-- Third Quarter Total Sales Increased 16.9 Percent --
-- Third Quarter Comparable Store Sales Increased 6.2 Percent --
MOORESVILLE, N.C., Nov. 14 - Lowe's Companies, Inc. (NYSE: LOW), the world's second largest home improvement retailer, today reported net earnings of $649 million for the quarter ended October 28, 2005, a 25.8 percent increase over the same period a year ago. Diluted earnings per share increased 24.6 percent to $0.81 from $0.65 in the third quarter of 2004. For the nine months ended October 28, 2005, net earnings grew 24.5 percent to $2.08 billion while diluted earnings per share increased 24.5 percent to $2.59.
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Sales for the quarter increased 16.9 percent to $10.6 billion, up from $9.1 billion in the third quarter of 2004. Comparable store sales for the third quarter increased 6.2 percent. For the nine months ended October 28, 2005, sales increased 16.2 percent to $32.4 billion. Comparable store sales increased 5.5 percent in the first nine months of 2005.
"Our performance, highlighted by positive comparable store sales in all of our 20 product categories and 19 of our 21 geographic regions, is a clear indication that consumers continue to invest in products and projects to maintain, enhance and improve their homes even in light of concerns about the impact of rising gasoline and home heating costs," explained Robert A. Niblock, Lowe's chairman, president and CEO. "Continued investments in our business coupled with our culture of customer service have strengthened our competitive position, and we're confident Lowe's has the flexibility to adapt to changes in the marketplace to continue to deliver solid results."
"Our employees provided exceptional service in a quarter marked by the distractions of three major hurricanes," Niblock added. "Our focus on serving our customers' needs with innovative and differentiated products and services allows us to continue to capture market share in a fragmented home improvement industry."
During the quarter, Lowe's opened 33 new stores and temporarily closed one store impacted by hurricane Katrina. As of October 28, 2005, Lowe's operated 1,170 stores in 49 states representing 133.0 million square feet of retail selling space, a 13.1 percent increase over last year.
A conference call to discuss third quarter 2005 operating results is scheduled for today (Monday, November 14) at 9:00 a.m. EST. Please dial 888- 817-4020 (international callers dial 706-679-3245) to participate. A webcast of the call will take place simultaneously and can be accessed by visiting Lowe's website at http://www.Lowes.com/investor and clicking on the icon for the Lowe's Third Quarter 2005 Earnings Conference Call Webcast. A replay of the call will be archived on Lowes.com/investor until February 26, 2006.
Lowe's Business Outlook
Fourth Quarter 2005 - a 14-week Quarter (comparisons to fourth quarter 2004 - a 13-week quarter)
- The company expects to open 63 new stores and reopen one store that was
temporarily closed following hurricane Katrina reflecting square
footage growth of approximately 13 percent
- Total sales are expected to increase approximately 22 percent
- The company expects to report a comparable store sales increase of 4 to
6 percent (14 weeks vs. a comparable 14 weeks)
- Operating margin (defined as gross margin less SG&A and depreciation)
is expected to decline approximately 20 basis points
- Store opening costs are expected to be approximately $50 million
- Diluted earnings per share of $0.77 to $0.80 are expected
- Lowe's fourth quarter ends on February 3, 2006 with operating results
to be publicly released on Monday, February 27, 2006
Fiscal Year 2005 - a 53-week Year (comparisons to fiscal year 2004 - a 52- week year)
- The company expects to open 150 stores in 2005 reflecting total square
footage growth of approximately 13 percent
- Total sales are expected to increase 17 to 18 percent for the year
- The company expects to report a comparable store sales increase of 5
to 6 percent
- Operating margin (defined as gross margin less SG&A and depreciation)
is expected to increase approximately 40 basis points
- Store opening costs are expected to be approximately $134 million
- Diluted earnings per share of $3.37 to $3.40 are expected for the
fiscal year ending February 3, 2006
Disclosure Regarding Forward-Looking Statements
This news release includes "forward-looking statements" within the meaning the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements of the company's expectations for sales growth, comparable store sales, earnings and performance, capital expenditures, store openings, demand for services, and any statement of an assumption underlying any of the foregoing, constitute "forward-looking statements" under the Act. Although the company believes that the expectations, opinions, projections, and comments reflected in its forward-looking statements are reasonable, it 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, rising fuel costs, and other factors which can negatively affect our customers as well as our ability to: (i) respond to decreases in the number of new housing starts 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 develop new sites for store development; (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 matters; and (viii) respond to unanticipated weather conditions. Additional information regarding the risks and uncertainties which may affect our operations and economic results can be found in our filings with the Securities and Exchange Commission.
The forward-looking statements contained in this news release speak only as of the date of this release and the company does not assume any obligation to update any such statements.
With fiscal year 2004 sales of $36.5 billion, Lowe's Companies, Inc. is a FORTUNE(R) 50 company that serves approximately 11 million customers a week at more than 1,150 home improvement stores in 49 states. Based in Mooresville, N.C., the 59-year old company is the second-largest home improvement retailer in the world. For more information, visit Lowes.com.
Lowe's Companies, Inc.
Consolidated Statements of Current and Retained Earnings (Unaudited)
In Millions, Except Per Share Data
Three Months Ended
October 29, 2004
October 28, 2005 As Restated
Current Earnings Amount Percent Amount Percent
Net sales $10,592 100.00 $9,064 100.00
Cost of sales 6,997 66.06 6,013 66.34
Gross margin 3,595 33.94 3,051 33.66
Expenses:
Selling, general and administrative 2,212 20.88 1,906 21.03
Store opening costs 35 0.33 32 0.35
Depreciation 257 2.43 232 2.56
Interest 36 0.34 40 0.44
Total expenses 2,540 23.98 2,210 24.38
Pre-tax earnings 1,055 9.96 841 9.28
Income tax provision 406 3.83 325 3.58
Net earnings $649 6.13 $516 5.70
Weighted average shares outstanding -
Basic 780 772
Basic earnings per share $0.83 $0.67
Weighted average shares outstanding -
Diluted 804 802
Diluted earnings per share $0.81 $0.65
Cash dividends per share $0.06 $0.04
Retained Earnings
Balance at beginning of period $10,984 $8,672
Net earnings 649 516
Cash dividends (47) (31)
Balance at end of period $11,586 $9,157
Lowe's Companies, Inc.
Consolidated Statements of Current and Retained Earnings (Unaudited)
In Millions, Except Per Share Data
Nine Months Ended
October 29, 2004
October 28, 2005 As Restated
Current Earnings Amount Percent Amount Percent
Net sales $32,435 100.00 $27,914 100.00
Cost of sales 21,388 65.94 18,605 66.65
Gross margin 11,047 34.06 9,309 33.35
Expenses:
Selling, general and administrative 6,711 20.69 5,728 20.52
Store opening costs 85 0.26 71 0.26
Depreciation 752 2.32 666 2.38
Interest 122 0.38 133 0.48
Total expenses 7,670 23.65 6,598 23.64
Pre-tax earnings 3,377 10.41 2,711 9.71
Income tax provision 1,300 4.01 1,043 3.73
Net earnings $2,077 6.40 $1,668 5.98
Weighted average shares outstanding -
Basic 776 778
Basic earnings per share $2.68 $2.14
Weighted average shares outstanding -
Diluted 804 809
Diluted earnings per share $2.59 $2.08
Cash dividends per share $0.16 $0.11
Retained Earnings
Balance at beginning of period $9,634 $7,574
Net earnings 2,077 1,668
Cash dividends (125) (85)
Balance at end of period $11,586 $9,157
Lowe's Companies, Inc.
Consolidated Balance Sheets
In Millions, Except Par Value Data
(Unaudited) (Unaudited)
October 28, October 29, January 28,
2005 2004 2005
As Restated
Assets
Current assets:
Cash and cash equivalents $1,599 $461 $642
Short-term investments 710 189 171
Accounts receivable - net 23 35 9
Merchandise inventory - net 6,613 5,864 5,982
Deferred income taxes 76 101 95
Other assets 177 96 75
Total current assets 9,198 6,746 6,974
Property, less accumulated
depreciation 15,410 13,265 13,911
Long-term investments 296 153 146
Other assets 205 199 178
Total assets $25,109 $20,363 $21,209
Liabilities and shareholders' equity
Current liabilities:
Current maturities of long-term
debt $632 $31 $630
Accounts payable 3,198 2,596 2,687
Accrued salaries and wages 369 281 386
Other current liabilities 2,525 1,993 2,016
Total current liabilities 6,724 4,901 5,719
Long-term debt, excluding
current maturities 3,749 3,661 3,060
Deferred income taxes 745 699 736
Other long-term liabilities 290 131 159
Total liabilities 11,508 9,392 9,674
Shareholders' equity:
Preferred stock - $5 par value,
none issued - - -
Common stock - $.50 par value;
Shares issued and outstanding
October 28, 2005 780
October 29, 2004 772
January 28, 2005 774 390 386 387
Capital in excess of par 1,625 1,429 1,514
Retained earnings 11,586 9,157 9,634
Accumulated other comprehensive
loss - (1) -
Total shareholders' equity 13,601 10,971 11,535
Total liabilities and
shareholders' equity $25,109 $20,363 $21,209
Lowe's Companies, Inc.
Consolidated Statements of Cash Flows (Unaudited)
In Millions
Nine Months Ended
Oct. 29, 2004
October 28, 2005 As Restated
Cash Flows From Operating Activities:
Net earnings $2,077 $1,668
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 771 679
Deferred income taxes 28 66
Loss on disposition/writedown of
fixed and other assets 23 41
Stock-based compensation expense 57 53
Tax effect of stock options exercised 48 14
Changes in operating assets and
liabilities:
Accounts receivable - net (14) 111
Merchandise inventory - net (631) (1,280)
Other operating assets (102) 10
Accounts payable 511 384
Other operating liabilities 592 382
Net cash provided by operating
activities 3,360 2,128
Cash flows from investing activities:
(Increase) decrease in short-term
investments (456) 629
Purchases of long-term investments (249) (10
Proceeds from sale/maturity of long-
term investments 10 15
Increase in other long-term assets (34) (15)
Fixed assets acquired (2,277) (2,116)
Proceeds from the sale of fixed and
other long-term assets 44 69
Net cash used in investing activities (2,962) (1,526)
Cash flows from financing activities:
Long-term debt borrowings 995 -
Debt issuance costs (8) -
Repayment of long-term debt (23) (70)
Proceeds from employee stock purchase
plan 32 30
Proceeds from stock options exercised 183 71
Cash dividend payments (125) (85)
Repurchase of common stock (495) (1,000)
Net cash used in financing activities 559 (1,054)
Net increase (decrease) in cash and
cash equivalents 957 (452)
Cash and cash equivalents, beginning
of period 642 913
Cash and cash equivalents, end of
period $1,599 $461
