-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, kR06DCAlIOSWGh2M/d8uNKwsTX1RnAhWfaLvIgkd7aL3w9YI3yad9E285h01dB1r KklamMzDvTLpgEiFJ2SCjQ== 0000060667-95-000004.txt : 19950615 0000060667-95-000004.hdr.sgml : 19950615 ACCESSION NUMBER: 0000060667-95-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950614 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOWES COMPANIES INC CENTRAL INDEX KEY: 0000060667 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-LUMBER & OTHER BUILDING MATERIALS DEALERS [5211] IRS NUMBER: 560578072 STATE OF INCORPORATION: NC FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07898 FILM NUMBER: 95546951 BUSINESS ADDRESS: STREET 1: PO BOX 1111 CITY: NORTH WILKESBORO STATE: NC ZIP: 28656 BUSINESS PHONE: 9196514000 MAIL ADDRESS: STREET 1: PO BOX 1111 CITY: NORTH WILKESBORO STATE: NC ZIP: 28656 10-Q 1 -1- 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, 1995 OR [ ] 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 (I.R.S. Employer incorporation or organization) Identification No.) P.O. BOX 1111, NORTH WILKESBORO, N.C. 28656 (Address of principal executive offices) (Zip Code) (910) 651-4000 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) 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. 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 31, 1995 Common Stock, $.50 par value 160,120,048 12 TOTAL PAGES -2- LOWE'S COMPANIES, INC. - INDEX - PART I - Financial Information: Page No. Consolidated Balance Sheets - April 30, 1995 and January 31, 1995. 3 Consolidated Statements of Current and Retained Earnings - three months ended April 30, 1995 and 1994. 4 Consolidated Statements of Cash Flows - three months ended April 30, 1995 and 1994. 5 Notes to Consolidated Financial Statements. 6-7 Management's Discussion and Analysis of Results of Operations and Financial Condition. 8-9 Independent Accountants' Report. 10 PART II - Other Information Item 6 (a) - Exhibits. Exhibit 11 Computation of per share earnings 11 Item 6 (b) - Reports on Form 8-K. 12 -3- Consolidated Balance Sheets Lowe's Companies, Inc. and Subsidiary Companies Dollars in thousands
April 30, January 31, 1995 1995 Assets Current assets: Cash and cash equivalents $ 141,533 $ 150,319 Short-term investments 50,430 118,155 Accounts receivable - net 144,728 109,214 Merchandise inventory 1,261,075 1,132,282 Other assets 46,022 47,198 Total current assets 1,643,788 1,557,168 Property, less accumulated depreciation 1,460,003 1,397,713 Long-term investments 45,411 83,459 Other assets 69,461 67,652 Total assets $3,218,663 $3,105,992 Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term debt $ 30,154 $ 26,91 Short-term notes payable 1,891 1,903 Accounts payable 691,755 675,436 Employee retirement plans 46,223 43,950 Accrued salaries and wages 27,440 63,356 Other current liabilities 193,696 134,334 Total current liabilities 991,159 945,892 Long-term debt, excluding current maturities 690,273 681,184 Deferred income taxes 49,211 49,211 Accrued store restructuring costs 3,204 9,815 Total liabilities 1,733,847 1,686,102 Shareholders' equity Common stock - $.50 par value; issued and outstanding April 30, 1995 159,527,389 January 31, 1995 147,886,770 79,963 79,764 Capital in excess of par 566,868 554,838 Retained earnings 844,620 792,891 Unearned compensation-restricted stock awards (5,591) (5,949) Unrealized loss on available-for-sale securities, net of income taxes of $562 and $891, respectively (1,044) (1,654) Total shareholders' equity 1,484,816 1,419,890 Total liabilities and shareholders' equit $3,218,663 $3,105,992 See accompanying notes to consolidated financial statements.
-4- Consolidated Statements of Current and Retained Earnings Lowe's Companies, Inc. and Subsidiary Companies Dollars In Thousands, Except Per Share Data
Three months ended April 30, 19 April 30, 1994 Current Earnings Amount Percent Amount Percent Net sales $1,634,690 100.00% $1,397,008 100.00% Cost of sales 1,212,580 74.18% 1,060,300 75.90% Gross margin 422,110 25.82% 336,708 24.10% Expenses: Selling, general and administrative 265,464 16.24% 206,214 14.76% Store opening costs 8,591 0.53% 7,392 0.53% Depreciation 32,970 2.02% 23,989 1.72% Employee retirement plans 13,539 0.83% 11,110 0.80% Interest 9,330 0.57% 8,383 0.60% Total expenses 329,894 20.18% 257,088 18.40% Pre-tax earnings 92,216 5.64% 79,620 5.70% Income tax provision 33,290 2.04% 27,867 1.99% Net earnings $ 58,926 3.60% $ 51,753 3.70% Shares outstanding (weighted average) 159,815 148,212 Earnings per common & common equivalent share $ 0.37 $ 0.35 Earnings per common share - assuming full dilution $ 0.36 $ 0.34 Retained earnings Balance at beginning of period $ 792,891 $ 596,764 Net earnings 58,926 51,753 Cash dividends (7,197) (5,930) Balance at end of period $ 844,620 $ 642,587 See accompanying notes to consolidated financial statements.
-5- CONSOLIDATED STATEMENTS OF CASH FLOWS Lowe's Companies, Inc. and Subsidiary Companies Dollars in Thousands
For the three months ended April 30 1995 1994 Cash Flows From Operating Activities: Net Earnings $ 58,926 $ 51,753 Adjustments to Reconcile Net Earnings to Net Cash Provided By (Used in) Operating Activities: Depreciation 32,970 23,989 Amortization of Original Issue Discount 1,112 786 Increase in Deferred Income Taxes 0 685 (Gain) Loss on Disposition/Writedown of Fixed and Other Assets (800) 1,745 Decrease (Increase) in Operating Assets: Accounts Receivable - Net (35,514) (26,659) Merchandise Inventory (128,793) (92,517) Other Operating Assets 1,825 (2,706) Increase (Decrease) in Operating Liabilities: Accounts Payable 16,319 93,935 Employee Retirement Plans 12,273 9,140 Accrued Store Restructuring (4,416) (2,848) Other Operating Liabilities 13,419 21,948 Net Cash Provided by (Used in) Operating Activities (32,679) 79,251 Cash Flows from Investing Activities: Decrease (Increase) in Investment Assets: Short-Term Investments 67,684 (13,228) Purchases of Long-Term Investments (8,450) (7,500) Proceeds from Sale/Maturity of Long-Term Investments 46,558 5,572 Other Long-Term Assets 3,752 1,732 Fixed Assets Acquired (87,292) (81,758) Proceeds from the Sale of Fixed and Other Long-Term Assets 3,093 2,413 Net Cash Provided by (Used in) Investing Activities 25,345 (92,769) Cash Flows from Financing Activities: Sources: Long-Term Debt Borrowings 0 500 Stock Options Exercised 0 749 Total Financing Sources 0 1,249 Uses: Repayment of Long-term Debt (1,440) (1,832) Net Decrease in Short-Term Borrowings (12) (220) Cash Dividend Payments 0 (5,930) Total Financing Uses (1,452) (7,982) Net Cash Used in Financing Activities (1,452) (6,733) Net Decrease in Cash and Cash Equivalents (8,786) (20,251) Cash and Cash Equivalents, Beginning of Period 150,319 73,253 Cash and Cash Equivalents, End of Period $141,533 $ 53,002 See accompanying notes to consolidated financial statements.
-6- Lowe's Companies, Inc. and Subsidiary Companies Notes to Consolidated Financial Statements Note 1: The accompanying Consolidated Financial Statements (unaudited) have been reviewed by an independent Certified Public Accountant, and in the opinion of management, they contain all adjustments necessary to present fairly the financial position as of April 30, 1995, and the results of operations and the cash flows for the three-month periods ended April 30, 1995 and 1994. Note 2: The results of operations for the three-month periods ended April 30, 1995 and 1994 are not necessarily indicative of the results to be expected for the full year. Note 3: Interest and loan expense is net of interest income of $2,259,000 and $1,103,000 for the three-month periods ended April 30, 1995 and 1994, respectively. In addition, interest on construction in progress was capitalized in the amount of $939,000 and $719,000 for the three-month periods ended April 30, 1995 and 1994, respectively. Note 4: If the FIFO method of inventory accounting had been used, inventories would have been $67,539,000 higher at April 30, 1995 and $64,976,000 higher at January 31, 1995. Note 5: Stock options exercised consisted of 84,600 shares resulting in proceeds of $749,000 for the three-month period ended April 30, 1994. There were no stock options exercised in the three-month period ended April 30, 1995. Note 6: Property is shown net of accumulated depreciation of $367,106,000 at April 30, 1995 and $344,438,000 at January 31, 1995. Note 7: Supplemental disclosures of cash flow information: Three months ended April 30 1995 1994 Cash paid for interest (net of capitalized) $ 15,555,000 $ 12,111,000 Cash paid for income taxes 739,000 1,204,000 Non-cash investing and financing activities: Common stock issued to ESOP 10,000,000 8,000,000 Fixed assets acquired under capital lease 14,887,000 14,957,000 Conversion of debt to common stock 2,230,000 10,000 Note 8: On January 23, 1995, the Board of Directors authorized the funding of the Fiscal 1994 ESOP contribution primarily with the issuance of new shares of the Company's common stock. During the first quarter of Fiscal 1995, the Company issued 301,058 shares with a market value of $10.0 million. The remaining shares will be issued by the end of the third quarter. -7- Note 9: On January 10, 1994, the Company filed with the Securities and Exchange Commission a shelf registration statement covering $500 million of "unallocated" debt or equity securities. The shelf registration enables the Company to issue common stock, preferred stock, senior unsecured debt securities or subordinated unsecured debt securities from time to time. On June 27, 1994, the Company sold 10,350,000 shares of common stock under the shelf registration discussed above. The Company received proceeds, net of the underwriting discount and other costs, of $315,697,000. The proceeds are being used to finance the Company's large store expansion program and for general corporate purposes. Note 10: During the first quarter of Fiscal 1995, $2,531,000 principal of the Company's 3% Convertible Subordinated Notes were converted into 96,866 shares of the Company's common stock. Note 11: Costs associated with the relocation and closing of stores during the three months ended April 30, 1995, which were recognized through the restructuring charge in Fiscal 1991, totaled $2,942,000. Comparable costs incurred during the three months ended April 30, 1994 were $4,684,000. Note 12: Unearned Compensation - Restricted Stock Awards of $5,591,000 included in Shareholders' Equity on the balance sheet is the result of stock grants totaling 190,000 shares made to certain executives and directors. The amount is amortized to expense as earned over periods not exceeding seven years. Note 13: Earnings per common and common equivalent share is computed based upon the weighted average number of common shares outstanding during the period plus the dilutive effect of common shares contingently issuable from stock options. Earnings per common share - assuming full dilution reflects the potential dilutive effect of dilutive common share equivalents and the Company's 3% Convertible Subordinated Notes issued July 22, 1993. These notes are due July 22, 2003. -8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS This discussion should be read in conjunction with the financial statements and the financial statement footnotes included in this Form 10-Q. For the first quarter ended April 30, sales grew 17% to $1.635 billion, net earnings increased 14% to $58.9 million and earnings per share (fully diluted) were $.36 compared to $.34 in the comparable quarter of last year. Comparable store sales were up 2%. Factors impacting overall performance in the first quarter included higher interest rates, prolonged inclement weather, weaker demand for home construction materials and an economy which grew more slowly in the first quarter than it did in 1994. Sales in the first quarter were enhanced by the addition of 4.7 million square feet of retail selling space at new and existing locations since last year's first quarter. The Company experienced a significant amount of cold and wet weather in our trading areas during February and March in comparison to milder weather in 1994. This resulted in a sales mix that was strong in categories related to home interiors such as cabinets, interior paint, electrical and plumbing, and weak in categories related to exteriors, such as lumber, outdoor power equipment and bag goods. Included in the 17% sales increase is approximately 1% decrease due to changing prices. While we experienced deflation in lumber, there was enough inflation in other products to basically offset it. Gross margin was 25.82% of sales for the quarter ended April 30, 1995, versus 24.10% in last year's quarter. The increase in gross margin rate continues to reflect favorable changes in our product mix, although a more balanced exterior-interior product sales mix would have held down this increase.. The successful implementation of our Everyday Competitive Pricing strategy is increasing sales and margin dollars. Selling, general and administrative expenses (SG&A) were 16.23% of sales versus 14.75% in last year's quarter. Store salaries (excluding those in store opening costs) increased 27% compared to the 17% sales increase. Rising interest rates reduced credit card related income compared to last year causing an unfavorable variance of 32 basis points. Net advertising expenses rose 38%, producing a 22 basis point impact. For the quarter ended April 30, 1995, store opening costs were $8.6 million versus $7.4 million last year, representing costs associated with the opening of 13 stores this year (7 new and 6 relocated) compared to 11 stores in last year's third quarter (6 new and 5 relocated). Store opening costs averaged $735,000 per project in the first quarter of 1995 and these costs averaged $670,000 in the first quarter of 1994. Advertising and staff training investments have been enhanced. Depreciation was $33.0 million for the quarter ended April 30, 1995. This is an increase of 37% over the comparable period last year. The increase is due primarily to fixtures, displays and computer equipment for our store expansion program. Employee retirement plans expense increased 22% to $13.5 million for the three months ended April 30, 1995, due to a 25% increase in salaries offset by a lower percentage of employees qualifying for the plans. -9- Interest expense increased $.9 million to $9.3 million for the three months ended April 30, 1995. The increase is primarily due to interest on capitalized building leases and other long term debt. The Company's effective income tax rate was 36.10% for the three months ended April 30, 1995, compared to 35.00% for the comparable three months last year. The current year's higher rates are due primarily to a higher effective state tax rate.. LIQUIDITY AND CAPITAL RESOURCES The uses of cash in the first three months have continued to lay the groundwork for successfully implementing our strategic plan. Merchandise inventory has increased $128.8 million, about 25% due to the increased merchandise assortments in our new and relocated stores and 75% due to seasonal increases in inventory. Real property has increased in line with the Company's strategic plan to continue expansion of sales floor square footage by relocating from older, smaller stores to larger stores and to expand into new markets. The Company's 1995 capital budget will range between $810 and $835 million, inclusive of $238 million in operating leases. Over 80% of this planned investment is for our store expansion program. Present plans are to finance our 1995 expansion through funds from operations, operating leases, issuance of about $40 million in common stock to our ESOP (see Note 8) and external financing. Financing in the first quarter came from net earnings and the sales of investments in our cash management program. At April 30, 1995, the Company had an uncommitted aggregate of $174 million available under a shelf registration statement filed with the Securities and Exchange Commission (see Note 9). In addition to these sources, the Company has available agreements for up to $146 million in lines of credit for issuing documentary and standby letters of credit. Another $235 million is available for the purpose of short-term borrowings on a bid basis from various banks. On April 10, 1995, the Company entered into a five year, $300 million revolving credit facility with a group of thirteen commercial banks to provide alternate liquidity for the Company's commercial paper program and for general corporate purposes. Lowe's ended the first quarter with 343 stores and 19.7 million square feet of retail selling space, a 31% increase over last April's selling space. Our expansion plans for 1995 envision about 50 to 55 new stores with about 65% in new markets and the balance relocations, for approximately 5.3 million square feet of incremental selling space. Approximately half the 1995 projects will be leased and half will be owned. Our first quarter expansion included 6 relocations, 7 new stores and 2 new contractor yards representing 1.1 million square feet of incremental retail space. We also closed 1 contractor yard. Also during the first quarter, both Moody's Investor Service and Standard and Poor raised the Company's securities ratings. Moody's raised its ratings as follows: Senior Unsecured Debt to A2 from A3; Subordinated Debt to A3 from Baa1; and Commercial Paper to Prime-1 from Prime-2. Standard and Poor raised its ratings as follows: Senior Unsecured Debt to A from A-; Subordinated Debt to A- from BBB+; and Commercial Paper to A-1 from A-2. -10- INDEPENDENT ACCOUNTANTS' REPORT The Board of Directors Lowe's Companies, Inc.: We have reviewed the accompanying consolidated balance sheet of Lowe's Companies, Inc. and subsidiary companies as of April 30, 1995, and the related consolidated statements of current and retained earnings and cash flows for the three-month periods ended April 30, 1995 and 1994. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, 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 review, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Lowe's Companies, Inc. and subsidiary companies as of January 31, 1995, and the related consolidated statements of current and retained earnings and cash flows for the year then ended (not presented herein); and in our report dated February 20, 1995, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of January 31, 1995 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 May 11, 1995 -12- Part II - OTHER INFORMATION 6 (b) - Reports on Form 8-K There were no reports filed on Form 8-K during the quarter ended April 30, 1995. SIGNATURES 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 13, 1995 \s\ Richard D. Elledge Date Richard D. Elledge, Vice President and Chief Accounting Officer EX-11 2 -11- Exhibit 11 - Computation of per share earnings Three Months Ended April 30 1995 1994 Earnings per Common & Common Equivalent Share: Net Earnings $58,926 $51,753 Weighted Average Shares Outstanding 159,734 148,045 Dilutive Effect of Common Stock Equivalents 81 167 Weighted Average Shares, as Adjusted 159,815 148,212 Earnings per Common & Common Equivalent Share $.37 $.35 Earnings per Common Share - Assuming Full Dilution: Net Earnings $58,926 $51,753 Interest (After Taxes) on Convertible Debt 1,882 1,912 Net Earnings, as Adjusted $60,808 $53,665 Weighted Average Shares Outstanding 159,734 148,045 Dilutive Effect of Common Stock Equivalents 81 167 Shares Added if All Debt Converted 10,898 11,003 Weighted Average Shares, as Adjusted 170,713 159,215 Earnings per Common Share - Assuming Full Dilution $.36 $.34
EX-27 3
5 1000 3-MOS JAN-31-1996 APR-30-1995 141,533 50,430 144,728 0 1,261,075 1,643,788 1,460,003 0 3,218,663 991,159 690,273 79,963 0 0 1,404,853 3,218,663 1,634,690 1,634,690 1,212,580 0 320,564 0 9,330 92,216 33,290 58,926 0 0 0 58,926 .37 .36
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