EX-99.1 2 exhibit991.htm LOWE'S Q2 2011 EARNINGS RELEASE exhibit991.htm
 
Exhibit 99.1
LOWE'S LOGO

August 15, 2011
For 6:00 am ET Release

                                                                                              
 
 Contacts:   Shareholders’/Analysts’ Inquiries:     Media Inquiries:
   Tiffany Mason    Chris Ahearn
   704-758-2033    704-758-2304
 
                                                                      
LOWE’S REPORTS SECOND QUARTER SALES AND EARNINGS RESULTS
-- Announces Closing of Seven Underperforming Stores --

MOORESVILLE, N.C.  – Lowe’s Companies, Inc. (NYSE: LOW), the world’s second largest home improvement retailer, today reported net earnings of $830 million for the quarter ended July 29, 2011, essentially flat from the same period a year ago.  Diluted earnings per share increased 10.3 percent to $0.64 from $0.58 in the second quarter of 2010.  For the six months ended July 29, 2011, net earnings decreased 2.2 percent from the same period a year ago to $1.29 billion while diluted earnings per share increased 6.5 percent to $0.98.

Included in the above reported results, the company recognized a charge related to an evaluation of the carrying value of long-lived assets, including seven stores that closed on August 14, which reduced pre-tax earnings for the quarter by $83 million and diluted earnings per share by four cents ($0.04).

Sales for the quarter increased 1.3 percent to $14.5 billion, up from $14.4 billion in the second quarter of 2010.  For the six months ended July 29, 2011, sales were $26.7 billion, essentially flat from the same period a year ago.  Comparable store sales for the second quarter decreased 0.3 percent and for the first half of 2011 decreased 1.7 percent.

“Despite some recovery in our seasonal business, our performance for the quarter fell short of our expectations,” commented Robert A. Niblock, Lowe’s chairman, president and CEO.  “We are working diligently to improve sales and profitability in the near-term in a way that we believe will generate sustained customer preference and shareholder value.  We are also building momentum in 2011 behind our longer-term commitment to deliver even better customer experiences.
 
"I would like to thank our hard working employees for their ongoing dedication and customer focus. I am also pleased to announce that our Sanford, N.C. store, which was destroyed by a tornado on April 16, will reopen to continue serving the Sanford community on September 8," Niblock added.

During the quarter, Lowe’s opened two stores.  As of July 29, 2011, Lowe’s operated 1,753 stores in the United States, Canada and Mexico representing 197.6 million square feet of retail selling space, a 1.5 percent increase over last year.

A conference call to discuss second quarter 2011 operating results is scheduled for today (Monday, August 15) at 9:00 am ET.  The conference call will be available through a webcast and can be accessed by visiting Lowe’s website at www.Lowes.com/investor and clicking on Lowe’s Second Quarter 2011 Earnings Conference Call Webcast.  A replay of the call will be archived on Lowes.com until November 13, 2011.

 
 

 

 
 Lowe’s Business Outlook
 

Third Quarter 2011 (comparisons to third quarter 2010)
·  
Total sales are expected to increase approximately 2 percent
·  
The company expects comparable store sales to be approximately flat
·  
The company expects average square footage growth of approximately 1.3 percent
·  
Earnings before interest and taxes as a percentage of sales (operating margin) are expected to decrease 10 to 20 basis points, which includes 20 to 30 basis points impact from additional expenses associated with seven stores that closed August 14
·  
Depreciation expense is expected to be approximately $370 million
·  
Diluted earnings per share of $0.30 to $0.33 are expected, which includes $0.01 to $0.02 per share impact from additional expenses associated with seven stores that closed August 14
·  
Lowe’s third quarter ends on October 28, 2011 with operating results to be publicly released on Monday, November 14, 2011

Fiscal Year 2011 – a 53-week Year (comparisons to fiscal year 2010 – a 52-week year)
·  
Total sales are expected to increase approximately 2 percent, including the 53rd week
·  
The 53rd week is expected to increase total sales by approximately 1.4 percent
·  
The company expects comparable store sales to decline approximately 1 percent
·  
The company expects to open approximately 25 stores in 2011 reflecting average square footage growth of approximately 1.3 percent
·  
Earnings before interest and taxes as a percentage of sales (operating margin) are expected to decrease approximately 30 basis points, which includes approximately 25 basis points impact from impairment and store closing costs
·  
Depreciation expense is expected to be approximately $1.5 billion
·  
Diluted earnings per share of $1.48 to $1.54 are expected for the fiscal year ending February 3, 2012, which includes approximately $0.06 per share impact from impairment and store closing costs

 
 

 
 
 
 Disclosure Regarding Forward-Looking Statements
 

This news release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements of the company's expectations for sales growth, comparable store sales, earnings and performance, capital expenditures, store openings, the housing market, the home improvement industry, demand for services, share repurchases and any statement of an assumption underlying any of the foregoing, constitute "forward-looking statements" under the Act.   Although the company believes that the expectations, opinions, projections, and comments reflected in its forward-looking statements are reasonable, it 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 consumer credit, 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 (the “SEC”) 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 news release are based upon data available as of the date of this release or other specified date and speak only as of such date.  All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf about any of the matters covered in this release are qualified by these cautionary statements and in the “Risk Factors” included in our Annual Report on Form 10-K to the SEC 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.

 
 
 
 
With fiscal year 2010 sales of $48.8 billion, Lowe's Companies, Inc. is a FORTUNE® 50 company that serves approximately 15 million customers a week at more than 1,725 home improvement stores in the United States, Canada and Mexico. Founded in 1946 and based in Mooresville, N.C., Lowe's is the second-largest home improvement retailer in the world. For more information, visit Lowes.com.
 
###

 
 

 



 Lowe's Companies, Inc.
                                               
Consolidated Statements of Current and Retained Earnings (Unaudited)
             
 In Millions, Except Per Share Data
                                               
                                                 
   
Three Months Ended
   
Six Months Ended
 
   
July 29, 2011
   
July 30, 2010
   
July 29, 2011
   
July 30, 2010
 
 Current Earnings
 
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
 
Net sales
  $ 14,543       100.00     $ 14,361       100.00     $ 26,728       100.00     $ 26,749       100.00  
                                                                 
Cost of sales
    9,527       65.51       9,355       65.14       17,393       65.07       17,384       64.99  
                                                                 
Gross margin
    5,016       34.49       5,006       34.86       9,335       34.93       9,365       35.01  
                                                                 
Expenses:
                                                               
                                                                 
Selling, general and administrative
    3,232       22.22       3,189       22.21       6,351       23.76       6,283       23.49  
                                                                 
Depreciation
    365       2.51       398       2.77       737       2.76       795       2.97  
                                                                 
Interest - net
    90       0.62       84       0.59       178       0.67       166       0.62  
                                                                 
Total expenses
    3,687       25.35       3,671       25.57       7,266       27.19       7,244       27.08  
                                                                 
Pre-tax earnings
    1,329       9.14       1,335       9.29       2,069       7.74       2,121       7.93  
                                                                 
Income tax provision
    499       3.43       503       3.50       777       2.91       800       2.99  
                                                                 
Net earnings
  $ 830       5.71     $ 832       5.79     $ 1,292       4.83     $ 1,321       4.94  
                                                                 
                                                                 
Weighted average common shares outstanding - basic
    1,275               1,417               1,300               1,427          
                                                                 
Basic earnings per common share (1)
  $ 0.65             $ 0.58             $ 0.99             $ 0.92          
                                                                 
Weighted average common shares outstanding - diluted
    1,278               1,419               1,303               1,430          
                                                                 
Diluted earnings per common share (1)
  $ 0.64             $ 0.58             $ 0.98             $ 0.92          
                                                                 
Cash dividends per share
  $ 0.14             $ 0.11             $ 0.25             $ 0.20          
                                                                 
                                                                 
Retained Earnings
                                                               
Balance at beginning of period
  $ 16,715             $ 18,246             $ 17,371             $ 18,307          
Net earnings
    830               832               1,292               1,321          
Cash dividends
    (176 )             (157 )             (322 )             (287 )        
Share repurchases
    (1,309 )             (467 )             (2,281 )             (887 )        
Balance at end of period
  $ 16,060             $ 18,454             $ 16,060             $ 18,454          
                                                                 
                                                                 
(1) Under the two-class method, earnings per share is calculated using net earnings allocable to common shares, which is derived by reducing net earnings by the earnings allocable to participating securities. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $823 million for the three months ended July 29, 2011 and $825 million for the three months ended July 30, 2010. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $1,281 million for the six months ended July 29, 2011 and $1,310 million for the six months ended July 30, 2010.  


 
 

 

Lowe's Companies, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Balance Sheets
 
 
 
 
 
 
 
 
 
 
 
 
In Millions, Except Par Value Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
July 29, 2011
 
July 30, 2010
 
January 28, 2011
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
 568
 
 
$
 1,191
 
 
$
 652
 
Short-term investments
 
 
 340
 
 
 
 816
 
 
 
 471
 
Merchandise inventory - net
 
 
 8,825
 
 
 
 8,653
 
 
 
 8,321
 
Deferred income taxes - net
 
 
 222
 
 
 
 205
 
 
 
 193
 
Other current assets
 
 
 213
 
 
 
 256
 
 
 
 330
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total current assets
 
 
 10,168
 
 
 
 11,121
 
 
 
 9,967
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property, less accumulated depreciation
 
 
 22,195
 
 
 
 22,274
 
 
 
 22,089
 
Long-term investments
 
 
 857
 
 
 
 730
 
 
 
 1,008
 
Other assets
 
 
 825
 
 
 
 508
 
 
 
 635
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
 34,045
 
 
$
 34,633
 
 
$
 33,699
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt
 
$
 39
 
 
$
 37
 
 
$
 36
 
Accounts payable
 
 
 5,378
 
 
 
 4,888
 
 
 
 4,351
 
Accrued compensation and employee benefits
 
 
 495
 
 
 
 537
 
 
 
 667
 
Deferred revenue
 
 
 831
 
 
 
 770
 
 
 
 707
 
Other current liabilities
 
 
 1,934
 
 
 
 1,761
 
 
 
 1,358
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total current liabilities
 
 
 8,677
 
 
 
 7,993
 
 
 
 7,119
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities
 
 
 6,581
 
 
 
 5,533
 
 
 
 6,537
 
Deferred income taxes - net
 
 
 479
 
 
 
 459
 
 
 
 467
 
Deferred revenue - extended protection plans
 
 
 673
 
 
 
 605
 
 
 
 631
 
Other liabilities
 
 
 856
 
 
 
 830
 
 
 
 833
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities
 
 
 17,266
 
 
 
 15,420
 
 
 
 15,587
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shareholders' equity:
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock - $5 par value, none issued
 
 
 - 
 
 
 
 - 
 
 
 
 - 
 
Common stock - $.50 par value;
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued and outstanding
 
 
 
 
 
 
 
 
 
 
 
 
July 29, 2011
 1,260
 
 
 
 
 
 
 
 
 
 
 
July 30, 2010
 1,423
 
 
 
 
 
 
 
 
 
 
 
January 28, 2011
 1,354
 
 630
 
 
 
 711
 
 
 
 677
 
Capital in excess of par value
 
 
 7
 
 
 
 9
 
 
 
 11
 
Retained earnings
 
 
 16,060
 
 
 
 18,454
 
 
 
 17,371
 
Accumulated other comprehensive income
 
 
 82
 
 
 
 39
 
 
 
 53
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total shareholders' equity
 
 
 16,779
 
 
 
 19,213
 
 
 
 18,112
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities and shareholders' equity
 
$
 34,045
 
 
$
 34,633
 
 
$
 33,699
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 

 

Lowe's Companies, Inc.
 
 
   
 
 
Consolidated Statements of Cash Flows (Unaudited)
 
 
   
 
 
In Millions
 
 
   
 
 
 
 
 
   
 
 
 
 
Six Months Ended
 
 
 
July 29, 2011
   
July 30, 2010
 
Cash flows from operating activities:
 
 
   
 
 
Net earnings
  $ 1,292     $ 1,321  
Adjustments to reconcile net earnings to net cash provided by operating activities:
               
Depreciation and amortization
    786       848  
Deferred income taxes
    (50 )     (143 )
Loss on property and other assets - net
    100       16  
Share-based payment expense
    59       55  
Net changes in operating assets and liabilities:
               
Merchandise inventory - net
    (495 )     (400 )
Other operating assets
    125       (41 )
Accounts payable
    1,026       600  
Other operating liabilities
    450       526  
Net cash provided by operating activities
    3,293       2,782  
 
               
Cash flows from investing activities:
               
Purchases of investments
    (948 )     (1,458 )
Proceeds from sale/maturity of investments
    1,232       609  
Increase in other long-term assets
    (218 )     (16 )
Property acquired
    (780 )     (612 )
Proceeds from sale of property and other long-term assets
    20       9  
Net cash used in investing activities
    (694 )     (1,468 )
 
               
Cash flows from financing activities:
               
Net proceeds from issuance of long-term debt
    -       991  
Repayment of long-term debt
    (18 )     (534 )
Proceeds from issuance of common stock under share-based payment plans
    55       62  
Cash dividend payments
    (294 )     (261 )
Repurchase of common stock
    (2,433 )     (1,015 )
Excess tax benefits of share-based payments
    3       1  
Net cash used in financing activities
    (2,687 )     (756 )
 
               
Effect of exchange rate changes on cash
    4       1  
 
               
Net (decrease)/increase in cash and cash equivalents
    (84 )     559  
Cash and cash equivalents, beginning of period
    652       632  
Cash and cash equivalents, end of period
  $ 568     $ 1,191