sale of property and other long-term assets |
30 | 10 | ||||||
Acquisition of businessnet |
| (505 | ) | |||||
Othernet |
1 | 10 | ||||||
Net cash used in investing activities |
(480 | ) | (796 | ) | ||||
Cash flows from financing activities: |
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Net change in short-term borrowings |
(1,137 | ) | (511 | ) | ||||
Net proceeds from issuance of long-term debt |
| 2,968 | ||||||
Repayment of long-term debt |
(24 | ) | (2,574 | ) | ||||
Proceeds from issuance of common stock under share-based payment plans |
50 | 80 | ||||||
Cash dividend payments |
(678 | ) | (603 | ) | ||||
Repurchase of common stock |
(1,846 | ) | (2,503 | ) | ||||
Othernet |
(2 | ) | (9 | ) | ||||
Net cash used in financing activities |
(3,637 | ) | (3,152 | ) | ||||
Effect of exchange rate changes on cash |
(7 | ) | 12 | |||||
Net increase in cash and cash equivalents |
1,663 | 1,138 | ||||||
Cash and cash equivalents, beginning of period |
588 | 558 | ||||||
Cash and cash equivalents, end of period |
$ | 2,251 | $ | 1,696 |
Lowes Companies, Inc.
Non-GAAP Financial Measures Reconciliation (Unaudited)
To provide additional transparency, the company has presented the non-GAAP financial measure of adjusted earnings per share to exclude the impact of certain discrete items, as further described below, not contemplated in Lowes original Business Outlooks for 2018 and 2017 to assist the user in understanding performance relative to that Business Outlook. The company believes this non-GAAP financial measure provides useful insight for analysts and investors in evaluating what management considers the companys operational performance.
In the second quarter of 2017, the company recognized a $96 million gain from the sale of the companys interest in its Australian joint venture.
In the second quarter of 2018, the company recognized $230 million of non-cash pre-tax charges, consisting of long-lived asset impairments and discontinued projects, as a result of a strategic reassessment of Orchard Supply Hardware (Orchard Supply Hardware charges).
Adjusted diluted earnings per share should not be considered an alternative to, or more meaningful indicator of, the companys diluted earnings per share as prepared in accordance with GAAP. The companys methods of determining this non-GAAP financial measure may differ from the method used by other companies for this or similar non-GAAP financial measures. Accordingly, this non-GAAP measure may not be comparable to the measures used by other companies.
Detailed reconciliations between the companys GAAP and non-GAAP financial results are shown below and available on the companys website at www.lowes.com/investor.
Three Months Ended | ||||||||||||||||||||||||
(Unaudited)
August 3, 2018 |
(Unaudited)
August 4, 2017 |
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(millions, except per share data) |
Pre-Tax
Earnings |
Tax |
Net
Earnings |
Pre-Tax
Earnings |
Tax |
Net
Earnings |
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Diluted earnings per share, as reported |
$ | 1.86 | $ | 1.68 | ||||||||||||||||||||
Non-GAAP Adjustments |
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Gain on sale of interest in Australian joint venture |
| | | (0.11 | ) | | (0.11 | ) | ||||||||||||||||
Orchard Supply Hardware charges |
0.28 | (0.07 | ) | 0.21 | | | | |||||||||||||||||
Adjusted diluted earnings per share |
$ | 2.07 | $ | 1.57 |
Exhibit 99.2
Lowes Q2 2018 RESULTS FINANCIAL HIGHLIGHTS COMPARABLE SALES SUMMARY TRANSACTIONS/TICKET $20.9B IN SALES +5.2% COMP SALES 34.46% GROSS MARGIN +25 basis points WE RETURNED $1.4 BILLION TO OUR SHAREHOLDERS THROUGH DIVIDENDS AND SHARE REPURCHASES TICKET SIZE >$500 $50-500 +4.6% <$50 +1.0% +8.2% 10.36% OPERATING MARGIN -186 basis points MONTHLY COMP +0.6% PERFORMANCE 2017 2018 MAY $1.86 $2.07 Diluted EPS Adj. Diluted EPS1 +10.7%2 +31.8%2 Lowes.com sales growth +18% We posted solid results this quarter by capitalizing on delayed spring demand. We are committed to driving even stronger performance in the future by sharpening our focus on retail fundamentals and by limiting any projects and initiatives that take us away from our core mission of being a great omni-channel home improvement retailer. I would like to thank our associates for their hard work and commitment to the company. - Marvin R. Ellison, Lowes president and CEO PRODUCT CATEGORY PERFORMANCE Positive comps in 8 °f 11 product categories ABOVE COMPANY AVERAGE LAWN & GARDEN LUMBER & BUILDING APPLIANCES SEASONAL & ROUGH PLUMBING MATERIALS OUTDOOR LIVING & ELECTRICAL +7.9% +4.2% Positive comps in 14 regions JUNE JULY Exit Orchard Supply Hardware Eliminate $500m of planned capital projects Aggressively rationalize store inventory
RECONCILIATION OF NON-GAAP MEASURES
Q2 2018 EARNINGS CALL NON-GAAP MEASURES Management uses non-GAAP financial measures, as further outlined in the following slides, because it considers them to be important supplemental measures of the Companys performance. Management also believes that these non-GAAP financial measures provide additional insight for analysts and investors in evaluating the Companys financial and operating performance. These non-GAAP financial measures should not be considered alternatives to, or more meaningful indicators of, the Companys earnings per common share, total debt or other financial measures as prepared in accordance with GAAP. The Companys methods of determining these non-GAAP financial measures may differ from the methods used by other companies for these or similar non-GAAP financial measures. Accordingly, these non-GAAP financial measures may not be comparable to measures used by other companies.
Q2 2018 EARNINGS CALL NON-GAAP MEASURES Adjusted Diluted Earnings Per Share We have presented Adjusted Diluted Earnings Per Share to exclude the impacts of certain items, as further detailed below, not contemplated in Lowes original Business Outlooks for fiscal 2018 and 2017 to assist the user in understanding performance relative to that Business Outlook. In the first quarter of 2017, the company recognized a $464 million loss on extinguishment of debt in connection with a $1.6 billion cash tender offer. In the second quarter of 2017, the company recognized a $96 million gain from the sale of the Companys interest in its Australian joint venture. In the second quarter of 2018, the company recognized $230 million of non-cash pre-tax charges, consisting of long-lived asset impairments and discontinued projects, as a result of a strategic reassessment of Orchard Supply Hardware (Orchard Supply Hardware charges). Adjusted diluted earnings per share should not be considered an alternative to, or more meaningful indicator of, the companys diluted earnings per share as prepared in accordance with GAAP. The companys methods of determining this non-GAAP financial measure may differ from the method used by other companies for this or similar non-GAAP financial measures. Accordingly, this non- GAAP measure may not be comparable to the measures used by other companies.
Q2 2018 EARNINGS CALL RECONCILIATION OF NON-GAAP MEASURES The following provides a reconciliation of adjusted diluted earnings per share to diluted earnings per share, the most directly comparable GAAP financial measure. Three Months Ended August 3, 2018 August 4, 2017 Pre-Tax Net Pre-Tax Net Earnings Tax Earnings Earnings Tax Earnings Diluted Earnings Per Share, As $1.86 $1.68 Reported Gain on Sale of Interest in Australian (0.11) (0.11) Joint Venture Orchard Supply Hardware Charges 0.28 (0.07) 0.21 Adjusted Diluted Earnings Per Share $2.07 $1.57
Q2 2018 EARNINGS CALL FORWARD LOOKING STATEMENTS This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements including words such as believe, expect, anticipate, plan, desire, project, estimate, intend, will, should, could, would, may, strategy, potential, opportunity and similar expressions are forward-looking statements. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties. Forward-looking statements include, but are not limited to, statements about future financial and operating results, Lowes plans, objectives, business outlook, priorities, expectations and intentions, expectations for sales growth, comparable sales, earnings and performance, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for services, share repurchases, Lowes strategic initiatives, including those relating to acquisitions and dispositions by Lowes and the expected impact of such transactions on our strategic and operational plans and financial results, and any statement of an assumption underlying any of the foregoing and other statements that are not historical facts. Although we believe that the expectations, opinions, projections and comments reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and we can give no assurance that such statements will prove to be correct. Actual results may differ materially from those expressed or implied in such statements. A wide variety of potential risks, uncertainties and other factors could materially affect our ability to achieve the results either expressed or implied by these forward-looking statements including, but not limited to, management and key personnel change, changes in general economic conditions, such as the rate of unemployment, interest rate and currency fluctuations, fuel and other energy costs, slower growth in personal income, changes in consumer spending, changes in the rate of housing turnover, the availability of consumer credit and of mortgage financing, inflation or deflation of commodity prices, and other factors that can negatively affect our customers, as well as our ability to: (i) respond to adverse trends in the housing industry, a reduced rate of growth in household formation, and slower rates of growth in housing renovation and repair activity, as well as uneven recovery in commercial building activity; (ii) secure, develop, and otherwise implement new technologies and processes necessary to realize the benefits of our strategic initiatives focused on omni-channel sales and marketing presence and enhance our efficiency, and otherwise successfully execute on our strategy and implement our strategic initiatives, including acquisitions and dispositions; (iii) attract, train, and retain highly-qualified associates; (iv) manage our business effectively as we adapt our operating model to meet the changing expectations of our customers; (v) maintain, improve, upgrade and protect our critical information systems from data security breaches, ransomware and other cyber threats; (vi) respond to fluctuations in the prices and availability of services, supplies, and products; (vii) respond to the growth and impact of competition; (viii) address changes in existing or new laws or regulations that affect consumer credit, employment/labor, trade, product safety, transportation/logistics, energy costs, health care, tax or environmental issues; (ix) positively and effectively manage our public image and reputation and respond appropriately to unanticipated failures to maintain a high level of product and service quality that could result in a negative impact on customer confidence and adversely affect sales; and (x) effectively manage our relationships with selected suppliers of brand name products and key vendors and service providers, including third party installers. In addition, we could experience impairment losses and other charges if either the actual results of our operating stores are not consistent with the assumptions and judgments we have made in estimating future cash flows and determining asset fair values, or we are required to reduce the carrying amount of our investment in certain unconsolidated entities. With respect to acquisitions and dispositions, potential risks include the effect of such transactions on Lowes and the target companys or operating businesss strategic relationships, operating results and businesses generally; our ability to integrate or divest personnel, labor models, financial, IT and other systems successfully; disruption of our ongoing business and distraction of management; hiring additional management and other critical personnel; increasing the scope, geographic diversity and complexity of our operations; significant integration or disposition costs or unknown liabilities; and failure to realize the expected benefits of the transaction. For more information about these and other risks and uncertainties that we are exposed to, you should read the Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of OperationsCritical Accounting Policies and Estimates included in our most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the SEC) and the description of material changes thereto, if any, included in our Quarterly Reports on Form 10-Q or subsequent filings with the SEC. The forward-looking statements contained in this presentation are expressly qualified in their entirety by the foregoing cautionary statements. The foregoing list of important factors that may affect future results is not exhaustive. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. All such forward-looking statements are based upon data available as of the date of this presentation or other specified date and speak only as of such date. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf about any of the matters covered in this presentation are qualified by these cautionary statements and in the Risk Factors included in our most recent Annual Report on Form 10-K and the description of material changes thereto, if any, included in our Quarterly Reports on Form 10-Q or subsequent filings with the SEC. We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, change in circumstances, future events, or otherwise, except as may be required by law. 5
Exhibit 99.3
FOR IMMEDIATE RELEASE
August 22, 2018
Contacts: | Shareholders/Analysts Inquiries: | Media Inquiries: | ||
Tiffany Mason | Dan Frahm | |||
704-758-2033 | 704-758-2350 | |||
tiffany.l.mason@lowes.com | daniel.frahm@lowes.com |
LOWES NAMES DAVID DENTON CHIEF FINANCIAL OFFICER
MOORESVILLE, N.C. Lowes Companies, Inc. (NYSE: LOW) today announced the appointment of David M. Denton as executive vice president, chief financial officer. Denton currently serves as executive vice president and CFO of CVS Health (NYSE: CVS) and will join Lowes shortly after the closing of the CVS acquisition of Aetna, which is expected in the second half of 2018.
Denton brings to Lowes more than 25 years of finance and operational expertise. At CVS, he is responsible for all aspects of financial planning and management. Since being appointed CFO in 2010, Denton has successfully restructured CVS Healths balance sheet and implemented a comprehensive capital allocation program designed to enhance shareholder value. Denton has also played an instrumental role in the companys pending acquisition of Aetna.
We are pleased to add a leader of Daves caliber to the Lowes team, said Marvin R. Ellison, Lowes president and CEO. Dave is a proven retail executive with expertise in finance, capital allocation and strategic planning. Dave also has a strong background in large-scale transformation efforts and has achieved outstanding results throughout his tenure. I am confident that Dave will play a key role as we accelerate growth, profitability and return on capital at Lowes.
I am honored to join Lowes and look forward to working with Marvin and the talented Lowes team to further enhance the companys financial and operational performance, while strengthening our competitiveness in this evolving retail environment, said Denton.
Denton succeeds Marshall A. Croom, whose retirement was previously announced.
Ellison said, On behalf of the entire Lowes board of directors, I would like to thank Marshall for his contributions to Lowes over the past 21 years. We wish him all the best in the future.
About David M. Denton
David Denton currently serves as executive vice president and CFO of CVS Health, and previously served as senior vice president and controller/chief accounting officer. Prior to that, Denton served as CFO and controller for PharmaCare, CVS Healths legacy pharmacy benefits manager subsidiary. Additionally, he has held positions in corporate treasury, financial planning and analysis and corporate finance. Before joining CVS Health, Denton was with the management consulting firm of Deloitte and Touche.
Denton is currently a director of Tapestry, Inc. and is chairman of the companys audit committee. Denton received his MBA from the Babcock Graduate School of Management at Wake Forest University and his undergraduate degree in Business Administration from Kansas State University.
About Lowes
Lowes Companies, Inc. (NYSE: LOW) is a FORTUNE ® 50 home improvement company serving more than 18 million customers a week in the United States, Canada and Mexico. With fiscal year 2017 sales of $68.6 billion, Lowes and its related businesses operate or service more than 2,390 home improvement and hardware stores and employ over 310,000 people. Founded in 1946 and based in Mooresville, N.C., Lowes supports the communities it serves through programs that focus on K-12 public education and community improvement projects. For more information, visit Lowes.com.