-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NDKiqYoSneMNkU6rYNopPaALqOxbWkPdNOFTHcvB2YHXQIs0+yPiVnF2zA0+4pYi sYnxPw2Q1zeHPXEDgG2rfw== 0000060667-97-000022.txt : 19970918 0000060667-97-000022.hdr.sgml : 19970918 ACCESSION NUMBER: 0000060667-97-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970801 FILED AS OF DATE: 19970912 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: SEC FILE NUMBER: 001-07898 FILM NUMBER: 97679818 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 August 1, 1997 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)658-4000 (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 August 1, 1997 Common Stock, $.50 par value 174,534,256 15 TOTAL PAGES -2- LOWE'S COMPANIES, INC. - - INDEX - PART I - Financial Information: Page No. Consolidated Balance Sheets - August 1, 1997, July 31, 1996 and January 31, 1997 3 Consolidated Statements of Current and Retained Earnings - three months and six months ended August 1, 1997 and July 31, 1996 4 Consolidated Statements of Cash Flows - six months ended August 1, 1997 and July 31, 1996 5 Notes to Consolidated Financial Statements 6-8 Management's Discussion and Analysis of Results of Operations and Financial Condition 9-11 Independent Accountants' Report 12 PART II - Other Information 13-14 Item 4 - Submission of Matters to a Vote of Security Holders Item 6 (a) - Exhibits Item 6 (b) - Reports on Form 8-K EXHIBIT INDEX Exhibit 11 Computation of per share earnings 15 -3- Consolidated Balance Sheets Lowe's Companies, Inc. and Subsidiary Companies Dollars in thousands
August 1, July 31, January 31, 1997 1996 1997 Assets Current assets: Cash and cash equivalents $ 35,673 $ 104,966 $ 40,387 Short-term investments 135,826 57,148 30,103 Accounts receivable - net 149,547 143,279 117,562 Merchandise inventory 1,748,931 1,452,715 1,605,880 Other assets 66,063 67,990 57,534 Total current assets 2,136,040 1,826,098 1,851,466 Property, less accumulated depreciation 2,719,711 2,124,568 2,494,396 Long-term investments 30,328 24,016 35,615 Other assets 49,742 57,043 53,477 Total assets $4,935,821 $4,031,725 $4,434,954 Liabilities and Shareholders' Equity Current liabilities: Short-term borrowings $ 84,375 $ 25,034 $ 80,905 Current maturities of long-term debt 11,750 9,792 22,566 Accounts payable 966,432 773,175 914,167 Employee retirement plans 59,822 44,527 60,770 Accrued salaries and wages 61,588 76,681 71,662 Other current liabilities 278,871 229,409 198,461 Total current liabilities 1,462,838 1,158,618 1,348,531 Long-term debt, excluding current maturities 934,329 693,649 767,338 Deferred income taxes 105,708 91,809 101,609 Total liabilities 2,502,875 1,944,076 2,217,478 Shareholders' equity Preferred stock - $5 par value, none issued - - - Common stock - $.50 par value; Issued and Outstanding August 1, 1997 174,310,291 July 31, 1996 172,597,431 January 31, 1997 173,403,639 87,155 86,299 86,702 Capital in excess of par 937,348 875,606 903,661 Retained earnings 1,423,699 1,133,216 1,245,888 Unearned compensation-restricted stock awards (15,287) (7,016) (18,434) Unrealized gain(loss) on available- for-sale securities 31 (456) (341) Total shareholders' equity 2,432,946 2,087,649 2,217,476 Total liabilities and shareholders' equity $4,935,821 $4,031,725 $4,434,954 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
Quarter Ended Six Months Ended August 1, 1997 July 31, 1996 August 1, 1997 July 31, 1996 Current Earnings Amount Percent Amount Percent Amount Percent Amount Percent Net sales $2,808,086 100.00 $2,459,008 100.00 $5,208,840 100.00 $4,365,506 100.00 Cost of sales 2,076,993 73.96 1,830,216 74.43 3,854,044 73.99 3,260,214 74.68 Gross margin 731,093 26.04 628,792 25.57 1,354,796 26.01 1,105,292 25.32 Expenses: Selling, general and administrative 427,844 15.24 361,915 14.73 840,062 16.13 680,893 15.60 Store opening costs 12,289 0.44 12,560 0.51 20,541 0.39 25,053 0.57 Depreciation 58,569 2.09 47,767 1.94 115,282 2.21 92,402 2.12 Employee retirement plans 19,459 0.69 17,051 0.69 38,721 0.74 30,722 0.70 Interest 16,005 0.57 12,115 0.49 33,290 0.63 25,304 0.58 Total expenses 534,166 19.03 451,408 18.36 1,047,896 20.12 854,374 19.57 Pre-tax earnings 196,927 7.01 177,384 7.21 306,900 5.89 250,918 5.75 Income tax provision 70,431 2.51 63,105 2.56 110,021 2.11 89,577 2.05 Net earnings $126,496 4.50 $114,279 4.65 $196,879 3.78 $161,341 3.70 Shares outstanding (weighted average) 174,121 163,363 173,821 162,264 Earnings per common & common equivalent share $0.73 $0.70 $1.13 $0.99 Earnings per common share - assuming full dilution $0.73 $0.67 $1.13 $0.96 Retained Earnings Balance at beginning of period $1,306,755 $1,027,462 1,245,888 988,447 Net earnings 126,496 114,279 196,879 161,341 Cash dividends (9,552) (8,525) (19,068) (16,572) Balance at end of period $1,423,699 $1,133,216 $1,423,699 $1,133,216 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 six months ended August 1, July 31, 1997 1996 Cash Flows From Operating Activities: Net Earnings $196,879 $161,341 Adjustments to Reconcile Net Earnings to Net Cash Provided By Operating Activities: Depreciation 115,282 92,402 Amortization of Original Issue Discount 86 1,616 Increase in Deferred Income Taxes 7,004 5,904 (Gain) Loss on Disposition/Writedown of Fixed and Other Assets 10,397 (385) Increase in Operating Assets: Accounts Receivable - Net (31,985) (29,796) Merchandise Inventory (143,051) (185,638) Other Operating Assets (11,516) (13,960) Increase in Operating Liabilities: Accounts Payable 52,265 117,776 Employee Retirement Plans 33,032 27,096 Other Operating Liabilities 73,498 88,319 Net Cash Provided by Operating Activities 301,891 264,675 Cash Flows from Investing Activities: Decrease (Increase) in Investment Assets: Short-Term Investments (97,339) 66,166 Purchases of Long-Term Investments (4,547) (9,671) Proceeds from Sale/Maturity of Long-Term Investments 2,022 11,578 (Increase) Decrease in Other Long-Term Assets (2,357) 329 Fixed Assets Acquired (321,741) (282,679) Proceeds from the Sale of Fixed and Other Long-Term Assets 7,594 8,426 Net Cash Used in Investing Activities (416,368) (205,851) Cash Flows from Financing Activities: Sources: Long-Term Debt Borrowings 142,028 - Net Increase in Short-Term Borrowings 3,470 8,417 Stock Options Exercised 145 - Total Financing Sources 145,643 8,417 Uses: Repayment of Long-Term Debt (16,812) (9,571) Cash Dividend Payments (19,068) (16,572) Total Financing Uses (35,880) (26,143) Net Cash Provided by (Used in) Financing Activities 109,763 (17,726) Net (Decrease) Increase in Cash and Cash Equivalents (4,714) 41,098 Cash and Cash Equivalents, Beginning of Period 40,387 63,868 Cash and Cash Equivalents, End of Period $35,673 $104,966 See accompanying notes to consolidated financial statements.
-6- Lowe's Companies, Inc. and Subsidiary Companies Notes to Consolidated Financial Statements Note 1: The accompanying Consolidated Financial Statements (unaudited) have been reviewed by independent certified public accountants, and in the opinion of management, they contain all adjustments necessary to present fairly the financial position as of August 1, 1997, and the results of operations for the quarter and six months ended August 1, 1997 and July 31, 1996, and the cash flows for the six months ended August 1, 1997 and July 31, 1996. Note 2: Effective February 1, 1997, the Company adopted a 52 week fiscal year, changing the year end date from January 31 to the Friday nearest January 31. Each quarter of the 52 week fiscal year will contain 13 weeks except for the fiscal years with 53 weeks. Note 3: The Company has a cash management program which provides for the investment of excess cash balances in financial instruments which have maturities of up to three years. Investments with original maturities of three months or less when purchased are classified as cash equivalents. Investments with a maturity of between three months and one year from the balance sheet date are classified as short-term investments. Investments with maturities greater than one year are classified as long-term. Note 4: Net interest expense is composed of the following ($ in thousands): Quarter ended Six months ended August 1, July 31, August 1, July 31, 1997 1996 1997 1996 Long-term debt$ 8,309 $ 8,908 $14,885 $18,671 Capitalized leases 9,914 6,652 19,924 12,328 Short-term debt 1,624 504 5,058 1,702 Amortization of loan cost 115 97 205 200 Short-term interest income (2,188) (2,504) (3,687) (4,725) Interest capitalized on construction in progress (1,769) (1,542) (3,095) (2,872) Net interest expense $16,005 $12,115 $33,290 $25,304 Note 5: If the FIFO method of inventory accounting had been used, inventories would have been $80,247,000 higher at August 1, 1997, $83,176,000 higher at July 31, 1996 and $74,616,000 higher at January 31, 1997. Note 6: Stock options exercised in the three-month and six-month periods ended August 1, 1997 consisted of 8,000 and 12,000 shares, respectively, resulting in proceeds of $69,000 and $145,000, respectively. There were no stock options exercised in the three- month and six-month periods ended July 31, 1996. -7- Note 7: Property is shown net of accumulated depreciation of $708,363,000 at August 1, 1997, $534,376,000 at July 31, 1996 and $609,707,000 at January 31, 1997. Note 8: Supplemental disclosures of cash flow information ($ in thousands): Six months ended August 1, 1997 July 31, 1996 Cash paid for interest (net of capitalized) $ 38,305 $ 29,462 Cash paid for income taxes 81,005 49,352 Non-cash investing and financing activities: Common stock issued to ESOP 33,980 27,493 Fixed assets acquired under capital lease 30,873 88,178 Conversion of debt to common stock - 256,798 Note 9: In January 1997, the Board of Directors authorized the funding of the Fiscal 1996 ESOP contribution primarily with the issuance of new shares of the Company's common stock. During the first half of Fiscal 1997, the Company issued 895,152 shares with a market value of $34 million. The remaining shares will be issued by the end of the third quarter. Note 10: On May 9, 1997, the Company registered $350 million of Medium- Term Notes (MTN's) from a shelf registration filed with the SEC on November 8, 1996. As of August 1, 1997, the Company had sold $143 million of these MTN's to investors with final maturities ranging from June 17, 2027 to May 15, 2037, at yields ranging from 7.11% to 7.61%. Approximately 70% of the MTN's may be put at the option of the holder on either the tenth or twentieth anniversary date of the issue. Note 11: 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 common share equivalents and the Company's 3% Convertible Subordinated Notes which were all redeemed or converted by July 22, 1996. In February 1997, Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128) was issued to simplify the standards for computing earnings per share (EPS) and make them comparable to international EPS standards. SFAS 128 is effective for periods ending after December 15, 1997 and can not be adopted at an earlier date. SFAS 128 will require dual presentation of basic and diluted EPS on the face of the statement of current earnings and a reconciliation of the components of the basic and diluted EPS calculations in the notes to the financial statements. Basic EPS excludes dilution and is computed by dividing net earnings by the weighted-average number of common shares outstanding for the period. Diluted EPS is similar to fully diluted EPS pursuant to APB Opinion No. 15. The Company will adopt SFAS 128 in the quarter and year ending January 30, 1998. Had the new standard been applied in the quarter and six months ending August 1, 1997, basic and diluted EPS would have been the same as primary and fully diluted EPS under APB opinion No. 15. -8- Note 12: Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" (SFAS 125), is effective for transactions after December 31, 1996. The Company has entered into a new consumer credit card program agreement with the Monogram Credit Card Bank of Georgia (the Bank), a wholly owned subsidiary of General Electric Capital Corporation. Because credit will be extended directly by the Bank, the provisions of SFAS 125 will not be applicable to the Company. Note 13: In June 1997, Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130) was issued. SFAS 130 will require disclosure of comprehensive income (which is defined as "the change in equity during a period excluding changes resulting from investments by shareholders and distributions to shareholders") and its components. SFAS 130 is effective for fiscal years beginning after December 15, 1997, with reclassification of comparative years. The Company will adopt SFAS 130 in the year ending January 29, 1999. Had the new standard been applied in the quarter ending August 1, 1997, comprehensive income would be $219,000 and $372,000 higher than net earnings for the quarter and six months ending August 1, 1997 due to the unrealized holding gains on available-for-sale securities. Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131) was also issued in June 1997. SFAS 131 will be effective for the Company in the fiscal year beginning January 31, 1998. SFAS 131 redefines how operating segments are determined and requires disclosure of certain financial and descriptive information about a company's operating segments. Management does not believe that the adoption of SFAS 131 will have a material impact on the Company's current disclosures of its one operating segment, home improvement retailing. -9- 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 second quarter ended August 1, 1997, sales increased 14% to $2.808 billion, net earnings increased 11% to $126.5 million and earnings per share (fully diluted) were $.73 compared to $.67 in the comparable quarter of last year. Comparable store sales were up 3%. For the large store group (more than 80,000 square feet), comparable store sales were up 5%. For the six months ended August 1, 1997, sales grew 19% to $5.209 billion, net earnings increased 22% to $196.9 million and earnings per share (fully diluted) were $1.13 compared to $.96 in the comparable period of last year. Comparable store sales were up 5% year to date. Sales in the second quarter were enhanced by the addition of 5.1 million square feet of retail selling space at new and existing locations since last year's second quarter. Significant sales gains came in appliances, electrical, home decor, tools, nursery and gardening, and outdoor hardlines. Average inflation in sales prices was flat. Gross margin was 26.04% of sales for the quarter ended August 1, 1997, versus 25.57% in last year's quarter. The increase in gross margin rate continues to reflect the continuing shift in business from contractor to retail, favorable changes in our product mix and ongoing monitoring of store pricing disciplines. Gross margin for the six months ended August 1, 1997, was 26.01% versus 25.32% last year. Selling, general and administrative expenses (SG&A) were 15.24% of sales in the second quarter versus 14.73% in last year's quarter. SG&A increased 18% compared to a 14% sales increase in the quarter. The unseasonably cool weather in May 1997 and its effect on sales in that month and soft project sales throughout the quarter resulted in stores' payroll not being leveraged by sales for the quarter. For the six months ended August 1, 1997, SG&A was 16.13% of sales versus 15.60% for the comparable period last year. The six months' SG&A percent of sales was impacted by similar factors which also occurred in the month of April this year. For the quarter ended August 1, 1997, store opening costs were $12.3 million versus $12.6 million last year, representing costs associated with the opening of 9 stores this year (4 new and 5 relocated) compared to 14 stores last year (12 new and 2 relocated). Charges in this quarter for future and prior openings were $5.5 million compared to $3.3 million in 1996's second quarter. For the six months ended August 1, 1997, store opening costs were $20.5 million versus $25.1 million last year, representing costs associated with the opening of 17 stores this year (10 new and 7 relocated) compared to 29 stores in the comparable period last year (22 new stores and 7 relocations). Depreciation was $58.6 million for the quarter ended August 1, 1997 and $115.3 million for the six months ended August 1, 1997, increasing 23% and 25% over the respective comparable periods last year. The increases are due primarily to buildings, fixtures, displays, computer equipment and store equipment relating to the Company's expansion program. -10- Employee retirement plans expense increased 14% to $19.5 million for the quarter ended August 1, 1997. As a percent to sales, employee retirement plans expense was 0.69%, unchanged from last year's comparable quarter. For the six months ended August 1, 1997, employee retirement plans expense was up 26% to $38.7 million. Interest expense increased $8.0 million to $33.3 million for the six months ended August 1, 1997. This is the result of an increase of $4.1 million in the first quarter and an increase of $3.9 million in the second quarter. Interest increased primarily due to medium-term notes issued during the second quarter, new capitalized building leases and short-term interest expense. The Company's effective income tax rate was 35.77% for the quarter ended August 1, 1997, compared to 35.58% for the comparable quarter last year. The effective rate was 35.85% versus 35.70% for the six months ended August 1, 1997 and July 31, 1996, respectively. LIQUIDITY AND CAPITAL RESOURCES The uses of cash in the first six months have continued to lay the groundwork for successfully implementing the Company's strategic plan. Net cash provided by operating activities was $302 million for the six months ended August 1, 1997 compared to $265 million for last year's first six months. The increase resulted primarily from increased net earnings and less expansion related increases in inventory levels offset by smaller increases in accounts payable. The Company's working capital was $673 million at August 1, 1997 compared to $667 million at July 31, 1996 and $503 million at January 31, 1997. Real property has increased as a result of the Company's plan to continue expansion of retail sales floor square footage by expanding into new markets and relocating from older, smaller stores to larger stores. The Company's 1997 capital budget is targeted at $1 billion, inclusive of capital leases. Over 80% of the capital budget is for store expansion. Lowe's ended the second quarter with 412 stores and 31.9 million square feet of retail selling space, a 19% increase over selling space at July 31, 1996. Expansion plans for 1997 consist of approximately 60 to 65 new stores with about 70% in new markets and the balance relocations of existing stores, for approximately 6.2 million square feet of additional retail space. Approximately one-half of the 1997 projects will be leased. Expansion in the first half of fiscal 1997 included 10 new stores and 7 relocations representing 1.5 million square feet of new incremental retail space. Current plans are to finance the Company's 1997 expansion program through funds from operations, leases, issuance of $58 million in common stock to our ESOP and from external financing. The Company had $84 million of short-term borrowings at August 1, 1997 compared to $25 million at July 31, 1996 and $81 million at January 31, 1997. On May 9, 1997, the Company registered $350 million of Medium-Term Notes (MTN's) from its shelf registration filed with the SEC on November 8, 1996. As of August 12, 1997, the Company had sold $143 million of these MTN's to investors with final maturities ranging from June 17, 2027 to May 15, 2037, at yields ranging from 7.11% to 7.61%. -11- Approximately 70% of the MTN's may be put at the option of the holder on either the tenth or twentieth anniversary date of the issue. IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS In February 1997, Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128) was issued to simplify the standards for computing earnings per share (EPS) and make them comparable to international EPS standards. SFAS 128 is effective for periods ending after December 15, 1997 and can not be adopted at an earlier date. SFAS 128 will require dual presentation of basic and diluted EPS on the face of the statement of current earnings and a reconciliation of the components of the basic and diluted EPS calculations in the notes to the financial statements. Basic EPS excludes dilution and is computed by dividing net earnings by the weighted-average number of common shares outstanding for the period. Diluted EPS is similar to fully diluted EPS pursuant to Accounting Principles Board (APB) Opinion No. 15. The Company will adopt SFAS 128 in the quarter and year ending January 30, 1998. Had the new standard been applied in the three months and six months ending August 1, 1997, basic and diluted EPS would have been the same as primary and fully diluted EPS under APB Opinion No. 15. In June 1997, Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130) was issued. SFAS 130 will require disclosure of comprehensive income (which is defined as "the change in equity during a period excluding changes resulting from investments by shareholders and distributions to shareholders") and its components. SFAS 130 is effective for fiscal years beginning after December 15, 1997, with reclassification of comparative years. The Company will adopt SFAS 130 in the year ending January 29, 1999. Had the new standard been applied in the quarter ending August 1, 1997, comprehensive income would be $219,000 and $372,000 higher than net earnings for the quarter and the six months ending August 1, 1997 due to the unrealized holding gains on available-for-sale securities. Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131) was also issued in June 1997. SFAS 131 will be effective for the Company in the fiscal year beginning January 31, 1998. SFAS 131 redefines how operating segments are determined and requires disclosure of certain financial and descriptive information about a company's operating segments. Management does not believe that the adoption of SFAS 131 will have a material impact on the Company's current disclosures of its one operating segment, home improvement retailing. FORWARD-LOOKING LANGUAGE This Securities and Exchange Commission Form 10-Q may include "forward- looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although the Company believes that comments reflected in such forward-looking statements are reasonable, they are based on information existing at the time made. Therefore, it can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ from expectations include, but are not limited to, general economic trends, availability and development of real estate for expansion, commodity markets, and the nature of competition and weather conditions, all of which are described in detail in the Company's 1996 Annual Report. -12- 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 August 1, 1997, and the related consolidated statements of current and retained earnings for the quarter and six months ended August 1, 1997 and July 31, 1996, and of cash flows for the six months ended August 1, 1997 and July 31, 1996. 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, 1997, and the related consolidated statements of current and retained earnings and of cash flows for the year then ended (not presented herein); and in our report dated February 20, 1997, 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, 1997 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 August 12, 1997 -13- Part II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders. (a)-The annual meeting of shareholders was held May 30, 1997. (b)-Directors elected at the meeting: Leonard G. Herring, Carol A. Farmer, Robert G. Schwartz, Robert L. Strickland, Paul Fulton and James F. Halpin -Incumbent Directors whose terms expire in subsequent years are: William A. Andres, John M. Belk, Claudine B. Malone and Robert L. Tillman (c)-The matters voted upon at the meeting and the results of the voting were as follows: (1) Election of Directors: FOR WITHHELD Class I: Leonard G. Herring 147,488,359 592,126 Class II: Carol A. Farmer 147,367,190 713,295 Robert G. Schwartz 147,394,457 686,028 Robert L. Strickland 147,493,732 586,753 Class III: Paul Fulton 147,468,756 611,729 James F. Halpin 147,437,366 643,119 (2) Proposal to approve an amendment to change to a fixed board not to exceed 15 members: For 146,453,815, Against 736,014, Abstain 384,339. (3) Proposal to approve the 1997 Incentive Plan: For 141,589,433, Against 6,031,003, Abstain 460,049. Item 6 (a) - Exhibits Exhibit 11 - Computation of per share earnings Item 6 (b) - Reports on Form 8-K A report on Form 8-K was filed May 13, 1997 by the registrant. Therein under Item 7, the Company filed certain exhibits in connection with the Registrant's offering from time to time of its Medium-Term Notes, Series B, at an aggregate initial offering price not to exceed $350 million pursuant to its shelf registration statements on Form S-3 (file nos. 33- 51865 and 333-14257) -14- 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. September 12, 1997 \s\ Richard D. Elledge Date_______________________ _____________________________________ Richard D. Elledge, Senior Vice President and Chief Accounting Officer EX-11 2 -15- Item 6 (a) - Exhibits Exhibit 11 - Computation of per share earnings Three Months Ended Six Months Ended August 1, July 31, August 1, July 31, 1997 1996 1997 1996 Earnings per Common & Common Equivalent Share: Net Earnings $126,496 $114,279 $196,879 $161,341 Weighted Average Shares Outstanding 174,054 163,286 173,753 162,187 Dilutive Effect of Common Stock Equivalent 67 77 68 77 Weighted Average Shares, as Adjusted 174,121 163,363 173,821 162,264 Earnings per Common & Common Equivalent Share $.73 $.70 $1.13 $.99 Earnings per Common Share - Assuming Full Dilution: Net Earnings $126,496 $114,279 $196,879 $161,341 Interest (After Taxes) on Convertible Debt - 1,703 - 3,614 Net Earnings, as Adjusted $126,496 $115,982 $196,879 $164,955 Weighted Average Shares Outstanding 174,054 163,286 173,753 162,187 Dilutive Effect of Common Stock Equivalents 67 77 68 77 Shares Added if All Debt Converted - 9,259 - 10,068 Weighted Average Shares, as Adjusted 174,121 172,622 173,821 172,332 Earnings per Common Share - Assuming Full Dilution $.73 $.67 $1.13 $.96 EX-27 3
5 1000 6-MOS JAN-30-1998 AUG-01-1997 35,673 135,826 149,547 0 1,748,931 2,136,040 2,719,711 0 4,935,821 1,462,838 0 0 0 87,155 2,345,791 4,935,821 5,208,840 5,208,840 3,854,044 3,854,044 1,014,606 0 33,290 306,900 110,021 196,879 0 0 0 196,879 1.13 1.13
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