Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended April 30,
2010
|
or
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from ______
to ______
|
Commission
file number 1-7898
|
LOWE'S COMPANIES, INC.
|
(Exact
name of registrant as specified in its
charter)
|
NORTH
CAROLINA
|
56-0578072
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
1000
Lowe's Blvd., Mooresville, NC
|
28117
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
telephone number, including area code
|
(704)
758-1000
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
x Yes o
No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
x Yes o
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer x
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
o Yes
x No
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
CLASS
|
OUTSTANDING
AT MAY 28, 2010
|
|
Common
Stock, $.50 par value
|
1,429,199,463
|
LOWE’S
COMPANIES, INC.
-
INDEX -
|
||||
PART I - Financial
Information
|
Page No.
|
|||
Item
1.
|
Financial
Statements
|
|||
4
|
||||
5
|
||||
6
|
||||
7-13
|
||||
14
|
||||
Item
2.
|
15-21
|
|||
|
||||
Item
3.
|
21
|
|||
Item
4.
|
21-22
|
|||
PART II - Other Information
|
||||
Item
1A.
|
23
|
|||
Item
2.
|
23
|
|||
Item
5.
|
23-24
|
|||
Submission of Matters to a Vote of Security Holders | ||||
Item
6.
|
25
|
|||
26
|
||||
27
|
||||
3
Item
1. Financial Statements
|
|||||||||||
Lowe's
Companies, Inc.
|
|||||||||||
Consolidated
Balance Sheets
|
|||||||||||
In
Millions, Except Par Value Data
|
|||||||||||
(Unaudited) | (Unaudited) | ||||||||||
April
30, 2010
|
May
1, 2009
|
January
29, 2010
|
|||||||||
Assets
|
|||||||||||
Current
assets:
|
|||||||||||
Cash
and cash equivalents
|
$
|
2,677
|
$
|
682
|
$
|
632
|
|||||
Short-term
investments
|
675
|
460
|
425
|
||||||||
Merchandise
inventory - net
|
9,899
|
9,013
|
8,249
|
||||||||
Deferred
income taxes - net
|
202
|
122
|
208
|
||||||||
Other
current assets
|
242
|
264
|
218
|
||||||||
Total
current assets
|
13,695
|
10,541
|
9,732
|
||||||||
Property,
less accumulated depreciation
|
22,379
|
22,715
|
22,499
|
||||||||
Long-term
investments
|
832
|
448
|
277
|
||||||||
Other assets
|
508
|
444
|
497
|
||||||||
Total
assets
|
$
|
37,414
|
$
|
34,148
|
$
|
33,005
|
|||||
Liabilities
and Shareholders' Equity
|
|||||||||||
Current
liabilities:
|
|||||||||||
Current
maturities of long-term debt
|
$
|
536
|
$
|
52
|
$
|
552
|
|||||
Accounts
payable
|
7,062
|
5,843
|
4,287
|
||||||||
Accrued
compensation and employee benefits
|
594
|
535
|
577
|
||||||||
Deferred
revenue
|
901
|
741
|
683
|
||||||||
Other
current liabilities
|
1,788
|
1,564
|
1,256
|
||||||||
Total
current liabilities
|
10,881
|
8,735
|
7,355
|
||||||||
Long-term
debt, excluding current maturities
|
5,531
|
5,023
|
4,528
|
||||||||
Deferred
income taxes - net
|
521
|
533
|
598
|
||||||||
Other
liabilities
|
1,462
|
1,420
|
1,455
|
||||||||
Total
liabilities
|
18,395
|
15,711
|
13,936
|
||||||||
Shareholders'
equity:
|
|||||||||||
Preferred
stock - $5 par value, none issued
|
-
|
-
|
-
|
||||||||
Common
stock - $.50 par value;
|
|||||||||||
Shares issued and outstanding
|
|||||||||||
April 30, 2010
|
1,443
|
||||||||||
May 1,
2009
|
1,474
|
||||||||||
January 29,
2010
|
1,459
|
722
|
737
|
729
|
|||||||
Capital
in excess of par value
|
6
|
296
|
6
|
||||||||
Retained
earnings
|
18,246
|
17,399
|
18,307
|
||||||||
Accumulated
other comprehensive income
|
45
|
5
|
27
|
||||||||
Total
shareholders' equity
|
19,019
|
18,437
|
19,069
|
||||||||
Total
liabilities and shareholders' equity
|
$
|
37,414
|
$
|
34,148
|
$
|
33,005
|
|||||
See
accompanying notes to the consolidated financial statements
(unaudited).
|
4
Consolidated Statements of
Current and Retained Earnings (Unaudited)
|
|||||||||
In
Millions, Except Per Share Data
|
|||||||||
Three
Months Ended
|
|||||||||
April
30, 2010
|
May
1, 2009
|
||||||||
Current
Earnings
|
Amount
|
Percent
|
Amount
|
Percent
|
|||||
Net
sales
|
$ | 12,388 | 100.00 | $ | 11,832 | 100.00 | |||
Cost
of sales
|
8,030 | 64.82 | 7,636 | 64.54 | |||||
Gross
margin
|
4,358 | 35.18 | 4,196 | 35.46 | |||||
Expenses:
|
|||||||||
Selling,
general and administrative
|
3,093 | 24.98 | 2,957 | 24.99 | |||||
Depreciation
|
397 | 3.20 | 401 | 3.39 | |||||
Interest
- net
|
82 | 0.66 | 78 | 0.66 | |||||
Total
expenses
|
3,572 | 28.84 | 3,436 | 29.04 | |||||
Pre-tax earnings
|
786 | 6.34 | 760 | 6.42 | |||||
Income
tax provision
|
297 | 2.39 | 284 | 2.40 | |||||
Net
earnings
|
$ | 489 | 3.95 | $ | 476 | 4.02 | |||
Weighted
average common shares outstanding - basic
|
1,438 | 1,462 | |||||||
Basic earnings per common
share
|
$ | 0.34 | $ | 0.32 | |||||
Weighted
average common shares outstanding - diluted
|
1,441 | 1,464 | |||||||
Diluted earnings per common
share
|
$ | 0.34 | $ | 0.32 | |||||
Cash dividends per
share
|
$ | 0.090 | $ | 0.085 | |||||
Retained
Earnings
|
|||||||||
Balance
at beginning of period
|
$ | 18,307 | $ | 17,049 | |||||
Net
earnings
|
489 | 476 | |||||||
Cash
dividends
|
(130) | (126) | |||||||
Share
repurchases
|
(420) | - | |||||||
Balance
at end of period
|
$ | 18,246 | $ | 17,399 | |||||
See
accompanying notes to the consolidated financial statements
(unaudited).
|
|||||||||
5
Consolidated
Statements of Cash Flows (Unaudited)
|
|||||||
In
Millions
|
|||||||
Three
Months Ended
|
|||||||
April
30, 2010
|
May
1, 2009
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
earnings
|
$ | 489 | $ | 476 | |||
Adjustments
to reconcile net earnings to net cash provided by operating
activities:
|
|||||||
Depreciation
and amortization
|
424 | 434 | |||||
Deferred income taxes
|
(82 | ) | (83 | ) | |||
Loss
on property and other assets - net
|
1 | 9 | |||||
Share-based payment expense
|
26 | 24 | |||||
Net
changes in operating assets and liabilities:
|
|||||||
Merchandise
inventory - net
|
(1,644 | ) | (801 | ) | |||
Other
operating assets
|
(35 | ) | (1 | ) | |||
Accounts
payable
|
2,773 | 1,732 | |||||
Other
operating liabilities
|
784 | 555 | |||||
Net
cash provided by operating activities
|
2,736 | 2,345 | |||||
Cash
flows from investing activities:
|
|||||||
Purchases
of short-term investments
|
(426 | ) | (68 | ) | |||
Proceeds
from sale/maturity of short-term investments
|
228 | 122 | |||||
Purchases
of long-term investments
|
(745 | ) | (302 | ) | |||
Proceeds
from sale/maturity of long-term investments
|
138 | 6 | |||||
(Increase)
decrease in other long-term assets
|
(1 | ) | 15 | ||||
Property
acquired
|
(283 | ) | (572 | ) | |||
Proceeds
from sale of property and other long-term assets
|
5 | 11 | |||||
Net
cash used in investing activities
|
(1,084 | ) | (788 | ) | |||
Cash
flows from financing activities:
|
|||||||
Net
decrease in short-term borrowings
|
- | (986 | ) | ||||
Proceeds
from issuance of long-term debt
|
992 | - | |||||
Repayment
of long-term debt
|
(25 | ) | (8 | ) | |||
Proceeds
from issuance of common stock from stock options exercised
|
20 | 1 | |||||
Cash
dividend payments
|
(131 | ) | (126 | ) | |||
Repurchase
of common stock
|
(465 | ) | - | ||||
Net
cash provided by (used in) financing activities
|
391 | (1,119 | ) | ||||
Effect
of exchange rate changes on cash
|
2 | (1 | ) | ||||
Net
increase in cash and cash equivalents
|
2,045 | 437 | |||||
Cash
and cash equivalents, beginning of period
|
632 | 245 | |||||
Cash
and cash equivalents, end of period
|
$ | 2,677 | $ | 682 | |||
See
accompanying notes to the consolidated financial statements
(unaudited).
|
6
Notes
to Consolidated Financial Statements (Unaudited)
Note 1: Basis of Presentation - The
accompanying consolidated financial statements (unaudited) and notes to
consolidated financial statements (unaudited) are presented in accordance with
the rules and regulations of the Securities and Exchange Commission and do not
include all the disclosures normally required in annual consolidated financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America. The consolidated financial
statements (unaudited), in the opinion of management, contain all adjustments
necessary to present fairly the financial position as of April 30, 2010, and May
1, 2009, and the results of operations and cash flows for the three months ended
April 30, 2010, and May 1, 2009.
These
interim consolidated financial statements (unaudited) should be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the Lowe's Companies, Inc. (the Company) Annual Report on Form 10-K
for the fiscal year ended January 29, 2010 (the Annual Report). The
financial results for the interim periods may not be indicative of the financial
results for the entire fiscal year.
Certain
prior period amounts have been reclassified to conform to current
classifications. For the three months ended May 1, 2009, store
opening costs of $13 million, which were previously reported as a single line
item on the consolidated statements of current and retained earnings, have been
combined with selling, general and administrative expenses. This change was not
material and had no impact on the consolidated balance sheets or statements of
cash flows for any of the periods presented.
The
long-term portion of the self-insurance liabilities, primarily for workers’
compensation, automobile, property, and general and product liability claims, of
$469 million at May 1, 2009, previously classified as current on the
consolidated balance sheets, has been reclassified to other liabilities
(non-current). The current portion of these self-insurance liabilities,
previously reported as a single line item on the consolidated balance sheets,
has been combined with other current liabilities. The non-current portion
of deferred income taxes related to these self-insurance liabilities has also
been reclassified from current to non-current deferred income taxes in the
consolidated balance sheets. These changes were not material and had
no impact on the consolidated statements of current and retained earnings or
cash flows for any of the periods presented.
Note 2: Fair Value Measurements and
Financial Instruments - Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The
authoritative guidance for fair value measurements establishes a three-level
hierarchy, which encourages an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair
value. The three levels of the hierarchy are defined as
follows:
·
|
Level
1 - inputs to the
valuation techniques that are quoted prices in active markets for
identical assets or liabilities
|
·
|
Level
2 - inputs to the
valuation techniques that are other than quoted prices but are observable
for the assets or liabilities, either directly or
indirectly
|
·
|
Level
3 - inputs to the
valuation techniques that are unobservable for the assets or
liabilities
|
7
The
following tables present the Company’s financial assets measured at fair value
on a recurring basis as of April 30, 2010, May 1, 2009, and January 29, 2010,
classified by fair value hierarchy:
Fair
Value Measurements at Reporting Date Using
|
|||||||||||
Quoted
Prices in Active Markets for Identical Assets
|
Significant
Other Observable Inputs
|
Significant
Unobservable Inputs
|
|||||||||
(In
millions)
|
April
30, 2010
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|||||||
Available-for-sale
securities:
|
|||||||||||
Municipal
Bonds
|
$
|
276
|
$
|
-
|
$
|
276
|
$
|
-
|
|||
Municipal Variable Rate Demand Obligations
|
261
|
-
|
261
|
-
|
|||||||
Money
Market Funds
|
84
|
84
|
-
|
-
|
|||||||
Other
|
7
|
2
|
5
|
-
|
|||||||
Trading
securities:
|
|||||||||||
Mutual
Funds
|
47
|
47
|
-
|
-
|
|||||||
Total
short-term investments
|
$
|
675
|
$
|
133
|
$
|
542
|
$
|
-
|
|||
Available-for-sale
securities:
|
|||||||||||
Municipal
Bonds
|
$
|
832
|
$
|
-
|
$
|
832
|
$
|
-
|
|||
Total
long-term investments
|
$
|
832
|
$
|
-
|
$
|
832
|
$
|
-
|
Fair
Value Measurements at Reporting Date Using
|
|||||||||||
Quoted
Prices in Active Markets for Identical Assets
|
Significant
Other Observable Inputs
|
Significant
Unobservable Inputs
|
|||||||||
(In
millions)
|
May
1, 2009
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|||||||
Available-for-sale
securities:
|
|||||||||||
Municipal
Bonds
|
$
|
346
|
$
|
-
|
$
|
346
|
$
|
-
|
|||
Money
Market Funds
|
66
|
66
|
-
|
-
|
|||||||
Other
|
15
|
2
|
13
|
-
|
|||||||
Trading
securities:
|
|||||||||||
Mutual
Funds
|
33
|
33
|
-
|
-
|
|||||||
Total
short-term investments
|
$
|
460
|
$
|
101
|
$
|
359
|
$
|
-
|
|||
Available-for-sale
securities:
|
|||||||||||
Municipal
Bonds
|
$
|
448
|
$
|
-
|
$
|
448
|
$
|
-
|
|||
Total
long-term investments
|
$
|
448
|
$
|
-
|
$
|
448
|
$
|
-
|
8
Fair
Value Measurements at Reporting Date Using
|
|||||||||||
Quoted
Prices in Active Markets for Identical Assets
|
Significant
Other Observable Inputs
|
Significant
Unobservable Inputs
|
|||||||||
(In
millions)
|
January
29, 2010
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|||||||
Available-for-sale
securities:
|
|||||||||||
Municipal
Bonds
|
$
|
303
|
$
|
-
|
$
|
303
|
$
|
-
|
|||
Money
Market Funds
|
68
|
68
|
-
|
-
|
|||||||
Other
|
12
|
2
|
10
|
-
|
|||||||
Trading
securities:
|
|||||||||||
Mutual
Funds
|
42
|
42
|
-
|
-
|
|||||||
Total
short-term investments
|
$
|
425
|
$
|
112
|
$
|
313
|
$
|
-
|
|||
Available-for-sale
securities:
|
|||||||||||
Municipal
Bonds
|
$
|
277
|
$
|
-
|
$
|
277
|
$
|
-
|
|||
Total
long-term investments
|
$
|
277
|
$
|
-
|
$
|
277
|
$
|
-
|
When available, quoted prices are used
to determine fair value. When quoted prices in active markets are
available, investments are classified within Level 1 of the fair value
hierarchy. When quoted prices in active markets are not available, fair
values are determined using pricing models and the inputs to those pricing
models are based on observable market inputs. The inputs to the
pricing models are typically benchmark yields, reported trades, broker-dealer
quotes, issuer spreads and benchmark securities, among others.
During
the three months ended April 30, 2010 and May 1, 2009, the Company had no
significant measurements of assets or liabilities at fair value on a
non-recurring basis subsequent to their initial recognition.
The Company’s financial instruments not
measured at fair value on a recurring basis include cash and cash equivalents,
accounts receivable, short-term borrowings, accounts payable, accrued
liabilities and long-term debt and are reflected in the financial statements at
cost. With the exception of long-term debt, cost approximates fair
value for these items due to their short-term nature. Estimated fair
values for long-term debt have been determined using available market
information, including reported trades, benchmark yields and broker-dealer
quotes.
Carrying
amounts and the related estimated fair value of the Company’s long-term debt,
excluding capital leases and other, are as follows:
April
30, 2010
|
|||||
Carrying
|
Fair
|
||||
(In
millions)
|
Amount
|
Value
|
|||
Long-term
debt (excluding capital leases and other)
|
$
|
5,712
|
$
|
6,205
|
Note 3: Restricted Investment
Balances - Short-term and long-term investments include restricted
balances pledged as collateral for letters of credit for the Company’s extended
warranty program and for a portion of the Company’s casualty insurance and
Installed Sales program liabilities. Restricted balances included in
short-term investments were $211 million at both April 30, 2010 and May 1, 2009,
and $186 million at January 29, 2010. Restricted balances included in
long-term investments were $177 million at April 30, 2010, $144 million at May
1, 2009, and $202 million at January 29, 2010.
9
Note 4: Property - Property is
shown net of accumulated depreciation of $10.2 billion at
April 30, 2010, $9.1 billion at May 1, 2009, and $9.8 billion at January 29,
2010.
Note 5: Long-Term Debt - In
April 2010, the Company issued $1.0 billion of unsecured senior notes, comprised
of two tranches: $500 million of 4.625% senior notes maturing in April 2020 and
$500 million of 5.800% senior notes maturing in April 2040 (collectively, the
“Senior Notes”). The 4.625% and 5.800% Senior Notes were issued at
discounts of approximately $3.2 million and $4.8 million,
respectively. Interest on the Senior Notes is payable semiannually in
arrears in April and October of each year until maturity, beginning in October
2010. The discount associated with the issuance is included in long-term debt
and is being amortized over the respective terms of the Senior
Notes.
The
Senior Notes may be redeemed by the Company at any time, in whole or in part, at
a redemption price plus accrued interest to the date of
redemption. The redemption price before six months prior to the
applicable maturity date is equal to the greater of (1) 100% of the principal
amount of the Senior Notes to be redeemed, or (2) the sum of the present values
of the remaining scheduled payments of principal and interest thereon,
discounted to the date of redemption on a semi-annual basis at a specified
rate. The redemption price within six months prior to the applicable
maturity date is equal to 100% of the principal amount of the Senior Notes to be
redeemed plus accrued interest thereon to but excluding the date of
redemption. The indenture under which the notes were issued also
contains a provision that allows the holders of the notes to require the Company
to repurchase all or any part of their notes if a change of control triggering
event occurs. If elected under the change in control provisions, the
repurchase of the notes will occur at a purchase price of 101% of the principal
amount, plus accrued and unpaid interest, if any, on such notes to the date of
purchase. The indenture governing the Senior Notes does not limit the
aggregate principal amount of debt securities that the Company may issue, nor is
the Company required to maintain financial ratios or specified levels of net
worth or liquidity. However, the indenture contains various
restrictive covenants, none of which is expected to impact the Company’s
liquidity or capital resources.
Note 6: Extended Warranties -
The Company sells separately-priced extended warranty contracts under a
Lowe’s-branded program for which the Company is ultimately
self-insured. The Company recognizes revenue from extended warranty
sales on a straight-line basis over the respective contract
term. Extended warranty contract terms primarily range from one to
four years from the date of purchase or the end of the manufacturer’s warranty,
as applicable. The Company’s extended warranty deferred revenue is
included in other liabilities (non-current) on the consolidated balance
sheets. Changes in deferred revenue for extended warranty contracts
are summarized as follows:
Three
Months Ended
|
||||||
(In
millions)
|
April
30, 2010
|
May
1, 2009
|
||||
Extended
warranty deferred revenue, beginning of period
|
$
|
549
|
$
|
479
|
||
Additions
to deferred revenue
|
68
|
52
|
||||
Deferred
revenue recognized
|
(41
|
) |
(35
|
) | ||
Extended
warranty deferred revenue, end of period
|
$
|
576
|
$
|
496
|
Incremental
direct acquisition costs associated with the sale of extended warranties are
also deferred and recognized as expense on a straight-line basis over the
respective contract term. Deferred costs associated with extended
warranty contracts were $159 million at April 30, 2010, $129 million at May 1,
2009, and $150 million at January 29, 2010. The Company’s extended
warranty deferred costs are included in other assets (non-current) on the
consolidated balance sheets. All other costs, such as costs of
services performed under the contract, general and administrative expenses and
advertising expenses, are expensed as incurred.
10
The
liability for extended warranty claims incurred is included in other current
liabilities on the consolidated balance sheets. Changes in the
liability for extended warranty claims are summarized as
follows:
Three
Months Ended
|
||||||
(In
millions)
|
April
30, 2010
|
May
1, 2009
|
||||
Liability
for extended warranty claims, beginning of period
|
$
|
23
|
$
|
17
|
||
Accrual
for claims incurred
|
17
|
13
|
||||
Claim
payments
|
(17
|
) |
(12
|
) | ||
Liability
for extended warranty claims, end of period
|
$
|
23
|
$
|
18
|
Note 7: Shareholders' Equity -
The Company has a share repurchase program that is implemented through purchases
made from time to time either in the open market or through private
transactions. Shares purchased under the share repurchase program are
retired and returned to authorized and unissued status. Authorization
for up to $5 billion of share repurchases with no expiration was approved by the
Company’s Board of Directors on January 29, 2010. The Company repurchased 18.6
million shares under the share repurchase program at a total cost of $450
million (of which $420 million was recorded as a reduction in retained earnings,
after capital in excess of par value was depleted) during the first quarter of
fiscal 2010. No shares were repurchased under the share repurchase
program during the first quarter of fiscal 2009. As of April 30,
2010, the Company had remaining authorization under the share repurchase program
of $4.6 billion. The Company also repurchased 0.6 million shares at a
total cost of $15 million from employees to satisfy either the exercise price of
stock options or their statutory withholding tax liability based upon the
vesting of restricted share-based awards during the first quarter of fiscal
2010, and an insignificant amount during the first quarter of fiscal
2009.
Note 8: Comprehensive Income -
Comprehensive income represents changes in shareholders’ equity from non-owner
sources and is comprised of net earnings plus or minus unrealized gains or
losses on available-for-sale securities and foreign currency translation adjustments. The
following table reconciles net earnings to comprehensive income for the three
months ended April 30, 2010, and May 1, 2009.
Three
Months Ended
|
||||||
(In
millions)
|
April
30, 2010
|
May
1, 2009
|
||||
Net
earnings
|
$ | 489 | $ | 476 | ||
Foreign
currency translation adjustments
|
19 | 12 | ||||
Net
unrealized investment losses
|
(1 | ) | (1 | ) | ||
Comprehensive
income
|
$ | 507 | $ | 487 |
Note 9: Earnings Per
Share - The Company calculates basic and diluted earnings per common
share using the two-class method. Under the two-class method, net
earnings are reduced by the amount of dividends declared in the period for each
class of common stock and participating security. The remaining
undistributed earnings are then allocated to common stock and participating
securities as if all of the net earnings for the period had been
distributed. Basic earnings per common share excludes dilution and is
calculated by dividing net earnings allocable to common shares by the
weighted-average number of common shares outstanding for the
period. Diluted earnings per common share is calculated by dividing
net earnings allocable to common shares by the weighted-average number of common
shares as of the balance sheet date, as adjusted for the potential dilutive
effect of non-participating share-based awards. The following table
reconciles earnings per common share for the three months ended April 30, 2010,
and May 1, 2009.
11
Three
Months Ended
|
||||||
(In
millions, except per share data)
|
April
30, 2010
|
May
1, 2009
|
||||
Basic
earnings per common share:
|
||||||
Net
earnings
|
$ | 489 | $ | 476 | ||
Less:
Net earnings allocable to participating securities
|
(4 | ) | (4 | ) | ||
Net
earnings allocable to common shares
|
$ | 485 | $ | 472 | ||
Weighted-average
common shares outstanding
|
1,438 | 1,462 | ||||
Basic
earnings per common share
|
$ | 0.34 | $ | 0.32 | ||
Diluted
earnings per common share:
|
||||||
Net
earnings
|
$ | 489 | $ | 476 | ||
Less:
Net earnings allocable to participating securities
|
(4 | ) | (4 | ) | ||
Net
earnings allocable to common shares
|
$ | 485 | $ | 472 | ||
Weighted-average
common shares outstanding
|
1,438 | 1,462 | ||||
Dilutive
effect of non-participating share-based awards
|
3 | 2 | ||||
Weighted-average
common shares, as adjusted
|
1,441 | 1,464 | ||||
Diluted
earnings per common share
|
$ | 0.34 | $ | 0.32 |
Stock options to purchase 17.2 million
and 26.0 million shares of common stock were excluded from the computation of
diluted earnings per common share because their effect would have been
anti-dilutive for the three months ended April 30, 2010, and May 1, 2009,
respectively.
Net
interest expense is comprised of the following:
|
||||||
Three
Months Ended
|
||||||
(In
millions)
|
April
30, 2010
|
May
1, 2009
|
||||
Long-term
debt
|
$ | 75 | $ | 73 | ||
Short-term
borrowings
|
- | 2 | ||||
Capitalized
lease obligations
|
9 | 7 | ||||
Interest
income
|
(2 | ) | (5 | ) | ||
Interest
capitalized
|
(3 | ) | (4 | ) | ||
Interest
on tax uncertainties
|
2 | 3 | ||||
Other
|
1 | 2 | ||||
Interest
- net
|
$ | 82 | $ | 78 |
12
Supplemental
disclosures of cash flow information:
|
||||||
Three
Months Ended
|
||||||
(In
millions)
|
April
30, 2010
|
May
1, 2009
|
||||
Cash
paid for interest, net of amount capitalized
|
$ | 130 | $ | 130 | ||
Cash
paid for income taxes
|
$ | 100 | $ | 68 | ||
Non-cash
investing and financing activities:
|
||||||
Non-cash
property acquisitions, including assets acquired under capital
lease
|
$ | 23 | $ | 54 | ||
Loss
on equity method investments
|
$ | (1 | ) | $ | (1 | ) |
Cash
dividends declared but not paid
|
$ | 130 | $ | - |
13
To the
Board of Directors and Shareholders of Lowe’s Companies, Inc.
Mooresville,
North Carolina
We have
reviewed the accompanying consolidated balance sheets of Lowe’s Companies, Inc.
and subsidiaries (the “Company”) as of April 30, 2010 and May 1, 2009, and the
related consolidated statements of current and retained earnings and of cash
flows for the fiscal three-month periods ended April 30, 2010 and May 1, 2009.
These consolidated interim financial statements are the responsibility of the
Company’s management.
We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on
our reviews, we are not aware of any material modifications that should be made
to such consolidated interim financial statements for them to be in conformity
with accounting principles generally accepted in the United States of
America.
We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
the Company as of January 29, 2010, and the related consolidated statements of
earnings, shareholders’ equity, and cash flows for the fiscal year then ended
(not presented herein); and in our report dated March 30, 2010, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance sheet of the
Company as of January 29, 2010 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
/s/
DELOITTE & TOUCHE LLP
Charlotte,
North Carolina
June 1,
2010
14
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This
discussion and analysis summarizes the significant factors affecting our
consolidated operating results, liquidity and capital resources during the three
months ended April 30, 2010, and May 1, 2009. This discussion and
analysis should be read in conjunction with the consolidated financial
statements and notes to the consolidated financial statements that are included
in our Annual Report on Form 10-K for the fiscal year ended January 29, 2010
(the Annual Report), as well as the consolidated financial statements
(unaudited) and notes to the consolidated financial statements (unaudited)
contained in this report. Unless otherwise specified, all comparisons
made are to the corresponding period of 2009. This discussion and
analysis is presented in six sections:
·
|
Executive
Overview
|
·
|
Operations
|
·
|
Company
Outlook
|
·
|
Financial
Condition, Liquidity and Capital
Resources
|
·
|
Off-Balance
Sheet Arrangements
|
·
|
Contractual
Obligations and Commercial
Commitments
|
EXECUTIVE
OVERVIEW
We
experienced solid results during the first quarter of 2010, driven by improving
consumer outlook, favorable weather, and our ability to satisfy demand generated
by government stimulus programs. While employment remains a concern,
on a relative basis the economic climate is better than a year ago, supported by
cautious signs that housing fundamentals are stabilizing. Our sales
results, combined with recent customer surveys, indicate consumers feel more
comfortable nationally that the worst of the economic cycle is behind
us. During the quarter, we saw several signs of increased consumer
willingness to spend on big ticket products and engage in discretionary home
improvement projects. We also benefited from favorable weather in the second
half of the quarter and government stimulus programs, including the
government-sponsored Cash for Appliances and Homebuyer Tax Credit
programs.
For
the first quarter of 2010, we experienced our first comparable store sales
increase in 15 quarters, with increases in 45 of the 50 U.S. states, strong
results in Canada, and positive comparable store sales in 13 of our 20 product
categories. While our sales performance was better than prior year,
our gross margin rate was lower than prior year, driven primarily by a change in
product mix. This was partially attributed to the shift of sales
to the appliance category due to the Cash for Appliances program.
While
our first quarter results were aided by good weather and government stimulus
programs, we are encouraged by the improvement in customer demand across
geographic regions and the positive comparable performance for the majority of
our product categories this quarter. We remain committed to providing
great customer service and products to meet consumers’ ever-evolving needs and
we are confident that we are positioned to continue to drive profitable market
share.
OPERATIONS
The
following table sets forth the percentage relationship to net sales of each line
item of the consolidated statements of earnings, as well as the percentage
change in dollar amounts from the prior period. This table should be
read in conjunction with the following discussion and analysis and the
consolidated financial statements (unaudited), including the related notes to
the consolidated financial statements (unaudited).
15
Three
Months Ended
|
Basis
Point Increase / (Decrease) in Percentage of Net Sales from Prior
Period
|
Percentage
Increase / (Decrease) in Dollar Amounts from Prior Period
|
||||||||
April
30, 2010
|
May
1, 2009
|
2009
vs. 2008
|
2009
vs. 2008
|
|||||||
Net
sales
|
100.00 | % | 100.00 | % | N/A | 4.7 | % | |||
Gross
margin
|
35.18 | 35.46 | (28 | ) | 3.9 | |||||
Expenses:
|
||||||||||
Selling,
general and administrative
|
24.98 | 24.99 | (1 | ) | 4.6 | |||||
Depreciation
|
3.20 | 3.39 | (19 | ) | (1.0 | ) | ||||
Interest
- net
|
0.66 | 0.66 | - | 5.1 | ||||||
Total
expenses
|
28.84 | 29.04 | (20 | ) | 4.0 | |||||
Pre-tax
earnings
|
6.34 | 6.42 | (8 | ) | 3.4 | |||||
Income
tax provision
|
2.39 | 2.40 | (1 | ) | 4.6 | |||||
Net
earnings
|
3.95 | % | 4.02 | % | (7 | ) | 2.7 | |||
EBIT margin1
|
7.00 | % | 7.08 | % | (8 | ) | 3.6 | % | ||
Three
Months Ended
|
|||||||
Other
Metrics
|
April
30, 2010
|
May
1, 2009
|
|||||
Comparable
store sales increase (decrease)2
|
2.4 | % | (6.6 | )% | |||
Total
customer transactions (in millions)
|
199 | 186 | |||||
Average
ticket3
|
$ | 62.27 | $ | 63.71 | |||
At
end of period:
|
|||||||
Number
of stores
|
1,721 | 1,670 | |||||
Sales
floor square feet (in millions)
|
194 | 189 | |||||
Average
store size selling square feet (in thousands)4
|
113 | 113 | |||||
|
(1) EBIT margin is defined as
earnings before interest and taxes as a percentage of sales (operating
margin).
|
|
(2)
A comparable
store is defined as a store that has been open longer than 13
months.
|
|
(3)
Average ticket is
defined as net sales divided by the total number of customer
transactions.
|
|
(4)Average store size selling
square feet is defined as sales floor square feet divided by the number of
stores open at the end of the
period.
|
Net Sales –
Net sales for the first three months ended April 30, 2010 were positively
impacted by consumers’ increased willingness to spend on more discretionary
products and engage in delayed home improvement projects, favorable weather, and
our ability to satisfy demand generated by government incentive
programs. Comparable store customer transactions increased 4.8%,
while comparable store average ticket decreased 2.3%. The decrease in
comparable store average ticket was primarily attributed to increased sales of
lower ticket seasonal living products as a result of the favorable weather in
the second half of the quarter.
During
the quarter, we experienced comparable store sales increases in 13 of our 20
product categories, including double-digit increases in our appliances, outdoor
power equipment, and seasonal living categories. The increase in
comparable store sales in appliances was aided by the government-sponsored Cash
for Appliances rebate program. Favorable weather conditions in the
second half of the quarter contributed to positive comparable store sales in
seasonal living products and outdoor power equipment. Consumers also
exhibited an increased willingness to spend on discretionary products,
as
16
exhibited
by solid demand for pressure washers, gas grills and patio
furniture. In addition, Installed Sales experienced a double digit
comparable store sales increase for the quarter, indicating a greater
willingness of consumers to take on previously delayed discretionary
projects. Sales to our Commercial Business Customers also increased
for the quarter consistent with the Company average.
We
experienced comparable store sales increases in the majority of our geographic
markets during the quarter. With the exception of certain areas of
the Gulf Coast, which experienced declines in comparable store sales as a result
of comparisons to last year’s hurricane-related spending, all of our geographic
areas had comparable store sales increases for the quarter. Our
Canadian stores contributed approximately 20 basis points of our comparable
store sales increase, driven primarily by favorable foreign exchange rates,
strong performance due to the differentiation of our stores, products, and
services in the Canadian marketplace, as well as our ability to satisfy demand
generated by government stimulus programs.
Gross
Margin - For the first quarter of 2010, gross margin decreased 28 basis
points as a percentage of sales compared to the first quarter of
2009. The mix of products sold across product categories negatively
impacted gross margin by 36 basis points primarily due to increased appliance
sales resulting from the Cash for Appliances program. Delays in our
ability to pass on commodity price increases due to the competitive environment,
as well as increased promotional activity, resulted in a decrease of
approximately 20 basis points, which was partially offset by a 13 basis point
increase attributable to realized efficiencies in our supply chain
network. We also experienced an increase of 11 basis points
attributable to lower inventory shrink.
SG&A
-
For the first quarter of 2010, SG&A decreased one basis point as a
percentage of sales compared to the first quarter of 2009. We
experienced de-leverage of 40 basis points in store payroll resulting primarily
from additional hours associated with the Project Specialist - Exteriors and
Facility Service Associate positions. This was partially offset by 35
basis points of leverage for the quarter from the Company’s private label credit
card program, driven by lower anticipated defaults and reduced financing
costs. During the first quarter SG&A was also negatively impacted
by increased rates for state unemployment and payroll taxes and increased
interchange fees due to a tender shift from proprietary cards to bank cards,
offset by favorable insurance costs.
Depreciation
-
Depreciation expense decreased slightly for the three months ended April 30,
2010 compared to the prior year due to reduced capital
spending. Property, less accumulated depreciation, totaled $22.4
billion and $22.7 billion at April 30, 2010 and May 1, 2009,
respectively. As of April 30, 2010 and May 1, 2009, we owned 88% of
our stores, which included stores on leased land.
Income Tax
Provision - Our effective income tax rates were 37.8% and 37.4% for the
three month periods ended April 30, 2010, and May 1, 2009,
respectively. Our effective income tax rate was 36.9% for fiscal
2009.
COMPANY
OUTLOOK
Second
Quarter 2010
As
of May 17, 2010, the date of our first quarter 2010 earnings release, we
expected to open approximately four new stores during the second quarter of
2010, reflecting square footage growth of approximately 2%. We expected total
sales to increase 5% to 7% and comparable store sales to increase 2% to
4%. Earnings before interest and taxes as a percentage of sales
(operating margin) was expected to increase approximately 40 basis
points. In addition, depreciation expense was expected to be
approximately $400 million. Diluted earnings per share of $0.57 to
$0.59 were expected for the second quarter. Our outlook for the
second quarter does not contemplate any share repurchases. All
comparisons are with the second quarter of 2009.
Fiscal
Year 2010
As
of May 17, 2010, the date of our first quarter 2010 earnings release, we
expected to open 40 to 45 new stores during 2010, which ends on January 28,
2011, reflecting square footage growth of approximately 2%. We expected total
sales to
17
increase
5% to 7% and comparable store sales to increase 2% to 4%. Earnings
before interest and taxes as a percentage of sales (operating margin) was
expected to increase approximately 60 basis points. In addition,
depreciation expense was expected to be approximately $1.6
billion. Diluted earnings per share of $1.37 to $1.47 were expected
for 2010. Our outlook for 2010 does not contemplate any future share
repurchases. All comparisons are with fiscal 2009.
FINANCIAL CONDITION, LIQUIDITY AND
CAPITAL RESOURCES
Cash
Flows
Cash
flows from operating activities continued to provide the primary source of our
liquidity. The increase in net cash flows provided by operating
activities for the first quarter of 2010 versus the first quarter of 2009 was
primarily driven by changes in working capital. The increase in net
cash used in investing activities for the first quarter of 2010 versus the first
quarter of 2009 was driven by increased net purchase activity related to
short-term and long-term investments, partially offset by a 51% decline in
property acquired due to a reduction in our store expansion
program. Net cash flows provided by financing activities for the
first quarter of 2010 was driven by the issuance of $1.0 billion of unsecured
senior notes in April 2010, partially offset by $450 million in share
repurchases under our share repurchase program. Net cash flows used
by financing activities for the first quarter of 2009 was primarily attributable
to approximately $1.0 billion of net repayment activity related to short-term
borrowings.
Sources
of Liquidity
In
addition to our cash flows from operations, liquidity is provided by our
short-term borrowing facilities. We have a $1.75 billion senior
credit facility that expires in June 2012. The senior credit facility
supports our commercial paper and revolving credit programs. The senior
credit facility has a $500 million letter of credit sublimit. Amounts
outstanding under letters of credit reduce the amount available for borrowing
under the senior credit facility. Borrowings made are unsecured and
are priced at fixed rates based upon market conditions at the time of funding in
accordance with the terms of the senior credit facility. The senior
credit facility contains certain restrictive covenants, which include
maintenance of a debt leverage ratio as defined by the senior credit
facility. We were in compliance with those covenants at April 30,
2010. Seventeen banking institutions are participating in the senior
credit facility. As of April 30, 2010, there were no outstanding
borrowings or letters of credit outstanding under the senior credit facility and
no outstanding borrowings under the commercial paper program.
We
also have a Canadian dollar (C$) denominated credit facility in the amount of
C$50 million that provides revolving credit support for our Canadian
operations. This uncommitted credit facility provides us with the
ability to make unsecured borrowings which are priced at fixed rates based upon
market conditions at the time of funding in accordance with the terms of the
credit facility. As of April 30, 2010, there were no outstanding
borrowings under the C$ credit facility.
Our
debt ratings at April 30, 2010, were as follows:
Current
Debt Ratings
|
S&P
|
Moody’s
|
Fitch
|
Commercial
Paper
|
A1 | P1 | F1 |
Senior
Debt
|
A | A1 | A+ |
Outlook
|
Stable
|
Stable
|
Stable
|
We
believe that net cash provided by operating and financing activities will be
adequate for our expansion plans and for our other operating requirements over
the next 12 months. The availability of funds through the issuance of
commercial paper or new debt or the borrowing cost of these funds could be
adversely affected due to a debt rating downgrade, which we do not expect, or a
deterioration of certain financial ratios. There are no provisions in
any agreements that would require early cash settlement of existing debt or
leases as a result of a downgrade in our debt rating or a decrease in our stock
price.
18
Cash
Requirements
Capital
Expenditures
Our
2010 capital expenditures forecast is approximately $2.2 billion, inclusive of
approximately $375 million of lease commitments, resulting in planned net cash
outflow of $1.8 billion. Approximately 61% of the planned net cash outflow
is for store expansion and approximately 19% is for investment in our existing
stores through resets and remerchandising. Our store expansion plans
for 2010 consist of 40 to 45 new stores and are expected to increase sales floor
square footage by approximately 2%. Approximately 93% of the 2010 projects
will be owned, of which 38% will be ground-leased. Other planned
capital expenditures include investing in our distribution and corporate
infrastructure, including enhancements in information technology.
At
April 30, 2010, we owned and operated 14 regional distribution
centers. At April 30, 2010, we also operated 15 flatbed distribution
centers for the handling of lumber, building materials and other long-length
items. We are confident that our current distribution network has the
capacity to ensure that our stores remain in stock and that customer demand is
met.
Debt
and Capital
In
April 2010, we issued $1.0 billion of unsecured senior notes, comprised of two
tranches: $500 million of 4.625% senior notes maturing in April 2020 and $500
million of 5.800% senior notes maturing in April 2040. Net proceeds from the
4.625% and 5.800% senior notes were $497 million and $495 million,
respectively. Interest on the senior notes is payable semiannually in
arrears in April and October of each year until maturity, beginning in October
2010. During the second fiscal quarter of fiscal 2010, we used a
portion of the net proceeds from the notes to repay the $500 million 8.25% Notes
due June 1, 2010. We are also using portions of the net proceeds for general
corporate purposes, including capital expenditures and working capital needs,
and for repurchases of shares of our common stock.
We
have a share repurchase program that is implemented through purchases made from
time to time either in the open market or through private
transactions. Shares purchased under the share repurchase program are
retired and returned to authorized and unissued status. As of April
30, 2010, we had a remaining repurchase authorization of approximately $4.6
billion with no expiration. We expect to utilize the remaining
authorization by fiscal 2012.
On May
28, 2010, the Board of Directors declared a quarterly cash dividend of $0.11 per share, which
represents a 22.2% increase.
OFF-BALANCE
SHEET ARRANGEMENTS
Other
than in connection with executing operating leases, we do not have any
off-balance sheet financing that has, or is reasonably likely to have, a
material, current or future effect on our financial condition, cash flows,
results of operations, liquidity, capital expenditures or capital
resources.
19
CONTRACTUAL
OBLIGATIONS AND COMMERCIAL COMMITMENTS
In
April 2010, we issued $1.0 billion of unsecured senior notes in the ordinary
course of business, which are included in the table below that summarizes
long-term debt, excluding capital leases and other, at April 30,
2010. The unsecured senior notes are further described in Note 5 to
the consolidated financial statements (unaudited) included herein.
April
30, 2010
|
Payments
Due by Period
|
|||||||||||||||
Contractual
Obligations
|
Less
Than
|
1-3 | 4-5 |
After
5
|
||||||||||||
(In
millions)
|
Total
|
1 Year
|
Years
|
Years
|
Years
|
|||||||||||
Long-term
debt (principal and interest amounts, excluding discount)
|
$ | 10,932 | $ | 826 | $ | 1,146 | $ | 549 | $ | 8,411 |
There
have been no material changes to our contractual obligations and commercial
commitments outside the ordinary course of business since the end of
2009. Refer to the Annual Report on Form 10-K for additional
information regarding our contractual obligations and commercial
commitments.
20
FORWARD-LOOKING STATEMENTS
This Form
10-Q contains “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 (the “Act”). All statements
other than those reciting historic fact are statements that could be
“forward-looking statements” under the Act. Such forward-looking
statements are found in, among other places, “Management’s Discussion and
Analysis of Financial Condition and Results of
Operations.” Statements containing words such as “expects,” “plans,”
“strategy,” “projects,” “believes,” “opportunity,” “anticipates,” “desires,” and
similar expressions are intended to highlight or indicate “forward-looking
statements.” Although we believe that the expectations, opinions,
projections, and comments reflected in our forward-looking statements are
reasonable, we can give no assurance that such statements will prove to be
correct. A wide variety of potential risks, uncertainties, and other
factors could materially affect our ability to achieve the results expressed or
implied by our forward-looking statements including, but not limited to, changes
in general economic conditions, such as continued high rates of unemployment,
interest rate and currency fluctuations, higher fuel and other energy costs,
slower growth in personal income, changes in consumer spending, changes in the
rate of housing turnover, the availability and increasing regulation of consumer
credit and of mortgage financing, inflation or deflation of commodity prices and
other factors which can negatively affect our customers, as well as our ability
to: (i) respond to adverse trends in the housing industry, such as
the psychological effects of falling home prices, and in the level of repairs,
remodeling, and additions to existing homes, as well as a general reduction in
commercial building activity; (ii) secure, develop, and otherwise implement new
technologies and processes designed to enhance our efficiency and
competitiveness; (iii) attract, train, and retain highly-qualified associates;
(iv) locate, secure, and successfully develop new sites for store development
particularly in major metropolitan markets; (v) respond to fluctuations in the
prices and availability of services, supplies, and products; (vi) respond to the
growth and impact of competition; (vii) address changes in existing or new laws
or regulations that affect employment/labor, trade, product safety,
transportation/logistics, energy costs, health care, tax or environmental
issues; and (viii) respond to unanticipated weather conditions that could
adversely affect sales. In addition, we could experience additional
impairment losses if 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. For more information about these
and other risks and uncertainties that we are exposed to, you should read the
“Risk Factors” and “Critical Accounting Policies and Estimates” included in our
Annual Report on Form 10-K to the United States Securities and Exchange
Commission and the description of material changes, if any, therein included in
our Quarterly Reports on Form 10-Q.
The
forward-looking statements contained in this Form 10-Q are based upon data
available as of the date of this report 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 are qualified
by the cautionary statements in this section and in the “Risk Factors” included
in our Annual Report on Form 10-K to the United States Securities and Exchange
Commission and the description of material changes, if any, therein included in
our Quarterly Reports on Form 10-Q. 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.
The
Company's market risk has not changed materially from that disclosed in our
Annual Report on Form 10-K for the fiscal year ended January 29,
2010.
The
Company's management, with the participation of the Chief Executive Officer and
Chief Financial Officer, has evaluated the effectiveness of the Company’s
“disclosure controls and procedures,” (as such term is defined in
Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as
amended, (the Exchange Act)). Based upon their evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that, as of April 30, 2010, the
Company’s disclosure controls and procedures were effective for the purpose of
ensuring that the information required to be disclosed in the reports that the
Company files or submits under the Exchange Act with the Securities and Exchange
Commission (the SEC) (1) is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and
21
forms,
and (2) is accumulated and communicated to the Company’s management,
including its principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required
disclosure.
In
addition, no change in the Company’s internal control over financial reporting
occurred during the quarter ended April 30, 2010, that has materially affected,
or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.
22
Part
II - OTHER INFORMATION
There
have been no material changes in our risk factors from those disclosed in our
Annual Report on Form 10-K.
Issuer
Purchases of Equity Securities
(In
millions, except average
price
paid per share)
|
Total
Number of Shares Purchased (1)
|
Average
Price Paid per Share
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
Dollar
Value of Shares that May Yet Be Purchased Under the Plans or Programs
(2)
|
||||||
January
30, 2010 – February 26, 2010
|
3.8 | $ | 23.56 | 3.8 | $ | 4,910 | ||||
February
27, 2010 – April 2, 2010
|
15.4 | 24.32 | 14.8 | 4,550 | ||||||
April
3, 2010 – April 30, 2010
|
- | - | - | 4,550 | ||||||
As
of April 30, 2010
|
19.2 | $ | 24.17 | 18.6 | $ | 4,550 |
(1)
During
the first quarter of fiscal 2010, the Company repurchased an aggregate of
18,612,008 shares of its common stock pursuant to the share repurchase
program. The total number of shares purchased also includes 614,479
shares repurchased from employees to satisfy either the exercise price of
stock options or their statutory withholding tax liability upon the
vesting of restricted share-based
awards.
|
(2)
Authorization for up to $5 billion of share repurchases with no
expiration was approved on January 29, 2010 by the Company's Board of
Directors. Although the repurchase authorization has no expiration,
the Company expects to implement the program by fiscal 2012 through
purchases made from time to time either in the open market or through
private transactions, in accordance with SEC
regulations.
|
Submission of Matters to a Vote of Security
Holders. Lowe’s Companies, Inc. (the “Company”)
held its annual meeting of shareholders on May 28, 2010. At the meeting,
shareholders elected all four Class III directors nominated by the Board of
Directors to a term of one year. Each director received a greater
number of votes cast “for” his or her election than “withheld” as reflected
below. In addition, shareholders ratified the appointment of Deloitte
& Touche LLP as the independent registered public accounting firm of the
Company for the 2010 fiscal year and approved an amendment to Lowe’s Bylaws
decreasing the percentage of shares required for shareholders to call a special
meeting of shareholders. Two shareholder proposals presented at the
meeting that are briefly described below were not approved. For more
information on the proposals, see the Company’s proxy statement dated April 12,
2010. Set forth below are the final voting results for each of the
proposals.
(1)
|
Election
of Director Nominees
|
VOTES
FOR
|
VOTES
WITHHELD
|
BROKER NON-VOTES | |
David
W. Bernauer
|
1,101,664,319
|
16,256,893
|
152,898,176 |
Leonard
L. Berry
|
1,093,613,581
|
24,307,631
|
152,898,176 |
Dawn
E. Hudson
|
1,099,811,739
|
18,109,473
|
152,898,176 |
Robert
A. Niblock
|
1,077,382,964
|
40,538,248
|
152,898,176 |
23
(2)
|
Proposal
to Ratify the Appointment of Deloitte & Touche LLP as Independent
Registered Public Accounting
Firm
|
VOTES
FOR
|
VOTES
AGAINST
|
ABSTENTATIONS
|
1,256,391,110
|
13,680,459
|
747,819
|
(3)
|
Proposal
to Approve an Amendment to the Company’s Bylaws Decreasing the Percentage
of Shares required for Shareholders to Call a Special
Meeting
|
VOTES
FOR
|
VOTES
AGAINST
|
ABSTENTATIONS
|
1,261,629,048
|
7,596,527
|
1,593,813
|
(4)
|
Shareholder
Proposal Regarding Report on Political
Spending
|
VOTES
FOR
|
VOTES
AGAINST
|
ABSTENTATIONS
|
BROKER NON-VOTE |
328,702,185 |
595,083,712
|
194,135,315 | 152,898,176 |
(5)
|
Shareholder
Proposal Regarding Separating the Roles of Chairman and
CEO
|
VOTES
FOR
|
VOTES
AGAINST
|
ABSTENTATIONS
|
BROKER
NON-VOTE
|
201,325,772
|
909,164,321
|
7,431,119
|
152,898,176
|
24
|
Exhibit
3.1 – Restated and Amended Charter of Lowe’s Companies, Inc. (filed as
Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed September
1, 2009 and incorporated by reference
herein)
|
|
Exhibit
3.2* – Bylaws of Lowe’s Companies, Inc., as amended and restated
|
|
Exhibit
4.1 – Sixth Supplemental Indenture, dated as of April 15, 2010, between
Lowe’s Companies, Inc. and the Bank of New York Mellon Trust Company,
N.A., as trustee (filed as Exhibit 4.1 to the Company’s Current Report on
Form 8-K filed April 15, 2010 and incorporated by reference
herein)
|
|
Exhibit
4.2 – Form of 4.625% Note due 2020 (included in Exhibit 4.1, which is
incorporated by reference herein)
|
|
Exhibit
4.3 – Form of 5.800% Note due 2040 (included in Exhibit 4.1, which is
incorporated by reference herein)
|
|
Exhibit
10.1* – Amendment No. 1 to Lowe's Companies, Inc. Employee Stock Purchase
Plan - Stock Options for Everyone, as amended and
restated
|
|
Exhibit
12.1* – Statement Re Computation of Ratio of Earnings to Fixed
Charges
|
|
Exhibit
15.1* – Deloitte & Touche LLP Letter Re Unaudited Interim Financial
Information
|
|
Exhibit
31.1* – Certification of Chief Executive Officer Pursuant to Rule
13a-14(a) promulgated under the Securities Exchange Act of 1934, as
amended
|
|
Exhibit
31.2* – Certification of Chief Financial Officer Pursuant to Rule
13a-14(a) promulgated under the Securities Exchange Act of 1934, as
amended
|
|
Exhibit
32.1* – Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
|
Exhibit
32.2* – Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
|
Exhibit
101 – The following financial information from the Quarterly Report
on Form 10-Q of Lowe’s Companies, Inc. for the quarter ended April 30,
2010, furnished electronically herewith, and formatted in XBRL (Extensible
Business Reporting Language): (i) Consolidated Balance Sheets; (ii)
Consolidated Statements of Current and Retained Earnings; (iii)
Consolidated Statements of Cash Flows; and (iv) Notes to the Consolidated
Financial Statements, tagged as blocks of
text.
|
_________________________
*Filed or
furnished herewith as an exhibit.
25
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 thereunto
duly authorized.
LOWE'S
COMPANIES, INC.
|
||
June 1,
2010
Date
|
/s/ Matthew V. Hollifield
Matthew
V. Hollifield
Senior
Vice President and Chief Accounting
Officer
|
26
Exhibit
No.
|
Description
|
|
3.1
|
Restated
and Amended Charter of Lowe’s Companies, Inc. (filed as Exhibit 3.1 to the
Company’s Quarterly Report on Form 10-Q filed September 1, 2009 and
incorporated by reference herein)
|
|
3.2*
|
Bylaws
of Lowe’s Companies, Inc., as amended and restated
|
|
4.1
|
Sixth
Supplemental Indenture, dated as of April 15, 2010, between Lowe’s
Companies, Inc. and the Bank of New York Mellon Trust Company, N.A., as
trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K
filed April 15, 2010 and incorporated by reference
herein)
|
|
4.2
|
Form
of 4.625% Note due 2020 (included in Exhibit 4.1, which is incorporated by
reference herein)
|
|
4.3
|
Form
of 5.800% Note due 2040 (included in Exhibit 4.1, which is incorporated by
reference herein)
|
|
10.1*
|
Amendment
No. 1 to Lowe's Companies, Inc. Employee Stock Purchase Plan - Stock
Options for Everyone, as amended and restated
|
|
12.1*
|
Statement
Re Computation of Ratio of Earnings to Fixed Charges
|
|
15.1*
|
Deloitte
& Touche LLP Letter Re Unaudited Interim Financial
Information
|
|
31.1*
|
Certification
of Chief Executive Officer Pursuant to Rule 13a-14(a) promulgated under
the Securities Exchange Act of 1934, as amended
|
|
31.2*
|
Certification
of Chief Financial Officer Pursuant to Rule 13a-14(a) promulgated
under the Securities Exchange Act of 1934, as amended
|
|
32.1*
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
32.2*
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
101 | The following financial information from the Quarterly Report on Form 10-Q of Lowe’s Companies, Inc. for the quarter ended April 30, 2010, furnished electronically herewith, and formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Current and Retained Earnings; (iii) Consolidated Statements of Cash Flows; and (iv) Notes to the Consolidated Financial Statements, tagged as blocks of text. |
_________________________
*Filed or
furnished herewith as an exhibit.
27