x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the quarterly period ended May 5,
2006
|
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
|
x
|
Yes
|
o
|
No
|
Large
accelerated filer x
|
Accelerated
filer o
|
Non-accelerated
filer o
|
o
|
Yes
|
x
|
No
|
CLASS
|
OUTSTANDING
AT JUNE 2, 2006
|
|
Common
Stock, $.50 par value
|
775,378,752
|
LOWE’S
COMPANIES, INC.
-
INDEX -
|
|||
PART I - Financial Information |
Page
No.
|
||
Item 1. | Financial Statements | ||
Consolidated Balance Sheets (Unaudited) - May 5, 2006, April 29, 2005, as restated, and February 3, 2006, as restated |
3
|
||
Consolidated Statements of Current and Retained Earnings (Unaudited) - Three months ended May 5, 2006 and April 29, 2005, as restated |
4
|
||
Consolidated Statements of Cash Flows (Unaudited) - Three months ended May 5, 2006 and April 29, 2005, as restated |
5
|
||
Notes to Consolidated Financial Statements (Unaudited) |
6-13
|
||
Report of Independent Registered Public Accounting Firm |
14
|
||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
15-20
|
|
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
21
|
|
Item 4. | Controls and Procedures |
21
|
|
PART II - Other Information | |||
Item 1A. | Risk Factors |
21
|
|
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
21
|
|
Item 6. | Exhibits |
22
|
|
Signature |
23
|
||
Exhibit Index |
24
|
Lowe's
Companies, Inc.
|
|||||||||||||
In
Millions, Except Par Value Data
|
|||||||||||||
May
5,
|
April
29, 2005
|
February
3, 2006
|
|||||||||||
2006
|
As
Restated
|
As
Restated
|
|||||||||||
Assets
|
|||||||||||||
Current
assets:
|
|||||||||||||
Cash
and cash equivalents
|
$
|
1,140
|
$
|
787
|
$
|
423
|
|||||||
Short-term
investments
|
517
|
439
|
453
|
||||||||||
Accounts
receivable - net
|
20
|
18
|
18
|
||||||||||
Merchandise
inventory - net
|
7,817
|
6,618
|
6,635
|
||||||||||
Deferred
income taxes - net
|
175
|
136
|
155
|
||||||||||
Other
current assets
|
119
|
89
|
104
|
||||||||||
Total
current assets
|
9,788
|
8,087
|
7,788
|
||||||||||
Property,
less accumulated depreciation
|
16,760
|
14,310
|
16,354
|
||||||||||
Long-term
investments
|
277
|
161
|
294
|
||||||||||
Other
assets
|
203
|
192
|
203
|
||||||||||
|
|||||||||||||
Total
assets
|
$
|
27,028
|
$
|
22,750
|
$
|
24,639
|
|||||||
Liabilities
and shareholders' equity
|
|||||||||||||
Current
liabilities:
|
|||||||||||||
Current
maturities of long-term debt
|
$
|
33
|
$
|
631
|
$
|
32
|
|||||||
Accounts
payable
|
4,553
|
3,471
|
2,832
|
||||||||||
Accrued
salaries and wages
|
313
|
211
|
424
|
||||||||||
Self-insurance
liabilities
|
613
|
496
|
571
|
||||||||||
Deferred
revenue
|
853
|
689
|
709
|
||||||||||
Other
current liabilities
|
1,615
|
1,309
|
1,264
|
||||||||||
Total
current liabilities
|
7,980
|
6,807
|
5,832
|
||||||||||
Long-term
debt, excluding current maturities
|
3,446
|
3,058
|
3,499
|
||||||||||
Deferred
income taxes
|
717
|
702
|
735
|
||||||||||
Other
long-term liabilities
|
304
|
208
|
277
|
||||||||||
|
|||||||||||||
Total
liabilities
|
12,447
|
10,775
|
10,343
|
||||||||||
Shareholders'
equity:
|
|||||||||||||
Preferred
stock - $5 par value, none issued
|
-
|
-
|
-
|
||||||||||
Common
stock - $.50 par value;
|
|||||||||||||
Shares
issued and outstanding
|
|||||||||||||
May
5, 2006
|
777
|
||||||||||||
April
29, 2005
|
773
|
||||||||||||
February
3, 2006
|
784
|
389
|
387
|
392
|
|||||||||
Capital
in excess of par value
|
1,205
|
1,437
|
1,712
|
||||||||||
Retained
earnings
|
12,985
|
10,152
|
12,191
|
||||||||||
Accumulated
other comprehensive income (loss)
|
2
|
(1
|
)
|
1
|
|||||||||
Total
shareholders' equity
|
14,581
|
11,975
|
14,296
|
||||||||||
Total
liabilities and shareholders' equity
|
$
|
27,028
|
$
|
22,750
|
$
|
24,639
|
|||||||
Lowe's
Companies, Inc.
|
|||||||||||||
In
Millions, Except Per Share Data
|
|||||||||||||
Three
Months Ended
|
|||||||||||||
April
29, 2005
|
|||||||||||||
May
5, 2006
|
As
Restated
|
||||||||||||
Current
Earnings
|
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||
Net
sales
|
$
|
11,921
|
100.00
|
$
|
9,913
|
100.00
|
|||||||
Cost
of sales
|
7,752
|
65.03
|
6,515
|
65.72
|
|||||||||
Gross
margin
|
4,169
|
34.97
|
3,398
|
34.28
|
|||||||||
Expenses:
|
|||||||||||||
Selling,
general and administrative
|
2,467
|
20.69
|
2,136
|
21.55
|
|||||||||
Store
opening costs
|
25
|
0.21
|
25
|
0.25
|
|||||||||
Depreciation
|
274
|
2.30
|
237
|
2.39
|
|||||||||
Interest
|
35
|
0.30
|
47
|
0.47
|
|||||||||
Total
expenses
|
2,801
|
23.50
|
2,445
|
24.66
|
|||||||||
Pre-tax
earnings
|
1,368
|
11.47
|
953
|
9.62
|
|||||||||
Income
tax provision
|
527
|
4.41
|
367
|
3.70
|
|||||||||
Net
earnings
|
$
|
841
|
7.06
|
$
|
586
|
5.92
|
|||||||
Weighted
average shares outstanding - basic
|
778
|
774
|
|||||||||||
Basic
earnings per share
|
$
|
1.08
|
$
|
0.76
|
|||||||||
Weighted
average shares outstanding - diluted
|
795
|
805
|
|||||||||||
Diluted
earnings per share
|
$
|
1.06
|
$
|
0.73
|
|||||||||
Cash
dividends per share
|
$
|
0.06
|
$
|
0.04
|
|||||||||
Retained
Earnings
|
|||||||||||||
Balance
at beginning of period, as restated
|
$
|
12,191
|
$
|
9,597
|
|||||||||
Net
earnings
|
841
|
586
|
|||||||||||
Cash
dividends
|
(47
|
)
|
(31
|
)
|
|||||||||
Balance
at end of period
|
$
|
12,985
|
$
|
10,152
|
|||||||||
Lowe's
Companies, Inc.
|
|||||||
In
Millions
|
|||||||
Three
Months Ended
|
|||||||
April
29, 2005
|
|||||||
May
5, 2006
|
As
Restated
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
earnings
|
$
|
841
|
$
|
586
|
|||
Adjustments
to reconcile net earnings to net cash provided by
|
|||||||
operating
activities:
|
|||||||
Depreciation
and amortization
|
290
|
254
|
|||||
Deferred
income taxes
|
(38
|
)
|
(50
|
)
|
|||
Loss
on disposition/writedown of fixed and other assets
|
8
|
9
|
|||||
Share-based
payment expense
|
11
|
16
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Merchandise
inventory - net
|
(1,182
|
)
|
(769
|
)
|
|||
Other
operating assets
|
(17
|
)
|
(23
|
)
|
|||
Accounts
payable
|
1,721
|
776
|
|||||
Other
operating liabilities
|
476
|
399
|
|||||
Net
cash provided by operating activities
|
2,110
|
1,198
|
|||||
Cash
flows from investing activities:
|
|||||||
Purchases
of short-term investments
|
(146
|
)
|
(155
|
)
|
|||
Proceeds
from sale/maturity of short-term investments
|
143
|
38
|
|||||
Purchases
of long-term investments
|
(72
|
)
|
(56
|
)
|
|||
Proceeds
from sale/maturity of long-term investments
|
26
|
-
|
|||||
Increase
in other long-term assets
|
(3
|
)
|
(21
|
)
|
|||
Fixed
assets acquired
|
(732
|
)
|
(624
|
)
|
|||
Proceeds
from the sale of fixed and other long-term assets
|
9
|
16
|
|||||
Net
cash used in investing activities
|
(775
|
)
|
(802
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Repayment
of long-term debt
|
(7
|
)
|
(8
|
)
|
|||
Proceeds
from stock options exercised
|
33
|
35
|
|||||
Cash
dividend payments
|
(47
|
)
|
(31
|
)
|
|||
Repurchase
of common stock
|
(600
|
)
|
(135
|
)
|
|||
Excess
tax benefits of share-based payments
|
3
|
-
|
|||||
Net
cash used in financing activities
|
(618
|
)
|
(139
|
)
|
|||
Net
increase in cash and cash equivalents
|
717
|
257
|
|||||
Cash
and cash equivalents, beginning of period
|
423
|
530
|
|||||
Cash
and cash equivalents, end of period
|
$
|
1,140
|
$
|
787
|
|||
Consolidated
Balance Sheet
|
||||||||||
April
29,
|
April
29,
|
|||||||||
2005
|
2005
|
|||||||||
(In
Millions)
|
As
Previously Reported (1)
|
Adjustments
|
As
Restated
|
|||||||
Cash
and cash equivalents
|
$
|
911
|
$
|
(124
|
)
|
$
|
787
|
|||
Short-term
investments
|
315
|
124
|
439
|
|||||||
Merchandise
inventory - net
|
6,686
|
(68
|
)
|
6,618
|
||||||
Deferred
income taxes - net
|
109
|
27
|
136
|
|||||||
Total
current assets
|
8,128
|
(41
|
)
|
8,087
|
||||||
Total
assets
|
$
|
22,791
|
$
|
(41
|
)
|
$
|
22,750
|
|||
Retained
earnings
|
10,193
|
(41
|
)
|
10,152
|
||||||
Total
shareholders' equity
|
12,016
|
(41
|
)
|
11,975
|
||||||
Total
liabilities and shareholders' equity
|
$
|
22,791
|
$
|
(41
|
)
|
$
|
22,750
|
Consolidated
Balance Sheet
|
||||||||||
February
3,
|
February
3,
|
|||||||||
2006
|
2006
|
|||||||||
(In
Millions)
|
As
Previously Reported
|
Adjustments
|
As
Restated
|
|||||||
Merchandise
inventory - net
|
$
|
6,706
|
$
|
(71
|
)
|
$
|
6,635
|
|||
Deferred
income taxes - net
|
127
|
28
|
155
|
|||||||
Total
current assets
|
7,831
|
(43
|
)
|
7,788
|
||||||
Total
assets
|
$
|
24,682
|
$
|
(43
|
)
|
$
|
24,639
|
|||
Retained
earnings
|
12,234
|
(43
|
)
|
12,191
|
||||||
Total
shareholders' equity
|
14,339
|
(43
|
)
|
14,296
|
||||||
Total
liabilities and shareholders' equity
|
$
|
24,682
|
$
|
(43
|
)
|
$
|
24,639
|
Consolidated
Statement of Earnings
|
||||||||||
April
29,
|
April
29,
|
|||||||||
Three
Months Ended
|
2005
|
2005
|
||||||||
(In
Millions, Except Per Share Data)
|
As
Previously Reported (1)
|
Adjustments
|
As
Restated
|
|||||||
Cost
of sales
|
$
|
6,509
|
$
|
6
|
$
|
6,515
|
||||
Gross
margin
|
3,404
|
(6
|
)
|
3,398
|
||||||
Pre-tax
earnings
|
959
|
(6
|
)
|
953
|
||||||
Income
tax provision
|
369
|
(2
|
)
|
367
|
||||||
Net
earnings
|
$
|
590
|
$
|
(4
|
)
|
$
|
586
|
|||
Basic
earnings per share
|
$
|
0.76
|
$
|
-
|
$
|
0.76
|
||||
Diluted
earnings per share
|
$
|
0.74
|
$
|
(0.01
|
)
|
$
|
0.73
|
Consolidated
Statement of Shareholders' Equity
|
||||||||||
January
28,
|
January
28,
|
|||||||||
2005
|
2005
|
|||||||||
(In
Millions)
|
As
Previously Reported
|
Adjustments
|
As
Restated
|
|||||||
Retained
Earnings
|
$
|
9,634
|
$
|
(37
|
)(2)
|
$
|
9,597
|
Three
Months Ended
|
|||||||
(In
Millions, Except Per Share Data)
|
May
5, 2006
|
April
29, 2005
|
|||||
Net
earnings
|
$
|
841
|
$
|
586
|
|||
Weighted
average shares outstanding
|
778
|
774
|
|||||
Basic
earnings per share
|
$
|
1.08
|
$
|
0.76
|
|||
Diluted
earnings per share:
|
|||||||
Net
earnings
|
$
|
841
|
$
|
586
|
|||
Net
earnings adjustment for interest on convertible debt, net of
tax
|
1
|
3
|
|||||
Net
earnings, as adjusted
|
$
|
842
|
$
|
589
|
|||
Weighted
average shares outstanding
|
778
|
774
|
|||||
Dilutive
effect of stock options
|
5
|
5
|
|||||
Dilutive
effect of convertible debt
|
12
|
26
|
|||||
Weighted
average shares, as adjusted
|
795
|
805
|
|||||
Diluted
earnings per share
|
$
|
1.06
|
$
|
0.73
|
Three
Months Ended
|
|||||||
(In
Millions)
|
May
5,
2006
|
April
29,
2005
|
|||||
Cash
paid for interest (net of amount capitalized)
|
$
|
69
|
$
|
42
|
|||
Cash
paid for income taxes
|
$
|
228
|
$
|
150
|
|||
Non-cash
investing and financing activities:
|
|||||||
Conversions
of long-term debt to equity
|
$
|
46
|
$
|
6
|
|||
Non-cash
fixed asset acquisitions, including assets acquired under capital
lease
|
$
|
11
|
$
|
41
|
Three
Months Ended
|
||||
(In
Millions, Except Per Share Data)
|
April
29, 2005
|
|||
Net
earnings, as reported
|
$
|
586
|
||
Add:
Share-based payment expense included in net earnings, net of related
tax
effects
|
10
|
|||
Deduct:
Total share-based payment expense determined under the fair-value-based
method for all awards, net of related tax effects
|
(12
|
)
|
||
Pro
forma net earnings
|
$
|
584
|
||
Earnings
per share:
|
||||
Basic
- as reported
|
$
|
0.76
|
||
Basic
- pro forma
|
$
|
0.75
|
||
Diluted
- as reported
|
$
|
0.73
|
||
Diluted
- pro forma
|
$
|
0.73
|
Three
Months Ended
|
||||
May
5,
2006
|
April
29,
2005
|
|||
Assumptions
used:
|
||||
Expected
volatility
|
23.6%
- 29.4%
|
30.8%
- 34.1%
|
||
Weighted
average expected volatility
|
26.9%
|
31.6%
|
||
Expected
dividend yield
|
0.27%
- 0.28%
|
0.23%
- 0.24%
|
||
Weighted
average dividend yield
|
0.27%
|
0.23%
|
||
Risk-free
interest rate
|
4.66%
- 4.68%
|
3.76%
- 3.89%
|
||
Weighted
average risk-free interest rate
|
4.67%
|
3.79%
|
||
Expected
term, in years
|
3
-
4
|
3
-
4
|
||
Weighted
average expected term, in years
|
3.57
|
3.24
|
Shares
(In
Thousands)
|
Weighted-Average
Exercise Price Per Share
|
Weighted-Average
Remaining Term
(In
Years)
|
Aggregate
Intrinsic Value
(In
Thousands)
|
||||||||||
Outstanding
at February 3, 2006
|
15,297
|
$
|
44.98
|
||||||||||
Granted
|
3,060
|
68.32
|
|||||||||||
Canceled
or expired
|
(129
|
)
|
61.59
|
||||||||||
Exercised
|
(845
|
)
|
39.73
|
||||||||||
Outstanding
at May 5, 2006
|
17,383
|
49.23
|
4.2
|
$
|
288,966
|
||||||||
Vested
and expected to vest at May 5, 2006 (1)
|
16,669
|
48.82
|
4.1
|
$
|
282,733
|
||||||||
Exercisable
at May 5, 2006
|
11,549
|
$
|
42.19
|
3.2
|
$
|
267,181
|
Shares
|
Weighted-Average
Grant-Date
Fair Value
Per
Share
|
||||||
Nonvested
at February 3, 2006
|
297,915
|
$
|
58.50
|
||||
Granted
|
442,410
|
68.32
|
|||||
Canceled
or expired
|
(2,783
|
)
|
63.33
|
||||
Nonvested
at May 5, 2006
|
737,542
|
$
|
64.37
|
Shares
|
Weighted-Average
Grant-Date
Fair Value
Per
Share
|
||||||
Nonvested
at February 3, 2006
|
882,656
|
$
|
62.34
|
||||
Canceled
or expired
|
(10,721
|
)
|
59.69
|
||||
Nonvested
at May 5, 2006
|
871,935
|
$
|
62.38
|
Shares
|
Weighted-Average
Grant-Date
Fair Value
Per
Share
|
||||||
Nonvested
at February 3, 2006
|
265,000
|
$
|
40.31
|
||||
Vested
|
60,000
|
39.30
|
|||||
Nonvested
at May 5, 2006
|
205,000
|
$
|
40.61
|
Three
Months Ended
|
|||||||
May
5, 2006
|
April
29, 2005
|
||||||
Basic
weighted average shares outstanding - pro forma
|
1,557
|
1,548
|
|||||
Basic
earnings per share - pro forma
|
$
|
0.54
|
$
|
0.38
|
|||
Diluted
weighted average shares outstanding - pro forma
|
1,590
|
1,610
|
|||||
Dilued
earnings per share - pro forma
|
$
|
0.53
|
$
|
0.37
|
Three
Months Ended
|
Basis
Point Increase / (Decrease) in Percentage of Net Sales from Prior
Period
|
|
Percentage
Increase / (Decrease) in Dollar Amounts from Prior
Period
|
||||||||||
May
5, 2006
|
April
29, 2005
|
2006
vs. 2005
|
2006
vs. 2005
|
||||||||||
Net
sales
|
100.00
|
%
|
100.00
|
%
|
N/A
|
20
|
%
|
||||||
Gross
margin
|
34.97
|
34.28
|
69
|
23
|
|||||||||
Expenses:
|
|||||||||||||
Selling,
general and administrative
|
20.69
|
21.55
|
(86
|
)
|
15
|
||||||||
Store
opening costs
|
0.21
|
0.25
|
(4
|
)
|
-
|
||||||||
Depreciation
|
2.30
|
2.39
|
(9
|
)
|
16
|
||||||||
Interest
|
0.30
|
0.47
|
(17
|
)
|
(26
|
)
|
|||||||
Total
expenses
|
23.50
|
24.66
|
(116
|
)
|
15
|
||||||||
Pre-tax
earnings
|
11.47
|
9.62
|
185
|
44
|
|||||||||
Income
tax provision
|
4.41
|
3.70
|
71
|
44
|
|||||||||
Net
earnings
|
7.06
|
%
|
5.92
|
%
|
114
|
44
|
%
|
Three
Months Ended
|
|||||||
Other
Metrics
|
May
5, 2006
|
April
29, 2005
|
|||||
Comparable
store sales increases 1
|
5.7
|
%
|
3.8
|
%
|
|||
Customer
transactions (in millions)
|
169
|
149
|
|||||
Average
ticket 2
|
$
|
70.74
|
$
|
66.33
|
|||
At
end of period:
|
|||||||
Number
of stores
|
1,258
|
1,112
|
|||||
Sales
floor square feet (in millions)
|
143
|
127
|
|||||
Average
store size square feet (in thousands)
|
114
|
114
|
Current
Debt Ratings
|
S&P
|
Moody’s
|
Fitch
|
Commercial
paper
|
A1
|
P1
|
F1+
|
Senior
debt
|
A+
|
A2
|
A+
|
Outlook
|
Stable
|
Positive
|
Stable
|
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
(2)
|
|
Dollar
Value of Shares that May Yet Be Purchased Under the Plans or Programs
(2)
|
|
|||||
February
4, 2006 - March 3, 2006
|
1.3
|
$
|
67.88
|
1.3
|
$
|
1,140
|
|||||||
March
4, 2006 - April 7, 2006
|
7.7
|
66.88
|
7.7
|
626
|
|||||||||
April
8, 2006 - May 5, 2006
|
-
|
-
|
-
|
626
|
|||||||||
As
of May 5, 2006
|
9.0
|
$
|
67.02
|
9.0
|
$
|
626
|
|||||||
(1) |
During
the first quarter of fiscal 2006, the Company repurchased an aggregate
of
8,949,000 shares of its common stock pursuant to the Program (as
defined
in note 2 below). 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
January 28, 2005, the Board of Directors approved a $1 billion share
repurchase program and subsequently, on January 27, 2006, the Board
of
Directors increased the authorization under the share repurchase
program
by an additional $1 billion (the “Program”). The repurchase
authority under the Program extends through fiscal
2007.
|
LOWE'S
COMPANIES, INC.
|
||
June
14, 2006
Date
|
/s/Matthew
V. Hollifield
Matthew
V. Hollifield
Senior
Vice President and Chief Accounting
Officer
|
Exhibit
No.
|
|
Description
|
|
|
|
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
|