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Lowe's Reports Second Quarter Sales and Earnings Results

-- Comparable Sales Increased 4.4 Percent --

MOORESVILLE, N.C., Aug. 20, 2014 /PRNewswire/ -- Lowe's Companies, Inc. (NYSE: LOW) today reported net earnings of $1.04 billion for the quarter ended August 1, 2014, a 10.4 percent increase over the same period a year ago. Diluted earnings per share increased 18.2 percent to $1.04 from $0.88 in the second quarter of 2013. For the six months ended August 1, 2014, net earnings increased 12.2 percent from the same period a year ago to $1.66 billion, and diluted earnings per share increased 20.6 percent to $1.64

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Sales for the second quarter increased 5.7 percent to $16.6 billion from $15.7 billion in the second quarter of 2013, and comparable sales for the quarter increased 4.4 percent.  For the six month period, sales were $30.0 billion, a 4.2 percent increase over the same period a year ago, and comparable sales increased 2.8 percent.

"I would like to thank our employees for their hard work during our peak selling season, which helped us deliver solid results for the second quarter.  We were able to recover most of the outdoor product sales missed in the first quarter due to unfavorable weather conditions," commented Robert A. Niblock, Lowe's chairman, president and CEO.

"We believe home improvement spending will continue to progress in tandem with strengthening job and income growth," Niblock added.  "Our year-to-date sales performance, together with our previous assumptions for the second half of 2014, result in a modest reduction to our sales outlook for the year.  Our diluted earnings per share outlook is unchanged, which is a testament to our keen focus on profitability."

Delivering on its commitment to return excess cash to shareholders, the company repurchased $1.1 billion of stock under its share repurchase program and paid $183 million in dividends in the second quarter.  For the six month period, the company repurchased $2.0 billion of stock under its share repurchase program and paid $369 million in dividends. 

As of August 1, 2014, Lowe's operated 1,837 home improvement and hardware stores in the United States, Canada and Mexico representing 200.8 million square feet of retail selling space.

A conference call to discuss second quarter 2014 operating results is scheduled for today (Wednesday, August 20) at 9:00 am ET.  The conference call will be available by webcast and can be accessed by visiting Lowe's website at www.Lowes.com/investor and clicking on Lowe's Second Quarter 2014 Earnings Conference Call Webcast.  Supplemental slides will be available fifteen minutes prior to the start of the conference call. A replay of the call will be archived on Lowes.com/investor until November 18, 2014.

Lowe's Business Outlook

The company has combined its year-to-date sales performance with its previous assumptions for the second half of 2014 when providing the updated outlook below.

Fiscal Year 2014 (comparisons to fiscal year 2013; based on U.S. GAAP unless otherwise noted) 

  • Total sales are expected to increase approximately 4.5 percent.
  • Comparable sales are expected to increase approximately 3.5 percent.
  • The company expects to open approximately 10 home improvement and 5 hardware stores.
  • Earnings before interest and taxes as a percentage of sales (operating margin) are expected to increase approximately 65 basis points.
  • The effective income tax rate is expected to be approximately 37.2%.
  • Diluted earnings per share of approximately $2.63 are expected for the fiscal year ending January 30, 2015.  

Disclosure Regarding Forward-Looking Statements

This news release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements of the company's expectations for sales growth, comparable sales, earnings and performance, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for services, share repurchases, the Company's strategic initiatives and any statement of an assumption underlying any of the foregoing, constitute "forward-looking statements" under the Act.   Although we believe that the expectations, opinions, projections, and comments reflected in these 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 either expressed or implied by our forward-looking statements including, but not limited to, changes in general economic conditions, such as the  rate of unemployment, interest rate and currency fluctuations, higher fuel and other energy costs, slower growth in personal income, changes in consumer spending, changes in the rate of housing turnover, the availability and increasing regulation of consumer credit and of mortgage financing, inflation or deflation of commodity prices, and other factors which can negatively affect our customers, as well as our ability to: (i) respond to adverse trends in the housing industry, such as the psychological effects of lower home prices, and in the level of repairs, remodeling, and additions to existing homes, as well as a general reduction in commercial building activity; (ii) secure, develop, and otherwise implement new technologies and processes designed to enhance our efficiency and competitiveness; (iii) attract, train, and retain highly-qualified associates; (iv) manage our business effectively as we adapt our traditional operating model to meet the changing expectations of our customers; (v) maintain, improve, upgrade and protect our critical information systems; (vi) respond to fluctuations in the prices and availability of services, supplies, and products; (vii) respond to the growth and impact of competition; (viii) address changes in existing or new laws or regulations that affect consumer credit, employment/labor, trade, product safety, transportation/logistics, energy costs, health care, tax or environmental issues; and (ix) respond to unanticipated weather conditions that could adversely affect sales. In addition, we could experience additional impairment losses if the actual results of our operating stores are not consistent with the assumptions and judgments we have made in estimating future cash flows and determining asset fair values. For more information about these and other risks and uncertainties that we are exposed to, you should read the "Risk Factors" and "Critical Accounting Policies and Estimates" included in our Annual Report on Form 10-K to the United States Securities and Exchange Commission (the "SEC") and the description of material changes therein or updated version thereof, if any, included in our Quarterly Reports on Form 10-Q.

The forward-looking statements contained in this news release are based upon data available as of the date of this release or other specified date and speak only as of such date.  All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf about any of the matters covered in this release are qualified by these cautionary statements and the "Risk Factors" included in our Annual Report on Form 10-K to the SEC and the description of material changes, if any, therein included in our Quarterly Reports on Form 10-Q.  We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, change in circumstances, future events, or otherwise.

Lowe's Companies, Inc. (NYSE: LOW) is a FORTUNE® 100 home improvement company serving approximately 15 million customers a week in the United States, Canada and Mexico.  With fiscal year 2013 sales of $53.4 billion, Lowe's has more than 1,835 home improvement and hardware stores and 260,000 employees.  Founded in 1946 and based in Mooresville, N.C., Lowe's supports the communities it serves through programs that focus on K-12 public education and community improvement projects. For more information, visit Lowes.com.

 

Lowe's Companies, Inc.



Consolidated Statements of Current and Retained Earnings (Unaudited)



In Millions, Except Per Share and Percentage Data




















Three Months Ended



Six Months Ended





August 1, 2014



August 2, 2013



August 1, 2014



August 2, 2013

Current Earnings




 Amount 

Percent



 Amount 

Percent



 Amount 

Percent



 Amount 

Percent

Net sales



$

16,599

100.00


$

15,711

100.00


$

30,001

100.00


$

28,800

100.00



















Cost of sales




10,864

65.45



10,314

65.65



19,508

65.02



18,848

65.44



















Gross margin




5,735

34.55



5,397

34.35



10,493

34.98



9,952

34.56



















Expenses:




































Selling, general and administrative




3,541

21.33



3,414

21.73



6,859

22.87



6,635

23.04



















Depreciation




375

2.26



367

2.33



748

2.49



719

2.50



















Interest - net




126

0.76



110

0.70



250

0.83



223

0.77



















Total expenses




4,042

24.35



3,891

24.76



7,857

26.19



7,577

26.31



















Pre-tax earnings 




1,693

10.20



1,506

9.59



2,636

8.79



2,375

8.25



















Income tax provision 




654

3.94



565

3.60



973

3.25



893

3.11



















Net earnings



$

1,039

6.26


$

941

5.99


$

1,663

5.54


$

1,482

5.14





































Weighted average common shares outstanding - basic




995




1,067




1,005




1,077




















Basic earnings per common share (1)



$

1.04



$

0.88



$

1.65



$

1.37




















Weighted average common shares outstanding - diluted




996




1,068




1,007




1,079




















Diluted earnings per common share (1)



$

1.04



$

0.88



$

1.64



$

1.36




















Cash dividends per share



$

0.23



$

0.18



$

0.41



$

0.34






































Retained Earnings


















Balance at beginning of period



$

10,985



$

12,618



$

11,355



$

13,224


Net earnings 




1,039




941




1,663




1,482


Cash dividends




(229)




(192)




(411)




(366)


Share repurchases




(1,046)




(863)




(1,858)




(1,836)


Balance at end of period



$

10,749



$

12,504



$

10,749



$

12,504






































(1) Under the two-class method, earnings per share is calculated using net earnings allocable to common shares, which is derived by reducing net earnings by the earnings allocable to participating securities. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $1,033 million for the three months ended August 1, 2014 and $935 million for the three months ended August 2, 2013. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $1,654 million for the six months ended August 1, 2014 and $1,472 million for the six months ended August 2, 2013.

 

 

Lowe's Companies, Inc.










Consolidated Statements of Comprehensive Income (Unaudited)










In Millions, Except Percentage Data
































Three Months Ended 



Six Months Ended





August 1, 2014



August 2, 2013



August 1, 2014



August 2, 2013





 Amount 

Percent



 Amount 

Percent



 Amount 

Percent



 Amount 

Percent

Net earnings



$

1,039

6.26


$

941

5.99


$

1,663

5.54


$

1,482

5.14



















Foreign currency translation adjustments - net of tax




4

0.02



(26)

(0.17)



12

0.04



(26)

(0.09)



















Other comprehensive income/(loss)




4

0.02



(26)

(0.17)



12

0.04



(26)

(0.09)



















Comprehensive income



$

1,043

6.28


$

915

5.82


$

1,675

5.58


$

1,456

5.05



















 

 

Lowe's Companies, Inc.

Consolidated Balance Sheets

In Millions, Except Par Value Data















 (Unaudited) 



 (Unaudited) 








August 1, 2014



August 2, 2013



January 31, 2014


Assets






















     Current assets:











     Cash and cash equivalents


$

1,039


$

1,085


$

391


     Short-term investments 



90



189



185


     Merchandise inventory - net



9,315



9,106



9,127


     Deferred income taxes - net 



276



224



252


     Other current assets



355



309



341













     Total current assets



11,075



10,913



10,296













     Property, less accumulated depreciation  



20,368



20,969



20,834


     Long-term investments 



382



306



279


     Other assets



1,312



1,220



1,323













     Total assets


$

33,137


$

33,408


$

32,732













Liabilities and shareholders' equity






















     Current liabilities:











     Short-term borrowings


$

-


$

-


$

386


     Current maturities of long-term debt



54



47



49


     Accounts payable



6,191



5,664



5,008


     Accrued compensation and employee benefits 


635



651



785


     Deferred revenue



1,039



985



892


     Other current liabilities



2,094



1,993



1,756













     Total current liabilities



10,013



9,340



8,876













     Long-term debt, excluding current maturities 


10,063



9,015



10,086


     Deferred income taxes - net  



187



390



291


     Deferred revenue - extended protection plans


743



733



730


     Other liabilities 



891



868



896













     Total liabilities



21,897



20,346



20,879













     Shareholders' equity:











     Preferred stock - $5 par value, none issued



-



-



-


     Common stock - $.50 par value; 











Shares issued and outstanding











August 1, 2014

991










August 2, 2013

1,063










January 31, 2014

1,030


496



532



515


     Capital in excess of par value



-



-



-


     Retained earnings



10,749



12,504



11,355


     Accumulated other comprehensive (loss)/income


(5)



26



(17)













     Total shareholders' equity



11,240



13,062



11,853













     Total liabilities and shareholders' equity

$

33,137


$

33,408


$

32,732













 

 

Lowe's Companies, Inc.

Consolidated Statements of Cash Flows (Unaudited)

In Millions








Six Months Ended



August 1, 2014


August 2, 2013

Cash flows from operating activities:





Net earnings 


$                   1,663


$                      1,482

Adjustments to reconcile net earnings to net cash provided by





operating activities:





Depreciation and amortization


798


767

Deferred income taxes


(137)


(56)

Loss on property and other assets - net


29


12

Loss on equity method investments


31


27

Share-based payment expense


53


44

Changes in operating assets and liabilities:





Merchandise inventory - net


(182)


(517)

Other operating assets


90


4

Accounts payable 


1,180


1,009

Other operating liabilities


398


584

Net cash provided by operating activities


3,923


3,356






Cash flows from investing activities:





Purchases of investments


(300)


(303)

Proceeds from sale/maturity of investments


293


224

Capital expenditures


(384)


(376)

Contributions to equity method investments - net


(151)


(113)

Proceeds from sale of property and other long-term assets


24


47

Other - net


(7)


3

Net cash used in investing activities


(525)


(518)






Cash flows from financing activities:





Net change in short-term borrowings


(386)


-

Repayment of long-term debt


(25)


(22)

Proceeds from issuance of common stock under
   share-based payment plans


68


100

Cash dividend payments


(369)


(352)

Repurchase of common stock


(2,051)


(2,027)

Other - net


12


8

Net cash used in financing activities


(2,751)


(2,293)






Effect of exchange rate changes on cash


1


(1)






Net increase in cash and cash equivalents


648


544

Cash and cash equivalents, beginning of period


391


541

Cash and cash equivalents, end of period


$                  1,039


$                    1,085






 

 

SOURCE Lowe's Companies, Inc.

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