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Lowe's Reports Record Fourth Quarter Earnings - Net Earnings Increased 46%

NORTH WILKESBORO, N.C., Feb. 22 /PRNewswire/ -- Lowe's Companies, Inc. (NYSE: LOW), the nation's second largest home improvement retailer, today reported record earnings of $106.2 million for the fourth quarter ended January 29, 1999, a 46 percent increase over the same period a year ago.

Diluted earnings per share increased 43 percent to $0.30, up from $0.21 in the fourth quarter of 1997. For fiscal 1998, net earnings grew 35 percent to $482.4 million, compared to $357.5 million in fiscal 1997. Diluted earnings per share increased 32 percent to $1.36 in fiscal 1998, up from $1.03 in fiscal 1997.

Cost of Sales in the fourth quarter included a LIFO credit of $17.9 million as compared to a LIFO credit of $12.5 million in the same quarter last year. For fiscal 1998, the company recorded a LIFO credit of $29.0 million compared to a LIFO credit of $7.0 million for fiscal 1997.

As previously reported, sales for the quarter increased 21.6 percent to $2.92 billion, up from $2.40 billion in the fourth quarter of 1997. Sales at the company's "comparable stores" (stores open in excess of one year) increased 8.2 percent during the quarter. Fiscal 1998 sales totaled $12.24 billion, a 20.8 percent increase over fiscal 1997 sales of $10.14 billion. Comparable store sales increased 5.9 percent in fiscal1998.

"In 1998, we identified three key initiatives to better serve our customers -- installed sales, special order sales, and an enhanced focus on the commercial business customer," said Robert L. Tillman, Lowe's Chairman and Chief Executive Officer. "The success of these three initiatives has had a meaningful impact on store performance and we anticipate further sales gains as we continue to expand and improve these initiatives. In fiscal 1999, we anticipate an approximately 18-20% increase in store square footage and are expecting sales gains of approximately 20%."

During the quarter, Lowe's opened 36 new stores, bringing the company's total store count to 484 stores in 27 states. Retail square footage grew to 43.4 million square feet, a 19 percent increase over the same period a year ago.

This news release may include "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although the company believes that comments reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Possible risks and uncertainties regarding these statements include, but are not limited to, general economic trends, availability and development of real estate for expansion, fluctuation in prices in commodities, the nature of competition and weather conditions, all of which are described in greater detail in Lowe's 1997 Annual Report.

                            LOWE'S COMPANIES, INC.
             Consolidated Statements of Current and Retained Earnings
                       In Thousands, Except Per Share Data

                                           Quarter Ended
                             January 29, 1999          January 30, 1998
    Current Earnings        Amount       Percent       Amount       Percent

     Net sales          $2,915,664        100.00   $2,397,568        100.00
     Cost of sales       2,096,331         71.90    1,733,478         72.30
     Gross margin          819,333         28.10      664,090         27.70

    Expenses:
     Selling, general and
      administrative       534,187         18.32      440,229         18.36
     Store opening costs    24,988          0.86       26,788          1.12
     Depreciation           72,104          2.47       65,053          2.72
     Interest               19,801          0.68       17,231          0.72
     Total expenses        651,080         22.33      549,301         22.92
     Pre-tax earnings      168,253          5.77      114,789          4.78
     Income tax provision   62,041          2.13       42,282          1.76
     Net earnings         $106,212          3.64      $72,507          3.02

    Shares outstanding
     (weighted average)    352,761            --      349,815            --
    Basic Earnings Per Share $0.30            --        $0.21            --
    Diluted Earnings
     Per Share               $0.30            --        $0.21            --

    Retained Earnings
     Balance at beginning
      of period         $1,910,699            --   $1,502,212            --
     Net earnings          106,212            --       72,507            --
     Cash dividends        (10,527)           --       (9,586)           --
     Balance at end
      of period         $2,006,384            --   $1,565,133            --

                                              Year Ended
                              January 29, 1999           January 30, 1998
                            Amount       Percent       Amount       Percent
    Current Earnings
     Net sales         $12,244,882        100.00  $10,136,890        100.00
     Cost of sales       8,950,156         73.09    7,447,117         73.47
     Gross margin        3,294,726         26.91    2,689,773         26.53

    Expenses:
     Selling, general and
      administrative     2,118,149         17.30    1,754,780         17.31
     Store opening costs    71,651          0.59       69,999          0.69
     Depreciation          271,769          2.22      240,880          2.38
     Interest               74,735          0.61       65,567          0.64
     Total expenses      2,536,304         20.72    2,131,226         21.02
     Pre-tax earnings      758,422          6.19      558,547          5.51
     Income tax provision  276,000          2.25      201,063          1.98
     Net earnings         $482,422          3.94     $357,484          3.53

    Shares outstanding
     (weighted average)    352,104            --      348,554            --

    Basic Earnings Per Share $1.37            --        $1.03            --
    Diluted Earnings
     Per Share               $1.36            --        $1.03            --

    Retained Earnings
     Balance at beginning
      of period         $1,565,133            --   $1,245,888            --
     Net earnings          482,422            --      357,484            --
     Cash dividends        (41,171)           --      (38,239)           --
     Balance at end
      of period         $2,006,384            --   $1,565,133            --

                              LOWE'S COMPANIES, INC.
                           Consolidated Balance Sheets
                                   In Thousands

                        January 29,            %    January 30,           %
                           1999            Total       1998           Total

    Assets
     Current Assets:
     Cash and Cash
      Equivalents         $222,709           3.5 %   $195,146           3.7 %
     Short-Term Investments 20,343           0.3       16,155           0.3
     Accounts Receivable -
      Net                  143,928           2.3      118,408           2.3
     Merchandise
      Inventory          2,104,845          33.2    1,714,592          32.8
     Deferred Income Taxes  56,124           0.9       34,116           0.7
     Other Current Assets   37,734           0.5       31,185           0.6
     Total Current Assets2,585,683          40.7    2,109,602          40.4
     Property, Less
      Accumulated
     Depreciation        3,636,917          57.3    3,005,199          57.6
     Long-Term Investments  28,716           0.5       35,161           0.7
     Other Assets           93,335           1.5       69,315           1.3
     Total Assets       $6,344,651         100.0 % $5,219,277         100.0 %

    Liabilities and Shareholders' Equity
     Current Liabilities:
     Short-Term Borrowings $92,475           1.4      $98,104          1.9 %
     Current Maturities
      of Long-Term Debt     99,019           1.6       12,478           0.2
     Accounts Payable    1,133,177          17.9      969,777          18.7
     Employee Retirement
      Plans                 80,104           1.3       64,669           1.2
     Accrued Salaries
      and Wages            112,749           1.8       83,377           1.6
     Other Current
      Liabilities          247,820           3.9      220,915           4.2
     Total Current
      Liabilities        1,765,344          27.9    1,449,320          27.8
     Long-Term Debt,
      Excluding Current
      Maturities         1,283,092          20.2    1,045,570          20.0
     Deferred Income Taxes 160,263           2.5      123,778           2.4
     Total Liabilities   3,208,699          50.6    2,618,668          50.2

     Shareholders' Equity:
     Preferred Stock - $5 Par
      Value, none issued        --                         --
     Common Stock - $.50 Par Value;
    Issued and Outstanding
     January 29, 1999
       352,643
     January 30, 1998
       350,632             176,321           2.8      175,316           3.3
     Capital in Excess
      of Par               983,217          15.5      892,666          17.1
     Retained Earnings    2,006,384          31.6     1,565,133         30.0
     Unearned Compensation-
      Restricted Stock
      Awards               (30,387)         (0.5)      (32,694)        (0.6)
     Accumulated Other
      Comprehensive Income     417           0.0          188           0.0
     Total Shareholders'
      Equity             3,135,952          49.4    2,600,609          49.8
     Total Liabilities and
      Shareholders'
      Equity            $6,344,651        100.0 %  $5,219,277         100.0 %

                              LOWE'S COMPANIES, INC.
                      Consolidated Statements of Cash Flows
                                   In Thousands

                                January 29,     January 30,   January 31,
    Fiscal Years Ended on            1999             1998          1997

    Cash Flows From Operating Activities:
     Net Earnings                  $482,422        $357,484      $292,150

    Adjustments to Reconcile Net
     Earnings to Net Cash
     Provided By Operating Activities:
     Depreciation                   271,769         240,880       198,115
     Amortization of
      Original Issue Discount           445             192         1,671
     Increase in Deferred
      Income Taxes                   14,337           7,637        17,043
     Loss on Disposition/Writedown
      of Fixed and Other Assets      23,540          14,263         9,892

     Changes in Operating
      Assets and Liabilities:
     Accounts Receivable - Net      (25,520)           (846)       (4,079)
     Merchandise Inventory         (390,253)       (108,712)     (338,803)
     Other Operating Assets          (6,313)          6,732        (4,788)
     Accounts Payable               163,400          55,610       258,768
     Employee Retirement Plans       75,508          60,527        59,736
     Other Operating Liabilities     87,513          31,103        53,288
     Net Cash Provided by
      Operating Activities          696,848         664,870       542,993

    Cash Flows from Investing Activities:
    (Increase) Decrease in Investment Assets:
     Short-Term Investments          19,848          25,773        98,754
     Purchases of Long-Term
      Investments                  (19,866)         (15,384)      (27,259)
     Proceeds from Sale/Maturity
      of Long-Term Investments        2,644           4,811        12,203
     (Increase) Decrease
      in Other Long-Term Assets     (18,528)         (5,472)        3,456
     Fixed Assets Acquired         (928,040)       (772,792)     (677,160)
     Proceeds from the Sale
      of Fixed and Other
      Long-Term Assets               38,202          31,183        11,615
     Net Cash Used in
      Investing Activities         (905,740)       (731,881)     (578,391)

    Cash Flows from Financing Activities:
     Net Increase (Decrease)
      in Short-Term Borrowings       (5,629)         17,199        64,288
     Long-Term Debt
      Borrowings                    296,159         265,795            --
     Repayment of Long-Term Debt    (15,458)        (32,781)      (17,662)
     Proceeds from Stock
      Options Exercised              12,140             210            --
     Cash Dividend Payments        (50,757)         (28,653)      (34,709)
     Net Cash Provided
      by Financing Activities       236,455         221,770        11,917

    Net Increase (Decrease)
    in Cash and Cash Equivalents     27,563         154,759       (23,481)
    Cash and Cash Equivalents,
    Beginning of Year               195,146          40,387        63,868
    Cash and Cash Equivalents,
     End of Year                   $222,709        $195,146       $40,387

    Supplemental Information:

STORE PERFORMANCE PERSPECTIVE

In 1992, Lowe's began a more detailed reporting on the transformation from a chain of small, contractor-oriented stores to a family of modern, home- improvement warehouses. In fourth quarter 1998, the Large stores contributed 83% of sales and 81% of operating profits. The following tables are intended to assist the user in understanding the impact of that transformation.

Store Group Categories, presented in these tables, are defined as follows:

  1. Yards : Focused Contractor Yards

  2. Small : Average of 19,000 square feet

  3. Medium : Average of 57,000 square feet

  4. Large : Average of more than 100,000 square feet.
All stores in excess of 80,000 square feet.

Further, large store sales are reported on both a comparable (same-store) basis and new (open less than a year) basis. A relocated store is removed from the comparable store computation until it has been open at least 12 months.

    Fourth Quarter 1998

    Table 1:  Store Group Unit Totals, End of Fourth Quarter

                              1998             1997                1996
                        % of               % of               % of
                       Total      Units   Total    Units     Total    Units
    Yards                 7%         32      7%       32        6%       25
    Small                 6%         31     11%       49       15%       60
    Medium               12%         58     17%       76       23%       93
    Large Comp           53%        257     46%      203       36%      145
    Large New            22%        106     19%       86       20%       79
    Total               100%        484    100%      446      100%      402


    Table 2:  Sales & Operating Profits* by Store Group, Fourth Quarter

                             1998               1997               1996
                       Sales       O.P.*  Sales     O.P.*    Sales     O.P.*
    Yards                 4%         3%      4%       3%        4%       4%
    Small                 3%         2%      5%       5%        8%       8%
    Medium               10%        14%     16%      23%       24%      37%
    Large Comp           61%        71%     54%      62%       45%      50%
    Large New            22%        10%     21%       7%       19%       1%
    Total               100%       100%    100%     100%      100%     100%

    *Operating Profits before corporate expense and intercompany charges,
     interest, LIFO and income taxes.

    Fiscal Year 1998

    Table 1:  Store Group Unit Totals, Fiscal Year 1998 Average

                              1998              1997               1996
                        % of               % of               % of
                       Total      Units   Total    Units     Total    Units
    Yards                 7%         31      7%       29        6%       25
    Small                 9%         40     13%       55       18%       70
    Medium               14%         67     20%       84       24%       95
    Large Comp           51%        238     42%      180       33%      124
    Large New            19%         88     18%       75       19%       74
    Total               100%        464    100%      423      100%      388

    Table 2:  Sales & Operating Profits* by Store Group, Fiscal Year 1998

                             1998                1997               1996
                       Sales       O.P.*  Sales     O.P.*    Sales     O.P.*
    Yards                 4%         3%      4%       3%        4%       3%
    Small                 4%         4%      7%       7%       10%      10%
    Medium               12%        16%     19%      26%       25%      34%
    Large Comp           59%        64%     51%      53%       42%      45%
    Large New            21%        13%     19%      11%       19%       8%
    Total               100%       100%    100%     100%      100%     100%

    * Operating Profits before corporate expense and intercompany charges,
      interest, LIFO and income taxes.

Lowe's Companies, Inc. is the second largest retailer of home improvement products in the nation, serving over four million do-it-yourself retail and commercial business customers weekly through 484 stores in 27 states. Headquartered in North Wilkesboro, N.C., the 53-year old company employs over 65,000 people.