MOORESVILLE, NC — Lowe’s Companies, Inc. (NYSE: LOW) today reported net earnings of $624 million for the quarter ended May 2, 2014, a 15.6 percent increase over the same period a year ago. Diluted earnings per share increased 24.5 percent to $0.61 from $0.49 in the first quarter of 2013.
Included in the above reported results are charges related to long-lived asset impairments, which reduced pre-tax earnings for the first quarter by $23 million and diluted earnings per share by $0.01. Also included in the above reported results is the impact of a lower tax rate in the first quarter. The lower tax rate, primarily the result of a settlement of prior year tax matters, contributed $0.04 to diluted earnings per share.
Sales for the first quarter increased 2.4 percent to $13.4 billion from $13.1 billion in the first quarter of 2013, and comparable sales increased 0.9 percent.
“We executed well during the quarter, despite an unexpectedly prolonged winter in many areas of the country,” commented Robert A. Niblock, Lowe’s chairman, president and CEO. “While poor weather dampened traffic and negatively impacted performance of exterior categories, results for indoor categories were solid. We effectively aligned inventory, staffing and marketing resources by climatic zone to best serve customers’ needs. I would like to thank our employees for their dedication to serving customers.
“Performance has improved in May which, together with our strengthening execution, gives us the confidence to reaffirm our sales and operating profit outlook for the year,” Niblock added.
Delivering on the commitment to return excess cash to shareholders, the company repurchased $850 million of stock under its share repurchase program and paid $186 million in dividends in the first quarter.
As of May 2, 2014, Lowe’s operated 1,836 home improvement and hardware stores in the United States, Canada and Mexicorepresenting 200.7 million square feet of retail selling space.
A conference call to discuss first quarter 2014 operating results is scheduled for today (Wednesday, May 21) at 9:00 am ET. The conference call will be available through a webcast and can be accessed by visiting Lowe’s website atwww.Lowes.com/investor and clicking on Lowe’s First 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 onLowes.com/investor until August 19, 2014.
Lowe’s Business Outlook
Fiscal Year 2014 (comparisons to fiscal year 2013; based on U.S. GAAP unless otherwise noted)
•Total sales are expected to increase approximately 5 percent.
•Comparable sales are expected to increase approximately 4 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.
The company raised its diluted earnings per share outlook for the year as a result of the lower tax rate, primarily the result of a settlement of prior year tax matters, offset by charges related to long-lived asset impairments in the first quarter.
| Lowe’s Companies, Inc. | ||||||||||
| Consolidated Statements of Current and Retained Earnings (Unaudited) | ||||||||||
| In Millions, Except Per Share and Percentage Data | ||||||||||
| Three Months Ended | ||||||||||
| May 2, 2014 | May 3, 2013 | |||||||||
| Current Earnings | Amount | Percent | Amount | Percent | ||||||
| Net sales | $ | 13,403 | 100.00 | $ | 13,088 | 100.00 | ||||
| Cost of sales | 8,645 | 64.50 | 8,533 | 65.20 | ||||||
| Gross margin | 4,758 | 35.50 | 4,555 | 34.80 | ||||||
| Expenses: | ||||||||||
| Selling, general and administrative | 3,319 | 24.76 | 3,222 | 24.62 | ||||||
| Depreciation | 373 | 2.78 | 352 | 2.69 | ||||||
| Interest – net | 124 | 0.93 | 113 | 0.86 | ||||||
| Total expenses | 3,816 | 28.47 | 3,687 | 28.17 | ||||||
| Pre-tax earnings | 942 | 7.03 | 868 | 6.63 | ||||||
| Income tax provision | 318 | 2.37 | 328 | 2.50 | ||||||
| Net earnings | $ | 624 | 4.66 | $ | 540 | 4.13 | ||||
| Weighted average common shares outstanding – basic | 1,015 | 1,088 | ||||||||
| Basic earnings per common share (1) | $ | 0.61 | $ | 0.49 | ||||||
| Weighted average common shares outstanding – diluted | 1,017 | 1,090 | ||||||||
| Diluted earnings per common share (1) | $ | 0.61 | $ | 0.49 | ||||||
| Cash dividends per share | $ | 0.18 | $ | 0.16 | ||||||
| Retained Earnings | ||||||||||
| Balance at beginning of period | $ | 11,355 | $ | 13,224 | ||||||
| Net earnings | 624 | 540 | ||||||||
| Cash dividends | (183) | (174) | ||||||||
| Share repurchases | (811) | (972) | ||||||||
| Balance at end of period | $ | 10,985 | $ | 12,618 | ||||||
| (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 $620 million for the three months ended May 2, 2014 and $537 million for the three months ended May 3, 2013. | ||||||||||
| Lowe’s Companies, Inc. | ||||||||||
| Consolidated Statements of Comprehensive Income (Unaudited) | ||||||||||
| In Millions, Except Percentage Data | ||||||||||
| Three Months Ended | ||||||||||
| May 2, 2014 | May 3, 2013 | |||||||||
| Amount | Percent | Amount | Percent | |||||||
| Net earnings | $ | 624 | 4.66 | $ | 540 | 4.13 | ||||
| Foreign currency translation adjustments – net of tax | 8 | 0.06 | - | - | ||||||
| Other comprehensive income | 8 | 0.06 | - | - | ||||||
| Comprehensive income | $ | 632 | 4.72 | $ | 540 | 4.13 | ||||
| Lowe’s Companies, Inc. | ||||||||||
| Consolidated Balance Sheets | ||||||||||
| In Millions, Except Par Value Data | ||||||||||
| (Unaudited) | (Unaudited) | |||||||||
| May 2, 2014 | May 3, 2013 | January 31, 2014 | ||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 658 | $ | 1,081 | $ | 391 | ||||
| Short-term investments | 110 | 118 | 185 | |||||||
| Merchandise inventory – net | 10,515 | 10,274 | 9,127 | |||||||
| Deferred income taxes – net | 283 | 228 | 252 | |||||||
| Other current assets | 386 | 313 | 341 | |||||||
| Total current assets | 11,952 | 12,014 | 10,296 | |||||||
| Property, less accumulated depreciation | 20,617 | 21,257 | 20,834 | |||||||
| Long-term investments | 360 | 272 | 279 | |||||||
| Other assets | 1,300 | 1,188 | 1,323 | |||||||
| Total assets | $ | 34,229 | $ | 34,731 | $ | 32,732 | ||||
| Liabilities and shareholders’ equity | ||||||||||
| Current liabilities: | ||||||||||
| Short-term borrowings | $ | - | $ | - | $ | 386 | ||||
| Current maturities of long-term debt | 47 | 47 | 49 | |||||||
| Accounts payable | 7,051 | 7,041 | 5,008 | |||||||
| Accrued compensation and employee benefits | 501 | 467 | 785 | |||||||
| Deferred revenue | 1,055 | 1,008 | 892 | |||||||
| Other current liabilities | 2,160 | 1,876 | 1,756 | |||||||
| Total current liabilities | 10,814 | 10,439 | 8,876 | |||||||
| Long-term debt, excluding current maturities | 10,080 | 9,026 | 10,086 | |||||||
| Deferred income taxes – net | 261 | 440 | 291 | |||||||
| Deferred revenue – extended protection plans | 730 | 717 | 730 | |||||||
| Other liabilities | 862 | 857 | 896 | |||||||
| Total liabilities | 22,747 | 21,479 | 20,879 | |||||||
| Shareholders’ equity: | ||||||||||
| Preferred stock – $5 par value, none issued | - | - | - | |||||||
| Common stock – $.50 par value; | ||||||||||
| Shares issued and outstanding | ||||||||||
| May 2, 2014 | 1,012 | |||||||||
| May 3, 2013 | 1,088 | |||||||||
| January 31, 2014 | 1,030 | 506 | 544 | 515 | ||||||
| Capital in excess of par value | - | 38 | - | |||||||
| Retained earnings | 10,985 | 12,618 | 11,355 | |||||||
| Accumulated other comprehensive (loss)/income | (9) | 52 | (17) | |||||||
| Total shareholders’ equity | 11,482 | 13,252 | 11,853 | |||||||
| Total liabilities and shareholders’ equity | $ | 34,229 | $ | 34,731 | $ | 32,732 | ||||
| Lowe’s Companies, Inc. | ||||
| Consolidated Statements of Cash Flows (Unaudited) | ||||
| In Millions | ||||
| Three Months Ended | ||||
| May 2, 2014 | May 3, 2013 | |||
| Cash flows from operating activities: | ||||
| Net earnings | $ 624 | $ 540 | ||
| Adjustments to reconcile net earnings to net cash provided by | ||||
| operating activities: | ||||
| Depreciation and amortization | 398 | 376 | ||
| Deferred income taxes | (67) | (26) | ||
| Loss on property and other assets – net | 24 | 5 | ||
| Loss on equity method investments | 17 | 15 | ||
| Share-based payment expense | 28 | 18 | ||
| Changes in operating assets and liabilities: | ||||
| Merchandise inventory – net | (1,384) | (1,674) | ||
| Other operating assets | 44 | (5) | ||
| Accounts payable | 2,041 | 2,381 | ||
| Other operating liabilities | 269 | 362 | ||
| Net cash provided by operating activities | 1,994 | 1,992 | ||
| Cash flows from investing activities: | ||||
| Purchases of investments | (163) | (84) | ||
| Proceeds from sale/maturity of investments | 157 | 89 | ||
| Capital expenditures | (194) | (196) | ||
| Contributions to equity method investments – net | (91) | (73) | ||
| Proceeds from sale of property and other long-term assets | 16 | 6 | ||
| Other – net | (5) | (5) | ||
| Net cash used in investing activities | (280) | (263) | ||
| Cash flows from financing activities: | ||||
| Net decrease in short-term borrowings | (386) | - | ||
| Repayment of long-term debt | (12) | (11) | ||
| Proceeds from issuance of common stock under share-based payment plans |
24 | 40 | ||
| Cash dividend payments | (186) | (178) | ||
| Repurchase of common stock | (910) | (1,046) | ||
| Other – net | 23 | 5 | ||
| Net cash used in financing activities | (1,447) | (1,190) | ||
| Effect of exchange rate changes on cash | - | 1 | ||
| Net increase in cash and cash equivalents | 267 | 540 | ||
| Cash and cash equivalents, beginning of period | 391 | 541 | ||
| Cash and cash equivalents, end of period | $ 658 | $ 1,081 | ||
Source: Lowe’s Companies, Inc.
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