x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended October 31,
2008
|
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)
|
(704) 758-1000 | |
(Registrant's
telephone number, including area code)
|
Large
accelerated filer x
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
CLASS
|
OUTSTANDING
AT NOVEMBER 28, 2008
|
|
Common
Stock, $.50 par value
|
1,469,449,361
|
LOWE’S
COMPANIES, INC.
-
INDEX -
|
|||||
PART I - Financial
Information
|
Page
No.
|
||||
Item
1.
|
Financial
Statements
|
||||
3
|
|||||
4
|
|||||
5
|
|||||
6 -
11
|
|||||
12
|
|||||
Item
2.
|
13
- 20
|
||||
Item
3.
|
20
|
||||
Item
4.
|
20
|
||||
PART II - Other
Information
|
|||||
Item
1A.
|
21
|
||||
Item
6.
|
21
|
||||
22
|
|||||
23
|
|||||
Part
I - FINANCIAL INFORMATION
|
|||||||||||||
Item
1. Financial Statements
|
|||||||||||||
Lowe's
Companies, Inc.
|
|||||||||||||
In
Millions, Except Par Value Data
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
||||||||||||
October
31, 2008
|
November
2, 2007
|
February
1, 2008
|
|||||||||||
Assets
|
|||||||||||||
Current
assets:
|
|||||||||||||
Cash
and cash equivalents
|
$
|
322
|
$
|
336
|
$
|
281
|
|||||||
Short-term
investments (includes $33 million of trading
|
|||||||||||||
securities
at October 31, 2008)
|
445
|
231
|
249
|
||||||||||
Merchandise
inventory - net
|
8,327
|
7,775
|
7,611
|
||||||||||
Deferred
income taxes - net
|
230
|
241
|
247
|
||||||||||
Other
current assets
|
197
|
193
|
298
|
||||||||||
Total
current assets
|
9,521
|
8,776
|
8,686
|
||||||||||
Property,
less accumulated depreciation
|
22,602
|
20,755
|
21,361
|
||||||||||
Long-term
investments
|
466
|
333
|
509
|
||||||||||
Other
assets
|
440
|
325
|
313
|
||||||||||
Total
assets
|
$
|
33,029
|
$
|
30,189
|
$
|
30,869
|
|||||||
Liabilities
and shareholders' equity
|
|||||||||||||
Current
liabilities:
|
|||||||||||||
Short-term
borrowings
|
$
|
249
|
$
|
16
|
$
|
1,064
|
|||||||
Current
maturities of long-term debt
|
34
|
35
|
40
|
||||||||||
Accounts
payable
|
4,831
|
3,895
|
3,713
|
||||||||||
Accrued
compensation and employee benefits
|
516
|
512
|
467
|
||||||||||
Self-insurance
liabilities
|
723
|
653
|
671
|
||||||||||
Deferred
revenue
|
748
|
793
|
717
|
||||||||||
Other
current liabilities
|
1,330
|
1,288
|
1,079
|
||||||||||
Total
current liabilities
|
8,431
|
7,192
|
7,751
|
||||||||||
Long-term
debt, excluding current maturities
|
5,044
|
5,580
|
5,576
|
||||||||||
Deferred
income taxes - net
|
751
|
615
|
670
|
||||||||||
Other
liabilities
|
846
|
748
|
774
|
||||||||||
Total
liabilities
|
15,072
|
14,135
|
14,771
|
||||||||||
Shareholders'
equity:
|
|||||||||||||
Preferred
stock - $5 par value, none issued
|
-
|
-
|
-
|
||||||||||
Common
stock - $.50 par value;
|
|||||||||||||
Shares
issued and outstanding
|
|||||||||||||
October 31, 2008 1,467 |
|
||||||||||||
November 2, 2007 1,470 |
|
||||||||||||
February 1, 2008 1,458 |
|
734
|
735
|
729
|
|||||||||
Capital
in excess of par value
|
215
|
20
|
16
|
||||||||||
Retained
earnings
|
17,012
|
15,281
|
15,345
|
||||||||||
Accumulated
other comprehensive (loss) income
|
(4)
|
18
|
8
|
||||||||||
Total
shareholders' equity
|
17,957
|
16,054
|
16,098
|
||||||||||
Total
liabilities and shareholders' equity
|
$
|
33,029
|
$
|
30,189
|
$
|
30,869
|
|||||||
Lowe's Companies,
Inc.
|
|||||||||||||||||
In
Millions, Except Per Share Data
|
|||||||||||||||||
|
|||||||||||||||||
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
October
31, 2008
|
November
2, 2007
|
October
31, 2008
|
November
2, 2007
|
|||||||||||||
Current Earnings
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||
Net sales
|
$
|
11,728
|
100.00
|
$
|
11,565
|
100.00
|
$
|
38,246
|
100.00
|
$
|
37,904
|
100.00
|
|||||
|
|||||||||||||||||
Cost
of sales
|
7,743
|
66.02
|
7,601
|
65.73
|
25,113
|
65.66
|
24,798
|
65.42
|
|||||||||
|
|||||||||||||||||
Gross margin
|
3,985
|
33.98
|
3,964
|
34.27
|
13,133
|
34.34
|
13,106
|
34.58
|
|||||||||
|
|||||||||||||||||
Expenses:
|
|||||||||||||||||
|
|||||||||||||||||
Selling,
general and administrative
|
2,726
|
23.23
|
2,503
|
21.63
|
8,464
|
22.13
|
8,026
|
21.17
|
|||||||||
|
|||||||||||||||||
Store
opening costs
|
31
|
0.27
|
41
|
0.36
|
70
|
0.18
|
79
|
0.21
|
|||||||||
|
|||||||||||||||||
Depreciation
|
385
|
3.29
|
340
|
2.94
|
1,142
|
2.99
|
995
|
2.63
|
|||||||||
|
|||||||||||||||||
Interest
- net
|
65
|
0.56
|
50
|
0.43
|
210
|
0.55
|
148
|
0.39
|
|||||||||
|
|||||||||||||||||
Total expenses
|
3,207
|
27.35
|
2,934
|
25.36
|
9,886
|
25.85
|
9,248
|
24.40
|
|||||||||
|
|||||||||||||||||
Pre-tax earnings
|
778
|
6.63
|
1,030
|
8.91
|
3,247
|
8.49
|
3,858
|
10.18
|
|||||||||
|
|||||||||||||||||
Income
tax provision
|
290
|
2.47
|
387
|
3.35
|
1,214
|
3.17
|
1,457
|
3.85
|
|||||||||
|
|||||||||||||||||
Net earnings
|
$
|
488
|
4.16
|
$
|
643
|
5.56
|
$
|
2,033
|
5.32
|
$
|
2,401
|
6.33
|
|||||
|
|||||||||||||||||
|
|||||||||||||||||
Weighted
average shares outstanding - basic
|
1,459
|
1,470
|
1,456
|
1,490
|
|||||||||||||
|
|||||||||||||||||
Basic earnings per share
|
$
|
0.33
|
$
|
0.44
|
$
|
1.40
|
$
|
1.61
|
|||||||||
|
|||||||||||||||||
Weighted
average shares outstanding - diluted
|
1,464
|
1,497
|
1,473
|
1,519
|
|||||||||||||
|
|||||||||||||||||
Diluted earnings per
share
|
$
|
0.33
|
$
|
0.43
|
$
|
1.38
|
$
|
1.58
|
|||||||||
|
|||||||||||||||||
Cash dividends per
share
|
$
|
0.085
|
$
|
0.080
|
$
|
0.250
|
$
|
0.210
|
|||||||||
|
|||||||||||||||||
|
|||||||||||||||||
Retained Earnings
|
|||||||||||||||||
Balance
at beginning of period
|
$
|
16,648
|
$
|
15,210
|
$
|
15,345
|
$
|
14,860
|
|||||||||
Cumulative
effect adjustment1
|
-
|
-
|
-
|
(8)
|
|||||||||||||
Net
earnings
|
488
|
643
|
2,033
|
2,401
|
|||||||||||||
Cash
dividends
|
(124)
|
(118)
|
(366)
|
(312)
|
|||||||||||||
Share
repurchases
|
-
|
(454)
|
-
|
(1,660)
|
|||||||||||||
Balance
at end of period
|
$
|
17,012
|
$
|
15,281
|
$
|
17,012
|
$
|
15,281
|
|||||||||
|
|||||||||||||||||
|
|||||||||||||||||
1 The
Company adopted FIN 48, "Accounting for Uncertainty in Income Taxes",
effective February 3, 2007.
|
|||||||||||||||||
|
|||||||||||||||||
Lowe's
Companies, Inc.
|
||||||
In
Millions
|
||||||
Nine
Months Ended
|
||||||
October
31, 2008
|
November
2, 2007
|
|||||
Cash
flows from operating activities:
|
||||||
Net
earnings
|
$
|
2,033
|
$
|
2,401
|
||
Adjustments
to reconcile net earnings to net cash provided by operating
activities:
|
||||||
Depreciation
and amortization
|
1,232
|
1,069
|
||||
Deferred
income taxes
|
99
|
(42)
|
||||
Loss
on property and other assets
|
48
|
33
|
||||
Loss
on redemption of long-term debt
|
8
|
-
|
||||
Share-based
payment expense
|
79
|
69
|
||||
Changes
in operating assets and liabilities:
|
||||||
Merchandise
inventory - net
|
(725)
|
(630)
|
||||
Other
operating assets
|
77
|
43
|
||||
Accounts
payable
|
1,124
|
368
|
||||
Other
operating liabilities
|
383
|
474
|
||||
Net
cash provided by operating activities
|
4,358
|
3,785
|
||||
Cash
flows from investing activities:
|
||||||
Purchases
of short-term investments
|
(179)
|
(592)
|
||||
Proceeds
from sale/maturity of short-term investments
|
265
|
853
|
||||
Purchases
of long-term investments
|
(1,097)
|
(1,286)
|
||||
Proceeds
from sale/maturity of long-term investments
|
837
|
1,057
|
||||
Increase
in other long-term assets
|
(53)
|
(20)
|
||||
Property
acquired
|
(2,539)
|
(2,912)
|
||||
Proceeds
from sale of property and other long-term assets
|
26
|
51
|
||||
Net
cash used in investing activities
|
(2,740)
|
(2,849)
|
||||
Cash
flows from financing activities:
|
||||||
Net
decrease in short-term borrowings
|
(786)
|
(9)
|
||||
Proceeds
from issuance of long-term debt
|
13
|
1,294
|
||||
Repayment
of long-term debt
|
(564)
|
(89)
|
||||
Proceeds
from issuance of common stock under employee stock purchase
plan
|
39
|
40
|
||||
Proceeds
from issuance of common stock from stock options exercised
|
94
|
58
|
||||
Cash
dividend payments
|
(366)
|
(312)
|
||||
Repurchase
of common stock
|
(8)
|
(1,950)
|
||||
Excess
tax benefits of share-based payments
|
1
|
4
|
||||
Net
cash used in financing activities
|
(1,577)
|
(964)
|
||||
Net
increase (decrease) in cash and cash equivalents
|
41
|
(28)
|
||||
Cash
and cash equivalents, beginning of period
|
281
|
364
|
||||
Cash
and cash equivalents, end of period
|
$
|
322
|
$
|
336
|
||
•
|
Level
1 – inputs to the valuation techniques that are quoted prices in active
markets for identical assets or
liabilities
|
•
|
Level
2 – inputs to the valuation techniques that are other than quoted prices
but are observable for the assets or liabilities, either directly or
indirectly
|
•
|
Level
3 – inputs to the valuation techniques that are unobservable for the
assets or liabilities
|
Fair
Value Measurements at Reporting Date Using
|
|||||||||
Quoted
Prices in Active Markets for Identical Assets
|
Significant
Other Observable Inputs
|
Significant
Unobservable Inputs
|
|||||||
(In
millions)
|
October
31, 2008
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|||||
Short-term
investments
|
|||||||||
Available-for-sale
securities
|
$
|
412
|
$
|
122
|
$
|
290
|
$
|
-
|
|
Trading
securities
|
33
|
33
|
-
|
-
|
|||||
Long-term
investments
|
|||||||||
Available-for-sale
securities
|
466
|
-
|
466
|
-
|
|||||
Total
investments
|
$
|
911
|
$
|
155
|
$
|
756
|
$
|
-
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
(In
millions)
|
October
31, 2008
|
November
2, 2007
|
October
31, 2008
|
November
2, 2007
|
||||||||||||
Extended
warranty deferred revenue, beginning of period
|
$
|
456
|
$
|
373
|
$
|
407
|
$
|
315
|
||||||||
Additions
to deferred revenue
|
45
|
42
|
150
|
136
|
||||||||||||
Deferred
revenue recognized
|
(32)
|
(23)
|
(88)
|
(59)
|
||||||||||||
Extended
warranty deferred revenue, end of period
|
$
|
469
|
$
|
392
|
$
|
469
|
$
|
392
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
(In
millions)
|
October
31, 2008
|
November
2, 2007
|
October
31, 2008
|
November
2, 2007
|
||||||||||||
Liability
for extended warranty claims, beginning of period
|
$
|
17
|
$
|
18
|
$
|
14
|
$
|
10
|
||||||||
Accrual
for claims incurred
|
15
|
17
|
40
|
36
|
||||||||||||
Claim
payments
|
(13)
|
(9)
|
(35)
|
(20)
|
||||||||||||
Liability
for extended warranty claims, end of period
|
$
|
19
|
$
|
26
|
$
|
19
|
$
|
26
|
Three Months
Ended
|
Nine
Months Ended
|
|||||||||||||||
(In
millions, except per share data)
|
October
31, 2008
|
November
2, 2007
|
October
31, 2008
|
November
2, 2007
|
||||||||||||
Basic
earnings per share:
|
||||||||||||||||
Net
earnings
|
$
|
488
|
$
|
643
|
$
|
2,033
|
$
|
2,401
|
||||||||
Weighted-average
shares outstanding
|
1,459
|
1,470
|
1,456
|
1,490
|
||||||||||||
Basic
earnings per share
|
$
|
0.33
|
$
|
0.44
|
$
|
1.40
|
$
|
1.61
|
||||||||
Diluted
earnings per share:
|
||||||||||||||||
Net
earnings
|
$
|
488
|
$
|
643
|
$
|
2,033
|
$
|
2,401
|
||||||||
Net
earnings adjustment for interest on convertible notes, net of
tax
|
-
|
-
|
2
|
2
|
||||||||||||
Net
earnings, as adjusted
|
$
|
488
|
$
|
643
|
$
|
2,035
|
$
|
2,403
|
||||||||
Weighted-average
shares outstanding
|
1,459
|
1,470
|
1,456
|
1,490
|
||||||||||||
Dilutive
effect of share-based awards
|
5
|
7
|
6
|
8
|
||||||||||||
Dilutive
effect of convertible notes
|
-
|
20
|
11
|
21
|
||||||||||||
Weighted-average
shares, as adjusted
|
1,464
|
1,497
|
1,473
|
1,519
|
||||||||||||
Diluted
earnings per share
|
$
|
0.33
|
$
|
0.43
|
$
|
1.38
|
$
|
1.58
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
(In
millions)
|
October
31, 2008
|
November
2, 2007
|
October
31, 2008
|
November
2, 2007
|
||||||||||||
Long-term
debt
|
$
|
73
|
$
|
65
|
$
|
219
|
$
|
174
|
||||||||
Short-term
borrowings
|
2
|
3
|
9
|
4
|
||||||||||||
Capitalized
leases
|
7
|
8
|
24
|
24
|
||||||||||||
Interest
income
|
(11)
|
(10)
|
(32)
|
(34)
|
||||||||||||
Interest
capitalized
|
(10)
|
(22)
|
(25)
|
(30)
|
||||||||||||
Other
|
4
|
6
|
15
|
10
|
||||||||||||
Interest
- net
|
$
|
65
|
$
|
50
|
$
|
210
|
$
|
148
|
Nine
Months Ended
|
||||||||
(In
millions)
|
October
31, 2008
|
November
2, 2007
|
||||||
Cash
paid for interest, net of amount capitalized
|
$
|
287
|
$
|
199
|
||||
Cash
paid for income taxes
|
$
|
952
|
$
|
1,336
|
||||
Non-cash
investing and financing activities:
|
||||||||
Non-cash
property acquisitions
|
$
|
185
|
$
|
125
|
||||
Conversions
of long-term debt to equity
|
$
|
1
|
$
|
13
|
Three
Months Ended
|
Basis
Point Increase / (Decrease) in Percentage of Net Sales from Prior
Period
|
Percentage
Increase / (Decrease) in Dollar Amounts from Prior Period
|
||||||
October
31, 2008
|
November
2, 2007
|
2008
vs. 2007
|
2008
vs. 2007
|
|||||
Net
sales
|
100.00
|
%
|
100.00
|
%
|
N/A
|
1.4
|
%
|
|
Gross
margin
|
33.98
|
34.27
|
(29)
|
0.5
|
||||
Expenses:
|
||||||||
Selling,
general and administrative
|
23.23
|
21.63
|
160
|
8.9
|
||||
Store
opening costs
|
0.27
|
0.36
|
(9)
|
(23.5)
|
||||
Depreciation
|
3.29
|
2.94
|
35
|
13.5
|
||||
Interest -
net
|
0.56
|
0.43
|
13
|
30.0
|
||||
Total
expenses
|
27.35
|
25.36
|
199
|
9.3
|
||||
Pre-tax
earnings
|
6.63
|
8.91
|
(228)
|
(24.5)
|
||||
Income
tax provision
|
2.47
|
3.35
|
(88)
|
(25.4)
|
||||
Net
earnings
|
4.16
|
%
|
5.56
|
%
|
(140)
|
(24.0)
|
%
|
|
EBIT
margin (1)
|
7.19
|
%
|
9.34
|
%
|
(215)
|
(22.0)
|
%
|
Nine
Months Ended
|
Basis
Point Increase / (Decrease) in Percentage of Net Sales from Prior
Period
|
Percentage
Increase / (Decrease) in Dollar Amounts from Prior Period
|
||||||
October
31, 2008
|
November
2, 2007
|
2008
vs. 2007
|
2008
vs. 2007
|
|||||
Net
sales
|
100.00
|
%
|
100.00
|
%
|
N/A
|
0.9
|
%
|
|
Gross
margin
|
34.34
|
34.58
|
(24)
|
0.2
|
||||
Expenses:
|
||||||||
Selling,
general and administrative
|
22.13
|
21.17
|
96
|
5.5
|
||||
Store
opening costs
|
0.18
|
0.21
|
(3)
|
(11.9)
|
||||
Depreciation
|
2.99
|
2.63
|
36
|
14.8
|
||||
Interest -
net
|
0.55
|
0.39
|
16
|
42.4
|
||||
Total
expenses
|
25.85
|
24.40
|
145
|
6.9
|
||||
Pre-tax
earnings
|
8.49
|
10.18
|
(169)
|
(15.8)
|
||||
Income
tax provision
|
3.17
|
3.85
|
(68)
|
(16.7)
|
||||
Net
earnings
|
5.32
|
%
|
6.33
|
%
|
(101)
|
(15.3)
|
%
|
|
EBIT
margin (1)
|
9.04
|
%
|
10.57
|
%
|
(153)
|
(13.7)
|
%
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
Other
metrics:
|
October
31, 2008
|
November
2, 2007
|
October
31, 2008
|
November
2, 2007
|
|||||||||
Comparable
store sales changes (2)
|
(5.9)
|
%
|
(4.3)
|
%
|
(6.5)
|
%
|
(4.3)
|
%
|
|||||
Customer
transactions (in millions)
|
179
|
173
|
577
|
558
|
|||||||||
Average
ticket (3)
|
$
|
65.64
|
$
|
66.95
|
$
|
66.32
|
$
|
67.92
|
|||||
At
end of period:
|
|||||||||||||
Number
of stores
|
1,616
|
1,464
|
|||||||||||
Sales
floor square feet (in millions)
|
183
|
166
|
|||||||||||
Average
store size selling square feet (in thousands) (4)
|
113
|
113
|
|||||||||||
|
(1) We define EBIT margin as
earnings before interest and taxes as a percentage of sales (operating
margin).
|
|
(2)
We define a
comparable store as a store that has been open longer than 13
months. A store that is identified for relocation is no longer
considered comparable one
|
month prior to its relocation. The relocated store must then remain open longer than 13 months to be considered comparable. | |
|
(3)
We define average
ticket as net sales divided by number of customer
transactions.
|
|
(4)
We define average
store size selling square feet as sales floor square feet divided by the
number of stores open at the end of the
period.
|
Current
Debt Ratings
|
S&P
|
Moody’s
|
Fitch
|
Commercial
Paper
|
A1
|
P1
|
F1
|
Senior
Debt
|
A+
|
A1
|
A+
|
Outlook
|
Stable
|
Stable
|
Negative
|
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)
|
$ |
9,277
|
$ |
295
|
$ |
1,064
|
$ |
1,025
|
$ |
6,893
|
LOWE'S
COMPANIES, INC.
|
||
December
2, 2008
Date
|
/s/ Matthew
V. Hollifield
Matthew
V. Hollifield
Senior
Vice President and Chief Accounting
Officer
|
Exhibit
No.
|
Description
|
|
10.1
|
Lowe’s
Companies, Inc. Directors’ Deferred Compensation Plan
|
|
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
|
|