Lowe’s Companies, Inc.
Consolidated Statements of Current and Retained Earnings (Unaudited)
In Millions, Except Per Share and Percentage Data
Three Months Ended
August 2, 2019
Current Earnings
Net sales
Cost of sales
Amount
$ 20,992
14,252
Gross margin
% Sales
Six Months Ended
August 3, 2018
Amount
100.00 $ 20,888
67.89
14,003
% Sales
August 2, 2019
Amount
100.00 $ 38,733
67.04
26,412
% Sales
August 3, 2018
Amount
% Sales
100.00 $ 38,247
68.19
25,615
100.00
66.97
6,740
32.11
6,885
32.96
12,321
31.81
12,632
33.03
4,048
19.29
4,386
20.99
7,909
20.42
8,319
21.75
311
1.48
336
1.61
614
1.58
685
1.79
2,381
11.34
2,163
10.36
3,798
9.81
3,628
9.49
169
0.80
153
0.74
331
0.86
313
0.82
2,212
10.54
2,010
9.62
3,467
8.95
3,315
8.67
536
2.56
490
2.34
745
1.92
806
2.11
2,509
6.56
Expenses:
Selling, general and administrative
Depreciation and amortization
Operating income
Interest - net
Pre-tax earnings
Income tax provision
Net earnings
$
1,676
Weighted average common shares outstanding
- basic
Basic earnings per common share (1)
$
781
2.14
Weighted average common shares outstanding
- diluted
Diluted earnings per common share (1)
$
Cash dividends per share
7.98 $
1,520
7.28 $
813
$
1.86
2.14
$
$
0.55
$
3,095
—
2,722
788
$
3.44
1.86
$
$
0.48
$
5,405
—
781
7.03 $
819
$
3.05
3.44
$
3.05
$
1.03
$
0.89
$
3,452
(263)
$
5,425
33
814
789
820
Retained Earnings
Balance at beginning of period
Cumulative effect of accounting change
Net earnings
1,676
Cash dividends declared
Share repurchases
Balance at end of period
(1)
1,520
(428)
(1,904)
$
2,722
(390)
(1,018)
2,439
$
2,509
(810)
(728)
(2,662)
5,517
$
(1,722)
2,439
$
5,517
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 $1,670 million for the three months ended August 2, 2019 and $1,515 million for the three months
ended August 3, 2018. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $2,713
million for the six months ended August 2, 2019 and $2,500 million for the six months ended August 3, 2018.
Lowe’s Companies, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
In Millions, Except Percentage Data
Three Months Ended
August 2, 2019
Amount
Net earnings
Foreign currency translation adjustments net of tax
Other
$
Other comprehensive income/(loss)
Comprehensive income
$
1,676
% Sales
0.33
—
—
69
0.33
1,745
August 3, 2018
Amount
7.98 $
69
Six Months Ended
8.31 $
1,520
(70)
—
(70)
1,450
% Sales
August 2, 2019
Amount
7.28 $
(0.34)
—
(0.34)
6.94 $
2,722
% Sales
August 3, 2018
Amount
7.03 $
2,509
36
0.09
(154)
(14)
(0.04)
—
22
0.05
2,744
7.08 $
(154)
2,355
% Sales
6.56
(0.40)
—
(0.40)
6.16
Lowe’s Companies, Inc.
Consolidated Balance Sheets
In Millions, Except Par Value Data
(Unaudited)
August 2, 2019
(Unaudited)
August 3, 2018
February 1, 2019
Assets
Current assets:
Cash and cash equivalents
$
Short-term investments
Merchandise inventory - net
Other current assets
Total current assets
Property, less accumulated depreciation
Operating lease right-of-use assets
1,796 $
2,251 $
511
275
391
218
13,730
11,885
12,561
995
956
938
16,796
18,203
15,483
19,172
14,228
18,432
3,967
—
—
Long-term investments
179
87
256
Deferred income taxes - net
512
249
294
Goodwill
303
1,271
303
Other assets
735
843
995
40,695 $
37,105 $
Total assets
$
34,508
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings
$
Current maturities of long-term debt
— $
1,009
Current operating lease liabilities
Accounts payable
Accrued compensation and employee benefits
Deferred revenue
Other current liabilities
— $
894
722
1,110
492
—
—
9,499
8,984
8,279
717
671
662
1,324
1,449
1,299
2,794
2,583
2,425
15,835
16,538
14,581
14,937
14,497
14,391
4,055
—
—
Deferred revenue - extended protection plans
868
828
827
Other liabilities
759
978
1,149
Total liabilities
38,055
31,324
30,864
—
—
—
388
406
401
—
—
—
2,439
5,517
3,452
Total current liabilities
Long-term debt, excluding current maturities
Noncurrent operating lease liabilities
Shareholders' equity:
Preferred stock - $5 par value, none issued
Common stock - $0.50 par value;
Shares issued and outstanding
August 2, 2019
776
August 3, 2018
811
February 1, 2019
801
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
(187)
Total shareholders' equity
Total liabilities and shareholders' equity
2,640
$
40,695 $
(142)
5,781
37,105 $
(209)
3,644
34,508
Lowe’s Companies, Inc.
Consolidated Statements of Cash Flows (Unaudited)
In Millions
Six Months Ended
August 2, 2019
Cash flows from operating activities:
Net earnings
$
August 3, 2018
2,722 $
2,509
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
684
751
Noncash lease expense
228
—
Deferred income taxes
(121)
(75)
Loss on property and other assets - net
38
261
Loss on cost method and equity method investments
12
3
Share-based payment expense
51
62
Changes in operating assets and liabilities:
Merchandise inventory - net
(1,153)
Other operating assets
(116)
Accounts payable
1,202
Other operating liabilities
Net cash provided by operating activities
(549)
(140)
2,408
36
557
3,583
5,787
Cash flows from investing activities:
Purchases of investments
(245)
Proceeds from sale/maturity of investments
272
Capital expenditures
(980)
1,012
(526)
(543)
Proceeds from sale of property and other long-term assets
42
30
Other - net
(1)
1
Net cash used in investing activities
(458)
(480)
(722)
(1,137)
Cash flows from financing activities:
Net change in short-term borrowings
Net proceeds from issuance of long-term debt
2,972
Repayment of long-term debt
Proceeds from issuance of common stock under share-based payment plans
Cash dividend payments
Repurchase of common stock
Other - net
Net cash used in financing activities
Effect of exchange rate changes on cash
Net increase in cash and cash equivalents, including cash
classified within current assets held for sale
Less: Net decrease in cash classified within current assets
held for sale
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
$
—
(629)
(24)
72
50
(767)
(678)
(2,770)
(1,846)
(7)
(2)
(1,851)
(3,637)
(1)
(7)
1,273
1,663
12
—
1,285
1,663
511
588
1,796 $
2,251
Lowe’s Companies, Inc.
Non-GAAP Financial Measures Reconciliation (Unaudited)
To provide additional transparency, the company has presented the non-GAAP financial measure of adjusted earnings per share
to exclude the impact of certain discrete items, as further described below, not contemplated in Lowe’s original Business
Outlook for 2019 to assist the user in understanding performance relative to that Business Outlook.
In addition, as part of its Business Outlook for 2019, the company has provided a comparison to the non-GAAP financial
measure of adjusted operating margin for fiscal 2018, which excludes the impact of certain discrete items, as further described
below, not contemplated in Lowe's original Business Outlook for 2018, to assist the user in further understanding the
company's Business Outlook for fiscal 2019 in comparison to fiscal 2018.
The company believes these non-GAAP financial measures provide useful insight for analysts and investors in evaluating the
company’s operational performance.
The company previously announced its intention to exit its Mexico retail operations and had planned to sell the operating
business. However, in the first quarter of 2019, after an extensive market evaluation, the decision was made to instead sell the
assets of the business. During the second quarter, the Company recognized $14 million of pre-tax operating costs for the
ongoing wind-down of the Mexico retail operations which were offset by $3 million tax benefit (Mexico adjustments).
During fiscal 2018, the company recognized the following pre-tax charges, not contemplated in the company's original
Business Outlook for 2018:
•
During the fourth quarter of fiscal 2018, the company recorded $952 million of goodwill impairment associated with
its Canadian operations (Canadian goodwill impairment);
•
On August 17, 2018, the company committed to exit its Orchard Supply Hardware operations. As a result, the
company recognized pre-tax charges of $230 million during the second quarter of fiscal 2018 associated with longlived asset impairments and discontinued projects. During the third quarter of fiscal 2018, the company recognized
pre-tax charges of $123 million associated with accelerated depreciation and amortization, severance and lease
obligations. During the fourth quarter of fiscal 2018, the company recognized additional pre-tax charges of $208
million primarily related to lease obligations. Total pre-tax charges for fiscal year 2018 were $561 million (Orchard
Supply Hardware charges);
•
On October 31, 2018, the company committed to close 20 under-performing stores across the U.S. and 31 locations
in Canada, including 27 under-performing stores. As a result, the company recognized pre-tax charges of $121
million during the third quarter of fiscal 2018 associated with long-lived asset impairment and severance obligations.
During the fourth quarter of fiscal 2018, the company recognized additional pre-tax charges of $150 million, primarily
associated with severance and lease obligation costs, as well as accelerated depreciation. Total pre-tax charges for
fiscal year 2018 were $271 million (U.S. and Canada store closure charges);
•
On November 20, 2018, the company announced its plans to exit retail operations in Mexico and is exploring strategic
alternatives. During the third quarter, $22 million of long-lived asset impairment was recognized on certain assets
in Mexico as a result of the strategic evaluation. During the fourth quarter, an additional $222 million of impairment
was recognized. Total charges for fiscal year 2018 were $244 million (Mexico impairment charges);
•
During the third quarter of fiscal 2018, the company identified certain non-core activities within its U.S. home
improvement business to exit, including Alacrity Renovation Services and Iris Smart Home. As a result, during the
third quarter of 2018, the company recognized pre-tax charges of $14 million associated with long-lived asset
impairment and inventory write-down. During the fourth quarter of fiscal 2018, the company recognized additional
pre-tax charges of $32 million. Total pre-tax charges for fiscal year 2018 were $46 million (Non-core activities
charges), and;
•
During the fourth quarter of fiscal 2018, the company recorded pre-tax charges of $13 million, associated with
severance costs due to the elimination of the Project Specialists Interiors position (Project Specialists Interiors charge).
Adjusted diluted earnings per share and adjusted operating margin should not be considered an alternative to, or more
meaningful indicator of, the company’s diluted earnings per share or operating margin as prepared in accordance with GAAP.
The company’s methods of determining these non-GAAP financial measures may differ from the method used by other
companies for this or similar non-GAAP financial measures. Accordingly, these non-GAAP measures may not be comparable
to the measures used by other companies.
Detailed reconciliations between the company’s GAAP and non-GAAP financial results are shown below and available on the
company’s website at www.lowes.com/investor.
Three Months Ended
(Unaudited)
August 2, 2019
Pre-Tax
Earnings
(in millions, except per share data)
Tax
Diluted earnings per share, as reported
Non-GAAP adjustments - per share impacts
Mexico adjustments
0.02
Orchard Supply Hardware charges
—
(Audited)
February 1, 2019
$
4,018
Canadian goodwill impairment
952
Orchard Supply Hardware charges
561
U.S. and Canada store closure charges
271
Mexico impairment charges
244
Non-core activities charges
46
Project Specialists Interiors charge
13
Adjusted operating margin
0.01
—
—
0.28
$
(in millions, except operating margin)
Adjusted operating income
Pre-Tax
Earnings
—
Year Ended
Operating income, as reported
Non-GAAP adjustments
Net
Earnings
$
2.14
(0.01)
Adjusted diluted earnings per share
$
6,105
8.56%
(Unaudited)
August 3, 2018
2.15
Net
Earnings
$
1.86
Tax
—
—
(0.07)
0.21
$
2.07
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