x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the quarterly period ended November 2,
2007
|
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
|
x
|
Yes
|
o
|
No
|
Large
accelerated filer x
|
Accelerated
filer o
|
Non-accelerated
filer o
|
o
|
Yes
|
x
|
No
|
CLASS
|
OUTSTANDING
AT NOVEMBER 30, 2007
|
|
Common
Stock, $.50 par value
|
1,462,603,002
|
LOWE’S
COMPANIES, INC.
-
INDEX -
|
|||
PART
I - Financial Information
|
Page
No.
|
||
Item
1. Financial Statements
|
|||
3
|
|||
4
|
|||
5
|
|||
6-11
|
|||
12
|
|||
13-20
|
|||
20
|
|||
|
|||
Item
4. Controls and
Procedures
|
20
|
||
PART
II - Other Information
|
|||
Item
1A. Risk Factors
|
21
|
||
21
|
|||
Item
6. Exhibits
|
22
|
||
23
|
|||
24
|
|||
Lowe's
Companies, Inc.
|
||||||||||||||||
Consolidated
Balance Sheets
|
||||||||||||||||
In
Millions, Except Par Value Data
|
||||||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
November
2, 2007
|
November
3, 2006
|
February
2, 2007
|
||||||||||||||
Assets
|
||||||||||||||||
Current
assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$ |
336
|
$ |
657
|
$ |
364
|
||||||||||
Short-term
investments
|
231
|
464
|
432
|
|||||||||||||
Merchandise
inventory - net
|
7,775
|
7,219
|
7,144
|
|||||||||||||
Deferred
income taxes - net
|
241
|
157
|
161
|
|||||||||||||
Other
current assets
|
193
|
125
|
213
|
|||||||||||||
Total
current assets
|
8,776
|
8,622
|
8,314
|
|||||||||||||
Property,
less accumulated depreciation
|
20,755
|
18,188
|
18,971
|
|||||||||||||
Long-term
investments
|
333
|
121
|
165
|
|||||||||||||
Other
assets
|
325
|
242
|
317
|
|||||||||||||
Total
assets
|
$ |
30,189
|
$ |
27,173
|
$ |
27,767
|
||||||||||
Liabilities
and shareholders' equity
|
||||||||||||||||
Current
liabilities:
|
||||||||||||||||
Short-term
borrowings
|
$ |
16
|
$ |
-
|
$ |
23
|
||||||||||
Current
maturities of long-term debt
|
35
|
89
|
88
|
|||||||||||||
Accounts
payable
|
3,895
|
3,416
|
3,524
|
|||||||||||||
Accrued
salaries and wages
|
437
|
432
|
425
|
|||||||||||||
Self-insurance
liabilities
|
653
|
616
|
650
|
|||||||||||||
Deferred
revenue
|
793
|
846
|
731
|
|||||||||||||
Other
current liabilities
|
1,363
|
1,315
|
1,098
|
|||||||||||||
Total
current liabilities
|
7,192
|
6,714
|
6,539
|
|||||||||||||
Long-term
debt, excluding current maturities
|
5,580
|
4,337
|
4,325
|
|||||||||||||
Deferred
income taxes - net
|
615
|
683
|
735
|
|||||||||||||
Other
liabilities
|
748
|
353
|
443
|
|||||||||||||
Total
liabilities
|
14,135
|
12,087
|
12,042
|
|||||||||||||
Shareholders'
equity:
|
||||||||||||||||
Preferred
stock - $5 par value, none issued
|
-
|
-
|
-
|
|||||||||||||
Common
stock - $.50 par value;
|
||||||||||||||||
Shares
issued and outstanding
|
||||||||||||||||
November
2, 2007
|
1,470 | |||||||||||||||
November
3, 2006
|
1,520 | |||||||||||||||
February
2, 2007
|
1,525 |
735
|
760
|
762
|
||||||||||||
Capital
in excess of par value
|
20
|
-
|
102
|
|||||||||||||
Retained
earnings
|
15,281
|
14,323
|
14,860
|
|||||||||||||
Accumulated
other comprehensive income
|
18
|
3
|
1
|
|||||||||||||
Total
shareholders' equity
|
16,054
|
15,086
|
15,725
|
|||||||||||||
Total
liabilities and shareholders' equity
|
$ |
30,189
|
$ |
27,173
|
$ |
27,767
|
||||||||||
Consolidated
Statements of Current and Retained Earnings
(Unaudited)
|
||||||||||||||||||||||||||||||||
In
Millions, Except Per Share Data
|
||||||||||||||||||||||||||||||||
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||||||||||
November
2, 2007
|
November
3, 2006
|
November
2, 2007
|
November
3, 2006
|
|||||||||||||||||||||||||||||
Current
Earnings
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
||||||||||||||||||||||||
Net
sales
|
$ |
11,565
|
100.00
|
$ |
11,211
|
100.00
|
$ |
37,904
|
100.00
|
$ |
36,522
|
100.00
|
||||||||||||||||||||
Cost
of sales
|
7,601
|
65.73
|
7,346
|
65.53
|
24,798
|
65.42
|
24,011
|
65.74
|
||||||||||||||||||||||||
Gross
margin
|
3,964
|
34.27
|
3,865
|
34.47
|
13,106
|
34.58
|
12,511
|
34.26
|
||||||||||||||||||||||||
Expenses:
|
||||||||||||||||||||||||||||||||
Selling,
general and administrative
|
2,503
|
21.63
|
2,320
|
20.70
|
8,026
|
21.17
|
7,404
|
20.27
|
||||||||||||||||||||||||
Store
opening costs
|
41
|
0.36
|
44
|
0.39
|
79
|
0.21
|
97
|
0.27
|
||||||||||||||||||||||||
Depreciation
|
340
|
2.94
|
297
|
2.65
|
995
|
2.63
|
854
|
2.34
|
||||||||||||||||||||||||
Interest
- net
|
50
|
0.43
|
45
|
0.40
|
148
|
0.39
|
110
|
0.30
|
||||||||||||||||||||||||
Total
expenses
|
2,934
|
25.36
|
2,706
|
24.14
|
9,248
|
24.40
|
8,465
|
23.18
|
||||||||||||||||||||||||
Pre-tax
earnings
|
1,030
|
8.91
|
1,159
|
10.33
|
3,858
|
10.18
|
4,046
|
11.08
|
||||||||||||||||||||||||
Income
tax provision
|
387
|
3.35
|
443
|
3.94
|
1,457
|
3.85
|
1,554
|
4.26
|
||||||||||||||||||||||||
Net
earnings
|
$ |
643
|
5.56
|
$ |
716
|
6.39
|
$ |
2,401
|
6.33
|
$ |
2,492
|
6.82
|
||||||||||||||||||||
Weighted
average shares outstanding - basic
|
1,470
|
1,522
|
1,490
|
1,540
|
||||||||||||||||||||||||||||
Basic
earnings per share
|
$ |
0.44
|
$ |
0.47
|
$ |
1.61
|
$ |
1.62
|
||||||||||||||||||||||||
Weighted
average shares outstanding - diluted
|
1,497
|
1,551
|
1,519
|
1,571
|
||||||||||||||||||||||||||||
Diluted
earnings per share
|
$ |
0.43
|
$ |
0.46
|
$ |
1.58
|
$ |
1.59
|
||||||||||||||||||||||||
Cash
dividends per share
|
$ |
0.08
|
$ |
0.05
|
$ |
0.21
|
$ |
0.13
|
||||||||||||||||||||||||
Retained
Earnings
|
||||||||||||||||||||||||||||||||
Balance
at beginning of period
|
$ |
15,210
|
$ |
13,843
|
$ |
14,860
|
$ |
12,191
|
||||||||||||||||||||||||
Cumulative
effect adjustment (Note 12)
|
-
|
-
|
(8 | ) |
-
|
|||||||||||||||||||||||||||
Net
earnings
|
643
|
716
|
2,401
|
2,492
|
||||||||||||||||||||||||||||
Cash
dividends
|
(118 | ) | (76 | ) | (312 | ) | (200 | ) | ||||||||||||||||||||||||
Share
repurchases
|
(454 | ) | (160 | ) | (1,660 | ) | (160 | ) | ||||||||||||||||||||||||
Balance
at end of period
|
$ |
15,281
|
$ |
14,323
|
$ |
15,281
|
$ |
14,323
|
||||||||||||||||||||||||
Consolidated
Statements of Cash Flows (Unaudited)
|
||||||||
In
Millions
|
||||||||
Nine
Months Ended
|
||||||||
November
2, 2007
|
November
3, 2006
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
earnings
|
$ |
2,401
|
$ |
2,492
|
||||
Adjustments
to reconcile net earnings to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
1,069
|
907
|
||||||
Deferred
income taxes
|
(42 | ) | (54 | ) | ||||
Loss
on disposition/writedown of fixed and other assets
|
33
|
35
|
||||||
Share-based
payment expense
|
69
|
56
|
||||||
Changes
in operating assets and liabilities:
|
||||||||
Merchandise
inventory - net
|
(630 | ) | (584 | ) | ||||
Other
operating assets
|
43
|
(26 | ) | |||||
Accounts
payable
|
368
|
584
|
||||||
Other
operating liabilities
|
474
|
233
|
||||||
Net
cash provided by operating activities
|
3,785
|
3,643
|
||||||
Cash
flows from investing activities:
|
||||||||
Purchases
of short-term investments
|
(592 | ) | (248 | ) | ||||
Proceeds
from sale/maturity of short-term investments
|
853
|
490
|
||||||
Purchases
of long-term investments
|
(1,286 | ) | (225 | ) | ||||
Proceeds
from sale/maturity of long-term investments
|
1,057
|
141
|
||||||
Increase
in other long-term assets
|
(20 | ) | (8 | ) | ||||
Fixed
assets acquired
|
(2,912 | ) | (2,724 | ) | ||||
Proceeds
from the sale of fixed and other long-term assets
|
51
|
30
|
||||||
Net
cash used in investing activities
|
(2,849 | ) | (2,544 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Net
decrease in short-term borrowings
|
(9 | ) |
-
|
|||||
Proceeds
from issuance of long-term debt
|
1,294
|
991
|
||||||
Repayment
of long-term debt
|
(89 | ) | (24 | ) | ||||
Proceeds
from issuance of common stock under employee stock purchase
plan
|
40
|
36
|
||||||
Proceeds
from issuance of common stock from stock options exercised
|
58
|
64
|
||||||
Cash
dividend payments
|
(312 | ) | (200 | ) | ||||
Repurchase
of common stock
|
(1,950 | ) | (1,737 | ) | ||||
Excess
tax benefits of share-based payments
|
4
|
5
|
||||||
Net
cash used in financing activities
|
(964 | ) | (865 | ) | ||||
Net
(decrease) increase in cash and cash equivalents
|
(28 | ) |
234
|
|||||
Cash
and cash equivalents, beginning of period
|
364
|
423
|
||||||
Cash
and cash equivalents, end of period
|
$ |
336
|
$ |
657
|
||||
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
(In
millions)
|
November
2, 2007
|
November
3, 2006
|
November
2, 2007
|
November
3, 2006
|
||||||||||||
Extended
warranty deferred revenue,
beginning of period
|
$ |
373
|
$ |
273
|
$ |
315
|
$ |
206
|
||||||||
Additions
to deferred revenue
|
42
|
34
|
136
|
116
|
||||||||||||
Deferred
revenue recognized
|
(23 | ) | (11 | ) | (59 | ) | (26 | ) | ||||||||
Extended
warranty deferred revenue,
end of period
|
$ |
392
|
$ |
296
|
$ |
392
|
$ |
296
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
(In
millions)
|
November
2, 2007
|
November
3, 2006
|
November
2, 2007
|
November
3, 2006
|
||||||||||||
Liability
for extended warranty claims,
beginning of period
|
$ |
18
|
$ |
-
|
$ |
10
|
$ |
-
|
||||||||
Accrual
for claims incurred
|
17
|
8
|
36
|
10
|
||||||||||||
Claim
payments
|
(9 | ) | (2 | ) | (20 | ) | (4 | ) | ||||||||
Liability
for extended warranty claims,
end of period
|
$ |
26
|
$ |
6
|
$ |
26
|
$ |
6
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
(In
millions, except per share data)
|
November
2,
2007
|
November
3,
2006
|
November
2,
2007
|
November
3,
2006
|
||||||||||||
Basic
earnings per share:
|
||||||||||||||||
Net
earnings
|
$ |
643
|
$ |
716
|
$ |
2,401
|
$ |
2,492
|
||||||||
Weighted-average
shares outstanding
|
1,470
|
1,522
|
1,490
|
1,540
|
||||||||||||
Basic
earnings per share
|
$ |
0.44
|
$ |
0.47
|
$ |
1.61
|
$ |
1.62
|
||||||||
Diluted
earnings per share:
|
||||||||||||||||
Net
earnings
|
$ |
643
|
$ |
716
|
$ |
2,401
|
$ |
2,492
|
||||||||
Net
earnings adjustment for interest on convertible notes, net of
tax
|
-
|
1
|
2
|
3
|
||||||||||||
Net
earnings, as adjusted
|
$ |
643
|
$ |
717
|
$ |
2,403
|
$ |
2,495
|
||||||||
Weighted-average
shares outstanding
|
1,470
|
1,522
|
1,490
|
1,540
|
||||||||||||
Dilutive
effect of share-based awards
|
7
|
8
|
8
|
8
|
||||||||||||
Dilutive
effect of convertible notes
|
20
|
21
|
21
|
23
|
||||||||||||
Weighted-average
shares, as adjusted
|
1,497
|
1,551
|
1,519
|
1,571
|
||||||||||||
Diluted
earnings per share
|
$ |
0.43
|
$ |
0.46
|
$ |
1.58
|
$ |
1.59
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
(In
millions)
|
November
2, 2007
|
November
3, 2006
|
November
2, 2007
|
November
3, 2006
|
||||||||||||
Long-term
debt
|
$ |
65
|
$ |
45
|
$ |
174
|
$ |
129
|
||||||||
Capitalized
leases
|
8
|
8
|
24
|
25
|
||||||||||||
Interest
income
|
(10 | ) | (9 | ) | (34 | ) | (36 | ) | ||||||||
Interest
capitalized
|
(22 | ) | (10 | ) | (30 | ) | (23 | ) | ||||||||
Other
|
9
|
11
|
14
|
15
|
||||||||||||
Interest
- net
|
$ |
50
|
$ |
45
|
$ |
148
|
$ |
110
|
Nine
Months Ended
|
||||||||
(In
millions)
|
November
2, 2007
|
November
3, 2006
|
||||||
Cash
paid for interest, net of amount capitalized
|
$ |
199
|
$ |
155
|
||||
Cash
paid for income taxes
|
$ |
1,336
|
$ |
1,617
|
||||
Non-cash
investing and financing activities:
|
||||||||
Non-cash
fixed asset acquisitions
|
$ |
125
|
$ |
198
|
||||
Conversions
of long-term debt to equity
|
$ |
13
|
$ |
75
|
Three
Months Ended
|
Basis
Point Increase / (Decrease) in Percentage of Net Sales
from
Prior
Period
|
Percentage
Increase / (Decrease) in Dollar Amounts from Prior
Period
|
||||||||||||||
November
2, 2007
|
November
3, 2006
|
2007
vs. 2006
|
2007
vs. 2006
|
|||||||||||||
Net
sales
|
100.00 | % | 100.00 | % |
N/A
|
3.2 | % | |||||||||
Gross
margin
|
34.27
|
34.47
|
(20 | ) |
2.6
|
|||||||||||
Expenses:
|
||||||||||||||||
Selling,
general and administrative
|
21.63
|
20.70
|
93
|
7.8
|
||||||||||||
Store
opening costs
|
0.36
|
0.39
|
(3 | ) | (6.4 | ) | ||||||||||
Depreciation
|
2.94
|
2.65
|
29
|
14.4
|
||||||||||||
Interest
- net
|
0.43
|
0.40
|
3
|
12.5
|
||||||||||||
Total
expenses
|
25.36
|
24.14
|
122
|
8.4
|
||||||||||||
Pre-tax
earnings
|
8.91
|
10.33
|
(142 | ) | (11.1 | ) | ||||||||||
Income
tax provision
|
3.35
|
3.94
|
(59 | ) | (12.4 | ) | ||||||||||
Net
earnings
|
5.56 | % | 6.39 | % | (83 | ) | (10.3 | )% |
Nine
Months Ended
|
Basis
Point Increase / (Decrease) in Percentage of Net Sales from Prior
Period
|
Percentage
Increase / (Decrease) in Dollar Amounts from Prior
Period
|
||||||||||||||
November
2, 2007
|
November
3, 2006
|
2007
vs. 2006
|
2007
vs. 2006
|
|||||||||||||
Net
sales
|
100.00 | % | 100.00 | % |
N/A
|
3.8 | % | |||||||||
Gross
margin
|
34.58
|
34.26
|
32
|
4.8
|
||||||||||||
Expenses:
|
||||||||||||||||
Selling,
general and administrative
|
21.17
|
20.27
|
90
|
8.4
|
||||||||||||
Store
opening costs
|
0.21
|
0.27
|
(6 | ) | (18.1 | ) | ||||||||||
Depreciation
|
2.63
|
2.34
|
29
|
16.6
|
||||||||||||
Interest
- net
|
0.39
|
0.30
|
9
|
33.7
|
||||||||||||
Total
expenses
|
24.40
|
23.18
|
122
|
9.3
|
||||||||||||
Pre-tax
earnings
|
10.18
|
11.08
|
(90 | ) | (4.7 | ) | ||||||||||
Income
tax provision
|
3.85
|
4.26
|
(41 | ) | (6.2 | ) | ||||||||||
Net
earnings
|
6.33 | % | 6.82 | % | (49 | ) | (3.7 | )% |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
Other
metrics:
|
November
2, 2007
|
November
3, 2006
|
November
2, 2007
|
November
3, 2006
|
||||||||||||
Comparable
store sales changes
(1)
|
(4.3 | )% | (4.0 | )% | (4.3 | )% | 1.7 | % | ||||||||
Customer
transactions (in millions)
|
173
|
165
|
558
|
524
|
||||||||||||
Average
ticket (2)
|
$ |
66.95
|
$ |
67.97
|
$ |
67.92
|
$ |
69.68
|
||||||||
At
end of period:
|
||||||||||||||||
Number
of stores
|
1,464
|
1,330
|
||||||||||||||
Sales
floor square feet (in millions)
|
166
|
151
|
||||||||||||||
Average
store size square feet (in thousands) (3)
|
113
|
114
|
Current
Debt Ratings
|
S&P
|
Moody’s
|
Fitch
|
Commercial
paper
|
A1
|
P1
|
F1+
|
Senior
debt
|
A+
|
A1
|
A+
|
Outlook
|
Stable
|
Stable
|
Stable
|
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)
|
$ |
10,185
|
$ |
307
|
$ |
1,090
|
$ |
1,058
|
$ |
7,730
|
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)
|
||||||||||||
August
4, 2007 – August 31, 2007
|
6.7
|
$ |
29.90
|
6.7
|
$ |
2,839
|
||||||||||
September
1, 2007 – October 5, 2007
|
9.9
|
30.26
|
9.9
|
2,539
|
||||||||||||
October
6, 2007 – November 2, 2007
|
-
|
-
|
-
|
2,539
|
||||||||||||
As
of November 2, 2007
|
16.6
|
$ |
30.12
|
16.6
|
$ |
2,539
|
(1)
|
During
the third quarter of fiscal 2007, the Company repurchased an aggregate
of
16,602,566 shares of its common stock pursuant to the share repurchase
program (the Program). The total number of shares purchased also
includes a nominal amount of shares repurchased from employees
to satisfy
the exercise price of certain stock option
exercises.
|
(2)
|
On
May 25, 2007, the Company’s Board of Directors authorized up to an
additional $3 billion in share repurchases and extended the period
of the
Program through fiscal 2009. The Company will continue
implementing the Program through purchases made from time to time
either
in the open market or through private transactions, in accordance
with SEC
regulations.
|
LOWE'S
COMPANIES, INC.
|
||
December
11, 2007
Date
|
/s/Matthew
V. Hollifield
Matthew
V. Hollifield
Senior
Vice President and Chief Accounting
Officer
|
Exhibit
No.
|
|
Description
|
10.1
|
Amendment
Number One to the Lowe’s Companies Cash Deferral Plan
|
|
10.2
|
Lowe’s
Companies Benefit Restoration Plan Amended and Restated as of January
1,
2008
|
|
12.1
|
Statement
Re Computation of Ratio of Earnings to Fixed Charges
|
|
15.1
|
Deloitte
& Touche LLP Letter Re Unaudited Interim Financial
Information
|
|
31.1
|
|
Certification
Pursuant to Rules 13a-14(a) and 15d-14(a) Under the Securities
Exchange
Act of 1934, as Amended
|
|
|
|
31.2
|
|
Certification
Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange
Act of 1934, as Amended
|
|
|
|
32.1
|
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
|
|
|
32.2
|
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|