-----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, LHpmOecb5zaUsLDJGr0V5079wvKZ02ASDoL2A55O33zD7+OJrp9bfvVRS448qZE4 Aw7Ta0Xpy08rmf8HPjTJqw== 0000060667-99-000014.txt : 19990615 0000060667-99-000014.hdr.sgml : 19990615 ACCESSION NUMBER: 0000060667-99-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990430 FILED AS OF DATE: 19990614 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: 0129 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07898 FILM NUMBER: 99645557 BUSINESS ADDRESS: STREET 1: HIGHWAY 268 EAST CITY: NORTH WILKESBORO STATE: NC ZIP: 28659 BUSINESS PHONE: 3366584000 MAIL ADDRESS: STREET 1: PO BOX 1111 CITY: NORTH WILKESBORO STATE: NC ZIP: 28659 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, 1999 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. EmployerIdentification incorporation or organization) No.) P.O. BOX 1111, NORTH WILKESBORO, N.C. 28656 (Address of principal executive offices) (Zip Code) (336) 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 May 28, 1999 Common Stock, $.50 par value 381,447,451 14 TOTAL PAGES -2- LOWE'S COMPANIES, INC. - INDEX - Page No. PART I - Financial Information: Consolidated Balance Sheets - April 30, 1999, May 1, 1998 and January 29, 1999 3 Consolidated Statements of Current and Retained Earnings - three months ended April 30, 1999 and May 1, 1998 4 Consolidated Statements of Cash Flows - three months ended April 30, 1999 and May 1, 1998 5 Notes to Consolidated Financial Statements. 6-7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-12 Independent Accountants' Report 13 PART II - Other Information 14 Item 6 (b) - Reports on Form 8-K -3- Lowe's Companies, Inc. Consolidated Balance Sheets In Thousands
April 30, May 1, January 29, 1999 1998 1999 Assets Current assets: Cash and cash equivalents $1,047,632 $715,258 $228,874 Short-term investments 17,988 27,781 20,343 Accounts receivable - net 171,412 150,219 143,928 Merchandise inventory 2,775,794 2,253,401 2,346,092 Deferred income taxes 58,504 40,035 56,124 Other assets 80,232 57,172 49,021 Total current assets 4,151,562 3,243,866 2,844,382 Property, less accumulated depreciation 4,289,230 3,430,701 4,085,798 Long-term investments 33,013 39,139 28,716 Other assets 114,211 66,487 105,508 Total assets $8,588,016 $6,780,193 $7,064,404 Liabilities and Shareholders' Equity Current liabilities: Short-term borrowings $92,475 $93,975 $117,075 Current maturities of long-term debt 132,180 30,277 107,893 Accounts payable 1,715,441 1,427,003 1,220,543 Employee retirement plans 85,668 70,486 85,466 Accrued salaries and wages 127,230 83,625 123,545 Other current liabilities 445,713 377,248 269,734 Total current liabilities 2,598,707 2,082,614 1,924,256 Long-term debt, excluding current maturities 1,722,316 1,504,909 1,364,278 Deferred income taxes 172,226 133,971 175,372 Other long-term liabilities 3,127 3,122 3,209 Total liabilities 4,496,376 3,724,616 3,467,115 Shareholders' equity Preferred stock - $5 par value, none issued - - - Common stock - $.50 par value; Issued and Outstanding April 30, 1999 381,235 May 1, 1998 370,064 January 29, 1999 374,388 190,617 185,032 187,194 Capital in excess of par 1,698,757 1,170,615 1,325,817 Retained earnings 2,227,816 1,727,783 2,114,248 Unearned compensation- restricted stock awards (25,780) (27,900) (30,387) Accumulated other comprehensive income 230 47 417 Total shareholders' equity 4,091,640 3,055,577 3,597,289 Total liabilities and shareholders' equity $8,588,016 $6,780,193 $7,064,404 See accompanying notes to consolidated financial statements.
-4- Lowe's Companies, Inc. Consolidated Statements of Current and Retained Earnings In Thousands, Except Per Share Data
Quarter Ended April 30, 1999 May 1, 1998 Current Earnings Amount Percent Amount Percent Net sales $3,771,919 100.00 $3,149,779 100.00 Cost of sales 2,764,829 73.30 2,319,276 73.63 Gross margin 1,007,090 26.70 830,503 26.37 Expenses: Selling, general and administrative 664,351 17.61 569,555 18.08 Store opening costs 18,210 0.48 12,395 0.39 Depreciation 77,920 2.07 68,848 2.19 Interest 23,307 0.62 21,639 0.69 Nonrecurring merger costs 24,378 0.65 - - Total expenses 808,166 21.43 672,437 21.35 Pre-tax earnings 198,924 5.27 158,066 5.02 Income tax provision 73,966 1.96 57,339 1.82 Net earnings $124,958 3.31 $100,727 3.20 Shares outstanding - Basic 378,805 369,639 Basic Earnings Per Share $0.33 $0.27 Shares outstanding - Diluted 382,001 374,309 Diluted Earnings Per Share $0.33 $0.27 Retained Earnings Balance at beginning of period $2,114,248 $1,636,666 Net earnings 124,958 100,727 Cash dividends (11,390) (9,610) Balance at end of period $2,227,816 $1,727,783 See accompanying notes to consolidated financial statements.
-5- Lowe's Companies, Inc. Consolidated Statements of Cash Flows In Thousands
For the Three Months Ended April 30, May 1, 1999 1998 Cash Flows From Operating Activities: Net Earnings $124,958 $100,727 Adjustments to Reconcile Net Earnings to Net Cash Provided By Operating Activities: Depreciation 77,920 68,848 Amortization of Original Issue Discount 161 109 Decrease in Deferred Income Taxes (3,700) (7,860) Loss on Disposition/Writedown of Fixed and Other Assets 25,535 12,197 Changes in Operating Assets and Liabilities: Accounts Receivable - Net (27,484) (31,811) Merchandise Inventory (429,701) (335,976) Other Operating Assets (30,820) (16,331) Accounts Payable 494,898 391,121 Employee Retirement Plans 18,456 18,550 Other Operating Liabilities 183,849 145,129 Net Cash Provided by Operating Activities 434,072 344,703 Cash Flows from Investing Activities: (Increase) Decrease in Investment Assets: Short-Term Investments 2,916 (7,611) Purchases of Long-Term Investments (6,554) (8,193) Proceeds from Sale/Maturity of Long-Term Investments 1,509 - (Increase) Decrease in Other Long-Term Assets (28,975) 831 Fixed Assets Acquired (288,771) (177,686) Proceeds from the Sale of Fixed and Other Long-Term Assets 3,652 1,927 Net Cash Used in Investing Activities (316,223) (190,732) Cash Flows from Financing Activities: Net Decrease in Short-Term Borrowings (24,600) (4,129) Long-Term Debt Borrowings 394,587 328,160 Repayment of Long-Term Debt (16,135) (7,122) Proceeds from Stock Offering 348,299 - Proceeds from Stock Options Exercised 10,148 4,871 Cash Dividend Payments (11,390) (19,196) Net Cash Provided by Financing Activities 700,909 302,584 Net Increase in Cash and Cash Equivalents 818,758 456,555 Cash and Cash Equivalents, Beginning of Period 228,874 258,703 Cash and Cash Equivalents, End of Period $1,047,632 $715,258 See accompanying notes to consolidated financial statements.
-6- Lowe's Companies, Inc. 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 April 30, 1999, and the results of operations and the cash flows for the three months ended April 30, 1999 and May 1, 1998. These interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 1999. First quarter financial results may not be indicative of the financial results for the entire fiscal year. Note 2 The Company completed its merger with Eagle Hardware & Garden, Inc. (Eagle) on April 2, 1999. The transaction, which is valued at approximately $1.3 billion, was structured as a tax-free exchange of the Company's common stock for Eagle's common stock, and was accounted for as a pooling of interests. The financial statements and notes presented provide information on a combined basis for the quarters ended April 30, 1999, May 1, 1998 and the year ended January 29, 1999. Note 3 Diluted earnings per share are calculated on the weighted average shares of common stock as adjusted for the dilutive effect of stock options and convertible debt outstanding at the balance sheet date. The weighted average number of shares, as adjusted for dilution, were 382,001,000 and 374,309,000 for the three months ended April 30, 1999 and May 1, 1998, respectively. Note 4: Net interest expense is composed of the following (in thousands):
Quarter ended April 30, May 1, 1999 1998 Long-term debt $ 22,535 $ 18,486 Capitalized leases 10,337 10,022 Short-term debt 1,868 1,429 Amortization of loan cost 237 206 Short-term interest income (7,954) (5,784) Interest capitalized on construction in progress (3,716) (2,720) Net interest expense $ 23,307 $ 21,639
Note 5: Inventory is stated at the lower of cost or market using the last-in, first-out inventory accounting method, except for the inventory held by Eagle. Inventory held by Eagle of $271.4 and $220.3 million at April 30, 1999 and May 1, 1998, respectively, is stated at the lower of cost or market using the weighted average method of inventory accounting. The Company's LIFO reserve was $38.6 million at April 30, 1999 and January 29, 1999 and $67.6 million at May 1, 1998. Note 6: Property is shown net of accumulated depreciation of $1.1 billion at April 30, 1999, $.9 billion at May 1, 1998 and $1.0 billion at January 29, 1999. -7- Note 7: Supplemental disclosures of cash flow information (in thousands):
Quarter ended April 30, May 1, 1999 1998 Cash paid for interest (net of capitalized) $ 42,459 $ 28,723 Cash paid for income taxes 8,008 6,624 Non-cash investing and financing activities: Common stock issued to ESOP 18,254 17,928 Fixed assets acquired under capital lease 3,709 3,937
Note 8: In January 1999, the Board of Directors authorized the funding of the Fiscal 1998 ESOP contribution primarily with the issuance of new shares of the Company's common stock. During the first quarter of Fiscal 1999, the Company issued 296,244 shares, with a market value of $18.3 million. Note 9: In February 1999, the Company issued $400 million of 6.5% Debentures due March 15, 2029 in a private offering. The debentures were issued at an original price of $986.47 per $1,000 principal amount, net of the original issue discount and underwriters' discount. The debentures may not be redeemed prior to maturity. In March 1999, the Company issued 6,206,895 shares of common stock in a public offering. The net proceeds from the offering were $348.3 million and were issued under a shelf registration statement filed with the Securities and Exchange Commission in December 1997. Note 10:Total comprehensive income, comprised of net earnings and unrealized holding gains (losses) on available-for-sale securities, was $124.8 and $100.6 million for the quarters ended April 30, 1999 and May 1, 1998, respectively, compared to reported income of $125.0 and $100.7 million for the first quarter of 1999 and 1998. -8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion summarizes the significant factors affecting the Company's consolidated operating results and liquidity and capital resources during the quarter ended April 30, 1999. This discussion should be read in conjunction with the financial statements, and financial statement footnotes included in the Company's most recent Form 10-K. The Company completed its merger with Eagle Hardware & Garden, Inc. (Eagle) on April 2, 1999. The transaction, which is valued at approximately $1.3 billion, was structured as a tax-free exchange of the Company's common stock for Eagle's common stock, and was accounted for as a pooling of interests. As a result, all current and historical financial information is presented on a combined basis. OPERATIONS For the first quarter of fiscal 1999, sales increased 20% to $3.8 billion, comparable store sales increased 6.7% and net earnings rose 24% to $125.0 million compared to last year's first quarter results. Diluted earnings per share were $.33 compared to $.27 for the comparable quarter of last year. First quarter 1999 earnings included a nonrecurring charge of $24.4 million relating to the Company's merger with Eagle. Exluding the one-time charge, diluted earnings per share would have been $.37 for the first quarter. The charge reduced diluted earnings per share by $.04 for the first quarter. The sales increase in the first quarter was attributable to the 7.9 million square feet of retail selling space relating to new and relocated stores since last year's first quarter and the 6.7% comparable store sales gain. Sales in the Company's core businesses performed well during the first quarter. The Company experienced its strongest sales increases in appliances, kitchen cabinets, plumbing and electrical and home decor categories. Gross margin was 26.70% of sales for the quarter ended April 30, 1999 compared to 26.37% for last year's comparable quarter. The increase in this year's margin rate is prmarily due to favorable changes in product mix, ongoing store pricing disciplines, leveraging of its distribution facilities, and lower costs of product. Selling, general and administrative expenses (SG&A) were 17.61% of sales versus 18.08% in last year's first quarter. SG&A increased by 17% compared to the 20% increase in sales for the quarter. Lower net advertising expense, increased credit card program income and lower property writedowns contributed to the positive leverage in SG&A for the first quarter. Store opening costs were $18.2 million for the quarter ended April 30, 1999 compared to $12.4 million last year, representing costs associated with the opening of 13 stores during the current year's first quarter (8 new and 5 relocated) compared to 10 stores for the comparable period last year (8 new and 2 relocated). Charges in this quarter for future and prior openings were $6.0 million compared to $4.9 million in last year's first quarter. The current quarter also included a $2.2 million charge relating to Eagle's adoption of the American Institute of Certified Public Accountants' ("AICPA") Statement -9- of Postion 98-5, "Reporting on the Costs of Start-Up Activities". The Company's 1999 expansion plans are discussed under "Liquidity and Capital Resources" below. Depreciation was $77.9 million for the quarter ended April 30, 1999, representing an increase of 13.2% over the comparable period last year. The increase is due primarily to additions of buildings, fixtures, displays and computer equipment relating to the Company's expansion program. Interest expense increased from $21.6 million to $23.3 million for the quarter ended April 30, 1999. Interest has increased primarily due to interest expense on debentures issued since last year's first quarter. In the first quarter of 1999, the Company recorded nonrecurring costs of $24.4 million relating to the merger with Eagle which consisted of $15.7 million relating to the writeoff of nonusable Eagle properties, $1.5 million in future severance payments to former Eagle executives and $7.2 million in direct merger costs such as accounting, legal, investment banker and other miscellaneous fees. The Company's effective income tax rate was 37.18% for the quarter ended April 30, 1999 and 36.27% for last year's first quarter. The higher rate in 1999 is primarily related to the expansion into states with higher income tax rates and the impact of non-dedcutible merger expenses. LIQUIDITY AND CAPITAL RESOURCES Primary sources of liquidity are cash flows from operating activities and certain financing activities. Net cash provided by operating activities was $434 million for the three months ended April 30, 1999 compared to $345 million for the first three months of fiscal 1998. The $89 million increase in the current year resulted primarily from increased earnings, and increases in accounts payable, net of increases in merchandise inventory. The Company's working capital was $1.6 billion at April 30, 1999 compared to $1.2 billion at May 1, 1998 and $920 million at January 29, 1999. The primary component of net cash used in investing activities continues to be new store facilities in connection with the Company's expansion plan. Cash acquisitions of fixed assets were $289 million and $178 million for the three months ended April 30, 1999 and May 1, 1998, respectively. At April 30, 1999, the Company had 526 stores in 37 states and 49.4 million square feet of retail selling space, a 19% increase over the selling space as of May 1, 1998. Cash flows provided by financing activities were $701 million for the three months ended April 30, 1999 compared to $303 million for the three months ended May 1, 1998. The major cash components of financing activities in the first three months of 1999 included the issuance of $400 million principal of 6.5% debentures and $348.3 million in net proceeds from a common stock offering. 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 1999 capital budget is approximately $1.7 billion, inclusive of approximately $214 million in operating or capital leases. More than 80% of this planned commitment is for store expansion. Expansion plans for 1999 consist of approximately 85 to 90 stores (including the relocation of 30 to 35 older, smaller format stores). This planned expansion is expected to increase sales floor square footage by approximately 18%. Approximately 15% of the 1999 projects will be leased and -10- 85% will be owned. Expansion in the first three months of fiscal 1999 included 8 new stores and 5 relocations representing 1.3 million square feet of new incremental retail space. The Company believes that funds from operations, debt issuances, leases and existing credit agreements will be adequate to finance the 1999 expansion plan and other operating needs. As discussed in the annual report for the year ending January 29, 1999, the Company's major market risk exposure is the potential loss arising from changing interest rates and its impact on long-term investments and long-term debt. The Company's policy is to manage interest rate risks by maintaining a combination of fixed and variable rate financial instruments. The risks associated with long-term investments at April 30, 1999 have not changed materially since January 29, 1999. Long-term debt has increased primarily due to the issuance of $400 million principal amount of 6.5% Debentures due March 15, 2029. Disclosures of the Company's principal cash outflows for long-term debt and related interest rates have changed since January 29, 1999 due to the new fixed rate debt. YEAR 2000 The Year 2000 problem arose because many existing computer programs and embedded computer chips use only the last two digits to refer to a year. If not addressed, computer programs that are date sensitive may not have the ability to properly recognize dates in year 2000 and beyond. The result could be a disruption of operations and the processing of transactions. In 1997 and 1998, the Company completed an analysis of the impact and costs relating to the Year 2000 problem and developed an implementation plan to address information technology (IT), non-information technology (non-IT) and third party readiness issues. In preparing IT systems for the Year 2000, the Company has utilized both internal and external resources. Contracted programming costs to convert the Company's IT systems during 1997, 1998 and 1999 are estimated to total approximately $5 million and are being expensed as incurred, the majority of which had been incurred through April 30, 1999. Currently, over 99% of the programs have been remediated. In addition, approximately $19 million of computer hardware is being purchased to replace non-compliant computer hardware. These purchases are substantially complete. The cost of new hardware is being capitalized and depreciated over useful lives ranging from 3 to 5 years. Cash flow from operations is the Company's source of funding all Year 2000 costs. The incremental cost to convert systems has been mitigated by substantial investments in new computer systems over the past six years. During this period, new computer systems have been developed or purchased including, but not limited to, these applications: Distribution, Electronic Data Interchange, Payroll and Human Resources, General Ledger, Accounts Payable, Forecasting and Replenishment, and Supply Services. All of these new systems are Year 2000 compliant. The Company's conversion of internally developed legacy systems was completed by the end of fiscal 1998 with certification testing planned to be completed by the Fall of 1999. With respect to non-IT related risks, each functional area of the Company is responsible for identifying these issues. Within each business function, objectives are being prioritized and evaluated for risk of Year 2000 problems. The assessment phase completed in April 1999. Contingency plans based on those assessments have been developed and are being reviewed by the Companies' senior management. Examples of potential non-IT risks of Year 2000 problems would be power outages and -11- failures of communication systems, bar code readers and security devices. For most of the Company's stores, back-up generators are already in place, which would mitigate temporary power outages. By mid 1999, similar remediation and/or contingency plans will be developed by the respective business functions for non-IT Year 2000 risks impacting all high priority and critical business objectives. In regards to third party readiness, the Company mailed Year 2000 questionnaires to all identified third parties (merchandise vendors and other entities with which the Company conducts business) in order to assess whether they are Year 2000 compliant or have adequately addressed their system conversion requirements. Of the approximate six thousand questionnaires mailed, 41% of the recipients have currently responded. Presently, non- respondents are being contacted by phone and our questionnaires are being faxed to them requesting signed returns within 24 hours. The Company cannot predict how many of the responses received may prove later to be inaccurate or overly optimistic. To address this uncertainty, the Company is developing contingency plans to address unanticipated interruptions or down time in both the Company's and third parties' systems and services. The Company is continuing to closely monitor adherence to the remainder of its Year 2000 implementation plan and is currently satisfied that it will be completed by Fall 1999. For the remainder of the project, the Company's efforts will be devoted to five primary areas: (1) certification testing of IT systems to ensure Year 2000 compliance, (2) contingency plan development for business areas as well as IT systems, (3) continued follow-up to questionnaires sent to third parties, (4) replacement of certain older model personal computers and point-of-sale equipment, and (5) updating some of the purchased software packages with Year 2000 compliant upgrades. If the Company encounters unforeseen complications or issues not previously addressed in the comprehensive plan, additional resources from internal and external sources will be committed to complete the project by the planned completion time of Fall 1999. Since the use of these additional resources is considered unlikely, no estimates as to their costs have been made at this time. Following completion of the merger on April 2, 1999, the Company began a review of the Eagle Hardware and Garden subsidiary preparedness for the Year 2000. Preliminary findings are that the Eagle computer systems are substantially Year 2000 ready. The remainder of this year will be focused on developing contingency plans and upgrading point-of-sale software. The Company believes that its compliance plan should mitigate any adverse effect on its business from the Year 2000 problem. However, if: (1) the implementation of the plan is not completed on time, (2) the Company has failed to identify and fix material non-complying equipment or software, or (3) third parties are unable to fulfill significant commitments to the Company as a result of their failure to effectively address their Year 2000 problems, the Company's ability to carry out its business could be adversely affected. For example, the Company believes that its most likely worst case scenarios would involve the inability of the Company's IT and non-IT systems to process transactions in the stores or on a regional or company-wide basis. If that were to occur, the Company could be forced to process these transactions manually. The volume of business the Company could transact, and its sales and income, would be reduced until it was able to develop alternatives to defective systems or non-complying vendors. These reductions could occur at individual stores or in clusters of stores sharing defective systems or non- complying vendors. The effect of any -12- failures on the Company's results of operations would depend, of course, upon the extent of any non-compliance and its impact on critical business systems and sources of supply, but could be significant. NEW ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) was issued in June 1998. SFAS 133 is effective for the Company in the year beginning January 28, 2001. SFAS 133 requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. Management is currently evaluating the impact of the adoption of SFAS 133 and its effect on the Company's financial statements. FORWARD-LOOKING STATEMENTS 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 the expectations reflected in such forward-looking statements are reasonable, 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, the nature of competition, vendor supply, and weather conditions, all which are described in detail in the Company's 1998 Annual Report. -13- 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 (the "Company") as of April 30, 1999, and the related consolidated statements of current and retained earnings, and cash flows for the three-month periods ended April 30, 1999 and May 1, 1998. These financial statements are the responsibility of the Company's management. The accompanying consolidated financial statements give retroactive effect to the 1999 merger of the Company and Eagle Hardware & Garden, Inc. which has been accounted for as a pooling of interests as described in note 2 to the consolidated financial statements. 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 the Company as of January 29, 1999 (not presented herein), prior to restatement for the 1999 pooling of interests; and in our report dated February 19, 1999, we expressed an unqualified opinion on those consolidated financial statements. The financial statements of Eagle Hardware & Garden, Inc. for the year ended January 29, 1999 (not presented herein), were audited by other auditors whose report, dated March 10, 1999, expressed an unqualified opinion on those financial statements. /s/ Deloitte & Touche LLP Charlotte, North Carolina May 11, 1999 -14- Part II - OTHER INFORMATION 6 (b) - Reports on Form 8-K A report on Form 8-K was filed on February 22, 1999 by the registrant. Therein under Item 7, the company filed certain exhibits in connection with the Registrant's offering of $400,000,000 principal amount of 6.5% Debentures pursuant to its Shelf Registration Statements on Form S-3 (File No. 333-14257 and File No. 333-51865). A report on Form 8-K was filed on March 5, 1999 by the registrant. Therein under Item 5, the company filed a summary and exhibit in connection with the Registrant's offering of 6,206,895 shares of the Company's common stock, $.50 par value, pursuant to its Registration Statement on Form S-3 (File No. 333-72905). A report on Form 8-K was filed on April 5, 1999 by the registrant. Therein under Item 5, the company filed a summary and exhibit in connection with the consumation of the merger with Eagle Hardware & Garden, Inc. pursuant to its Registration Statement on Form S-4 (File No. 333-72585). 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 11, 1999 /s/ Kenneth W. Black, Jr. Date __________________ ________________________________________ Kenneth W. Black, Jr. Vice President and Corporate Controller EX-27 2
5 1,000 3-MOS JAN-28-2000 JAN-30-1999 APR-30-1999 1,047,632 17,988 171,412 0 2,775,794 4,151,562 4,289,230 0 8,588,016 2,598,707 0 0 0 190,617 3,901,023 8,588,016 3,771,919 3,771,919 2,764,829 2,764,829 784,859 0 23,307 198,924 73,966 124,958 0 0 0 124,958 0.33 0.33
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