EX-99.1 2 exhibit991.htm LOWE'S Q3 2011 EARNINGS RELEASE exhibit991.htm
 
Exhibit 99.1
LOWE'S LOGO

November 14, 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 THIRD QUARTER SALES AND EARNINGS RESULTS
-- Charges for Store Closings and Discontinued Projects Reduced Earnings Per Share by $0.17--
 
MOORESVILLE, N.C.  – Lowe’s Companies, Inc. (NYSE: LOW), the world’s second largest home improvement retailer, today reported net earnings of $225 million for the quarter ended October 28, 2011, a 44.3 percent decline from the same period a year ago.  Diluted earnings per share decreased 37.9 percent to $0.18 from $0.29 in the third quarter of 2010.  For the nine months ended October 28, 2011, net earnings decreased 12.1 percent from the same period a year ago to $1.52 billion while diluted earnings per share decreased 3.3 percent to $1.17.
 
Included in the above reported results are charges related to store closings and discontinued projects which, in the aggregate, reduced pre-tax earnings for the quarter by $336 million and diluted earnings per share by $0.17.
 
Sales for the quarter increased 2.3 percent to $11.9 billion, up from $11.6 billion in the third quarter of 2010.  For the nine months ended October 28, 2011, sales were $38.6 billion, an increase of 0.6 percent from the same period a year ago.  Comparable store sales for the third quarter increased 0.7 percent and for the first nine months of 2011 decreased 1.0 percent.
 
"Our performance is not at the level we expect relative to the market," commented Robert A. Niblock, Lowe’s chairman, president and CEO.  "We are making the changes necessary to right size the organization, improve speed to market and enhance the shopping experience.  We are keenly focused on improving our core business while also developing new capabilities and services for the future.  I am confident we are moving forward on a clear path that is not dependent on an unlikely near-term economic recovery.  
 
“I would like to thank our hard-working employees for their ongoing dedication and customer focus during a time of significant change,” Niblock added.
 
During the quarter, Lowe’s opened eight stores.  As of October 28, 2011, Lowe’s operated 1,744 stores in the United States, Canada and Mexico representing 196.5 million square feet of retail selling space, a 0.5 percent increase over last year.
 
A conference call to discuss third quarter 2011 operating results is scheduled for today (Monday, November 14) 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 Third Quarter 2011 Earnings Conference Call Webcast.  A replay of the call will be archived on Lowes.com until February 26, 2012.
 
 
 
 

 

 
 Lowe’s Business Outlook
 
Fourth Quarter 2011 – a 14-week Quarter (comparisons to fourth quarter 2010 – a 13-week quarter)
·  
Total sales are expected to increase approximately 8 percent, including the 14th week
·  
The 14th week is expected to increase total sales by approximately 7 percent
·  
The company expects comparable store sales of flat to 1 percent
·  
Earnings before interest and taxes as a percentage of sales (operating margin) are expected to decrease approximately 50 basis points, which includes approximately 10 basis points impact from additional expenses associated with previously announced store closings
·  
Depreciation expense is expected to be approximately $370 million
·  
Diluted earnings per share of $0.20 to $0.23 are expected
·  
Lowe’s fourth quarter ends on February 3, 2012 with operating results to be publicly released on Monday, February 27, 2012

Fiscal Year 2011 – a 53-week Year (comparisons to fiscal year 2010 – a 52-week year)
·  
Total sales are expected to increase 2 to 3 percent, including the 53rd week
·  
The 53rd week is expected to increase total sales by approximately 1.5 percent
·  
The company expects comparable store sales to decline approximately 1 percent
·  
The company expects to open approximately 25 stores in 2011
·  
Earnings before interest and taxes as a percentage of sales (operating margin) are expected to decrease 80 to 90 basis points, which includes approximately 80 basis points impact from charges associated with store closings and discontinued projects
·  
Depreciation expense is expected to be approximately $1.5 billion
·  
Diluted earnings per share of $1.37 to $1.40 are expected for the fiscal year ending February 3, 2012, which includes approximately $0.20 per share impact from charges associated with store closings and discontinued projects


 
 

 

 
 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 therein or updated version thereof, if any, 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
   
Nine Months Ended
 
   
October 28, 2011
   
October 29, 2010
   
October 28, 2011
   
October 29, 2010
 
Current Earnings
 
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
 
Net sales
  $ 11,852       100.00     $ 11,587       100.00     $ 38,579       100.00     $ 38,335       100.00  
                                                                 
Cost of sales
    7,815       65.94       7,526       64.95       25,208       65.34       24,909       64.98  
                                                                 
Gross margin
    4,037       34.06       4,061       35.05       13,371       34.66       13,426       35.02  
                                                                 
Expenses:
                                                               
                                                                 
Selling, general and administrative
    3,233       27.27       2,931       25.30       9,583       24.84       9,214       24.03  
                                                                 
Depreciation
    361       3.05       399       3.44       1,098       2.84       1,194       3.12  
                                                                 
Interest - net
    91       0.77       80       0.69       269       0.70       246       0.64  
                                                                 
Total expenses
    3,685       31.09       3,410       29.43       10,950       28.38       10,654       27.79  
                                                                 
Pre-tax earnings
    352       2.97       651       5.62       2,421       6.28       2,772       7.23  
                                                                 
Income tax provision
    127       1.07       247       2.13       904       2.35       1,047       2.73  
                                                                 
Net earnings
  $ 225       1.90     $ 404       3.49     $ 1,517       3.93     $ 1,725       4.50  
                                                                 
                                                                 
Weighted average common shares outstanding - basic
    1,250               1,390               1,283               1,415          
                                                                 
Basic earnings per common share (1)
  $ 0.18             $ 0.29             $ 1.17             $ 1.21          
                                                                 
Weighted average common shares outstanding - diluted
    1,252               1,392               1,286               1,417          
                                                                 
Diluted earnings per common share (1)
  $ 0.18             $ 0.29             $ 1.17             $ 1.21          
                                                                 
Cash dividends per share
  $ 0.14             $ 0.11             $ 0.39             $ 0.31          
                                                                 
                                                                 
Retained Earnings
                                                               
Balance at beginning of period
  $ 16,060             $ 18,454             $ 17,371             $ 18,307          
Net earnings
    225               404               1,517               1,725          
Cash dividends
    (176 )             (154 )             (498 )             (440 )        
Share repurchases
    -               (560 )             (2,281 )             (1,448 )        
Balance at end of period
  $ 16,109             $ 18,144             $ 16,109             $ 18,144          
                                                                 
                                                                 
(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 $223 million for the three months ended October 28, 2011 and $400 million for the three months ended October 29, 2010. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $1,505 million for the nine months ended October 28, 2011 and $1,710 million for the nine months ended October 29, 2010.
 
 
 

 
 

 


Lowe's Companies, Inc.
                   
Consolidated Balance Sheets
                   
In Millions, Except Par Value Data
                   
                     
     
(Unaudited)
   
(Unaudited)
       
     
October 28, 2011
   
October 29, 2010
   
January 28, 2011
 
Assets
                   
                     
     Current assets:
                   
     Cash and cash equivalents
    $ 675     $ 1,078     $ 652  
     Short-term investments
      294       659       471  
     Merchandise inventory - net
      8,990       8,543       8,321  
     Deferred income taxes - net
      237       202       193  
     Other current assets
      227       219       330  
                           
     Total current assets
      10,423       10,701       9,967  
                           
     Property, less accumulated depreciation
      21,888       22,180       22,089  
     Long-term investments
      705       865       1,008  
     Other assets
      850       595       635  
                           
     Total assets
    $ 33,866     $ 34,341     $ 33,699  
                           
Liabilities and Shareholders' Equity
                         
                           
     Current liabilities:
                         
     Current maturities of long-term debt
    $ 590     $ 36     $ 36  
     Accounts payable
      5,242       4,959       4,351  
     Accrued compensation and employee benefits
    622       678       667  
     Deferred revenue
      789       802       707  
     Other current liabilities
      1,913       1,533       1,358  
                           
     Total current liabilities
      9,156       8,008       7,119  
                           
     Long-term debt, excluding current maturities
    6,025       5,539       6,537  
     Deferred income taxes - net
      322       456       467  
     Deferred revenue - extended protection plans
    687       621       631  
     Other liabilities
      867       825       833  
                           
     Total liabilities
      17,057       15,449       15,587  
                           
     Shareholders' equity:
                         
     Preferred stock - $5 par value, none issued
      -       -       -  
     Common stock - $.50 par value;
                         
Shares issued and outstanding
                         
October 28, 2011
1,260                        
October 29, 2010
1,394                        
January 28, 2011
1,354     630       697       677  
     Capital in excess of par value
      24       6       11  
     Retained earnings
      16,109       18,144       17,371  
     Accumulated other comprehensive income
      46       45       53  
                           
     Total shareholders' equity
      16,809       18,892       18,112  
                           
     Total liabilities and shareholders' equity
  $ 33,866     $ 34,341     $ 33,699  
                           
                           

 
 

 


Lowe's Companies, Inc.
           
Consolidated Statements of Cash Flows (Unaudited)
           
In Millions
           
             
   
Nine Months Ended
 
   
October 28, 2011
   
October 29, 2010
 
Cash flows from operating activities:
           
Net earnings
  $ 1,517     $ 1,725  
Adjustments to reconcile net earnings to net cash provided by operating activities:
               
Depreciation and amortization
    1,171       1,272  
Deferred income taxes
    (200 )     (147 )
Loss on property and other assets - net
    407       72  
Share-based payment expense
    81       84  
Net changes in operating assets and liabilities:
               
Merchandise inventory - net
    (669 )     (288 )
Other operating assets
    126       (25 )
Accounts payable
    892       668  
Other operating liabilities
    567       472  
Net cash provided by operating activities
    3,892       3,833  
                 
Cash flows from investing activities:
               
Purchases of investments
    (1,200 )     (2,033 )
Proceeds from sale/maturity of investments
    1,672       1,206  
Increase in other long-term assets
    (217 )     (53 )
Property acquired
    (1,264 )     (1,012 )
Proceeds from sale of property and other long-term assets
    26       24  
Net cash used in investing activities
    (983 )     (1,868 )
                 
Cash flows from financing activities:
               
Net proceeds from issuance of long-term debt
    -       991  
Repayment of long-term debt
    (28 )     (542 )
Proceeds from issuance of common stock under share-based payment plans
    55       63  
Cash dividend payments
    (470 )     (418 )
Repurchase of common stock
    (2,434 )     (1,616 )
Other - net
    (9 )     1  
Net cash used in financing activities
    (2,886 )     (1,521 )
                 
Effect of exchange rate changes on cash
    -       2  
                 
Net increase in cash and cash equivalents
    23       446  
Cash and cash equivalents, beginning of period
    652       632  
Cash and cash equivalents, end of period
  $ 675     $ 1,078