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News Release

Lowe's Reports 27% Increase in Second Quarter Net Earnings And 25% Increase in Diluted Earnings Per Share

Second Quarter Sales Increased 19%

WILKESBORO, N.C., Aug. 16 -- Lowe's Companies, Inc. (NYSE: LOW), the world's second largest home improvement retailer, today reported earnings of $230.2 million for the quarter ended July 30, 1999, a 27 percent increase over the same period a year ago. Diluted earnings per share increased 25 percent to $0.60 from $0.48 in the second quarter of 1998.

For the six months ended July 30, 1999, net earnings grew 32 percent to $372.3 million while diluted earnings per share increased 29 percent to $0.97, excluding the one-time charge of $0.04 per share for costs related to the merger with Eagle Hardware and Garden ("Eagle") on April 2, 1999.

Sales for the quarter increased 19 percent to $4.44 billion, up from $3.73 billion in the second quarter of 1998. Sales at the company's comparable stores increased 5.6 percent during the quarter. For the six months ended July 30, 1999, sales increased 19 percent to $8.21 billion. Comparable store sales increased 6.1 percent in the first six months of 1999.

There was no LIFO charge or credit included in the second quarter Cost of Sales in 1999, compared to a $3 million LIFO earnings credit in the second quarter of 1998.

Because Lowe's merger with Eagle is accounted for as a pooling of interests, prior year and year to date numbers included in this release have been restated to reflect the combined results of both companies.

"We're pleased with the results Lowe's achieved in the second quarter," said Robert L. Tillman, Lowe's chairman and CEO. "We continue to perform well in our core product categories and enjoyed especially strong sales in appliances, home decor and live nursery."

During the quarter, Lowe's opened eight new stores, relocated thirteen stores and closed one older, smaller store bringing total store count to 533 stores in 37 states. Retail square footage grew to 50.6 million, 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, the direction of general economic trends, the availability of real estate for expansion and its successful development, fluctuations in prices and availability of commodities, unanticipated increases in competition with home improvement chains, adverse weather conditions that affect sales, not fully realized cost savings from the Eagle merger, and greater than anticipated costs associated with the integration of the two businesses.

  • Lowe's Companies, Inc.
  • Consolidated Statements of Current and Retained Earnings
  • In Thousands, Except Per Share Data

                                                       Quarter Ended
                                           July 30, 1999       July 31, 1998
    Current Earnings                   Amount    Percent     Amount    Percent

    Net sales                        $4,435,219   100.00   $3,733,642   100.00

    Cost of sales                     3,247,933    73.23    2,743,765    73.49

    Gross margin                      1,187,286    26.77      989,877    26.51

    Expenses:

    Selling, general and administrative 704,821    15.89      602,055    16.13

    Store opening costs                  15,465     0.35       14,952     0.40

    Depreciation                         81,723     1.84       70,455     1.89

    Interest                             22,096     0.50       18,810     0.50

    Nonrecurring merger costs                --       --           --       --

    Total expenses                      824,105    18.58      706,272    18.92

    Pre-tax earnings                    363,181     8.19      283,605     7.59

    Income tax provision                132,964     3.00      102,856     2.75

    Net earnings                     $  230,217     5.19   $  180,749     4.84


    Shares outstanding - Basic          381,635               370,612

    Basic earnings per share         $     0.60            $     0.49

    Shares outstanding - Diluted        384,311               375,667

    Diluted earnings per share       $     0.60            $     0.48


    Retained Earnings
    Balance at beginning of period   $2,227,816            $1,727,783
    Net earnings                        230,217               180,749
    Cash dividends                      (11,411)              (10,510)
    Balance at end of period         $2,446,622            $1,898,022


                                                      Six Months Ended
                                           July 30, 1999       July 31, 1998
    Current Earnings                   Amount     Percent    Amount    Percent
    Net sales                        $8,207,138    100.00   $6,883,421  100.00

    Cost of sales                     6,012,762     73.26    5,063,041   73.55

    Gross margin                      2,194,376     26.74    1,820,380   26.45

    Expenses:

    Selling, general
     and administrative               1,369,172     16.68    1,171,610   17.02

    Store opening costs                  33,675      0.41       27,347    0.40

    Depreciation                        159,643      1.95      139,303    2.02

    Interest                             45,403      0.55       40,449    0.59

    Nonrecurring merger costs            24,378      0.30           --      --

    Total expenses                    1,632,271     19.89    1,378,709   20.03

    Pre-tax earnings                    562,105      6.85      441,671    6.42

    Income tax provision                206,930      2.52      160,195    2.33

    Net earnings                     $  355,175      4.33   $  281,476    4.09


    Shares outstanding - Basic          380,220                370,125

    Basic earnings per share         $     0.93             $     0.76

    Shares outstanding - Diluted        383,104                375,004

    Diluted earnings per share       $     0.93             $     0.76


    Retained Earnings
    Balance at beginning of period   $2,114,248             $1,636,666
    Net earnings                        355,175                281,476
    Cash dividends                      (22,801)               (20,120)
    Balance at end of period         $2,446,622             $1,898,022


    Lowe's Companies, Inc.
    Consolidated Balance Sheets
    In Thousands


                                        July 30,       July 31,    January 29,
                                         1999            1998          1999

    Assets

     Current assets:
     Cash and cash equivalents      $   973,684     $   603,330    $   228,874
     Short-term investments              51,366          43,680         20,343
     Accounts receivable - net          181,651         159,613        143,928
     Merchandise inventory            2,589,854       2,182,043      2,346,092
     Deferred income taxes               56,245          43,566         56,124
     Other assets                        77,051          94,907         49,021

     Total current assets             3,929,851       3,127,139      2,844,382

     Property, less accumulated
      depreciation                    4,535,999       3,602,045      4,085,798
     Long-term investments               33,202          36,775         28,716
     Other assets                       119,402          80,080        105,508

     Total assets                   $ 8,618,454     $ 6,846,039    $ 7,064,404

    Liabilities and Shareholders' Equity

     Current liabilities:
     Short-term borrowings          $    92,475     $    93,975    $   117,075
     Current maturities of long-term
      debt                              118,217          48,020        107,893
     Accounts payable                 1,472,209       1,287,855      1,220,543
     Employee retirement plans           78,350          59,361         85,466
     Accrued salaries and wages         119,972          87,944        123,545
     Other current liabilities          464,610         369,801        269,734

     Total current liabilities        2,345,833       1,946,956      1,924,256

     Long-term debt, excluding
      current maturities              1,747,142       1,495,495      1,364,278
     Deferred income taxes              174,028         139,366        175,372
     Other long-term liabilities          3,603           3,516          3,209

     Total liabilities                4,270,606       3,585,333      3,467,115

     Shareholders' equity
     Preferred stock - $5 par value,
      none issued                            --              --             --
     Common stock - $.50 par value;
      Issued and Outstanding
       July 30, 1999        381,918
       July 31, 1998        370,932
       January 29, 1999     374,388     190,959         185,466        187,194
     Capital in excess of par         1,731,544       1,209,739      1,325,817
     Retained earnings                2,446,622       1,898,022      2,114,248
     Unearned compensation-restricted
      stock awards                      (21,204)        (32,679)      (30,387)
     Accumulated other comprehensive
      income                                (73)            158           417

     Total shareholders' equity       4,347,848       3,260,706     3,597,289

     Total liabilities and
      shareholders' equity          $ 8,618,454     $ 6,846,039   $ 7,064,404


    Lowe's Companies, Inc.
    Consolidated Statements of Cash Flows
    In Thousands
                                                      For the Six Months Ended
                                                      July 30,        July 31,
    Years Ended on                                     1999            1998
    Cash Flows From Operating Activities:
     Net Earnings                                 $ 355,175         $ 281,476
     Adjustments to Reconcile Net Earnings to
      Net Cash
       Provided By Operating Activities:
         Depreciation                               159,643           139,303
         Amortization of Original Issue Discount        307               221
         Decrease in Deferred Income Taxes           (1,329)           (6,494)
         Loss on Disposition/Writedown of Fixed
          and Other Assets                           37,994            14,722
         Changes in Operating Assets and Liabilities:
           Accounts Receivable - Net                (37,723)          (41,205)
           Merchandise Inventory                   (243,762)         (264,618)
           Other Operating Assets                   (25,759)          (56,648)
           Accounts Payable                         251,666           251,973
           Employee Retirement Plans                 40,455            33,989
           Other Operating Liabilities              200,241           146,895
     Net Cash Provided by Operating Activities      736,908           499,614

    Cash Flows from Investing Activities:
     (Increase) Decrease in Investment Assets:
        Short-Term Investments                      (29,926)          (16,059)
        Purchases of Long-Term Investments           (7,713)          (13,632)
        Proceeds from Sale/Maturity of Long-Term
         Investments                                  1,509               522
     Increase in Other Long-Term Assets             (32,733)           (7,768)
     Fixed Assets Acquired                         (617,395)         (422,232)
     Proceeds from the Sale of Fixed and Other
      Long-Term Assets                               21,377            12,188
     Net Cash Used in Investing Activities         (664,881)         (446,981)

    Cash Flows from Financing Activities:
     Net Decrease in Short-Term Borrowings          (24,600)           (4,129)
     Long-Term Debt Borrowings                      394,587           328,160
     Repayment of Long-Term Debt                    (36,950)          (10,917)
     Proceeds from Stock Offering                   348,299                --
     Proceeds from Stock Options Exercised           14,249             8,587
     Cash Dividend Payments                         (22,802)          (29,707)
     Net Cash Provided by Financing Activities      672,783           291,994

    Net Increase in Cash and Cash Equivalents       744,810           344,627
    Cash and Cash Equivalents, Beginning of Period  228,874           258,703
    Cash and Cash Equivalents, End of Period      $ 973,684         $ 603,330


    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 second quarter 1999, the Large stores contributed 88% of sales and operating profits. The following tables are intended to assist 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 56,000 square feet
  • 4. Large : Average of more than 100,000 square feet.

All stores in excess of 80,000 square feet.

Large store sales are reported on both a comparable (same-store) basis and new (open less than fourteen months) basis. A relocated store is removed from the comparable store computation until the fourteenth month following its grand opening.

    Second Quarter 1999

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

                      1999             1998            1997
                  % of            % of             % of
                  Total  Units    Total  Units     Total  Units

    Yards          6%     32        6%    29        6%     27

    Small          4%     23        9%    45       13%     57

    Medium         8%     45       14%    70       20%     87

    Large Comp    62%    325       54%   261       44%    197

    Large New     20%    108       17%    84       17%     74

    Total        100%    533      100%   489      100%    442


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

                        1999           1998             1997

                  Sales   O.P.*    Sales  O.P.*    Sales    O.P.*
    Yards          3%      2%       3%     2%       3%      2%

    Small          2%      2%       4%     4%       6%      6%

    Medium         7%      8%      12%    15%      19%     23%

    Large Comp    68%     74%      62%    67%      55%     56%

    Large New     20%     14%      19%    12%      17%     13%

    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 world, serving over four million do-it-yourself retail and commercial business customers weekly through 533 stores in 37 states. Headquartered in Wilkesboro, N.C., the 53-year old company employs over 70,000 people. More information on the company is available on Lowe's web site at www.lowes.com .