lowesform10q1122007.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
For
the quarterly period ended November 2,
2007
|
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 incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
1000
Lowe's Blvd., Mooresville, NC
|
28117
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
|
Registrant's
telephone number, including area code
|
(704)
758-1000
|
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.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer x
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
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 NOVEMBER 30, 2007
|
Common
Stock, $.50 par value
|
|
1,462,603,002
|
LOWE’S
COMPANIES, INC.
-
INDEX -
|
|
|
|
|
PART
I - Financial Information
|
Page
No.
|
|
|
|
|
|
Item
1. Financial Statements
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
6-11
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
13-20
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
20
|
|
|
|
|
PART
II - Other Information
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
24
|
|
|
|
|
Item
1. Financial Statements
Lowe's
Companies, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
In
Millions, Except Par Value Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
|
February
2, 2007
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
|
|
$ |
336
|
|
|
$ |
657
|
|
|
$ |
364
|
|
Short-term
investments
|
|
|
|
|
|
231
|
|
|
|
464
|
|
|
|
432
|
|
Merchandise
inventory - net
|
|
|
|
|
|
7,775
|
|
|
|
7,219
|
|
|
|
7,144
|
|
Deferred
income taxes - net
|
|
|
|
|
|
241
|
|
|
|
157
|
|
|
|
161
|
|
Other
current assets
|
|
|
|
|
|
193
|
|
|
|
125
|
|
|
|
213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
|
|
|
8,776
|
|
|
|
8,622
|
|
|
|
8,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
less accumulated depreciation
|
|
|
|
|
|
20,755
|
|
|
|
18,188
|
|
|
|
18,971
|
|
Long-term
investments
|
|
|
|
|
|
333
|
|
|
|
121
|
|
|
|
165
|
|
Other
assets
|
|
|
|
|
|
325
|
|
|
|
242
|
|
|
|
317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
|
|
$ |
30,189
|
|
|
$ |
27,173
|
|
|
$ |
27,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
|
|
$ |
16
|
|
|
$ |
-
|
|
|
$ |
23
|
|
Current
maturities of long-term debt
|
|
|
|
|
|
35
|
|
|
|
89
|
|
|
|
88
|
|
Accounts
payable
|
|
|
|
|
|
3,895
|
|
|
|
3,416
|
|
|
|
3,524
|
|
Accrued
salaries and wages
|
|
|
|
|
|
437
|
|
|
|
432
|
|
|
|
425
|
|
Self-insurance
liabilities
|
|
|
|
|
|
653
|
|
|
|
616
|
|
|
|
650
|
|
Deferred
revenue
|
|
|
|
|
|
793
|
|
|
|
846
|
|
|
|
731
|
|
Other
current liabilities
|
|
|
|
|
|
1,363
|
|
|
|
1,315
|
|
|
|
1,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
|
|
|
7,192
|
|
|
|
6,714
|
|
|
|
6,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt, excluding current maturities
|
|
|
|
|
|
5,580
|
|
|
|
4,337
|
|
|
|
4,325
|
|
Deferred
income taxes - net
|
|
|
|
|
|
615
|
|
|
|
683
|
|
|
|
735
|
|
Other
liabilities
|
|
|
|
|
|
748
|
|
|
|
353
|
|
|
|
443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
|
|
|
14,135
|
|
|
|
12,087
|
|
|
|
12,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock - $5 par value, none issued
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common
stock - $.50 par value;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued and outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November
2, 2007
|
1,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
November
3, 2006
|
1,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
February
2, 2007
|
1,525 |
|
|
|
735
|
|
|
|
760
|
|
|
|
762
|
|
Capital
in excess of par value
|
|
|
|
|
|
|
20
|
|
|
|
-
|
|
|
|
102
|
|
Retained
earnings
|
|
|
|
|
|
|
15,281
|
|
|
|
14,323
|
|
|
|
14,860
|
|
Accumulated
other comprehensive income
|
|
|
|
|
|
|
18
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
|
|
|
|
|
16,054
|
|
|
|
15,086
|
|
|
|
15,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
|
|
|
|
$ |
30,189
|
|
|
$ |
27,173
|
|
|
$ |
27,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Current and Retained Earnings
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
Millions, Except Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
Current
Earnings
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
Net
sales
|
|
$ |
11,565
|
|
|
|
100.00
|
|
|
$ |
11,211
|
|
|
|
100.00
|
|
|
$ |
37,904
|
|
|
|
100.00
|
|
|
$ |
36,522
|
|
|
|
100.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
7,601
|
|
|
|
65.73
|
|
|
|
7,346
|
|
|
|
65.53
|
|
|
|
24,798
|
|
|
|
65.42
|
|
|
|
24,011
|
|
|
|
65.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
|
3,964
|
|
|
|
34.27
|
|
|
|
3,865
|
|
|
|
34.47
|
|
|
|
13,106
|
|
|
|
34.58
|
|
|
|
12,511
|
|
|
|
34.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
2,503
|
|
|
|
21.63
|
|
|
|
2,320
|
|
|
|
20.70
|
|
|
|
8,026
|
|
|
|
21.17
|
|
|
|
7,404
|
|
|
|
20.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Store
opening costs
|
|
|
41
|
|
|
|
0.36
|
|
|
|
44
|
|
|
|
0.39
|
|
|
|
79
|
|
|
|
0.21
|
|
|
|
97
|
|
|
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
340
|
|
|
|
2.94
|
|
|
|
297
|
|
|
|
2.65
|
|
|
|
995
|
|
|
|
2.63
|
|
|
|
854
|
|
|
|
2.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
- net
|
|
|
50
|
|
|
|
0.43
|
|
|
|
45
|
|
|
|
0.40
|
|
|
|
148
|
|
|
|
0.39
|
|
|
|
110
|
|
|
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
expenses
|
|
|
2,934
|
|
|
|
25.36
|
|
|
|
2,706
|
|
|
|
24.14
|
|
|
|
9,248
|
|
|
|
24.40
|
|
|
|
8,465
|
|
|
|
23.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
earnings
|
|
|
1,030
|
|
|
|
8.91
|
|
|
|
1,159
|
|
|
|
10.33
|
|
|
|
3,858
|
|
|
|
10.18
|
|
|
|
4,046
|
|
|
|
11.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax provision
|
|
|
387
|
|
|
|
3.35
|
|
|
|
443
|
|
|
|
3.94
|
|
|
|
1,457
|
|
|
|
3.85
|
|
|
|
1,554
|
|
|
|
4.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$ |
643
|
|
|
|
5.56
|
|
|
$ |
716
|
|
|
|
6.39
|
|
|
$ |
2,401
|
|
|
|
6.33
|
|
|
$ |
2,492
|
|
|
|
6.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic
|
|
|
1,470
|
|
|
|
|
|
|
|
1,522
|
|
|
|
|
|
|
|
1,490
|
|
|
|
|
|
|
|
1,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
0.44
|
|
|
|
|
|
|
$ |
0.47
|
|
|
|
|
|
|
$ |
1.61
|
|
|
|
|
|
|
$ |
1.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - diluted
|
|
|
1,497
|
|
|
|
|
|
|
|
1,551
|
|
|
|
|
|
|
|
1,519
|
|
|
|
|
|
|
|
1,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$ |
0.43
|
|
|
|
|
|
|
$ |
0.46
|
|
|
|
|
|
|
$ |
1.58
|
|
|
|
|
|
|
$ |
1.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends per share
|
|
$ |
0.08
|
|
|
|
|
|
|
$ |
0.05
|
|
|
|
|
|
|
$ |
0.21
|
|
|
|
|
|
|
$ |
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
$ |
15,210
|
|
|
|
|
|
|
$ |
13,843
|
|
|
|
|
|
|
$ |
14,860
|
|
|
|
|
|
|
$ |
12,191
|
|
|
|
|
|
Cumulative
effect adjustment (Note 12)
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
(8 |
) |
|
|
|
|
|
|
-
|
|
|
|
|
|
Net
earnings
|
|
|
643
|
|
|
|
|
|
|
|
716
|
|
|
|
|
|
|
|
2,401
|
|
|
|
|
|
|
|
2,492
|
|
|
|
|
|
Cash
dividends
|
|
|
(118 |
) |
|
|
|
|
|
|
(76 |
) |
|
|
|
|
|
|
(312 |
) |
|
|
|
|
|
|
(200 |
) |
|
|
|
|
Share
repurchases
|
|
|
(454 |
) |
|
|
|
|
|
|
(160 |
) |
|
|
|
|
|
|
(1,660 |
) |
|
|
|
|
|
|
(160 |
) |
|
|
|
|
Balance
at end of period
|
|
$ |
15,281
|
|
|
|
|
|
|
$ |
14,323
|
|
|
|
|
|
|
$ |
15,281
|
|
|
|
|
|
|
$ |
14,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows (Unaudited)
|
|
|
|
|
|
|
In
Millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended
|
|
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
earnings
|
|
$ |
2,401
|
|
|
$ |
2,492
|
|
Adjustments
to reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,069
|
|
|
|
907
|
|
Deferred
income taxes
|
|
|
(42 |
) |
|
|
(54 |
) |
Loss
on disposition/writedown of fixed and other assets
|
|
|
33
|
|
|
|
35
|
|
Share-based
payment expense
|
|
|
69
|
|
|
|
56
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Merchandise
inventory - net
|
|
|
(630 |
) |
|
|
(584 |
) |
Other
operating assets
|
|
|
43
|
|
|
|
(26 |
) |
Accounts
payable
|
|
|
368
|
|
|
|
584
|
|
Other
operating liabilities
|
|
|
474
|
|
|
|
233
|
|
Net
cash provided by operating activities
|
|
|
3,785
|
|
|
|
3,643
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of short-term investments
|
|
|
(592 |
) |
|
|
(248 |
) |
Proceeds
from sale/maturity of short-term investments
|
|
|
853
|
|
|
|
490
|
|
Purchases
of long-term investments
|
|
|
(1,286 |
) |
|
|
(225 |
) |
Proceeds
from sale/maturity of long-term investments
|
|
|
1,057
|
|
|
|
141
|
|
Increase
in other long-term assets
|
|
|
(20 |
) |
|
|
(8 |
) |
Fixed
assets acquired
|
|
|
(2,912 |
) |
|
|
(2,724 |
) |
Proceeds
from the sale of fixed and other long-term assets
|
|
|
51
|
|
|
|
30
|
|
Net
cash used in investing activities
|
|
|
(2,849 |
) |
|
|
(2,544 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
decrease in short-term borrowings
|
|
|
(9 |
) |
|
|
-
|
|
Proceeds
from issuance of long-term debt
|
|
|
1,294
|
|
|
|
991
|
|
Repayment
of long-term debt
|
|
|
(89 |
) |
|
|
(24 |
) |
Proceeds
from issuance of common stock under employee stock purchase
plan
|
|
|
40
|
|
|
|
36
|
|
Proceeds
from issuance of common stock from stock options exercised
|
|
|
58
|
|
|
|
64
|
|
Cash
dividend payments
|
|
|
(312 |
) |
|
|
(200 |
) |
Repurchase
of common stock
|
|
|
(1,950 |
) |
|
|
(1,737 |
) |
Excess
tax benefits of share-based payments
|
|
|
4
|
|
|
|
5
|
|
Net
cash used in financing activities
|
|
|
(964 |
) |
|
|
(865 |
) |
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(28 |
) |
|
|
234
|
|
Cash
and cash equivalents, beginning of period
|
|
|
364
|
|
|
|
423
|
|
Cash
and cash equivalents, end of period
|
|
$ |
336
|
|
|
$ |
657
|
|
|
|
|
|
|
|
|
|
|
Notes
to Consolidated Financial Statements (Unaudited)
Note
1: Basis of Presentation - The accompanying
consolidated financial statements (unaudited) and notes to consolidated
financial statements (unaudited) are presented in accordance with the rules
and
regulations of the Securities and Exchange Commission and do not include all
the
disclosures normally required in annual consolidated financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America. The consolidated financial statements
(unaudited), in the opinion of management, contain all adjustments necessary
to
present fairly the financial position as of November 2, 2007 and November 3,
2006, and the results of operations for the three and nine months ended November
2, 2007 and November 3, 2006, and cash flows for the nine months ended November
2, 2007 and November 3, 2006.
These
interim consolidated financial statements (unaudited) should be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the Lowe's Companies, Inc. (the Company) Annual Report on Form
10-K
for the fiscal year ended February 2, 2007 (the Annual Report). The
financial results for the interim periods may not be indicative of the financial
results for the entire fiscal year.
Certain
prior period amounts have been reclassified to conform to current
classifications.
Note
2: Change in Estimates – Self-insurance claims filed and claims
incurred but not reported are accrued based upon the Company’s estimates of the
discounted ultimate cost of self-insured claims using actuarial assumptions
followed in the insurance industry and historical loss
experience. These estimates, which are subject to changes in the
utilized discount rate, payroll, sales and vehicle units, and the frequency
and
severity of claims, are based on annual actuarial studies which are completed
in
the third quarter of each fiscal year and periodically updated throughout the
year. The Company’s ongoing safety initiatives, which reduced the
frequency and severity of claims, as well as state regulatory changes,
contributed to actuarial projections of lower costs to settle claims filed
and
claims incurred but not reported for the Company’s workers’ compensation and
general liability claims. As a result, during the third quarters of
fiscal 2007 and 2006, the Company’s self-insurance liabilities were reduced by
$112 million and $77 million, respectively. These adjustments
impacted net earnings by $73 million (approximately $0.05 per diluted share)
and
$50 million (approximately $0.03 per diluted share) for the three months ended
November 2, 2007 and November 3, 2006, respectively.
Note
3: Restricted Investment Balances – Short-term and long-term
investments include restricted balances pledged as collateral for letters of
credit for the Company’s extended warranty program and for a portion of the
Company’s casualty insurance and installed sales program
liabilities. Restricted balances included in short-term investments
were $154 million at November 2, 2007, $220 million at November 3, 2006, and
$248 million at February 2, 2007. Restricted balances included in
long-term investments were $128 million at November 2, 2007, $42 million at
November 3, 2006, and $32 million at February 2, 2007.
Note
4: Property - Property is shown net of accumulated depreciation of $7.1
billion at November
2, 2007,
$5.9 billion at November 3, 2006, and $6.1 billion at February 2,
2007.
Note
5: Short-Term Borrowings - On June 15, 2007, the Company entered into
an Amended and Restated Credit Agreement (Amended Facility) to modify the senior
credit facility dated July 30, 2004, which provided for borrowings of up to
$1
billion through July 2009. The Amended Facility extends the maturity
date to June 2012 and provides for borrowings of up to $1.75
billion. The Amended Facility supports the Company’s commercial paper
and revolving credit programs. Borrowings made are unsecured and are priced
at a
fixed rate based upon market conditions at the time of funding in accordance
with the terms of the Amended Facility. The Amended Facility contains certain
restrictive covenants, which include maintenance of a debt leverage ratio as
defined by the Amended Facility. The Company was in compliance with those
covenants at November 2, 2007. Seventeen banking institutions are
participating in the Amended Facility. As of November 2, 2007, there
were no outstanding borrowings under the Amended Facility or under the
commercial paper program.
On
October 3, 2007, the Company established a Canadian dollar (C$) denominated
credit facility in the amount of C$50 million, which provides support for the
Company’s Canadian operations. This uncommitted facility provides the
Company the ability to make unsecured borrowings, which are priced at a fixed
rate based upon market conditions at the time of funding in accordance with
the
terms of the credit facility. As of November 2, 2007, there was C$15
million or the equivalent of $16 million outstanding under the credit
facility. The interest rate on the short-term borrowing was
4.8%.
Note
6: Long-Term Debt– In September 2007, the Company issued $1.3 billion
of unsecured senior notes, comprised of three tranches: $550 million of 5.60%
senior notes maturing in September 2012, $250 million of 6.10% senior notes
maturing in September 2017 and $500 million of 6.65% senior notes maturing
in
2037 (collectively, the “Senior Notes”). The 5.60%, 6.10% and 6.65%
Senior Notes were issued at discounts of approximately $2.7 million, $1.3
million and $6.3 million, respectively. Interest on the Senior Notes
is payable semiannually in arrears in March and September of each year until
maturity, beginning in March 2008. The discount associated with the
issuance is included in long-term debt and is being amortized over the
respective terms of the Senior Notes. The net proceeds of
approximately $1.3 billion were used for general corporate purposes, including
capital expenditures and working capital needs, and to finance repurchases
of
shares of the Company’s common stock.
The
Senior Notes may be redeemed by the Company at any time, in whole or in part,
at
a redemption price plus accrued interest to the date of redemption. The
redemption price is equal to the greater of (1) 100% of the principal amount
of
the Senior Notes to be redeemed, or (2) the sum of the present values of the
remaining scheduled payments of principal and interest thereon, discounted
to
the date of redemption on a semi-annual basis at a specified rate. The indenture
under which the notes were issued also contains a provision that allows the
holders of the notes to require the Company to repurchase all or any part of
their notes if a change of control triggering event occurs. If
elected under the change in control provisions, the repurchase of the notes
will
occur at a purchase price of 101% of the principal amount, plus accrued and
unpaid interest, if any, on such notes to the date of purchase. The
indenture governing the Senior Notes does not limit the aggregate principal
amount of debt securities that the Company may issue, nor is the Company
required to maintain financial ratios or specified levels of net worth or
liquidity. However, the indenture contains various restrictive covenants, none
of which is expected to impact the Company’s liquidity or capital
resources.
Note
7: Extended Warranties – Lowe’s sells separately-priced extended
warranty contracts under a Lowe’s-branded program for which the Company is
ultimately self-insured. The Company recognizes revenue from extended
warranty sales on a straight-line basis over the respective contract
term. Extended warranty contract terms primarily range from one to
four years from the date of purchase or the end of the manufacturer’s warranty,
as applicable. Extended warranty deferred revenue is included in
other liabilities (non-current) in the accompanying consolidated balance
sheets. Changes in deferred revenue for extended warranty contracts
are summarized as follows:
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
(In
millions)
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
Extended
warranty deferred revenue,
beginning of period
|
|
$ |
373
|
|
|
$ |
273
|
|
|
$ |
315
|
|
|
$ |
206
|
|
Additions
to deferred revenue
|
|
|
42
|
|
|
|
34
|
|
|
|
136
|
|
|
|
116
|
|
Deferred
revenue recognized
|
|
|
(23 |
) |
|
|
(11 |
) |
|
|
(59 |
) |
|
|
(26 |
) |
Extended
warranty deferred revenue,
end of period
|
|
$ |
392
|
|
|
$ |
296
|
|
|
$ |
392
|
|
|
$ |
296
|
|
Incremental
direct acquisition costs associated with the sale of extended warranties are
also deferred and recognized as expense on a straight-line basis over the
respective contract term. Deferred costs associated with extended warranty
contracts were $88 million and $70 million at November 2, 2007 and November
3,
2006, respectively. Extended warranty deferred costs are included in
other assets (non-current) in the accompanying consolidated balance
sheets. All other costs, such as costs of services performed under
the contract, general and administrative expenses and advertising expenses,
are
expensed as incurred.
The
liability for extended warranty claims incurred is included in self-insurance
liabilities in the accompanying consolidated balance sheets. Changes
in the liability for extended warranty claims are summarized as
follows:
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
(In
millions)
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
Liability
for extended warranty claims,
beginning of period
|
|
$ |
18
|
|
|
$ |
-
|
|
|
$ |
10
|
|
|
$ |
-
|
|
Accrual
for claims incurred
|
|
|
17
|
|
|
|
8
|
|
|
|
36
|
|
|
|
10
|
|
Claim
payments
|
|
|
(9 |
) |
|
|
(2 |
) |
|
|
(20 |
) |
|
|
(4 |
) |
Liability
for extended warranty claims,
end of period
|
|
$ |
26
|
|
|
$ |
6
|
|
|
$ |
26
|
|
|
$ |
6
|
|
Note
8: Contingencies – The Company is a defendant in a variety of legal
proceedings, including class actions, considered to be in the normal course
of
its business, none of which, individually or collectively, are believed to
have
a risk of having a material impact on the Company’s consolidated financial
statements. In evaluating liabilities associated with its various
legal proceedings, the Company has accrued for probable liabilities associated
with some of these matters. The amounts accrued were not material to
the Company’s consolidated financial statements in any of the periods
presented.
A
Company
subsidiary, Lowe’s HIW, Inc., is a defendant in a lawsuit, Cynthia Parris,
et al. v. Lowe’s HIW, Inc., alleging failure to pay overtime wages pursuant
to the requirements of the California Labor Code. This case is similar to
litigation filed against other employers in California. This case was filed
on
October 29, 2001 in Los Angeles Superior Court on behalf of a class of all
non-exempt hourly employees who, since October 11, 1997, have been employed
or
are currently employed in California by Lowe’s HIW, Inc. As a result of a
recent California appellate court decision, the case is now proceeding in
the
trial court as a class action seeking monetary and other relief. Lowe’s
HIW, Inc. believes that its compensation practices comply with California
law
and is vigorously defending this lawsuit. Because this lawsuit is in
the very early stages of class action proceedings, the Company cannot
reasonably
estimate the range of loss that may arise from this
claim.
Note
9: Shareholders’ Equity– As of February 2, 2007, the
total remaining authorization under the share repurchase program was $1.5
billion. On May 25, 2007, the Company’s Board of Directors authorized
up to an additional $3 billion in share repurchases and extended the period
of
the share repurchase program through fiscal 2009. The Company
repurchased 62.3 million and 56.8 million common shares under the share
repurchase program during the first nine months of fiscal 2007 and 2006,
respectively. The total cost of the share repurchases was $2.0
billion and $1.7 billion for the first nine months of fiscal 2007 and 2006,
respectively. Of this total cost, $1.7 billion and $160 million were
recorded as reductions in retained earnings, after capital in excess of par
value was depleted, for the first nine months of fiscal 2007 and 2006,
respectively. As of November 2, 2007, the Company had remaining
authorization under the share repurchase program of $2.5 billion.
During
the first nine months of fiscal 2007, holders of $18 million principal amount,
$13 million carrying amount, of the Company’s convertible notes issued in
February 2001 exercised their right to convert the notes into approximately
591,000 shares of the Company’s common stock at the rate of 32.896 shares per
note. During the first nine months of fiscal 2006, holders of $107
million principal amount, $74 million carrying amount, of the Company’s
convertible notes issued in February 2001 exercised their right to convert
the
notes into 3.5 million shares of the Company’s common stock at the rate of
32.896 shares per note.
During
the first nine months of fiscal 2007 and 2006, holders of an insignificant
number of the Company’s senior convertible notes issued in October 2001
exercised their right to convert the notes into shares of the Company’s common
stock at the rate of 34.424 shares per note.
Note
10: Comprehensive Income - Comprehensive income
represents changes in shareholders’ equity from non-owner sources and is
comprised of net earnings plus or minus unrealized gains or losses on
available-for-sale securities and foreign currency translation adjustments. For
the three months ended November 2, 2007, comprehensive income totaled $655
million compared to net earnings of $643 million. For the three
months ended November 3, 2006, comprehensive income totaled $718 million
compared to net earnings of $716 million. For the nine months ended
November 2, 2007, both comprehensive income and net earnings totaled $2.4
billion. For the nine months ended November 3, 2006, both
comprehensive income and net earnings totaled $2.5 billion.
Note
11: Accounting for Share-Based Payment – During the three months ended
November 2, 2007, the Company granted under its 2006 Long-Term Incentive Plan
an
insignificant number of share-based payment awards. During the nine
months ended November 2, 2007, the Company granted under its 2006 Long-Term
Incentive Plan 1.8 million stock options at an exercise price equal to the
closing market price of a share of the Company’s common stock on the date of
grant. The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option pricing model, which resulted in a
weighted-average grant date fair value per share of $8.18. The
Company also granted 1.8 million restricted stock awards and 0.6 million
performance-based restricted stock awards with a weighted-average grant date
fair value per share of $31.88 and $32.18, respectively. See Note 9
to the consolidated financial statements in the Annual Report for additional
information regarding general terms and methods of valuation for stock options
and restricted stock awards.
Performance-based
restricted stock awards are valued at the market price of a share of the
Company’s common stock on the date of grant. In general, these awards vest at
the end of a three-year service period from the date of grant only if the
performance goal specified in the performance-based restricted stock agreement
is achieved. The performance goal is based on targeted Company
average return on non-cash assets, as such term is defined in the
performance-based restricted stock agreement. These awards are
expensed on a straight-line basis over the requisite service period, based
on
the probability of achieving the performance goal. The Company uses
historical data to estimate the timing and amount of forfeitures.
Total
unrecognized share-based payment expense for all share-based payment plans
was
$121 million at November 2, 2007, of which $19 million is expected to be
recognized in the remainder of 2007, $57 million in 2008, $35 million in 2009
and $10 million thereafter. This results in these amounts being
recognized over a weighted-average period of 1.1 years.
Note
12: Accounting for Uncertainty in Income Taxes - The Company adopted
Financial Accounting Standards Board (FASB) Interpretation (FIN) No. 48,
“Accounting for Uncertainty in Income Taxes”, effective February
3, 2007. As a result of the implementation, the Company recognized an
$8 million net increase to the reserve for uncertain tax
positions. This increase was accounted for as a cumulative effect
adjustment and recognized as a reduction in beginning retained earnings in
the
consolidated balance sheet (unaudited). Including the cumulative
effect adjustment, the Company had approximately $214 million of total
unrecognized tax benefits (including penalties and interest) as of February
3,
2007. Of this total, $56 million (net of the federal benefit on state
issues) represents the amount of unrecognized tax benefits that, if recognized,
would favorably impact the effective income tax rate in any future
periods. The remaining $158 million represents the amount of
unrecognized tax benefits for which the ultimate deductibility is certain,
but
for which there is uncertainty about the timing of deductibility. The
timing of such deductibility would not impact the effective tax
rate. The Company does not expect any changes in unrecognized tax
benefits over the next twelve months to have a significant impact on the results
of operations or the financial position of the Company.
The
Company is subject to U.S. federal and foreign income tax, as well as income
tax
in multiple state and local jurisdictions. The Company has
substantially concluded all U.S. federal income tax matters for fiscal years
through 2003. The Company has substantially concluded all material state, local,
and foreign income tax matters for fiscal years through 2002.
The
Company includes interest related to tax issues as part of net interest in
the
consolidated financial statements (unaudited). The Company records
any applicable penalties related to tax issues within the income tax
provision. The Company had $21 million accrued for interest and $7
million accrued for penalties as of February 3, 2007.
Note
13: Earnings Per Share - Basic earnings per share excludes dilution and
is computed by dividing the applicable net earnings by the weighted-average
number of common shares outstanding for the period. Diluted earnings
per share is calculated based on the weighted-average shares of common stock
as
adjusted for the potential dilutive effect of share-based awards and convertible
notes as of the balance sheet date. The following table reconciles
earnings per share for the three and nine months ended November 2, 2007 and
November 3, 2006.
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
(In
millions, except per share data)
|
|
November
2,
2007
|
|
|
November
3,
2006
|
|
|
November
2,
2007
|
|
|
November
3,
2006
|
|
Basic
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$ |
643
|
|
|
$ |
716
|
|
|
$ |
2,401
|
|
|
$ |
2,492
|
|
Weighted-average
shares outstanding
|
|
|
1,470
|
|
|
|
1,522
|
|
|
|
1,490
|
|
|
|
1,540
|
|
Basic
earnings per share
|
|
$ |
0.44
|
|
|
$ |
0.47
|
|
|
$ |
1.61
|
|
|
$ |
1.62
|
|
Diluted
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$ |
643
|
|
|
$ |
716
|
|
|
$ |
2,401
|
|
|
$ |
2,492
|
|
Net
earnings adjustment for interest on convertible notes, net of
tax
|
|
|
-
|
|
|
|
1
|
|
|
|
2
|
|
|
|
3
|
|
Net
earnings, as adjusted
|
|
$ |
643
|
|
|
$ |
717
|
|
|
$ |
2,403
|
|
|
$ |
2,495
|
|
Weighted-average
shares outstanding
|
|
|
1,470
|
|
|
|
1,522
|
|
|
|
1,490
|
|
|
|
1,540
|
|
Dilutive
effect of share-based awards
|
|
|
7
|
|
|
|
8
|
|
|
|
8
|
|
|
|
8
|
|
Dilutive
effect of convertible notes
|
|
|
20
|
|
|
|
21
|
|
|
|
21
|
|
|
|
23
|
|
Weighted-average
shares, as adjusted
|
|
|
1,497
|
|
|
|
1,551
|
|
|
|
1,519
|
|
|
|
1,571
|
|
Diluted
earnings per share
|
|
$ |
0.43
|
|
|
$ |
0.46
|
|
|
$ |
1.58
|
|
|
$ |
1.59
|
|
Stock
options to purchase 7.9 million and 11.3 million shares of common stock were
excluded from the computation of diluted earnings per share because their effect
would have been anti-dilutive for the three months ended November 2, 2007 and
November 3, 2006, respectively. Stock options to purchase 7.9 million
and 10.7 million shares of common stock were excluded from the computation
of
diluted earnings per share because their effect would have been anti-dilutive
for the nine months ended November 2, 2007 and November 3, 2006,
respectively.
Note
14: Supplemental Disclosure
Net
interest expense is comprised of the following:
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
(In
millions)
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
Long-term
debt
|
|
$ |
65
|
|
|
$ |
45
|
|
|
$ |
174
|
|
|
$ |
129
|
|
Capitalized
leases
|
|
|
8
|
|
|
|
8
|
|
|
|
24
|
|
|
|
25
|
|
Interest
income
|
|
|
(10 |
) |
|
|
(9 |
) |
|
|
(34 |
) |
|
|
(36 |
) |
Interest
capitalized
|
|
|
(22 |
) |
|
|
(10 |
) |
|
|
(30 |
) |
|
|
(23 |
) |
Other
|
|
|
9
|
|
|
|
11
|
|
|
|
14
|
|
|
|
15
|
|
Interest
- net
|
|
$ |
50
|
|
|
$ |
45
|
|
|
$ |
148
|
|
|
$ |
110
|
|
Supplemental
disclosures of cash flow information:
|
|
Nine
Months Ended
|
|
(In
millions)
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
Cash
paid for interest, net of amount capitalized
|
|
$ |
199
|
|
|
$ |
155
|
|
Cash
paid for income taxes
|
|
$ |
1,336
|
|
|
$ |
1,617
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Non-cash
fixed asset acquisitions
|
|
$ |
125
|
|
|
$ |
198
|
|
Conversions
of long-term debt to equity
|
|
$ |
13
|
|
|
$ |
75
|
|
Note
15: Recent Accounting Pronouncements – In September 2006, the FASB
issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value
Measurements.” SFAS No. 157 provides a single definition of fair
value, together with a framework for measuring it, and requires additional
disclosure about the use of fair value to measure assets and
liabilities. SFAS No. 157 also emphasizes that fair value is a
market-based measurement, not an entity-specific measurement, and sets out
a
fair value hierarchy with the highest priority being quoted prices in active
markets. Under SFAS No. 157, fair value measurements are required to
be disclosed by level within that hierarchy. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The
Company does not expect the adoption of SFAS No. 157 to have a material impact
on its consolidated financial statements.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.” SFAS No. 159 provides
entities with an option to measure many financial instruments and certain other
items at fair value, including available-for-sale securities previously
accounted for under SFAS No. 115, “Accounting for Certain Investments in Debt
and Equity Securities.” Under SFAS No. 159, unrealized gains and
losses on items for which the fair value option has been elected will be
reported in earnings at each subsequent reporting period. SFAS No.
159 is effective for fiscal years beginning after November 15,
2007. The Company does not expect the adoption of SFAS No. 159 to
have a material impact on its consolidated financial statements.
In
June
2007, the Emerging Issues Task Force (EITF) reached a consensus on Issue No.
06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment
Awards.” EITF 06-11 states that an entity should recognize a realized
tax benefit associated with dividends on nonvested equity shares, nonvested
equity share units and outstanding equity share options charged to retained
earnings as an increase in additional paid in capital. The amount
recognized in additional paid in capital should be included in the pool of
excess tax benefits available to absorb potential future tax deficiencies on
share-based payment awards. EITF 06-11 should be applied
prospectively to income tax benefits of dividends on equity-classified
share-based payment awards that are declared in fiscal years beginning after
December 15, 2007. The Company does not expect the adoption of EITF
06-11 to have a material impact on its consolidated financial
statements.
To
the
Board of Directors and Shareholders of Lowe’s Companies, Inc.
Mooresville,
North Carolina
We
have
reviewed the accompanying consolidated balance sheets of Lowe’s Companies, Inc.
and subsidiaries (the “Company”) as of November 2, 2007 and November 3, 2006,
and the related consolidated statements of current and retained earnings for
the
fiscal three and nine-month periods then ended, and of cash flows for the fiscal
nine-month periods ended November 2, 2007 and November 3, 2006. These interim
financial statements are the responsibility of the Company’s
management.
We
conducted our reviews in accordance with standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States),
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 reviews, we are not aware of any material modifications that should be
made
to such consolidated interim financial statements for them to be in conformity
with accounting principles generally accepted in the United States of
America.
We
have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet
of
the Company as of February 2, 2007, and the related consolidated statements
of
earnings, shareholders’ equity, and cash flows for the year then ended (not
presented herein); and in our report dated April 3, 2007, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance sheet of
the
Company as of February 2, 2007 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
December
11, 2007
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This
discussion and analysis summarizes the significant factors affecting our
consolidated operating results, liquidity and capital resources during the
three
and nine month periods ended November 2, 2007 and November 3, 2006. This
discussion and analysis should be read in conjunction with the consolidated
financial statements and notes to the consolidated financial statements that
are
included in our Annual Report on Form 10-K for the fiscal year ended February
2,
2007 (the Annual Report), as well as the consolidated financial statements
(unaudited) and notes to the consolidated financial statements (unaudited)
contained in this report.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
The
following discussion and analysis of the financial condition and results of
operations are based on the consolidated financial statements (unaudited) and
notes to consolidated financial statements (unaudited) contained in this report
that have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission and do not include all the disclosures
normally required in annual consolidated financial statements prepared in
accordance with accounting principles generally accepted in the United States
of
America. The preparation of these financial statements requires us to
make estimates that affect the reported amounts of assets, liabilities, sales
and expenses, and related disclosures of contingent assets and
liabilities. We base these estimates on historical results and
various other assumptions believed to be reasonable, all of which form the
basis
for making estimates concerning the carrying values of assets and liabilities
that are not readily available from other sources. Actual results may
differ from these estimates.
Our
significant accounting polices are described in Note 1 to the consolidated
financial statements presented in the Annual Report. Our critical accounting
policies and estimates are described in Management’s Discussion and Analysis of
Financial Condition and Results of Operations in the Annual
Report. Our significant and critical accounting policies have not
changed significantly since the filing of our Annual Report.
OPERATIONS
The
following tables set forth the percentage relationship to net sales of each
line
item of the consolidated statements of earnings, as well as the percentage
change in dollar amounts from the prior period. These tables should be read
in
conjunction with the following discussion and analysis and the consolidated
financial statements (unaudited), including the related notes to the
consolidated financial statements (unaudited).
|
|
Three
Months Ended
|
|
|
Basis
Point Increase / (Decrease) in Percentage of Net Sales
from
Prior
Period
|
|
|
Percentage
Increase / (Decrease) in Dollar Amounts from Prior
Period
|
|
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
|
2007
vs. 2006
|
|
|
2007
vs. 2006
|
|
Net
sales
|
|
|
100.00 |
% |
|
|
100.00 |
% |
|
N/A
|
|
|
|
3.2 |
% |
Gross
margin
|
|
|
34.27
|
|
|
|
34.47
|
|
|
|
(20 |
) |
|
|
2.6
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
21.63
|
|
|
|
20.70
|
|
|
|
93
|
|
|
|
7.8
|
|
Store
opening costs
|
|
|
0.36
|
|
|
|
0.39
|
|
|
|
(3 |
) |
|
|
(6.4 |
) |
Depreciation
|
|
|
2.94
|
|
|
|
2.65
|
|
|
|
29
|
|
|
|
14.4
|
|
Interest
- net
|
|
|
0.43
|
|
|
|
0.40
|
|
|
|
3
|
|
|
|
12.5
|
|
Total
expenses
|
|
|
25.36
|
|
|
|
24.14
|
|
|
|
122
|
|
|
|
8.4
|
|
Pre-tax
earnings
|
|
|
8.91
|
|
|
|
10.33
|
|
|
|
(142 |
) |
|
|
(11.1 |
) |
Income
tax provision
|
|
|
3.35
|
|
|
|
3.94
|
|
|
|
(59 |
) |
|
|
(12.4 |
) |
Net
earnings
|
|
|
5.56 |
% |
|
|
6.39 |
% |
|
|
(83 |
) |
|
|
(10.3 |
)% |
|
|
Nine
Months Ended
|
|
|
Basis
Point Increase / (Decrease) in Percentage of Net Sales from Prior
Period
|
|
|
Percentage
Increase / (Decrease) in Dollar Amounts from Prior
Period
|
|
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
|
2007
vs. 2006
|
|
|
2007
vs. 2006
|
|
Net
sales
|
|
|
100.00 |
% |
|
|
100.00 |
% |
|
N/A
|
|
|
|
3.8 |
% |
Gross
margin
|
|
|
34.58
|
|
|
|
34.26
|
|
|
|
32
|
|
|
|
4.8
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
21.17
|
|
|
|
20.27
|
|
|
|
90
|
|
|
|
8.4
|
|
Store
opening costs
|
|
|
0.21
|
|
|
|
0.27
|
|
|
|
(6 |
) |
|
|
(18.1 |
) |
Depreciation
|
|
|
2.63
|
|
|
|
2.34
|
|
|
|
29
|
|
|
|
16.6
|
|
Interest
- net
|
|
|
0.39
|
|
|
|
0.30
|
|
|
|
9
|
|
|
|
33.7
|
|
Total
expenses
|
|
|
24.40
|
|
|
|
23.18
|
|
|
|
122
|
|
|
|
9.3
|
|
Pre-tax
earnings
|
|
|
10.18
|
|
|
|
11.08
|
|
|
|
(90 |
) |
|
|
(4.7 |
) |
Income
tax provision
|
|
|
3.85
|
|
|
|
4.26
|
|
|
|
(41 |
) |
|
|
(6.2 |
) |
Net
earnings
|
|
|
6.33 |
% |
|
|
6.82 |
% |
|
|
(49 |
) |
|
|
(3.7 |
)% |
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
Other
metrics:
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
|
November
2, 2007
|
|
|
November
3, 2006
|
|
Comparable
store sales changes
(1)
|
|
|
(4.3 |
)% |
|
|
(4.0 |
)% |
|
|
(4.3 |
)% |
|
|
1.7 |
% |
Customer
transactions (in millions)
|
|
|
173
|
|
|
|
165
|
|
|
|
558
|
|
|
|
524
|
|
Average
ticket (2)
|
|
$ |
66.95
|
|
|
$ |
67.97
|
|
|
$ |
67.92
|
|
|
$ |
69.68
|
|
At
end of period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of stores
|
|
|
1,464
|
|
|
|
1,330
|
|
|
|
|
|
|
|
|
|
Sales
floor square feet (in millions)
|
|
|
166
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
Average
store size square feet (in thousands) (3)
|
|
|
113
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
(1)We
define a comparable store as a store that has been open longer than 13
months. A store that is identified for relocation is no longer
considered comparable one month prior to its relocation. The
relocated store must then remain open longer than 13 months to be considered
comparable.
(2)
We define average ticket as net sales divided by number of customer
transactions.
(3) We
define average store size square feet as sales floor square feet divided by the
number of stores open at the end of the period.
The
sales
environment remained challenging in the third quarter of fiscal 2007, and
we
expect the external pressures facing our industry to continue into 2008.
In
today’s sales environment, we are focused on managing expenses, as well as
evaluating ways to better leverage technology, our infrastructure and our
people
to efficiently drive sales and deliver great customer experiences. We
are committed to disciplined inventory management, particularly for seasonal
products, to ensure we minimize mark-downs while maximizing
sales. Additionally, we are focused on the opportunities we see in
the current environment to gain profitable market share.
We
remain
committed to providing excellent customer service in all sales environments,
as
well as identifying ways to increase store productivity. We know that
maintaining the appropriate staffing complement in our stores is one of the
keys
to our continued success. During past periods of robust growth we
staffed ahead of our sales by adding hours as sales trends approached the
threshold that would trigger changes to the staffing complement, anticipating
continued growth and ensuring that we stayed ahead of customer
demand. We will not sacrifice service, and we will continue to align
staffing levels with current sales trends. However, in this
challenging sales environment, we are waiting to increase our base staffing
hours until the sales threshold has been achieved. Our flexible
staffing model enables us to react quickly to changing sales
environments. Therefore, when sales improve we can efficiently add
hours to support growth. With this approach, we remain confident that
we will continue to provide the level of service customers have come to expect
from Lowe’s, while driving efficiencies.
We
are
always looking for opportunities to leverage our logistics and distribution
network. Approximately 75% of our goods are now running through our
distribution network, and we continue to work with our vendor partners to
drive
efficiencies by streamlining and automating the receiving processes at our
stores. Moving more products through our network allows more
efficient receiving at our stores, which in turn provides us with more time
to
assist customers in the aisles. Additionally, because current sales
levels are not what we expected, we have postponed the opening of our fourteenth
regional distribution center (RDC) by six to nine months. The expense
savings from postponing the opening of the RDC outweigh the costs associated
with slightly longer hauls to our stores. We are confident that our
current network has the capacity to ensure our stores remain in-stock and
customer demand is met.
While
we
continue to identify ways to simplify the shopping experience and make our
stores more operationally efficient, we are also looking for opportunities
to
gain profitable market share. We are evaluating the frequency and
scope of our reset and remerchandising program. We are also looking
for opportunities to gain additional advertising efficiencies, including
better
aligning our 18-month promotional calendar. Our market analysis
provides insight into the impact of housing on our performance by region
and
enables us to better target promotions that connect with customers in local
markets.
Net
Sales – The increase in sales for both the quarter and nine months ended
November 2, 2007 was driven by our store expansion program, which added 134
new
stores during the last four quarters. However, a challenging sales
environment led to a decline in comparable store sales of 4.3% for both the
quarter and the first nine months of 2007. Total customer
transactions increased 4.7% compared to the third quarter of 2006, while
average
ticket decreased 1.5% to $66.95. Comparable store customer
transactions decreased 2.3% compared to the third quarter of 2006 and comparable
store average ticket decreased 2.2%.
We
experienced comparable store sales increases in two of our 20 product categories
in the third quarter of 2007. The categories that performed above our
average comparable store sales change for the third quarter included rough
plumbing, hardware, paint, lighting, lawn & landscape products, appliances
and home environment. In addition, fashion plumbing and
cabinets/countertops performed at approximately the overall corporate average
comparable store sales change. Despite the external pressures that
affected the home improvement market, we continued to gain unit market share
in
17 of our 20 product categories during the third calendar quarter versus
the
same period last year and gained 100 basis points in total store unit market
share, according to independent third-party measures.
Housing
related pressures on the consumer had the largest impact on sales for the
third
quarter. The deterioration in housing related metrics, combined with
disruption in the credit markets, and the tightening of lending standards
and
credit availability impacted our performance. We are still
experiencing regionally disparate performance, with our stores in California,
Florida and the along the Gulf Coast experiencing double-digit negative
comparable store sales. However, the change in sales trends we
experienced in the quarter was broad based with many factors driving the
decline
in comparable store sales.
In
addition to continued macroeconomic pressures, our sales were impacted by
the
drought experienced in several regions of the country, as well as warmer
than
normal temperatures throughout much of the quarter. As a result, our
Nursery category experienced the largest decline versus year-to-date trends
of
any category. We also saw a significant decline in the performance of
outdoor products in drought affected regions versus their second quarter
trends.
As
we
have seen for the past few quarters, consumers remain hesitant to take on
larger
discretionary projects, including many projects offered through our Installed
Sales and Special Order Sales programs. As a result, our sales in
those areas fell short of our average comparable store sales
change. Our Commercial Business Customer sales continued to perform
well above the company average comparable store sales change. Our
focus on maintenance and repair customers, who shop our entire store and
are
less dependent on the housing cycle, has helped ensure solid Commercial Business
Customer sales and margin performance in 2007.
Gross
Margin – Gross margin as a percentage of sales decreased 20 basis points
from the third quarter of 2006. The decrease was primarily attributable to
the
timing of markdowns on seasonal inventory. Gross margin in the third
quarter of 2006 benefited from an earlier markdown and sell through of seasonal
products, which negatively impacted margin in the second quarter of 2006
but
positively impacted margin in the third quarter of 2006. In 2007, the
markdown process occurred in a more normalized fashion, with most seasonal
markdowns occurring in the third quarter, which negatively impacted gross
margin
in the third quarter relative to the prior year. This de-leverage was
partially offset by a positive impact of approximately 10 basis points from
the
mix of products sold and a positive impact of approximately 15 basis points
from
lower inventory shrink.
The
increase in gross margin as a percentage of sales for the first nine months
of
2007 compared to 2006 was attributable to the mix of products sold and a
positive impact associated with a greater proportion of imported
goods.
SG&A
– SG&A de-leveraged 93 basis points in the third quarter of 2007 versus
the prior year, driven by de-leverage of 64 basis points in store payroll
as a
result of the weak sales environment. Additionally, bonus and
retirement plan expenses de-leveraged 47 basis points compared to the third
quarter of 2006, due to accrual reversals in last year’s third quarter as a
result of declining performance. In addition, rent, property taxes,
utilities and other fixed expenses de-leveraged due to the comparable store
sales decline. This de-leverage was offset by a $112 million
reduction in casualty self-insurance expenses in the third quarter of
2007. Similarly, we had a favorable adjustment to our self-insurance
reserves of $77 million in the third quarter of 2006. The net impact
of these adjustments resulted in leverage of 32 basis points in casualty
self-insurance expenses in the third quarter of 2007 compared to 2006. Our
efforts over the past several years to maintain a safe shopping and working
environment have resulted in a reduction in both claim incidence and
severity. These efforts as well as state regulatory changes
contributed to actuarial projections of lower costs to settle claims filed
and
claims incurred but not reported, which led to a reduction of our actuarially
determined self-insurance liability.
The
increase in SG&A as a percentage of sales for the first nine months was
similarly driven by de-leverage in store payroll and fixed expenses, such
as
rent, property taxes and utilities, as a result of softer sales. This
was partially offset by leverage in advertising, store services and casualty
self-insurance expenses.
Store
Opening Costs - Store opening costs, which include payroll and supply costs
incurred prior to store opening as well as grand opening advertising costs,
totaled $41 million and $44 million in the third quarters of 2007 and 2006,
respectively. Because store opening costs are expensed as incurred,
the timing of expense recognition fluctuates based on the timing of store
openings. We opened 40 new stores in the third quarter of 2007,
compared to the opening of 49 new stores in the third quarter of
2006. Store opening costs for stores opened during both the third
quarter of 2007 and 2006 averaged approximately $0.8 million per
store.
Store
opening costs of $79 million and $97 million for the first nine months of
2007
and 2006, respectively, were associated with the opening of 81 stores in
2007
(79 new and 2 relocated), compared to 97 stores in 2006 (96 new and 1
relocated). Store opening costs for stores opened during the first
nine months of 2007 averaged approximately $0.7 million per store compared
to approximately $0.9 million for stores opened in the first nine months
of
2006. The decrease in average opening costs per store was driven by
higher average payroll costs in the first nine months of 2006 resulting from
stores opening in higher cost markets.
Depreciation
- The de-leverage in depreciation for the three and nine month periods
ended November 2, 2007, was driven by the opening of 134 new stores over
the
past four quarters and negative comparable store sales. Property,
less accumulated depreciation, totaled $20.8 billion at November 2, 2007,
an
increase of 14.1% from $18.2 billion at November 3, 2006. At November
2, 2007, we owned 86% of our stores, compared to 84% at November 3, 2006,
which
includes stores on leased land.
Interest–
The de-leverage in interest expense for the three and nine month periods
ended
November 2, 2007, was primarily due to additional expense as a result of
the
October 2006 $1 billion debt issuance and the September 2007 $1.3 billion
debt
issuance.
Income
Tax Provision - Our effective income tax rate was 37.6% and 37.8% for the
three and nine month periods ended November 2, 2007, respectively, and 38.2%
and
38.4% for the three and nine month periods ended November 3, 2006,
respectively. Our effective income tax rate was 37.9% for fiscal
2006.
LIQUIDITY
AND CAPITAL RESOURCES
Our
primary sources of liquidity are cash flows from operating activities and
our
$1.75 billion senior credit facility that expires in July 2012. Net
cash provided by operating activities totaled $3.8 billion and $3.6 billion
for
the nine month periods ended November 2, 2007 and November 3,
2006. The change in cash flows from operating activities was
primarily the result of the timing of cash payments and an improvement in
payment terms related to merchandise purchases.
The
primary component of net
cash used in investing activities continues to be opening new stores, investing
in existing stores through resets and remerchandising, and investing in our
distribution center and information technology infrastructure. Cash acquisitions
of fixed assets were $2.9
billion and $2.7 billion for
the nine month periods ended November 2, 2007 and November 3, 2006,
respectively. At November 2, 2007, we operated 1,464
stores in 49 states with
166
million square feet of
retail selling space, representing a 10%
increase over the retail
selling space at November 3, 2006.
Net
cash used in financing
activities was $964 million
and $865 million for the
nine month periods ended November 2, 2007 and November 3, 2006,
respectively. The change
in cash flows from
financing activities was primarily the result of increased
share repurchases
compared to the first nine months of 2006 and an increase in the amount of
dividends paid
per share from $0.13 in
the first nine months of fiscal 2006 to $0.21
in the first nine months of
fiscal 2007. This
was partially
offset by
the
September
2007 $1.3 billion
debt
offering. The
ratio of debt to
equity plus debt was 26.0%, 22.7% and 22.0% as of November 2, 2007, November
3,
2006 and February 2, 2007, respectively.
Our
initial 2007 capital forecast was $4.6 billion, inclusive of approximately
$300
million of lease commitments, resulting in a planned net cash outflow of
$4.3
billion in 2007. As of the end of the third quarter of 2007, we expect
that net cash outflows will be $4.1 billion, versus the forecasted amount
of
$4.3 billion. Approximately 80% of this expected commitment is for
store expansion and new distribution centers. Expansion plans for 2007
consist of approximately 153 stores, including four relocations of older
stores,
increasing our total sales floor square footage by approximately 11% for
the
year. Approximately 99% of the 2007 projects will be owned, which includes
approximately 30% that will be ground-leased properties.
As
of
November 2, 2007, we owned and operated 13 RDCs. We opened a new RDC
in Rockford, Illinois in the first quarter of 2007 and a new RDC in Lebanon,
Oregon in the second quarter of 2007. We delayed the opening of our
next RDC to the latter half of 2008. As of November 2, 2007, we also
operated 14 flatbed distribution centers (FDCs) for the handling of lumber,
building materials and other long-length items. We owned 12 and leased two
of these FDCs. We opened a new FDC in Port of Stockton, California in
the first quarter of 2007. We expect to open an additional FDC in
fiscal 2008.
On
June
15, 2007, we entered into an Amended and Restated Credit Agreement (Amended
Facility) to modify the senior credit facility dated July 30, 2004, which
provided for borrowings of up to $1 billion through July 2009. The
Amended Facility extends the maturity date to June 2012 and provides for
borrowings of up to $1.75 billion. The Amended Facility supports our
commercial paper and revolving credit programs. Borrowings made are
unsecured and
are
priced at a fixed rate based upon market conditions at the time of funding
in
accordance with the terms of the Amended Facility. The Amended Facility contains
certain restrictive covenants, which include maintenance of a debt leverage
ratio as defined by the Amended Facility. We were in compliance with those
covenants at November 2, 2007. Seventeen banking institutions are
participating in the Amended Facility. As of November 2, 2007, there
were no outstanding borrowings under the Amended Facility or under the
commercial paper program.
On
October 3, 2007, we established a Canadian dollar (C$) denominated credit
facility in the amount of C$50 million, which provides support for our Canadian
operations. This uncommitted facility provides us the ability to make
unsecured borrowings, which are priced at a fixed rate based upon market
conditions at the time of funding in accordance with the terms of the credit
facility. As of November 2, 2007, there was C$15 million or the
equivalent of $16 million outstanding under the credit facility. The
interest rate on the short-term borrowing was 4.8%.
From
their issuance through the end of the third quarter of 2007, principal amounts
of $985 million, or approximately 98%, of our February 2001 convertible notes
had converted from debt to equity. Of this total, principal amounts
of $12 million were converted in the third quarter of 2007. An
insignificant amount was converted in the third quarter of
2006. Principal amounts of $18 million and $107 million were
converted in the nine month periods ending November 2, 2007 and November
3,
2006, respectively.
Holders
of the senior convertible notes, issued in October 2001, may convert their
notes
into 34.424 shares of the company’s common stock only if: the closing share
price of the company’s common stock reaches specified thresholds, or the credit
rating of the notes is below a specified level, or the notes are called for
redemption, or specified corporate transactions representing a change in
control
have occurred. There is no indication that we will not be able to
maintain the minimum investment grade rating. From their issuance through
the
end of the third quarter of 2007, an insignificant amount of the senior
convertible notes had converted from debt to equity. During the
fourth quarter of 2006 and first and second quarters of 2007, our closing
share
prices reached the specified threshold such that the senior convertible notes
became convertible at the option of each holder into shares of common stock
in
the first, second and third quarters of 2007. The senior convertible
notes will not become convertible in the fourth quarter of 2007 because our
closing share prices did not reach the specified threshold. Cash
interest payments on the senior convertible notes ceased in October
2006. We may redeem for cash all or a portion of the notes at any
time, at a price equal to the sum of the issue price plus accrued original
issue
discount on the redemption date.
Our
debt
ratings at November 2, 2007, were as follows:
Current
Debt Ratings
|
S&P
|
Moody’s
|
Fitch
|
Commercial
paper
|
A1
|
P1
|
F1+
|
Senior
debt
|
A+
|
A1
|
A+
|
Outlook
|
Stable
|
Stable
|
Stable
|
We
believe that net cash provided by operating activities and financing activities
will be adequate for our expansion plans and other operating requirements
over
the next 12 months. However, the availability of funds at favorable rates
through the issuance of commercial paper and new debt could be adversely
affected due to a debt rating downgrade, a deterioration of certain financial
ratios, or continuing unfavorable credit market conditions. There are no
provisions in any agreement that would require early cash settlement of existing
debt or leases as a result of a downgrade in our debt rating or a decrease
in
our stock price.
During
the first nine months of 2007, we repurchased 62.3 million shares under the
share repurchase program at a total cost of $2.0 billion. On May 25,
2007, the Board of Directors authorized up to an additional $3.0 billion
in
share repurchases and extended the period of the share repurchase program
through fiscal 2009. As of November 2, 2007, we had remaining
authorization of $2.5 billion.
OFF-BALANCE
SHEET ARRANGEMENTS
Other
than in connection with executing operating leases, we do not have any
off-balance sheet financing that has, or is reasonably likely to have, a
material, current or future effect on our financial condition, cash flows,
results of operations, liquidity, capital expenditures or capital
resources.
CONTRACTUAL
OBLIGATIONS AND COMMERCIAL COMMITMENTS
We
adopted FIN 48, “Accounting for Uncertainty in Income Taxes”, effective February
3, 2007. As of the date of adoption, our reserve for uncertain tax
positions (including penalties and interest) was approximately $214
million. In the nine months ended November 2, 2007, the reserve for
uncertain tax positions decreased $52 million (including penalties and
interest), offset by an adjustment to deferred taxes of $62
million. At November 2, 2007, approximately $3 million of the reserve
for uncertain tax positions (including penalties and interest) was classified
as
a current liability. At this time, we are unable to make a reasonably
reliable estimate of the timing of payments in individual years beyond 12
months
due to uncertainties in the timing of the effective settlement of tax
positions.
Though
considered to be in the ordinary course of business, in September 2007 we
issued
$1.3 billion in senior notes, which are included in the table below and further
described in Note 6 to the consolidated financial statements (unaudited)
herein.
|
|
Payments
Due by Period
|
|
Contractual
Obligations
|
|
|
|
|
Less
than
|
|
|
1-3
|
|
4-5
|
|
|
After
5
|
|
(In
millions)
|
|
Total
|
|
|
1
year
|
|
|
years
|
|
years
|
|
|
years
|
|
Long-term
debt (principal and interest amounts,
excluding discount)
|
|
$ |
10,185
|
|
|
$ |
307
|
|
|
$ |
1,090
|
|
|
$ |
1,058
|
|
|
$ |
7,730
|
|
There
have been no other material changes in our contractual obligations and
commercial commitments other than in the ordinary course of business since
the
end of fiscal 2006. Refer to the Annual Report for additional
information regarding our contractual obligations and commercial
commitments.
COMPANY
OUTLOOK
Fourth
Quarter
As
of
November 19, 2007, the date of our third
quarter
2007 earnings release, we expected to open approximately 72 stores during
the
fourth quarter of fiscal 2007, which ends on February 1, 2008, reflecting
square
footage growth of approximately 11%. Total sales were expected to increase
approximately 3%. Comparable store sales were expected to decline 3%
to 5%. We expected diluted earnings per share of $0.25 to
$0.29. All comparisons are with the fourth quarter of fiscal
2006.
Fiscal
2007
As
of
November 19, 2007, the date of our third quarter 2007 earnings release, we
expected to open approximately 153 stores during fiscal 2007, which ends
on
February 1, 2008, reflecting total square footage growth of approximately
11%.
Total sales were expected to increase 3% to 4% for the
year. Comparable store sales were expected to decline approximately
4%. We expected diluted earnings per share of $1.83 to
$1.87. All comparisons are with fiscal 2006.
FORWARD-LOOKING
STATEMENTS
This
Form
10-Q contains “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 (the “Act”). All statements
other than those reciting historic fact are statements that could be
“forward-looking statements” under the Act. Such forward-looking
statements are found in, among other places, “Management’s Discussion and
Analysis of Financial Condition and Results of
Operations.” Statements containing words such as “expects,” “plans,”
“strategy,” “projects,” “believes,” “opportunity,” “anticipates,” “desires,” and
similar expressions are intended to highlight or indicate “forward-looking
statements.” Although we believe that the expectations, opinions,
projections, and comments reflected in our forward-looking statements are
reasonable, we 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 interest rate and currency fluctuations,
higher fuel and other energy costs, slower growth in personal income, declining
housing turnover, the availability 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 a greater or longer than
expected downturn in the housing industry and the level of repairs, remodeling,
and additions to existing homes, as well as 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 legal and regulatory
developments; and (viii) respond to unanticipated weather conditions that
could
adversely affect sales. For more information about these and other
risks and uncertainties that we are exposed to, you should read the “Risk
Factors” included in our Annual Report on Form 10-K to the United States
Securities and Exchange Commission and the description of material changes,
if
any, in those “Risk Factors” included in our Quarterly Reports on Form
10-Q.
The
forward-looking statements contained in this Form 10-Q are based upon data
available as of the date of this report or other specified date and speak
only
as of such date. 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.
The
Company's market risk has not changed materially from that disclosed in our
Annual Report on Form 10-K for the fiscal year ended February 2,
2007.
The
Company's management, with the participation of the Chief Executive Officer
and
Chief Financial Officer, has evaluated the effectiveness of the Company’s
“disclosure controls and procedures”, (as such term is defined in
Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as
amended, (the “Exchange Act”)). Based upon their evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that, as of November 2, 2007,
the
Company’s disclosure controls and procedures were effective for the purpose of
ensuring that the information required to be disclosed in the reports that
the
Company files or submits under the Exchange Act with the Securities and Exchange
Commission (the “SEC”) (1) is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and (2) is
accumulated and communicated to the Company’s management, including its
principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure.
In
addition, no change in the Company’s internal control over financial reporting
occurred during the fiscal quarter ended November 2, 2007 that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
Item
1A. - Risk Factors
There
have been no material changes in our risk factors from those disclosed in
our
Annual Report on Form 10-K.
Issuer
Purchases of Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions, except average price
paid per share)
|
|
Total
Number of Shares Purchased (1)
|
|
|
Average
Price Paid per Share
|
|
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans
or
Programs
|
|
|
Dollar
Value of Shares that May Yet Be Purchased Under the Plans or Programs
(2)
|
|
August
4, 2007 – August 31, 2007
|
|
|
6.7
|
|
|
$ |
29.90
|
|
|
|
6.7
|
|
|
$ |
2,839
|
|
September
1, 2007 – October 5, 2007
|
|
|
9.9
|
|
|
|
30.26
|
|
|
|
9.9
|
|
|
|
2,539
|
|
October
6, 2007 – November 2, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of November 2, 2007
|
|
|
16.6
|
|
|
$ |
30.12
|
|
|
|
16.6
|
|
|
$ |
2,539
|
|
(1)
|
During
the third quarter of fiscal 2007, the Company repurchased an aggregate
of
16,602,566 shares of its common stock pursuant to the share repurchase
program (the Program). The total number of shares purchased also
includes a nominal amount of shares repurchased from employees
to satisfy
the exercise price of certain stock option
exercises.
|
(2)
|
On
May 25, 2007, the Company’s Board of Directors authorized up to an
additional $3 billion in share repurchases and extended the period
of the
Program through fiscal 2009. The Company will continue
implementing the Program through purchases made from time to time
either
in the open market or through private transactions, in accordance
with SEC
regulations.
|
Exhibit
10.1 - Amendment Number One to the Lowe’s Companies Cash Deferral
Plan
Exhibit
10.2 - Lowe’s Companies Benefit Restoration Plan Amended and Restated as of
January 1, 2008
Exhibit
12.1 - Statement Re Computation of Ratio of Earnings to Fixed
Charges
Exhibit
15.1 - Deloitte & Touche LLP Letter Re Unaudited Interim Financial
Information
Exhibit
31.1 - Certification Pursuant to Rules 13a-14(a) and 15d-14(a) Under the
Securities Exchange Act of 1934, as Amended
Exhibit
31.2 - Certification Pursuant to Rules 13a-14(a) and 15d-14(a) Under the
Securities Exchange Act of 1934, as Amended
Exhibit
32.1 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit
32.2 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
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.
|
|
|
|
December
11, 2007
Date
|
|
/s/Matthew
V. Hollifield
Matthew
V. Hollifield
Senior
Vice President and Chief Accounting
Officer
|
Exhibit
No.
|
|
Description
|
|
|
|
10.1
|
|
Amendment
Number One to the Lowe’s Companies Cash Deferral Plan
|
|
|
|
10.2
|
|
Lowe’s
Companies Benefit Restoration Plan Amended and Restated as of January
1,
2008
|
|
|
|
12.1
|
|
Statement
Re Computation of Ratio of Earnings to Fixed Charges
|
|
|
|
15.1
|
|
Deloitte
& Touche LLP Letter Re Unaudited Interim Financial
Information
|
|
|
|
31.1
|
|
Certification
Pursuant to Rules 13a-14(a) and 15d-14(a) Under the Securities
Exchange
Act of 1934, as Amended
|
|
|
|
31.2
|
|
Certification
Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange
Act of 1934, as Amended
|
|
|
|
32.1
|
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
|
|
|
32.2
|
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
|
|
|