Lowe's Companies (LOW) 10-Q 1 Sep 09 2010 Q2 Quarterly report Financial data

Consolidated Balance Sheets

Consolidated Balance Sheets (USD $)
In Millions	Jul. 31, 2009	Jan. 30, 2009	Aug. 01, 2008
Assets
Cash and cash equivalents	$1,087	$245	$477
Short-term investments	424	416	377
Merchandise inventory - net	8,189	8,209	7,939
Deferred income taxes - net	177	166	275
Other current assets	216	215	236
Total current assets	10,093	9,251	9,304
Property, less accumulated depreciation	22,727	22,722	22,066
Long-term investments	900	253	798
Other assets	462	460	381
Total assets	34,182	32,686	32,549
Liabilities and shareholders' equity
Short-term borrowings	9	987	189
Current maturities of long-term debt	552	34	31
Accounts payable	4,970	4,109	4,786
Accrued compensation and employee benefits	540	434	492
Self-insurance liabilities	784	751	736
Deferred revenue	716	674	816
Other current liabilities	1,373	1,033	1,478
Total current liabilities	8,944	8,022	8,528
Long-term debt, excluding current maturities	4,515	5,039	5,050
Deferred income taxes - net	564	660	641
Other liabilities	983	910	824
Total liabilities	15,006	14,631	15,043
Preferred stock - $5 par value, none issued	0	0	0
Common stock - $.50 par value	738	735	732
Capital in excess of par value	367	277	118
Retained earnings	18,025	17,049	16,648
Accumulated other comprehensive income (loss)	46	(6)	8
Total shareholders' equity	19,176	18,055	17,506
Total liabilities and shareholders' equity	$34,182	$32,686	$32,549

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Par Value Disclosures) (USD $)
	Jul. 31, 2009	Jan. 30, 2009	Aug. 01, 2008
Shareholders' equity:
Preferred stock - $5 par value, none issued	5	5	5
Common stock - $.50 par value	0.5	0.5	0.5

Consolidated Balance Sheets (Sh

Consolidated Balance Sheets (Shares Issued and Oustanding Disclosures) (USD $)
Share data in Millions	Jul. 31, 2009	Jan. 30, 2009	Aug. 01, 2008
Shareholders' equity:
Preferred stock; shares issued and outstanding	0	0	0
Common stock; shares issued and outstanding	1,477	1,470	1,464

Consolidated Statements of Curr

Consolidated Statements of Current and Retained Earnings (USD $)
In Millions, unless otherwise specified	3 Months Ended Jul. 31, 2009	3 Months Ended Aug. 01, 2008	6 Months Ended Jul. 31, 2009	6 Months Ended Aug. 01, 2008
Current Earnings
Net sales	$13,844	$14,509	$25,676	$26,519
Cost of sales	9,021	9,527	16,658	17,371
Gross margin	4,823	4,982	9,018	9,148
Expenses:
Selling, general and administrative	3,109	3,014	6,052	5,738
Store opening costs	14	21	27	38
Depreciation	408	381	809	757
Interest - net	76	69	154	145
Total expenses	3,607	3,485	7,042	6,678
Pre-tax earnings	1,216	1,497	1,976	2,470
Income tax provision	457	559	741	925
Net earnings	759	938	1,235	1,545
Weighted average common shares outstanding - basic	1,464	1,455	1,463	1,454
Basic earnings per common share	0.51	0.64	0.84	1.06
Weighted average common shares outstanding - diluted	1,466	1,470	1,465	1,473
Diluted earnings per common share	0.51	0.63	0.84	1.04
Cash dividends per share	0.09	0.085	0.175	0.165
Retained Earnings
Balance at beginning of period	17,399	15,835	17,049	15,345
Net earnings	759	938	1,235	1,545
Cash dividends	(133)	(125)	(259)	(242)
Balance at end of period	$18,025	$16,648	$18,025	$16,648

1_Consolidated Statements of Cu

Consolidated Statements of Current and Retained Earnings (Percents) (USD $)
	3 Months Ended Jul. 31, 2009	3 Months Ended Aug. 01, 2008	6 Months Ended Jul. 31, 2009	6 Months Ended Aug. 01, 2008
Current Earnings
Net sales	100	100	100	100
Cost of sales	65.16	65.66	64.88	65.5
Gross margin	34.84	34.34	35.12	34.5
Expenses:
Selling, general and administrative	22.45	20.78	23.56	21.65
Store opening costs	0.1	0.14	0.11	0.14
Depreciation	2.95	2.63	3.15	2.85
Interest - net	0.55	0.47	0.6	0.55
Total expenses	26.05	24.02	27.42	25.19
Pre-tax earnings	8.79	10.32	7.7	9.31
Income tax provision	3.31	3.86	2.89	3.49
Net earnings	5.48	6.46	4.81	5.82

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (USD $)
In Millions	6 Months Ended Jul. 31, 2009	6 Months Ended Aug. 01, 2008
Cash flows from operating activities:
Net earnings	$1,235	$1,545
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	870	816
Deferred income taxes	(106)	(57)
Loss on property and other assets	73	30
Loss on redemption of long-term debt	0	8
Share-based payment expense	50	54
Net changes in operating assets and liabilities:
Merchandise inventory - net	32	(328)
Other operating assets	20	52
Accounts payable	858	1,073
Other operating liabilities	684	675
Net cash provided by operating activities	3,716	3,868
Cash flows from investing activities:
Purchases of short-term investments	(166)	(95)
Proceeds from sale/maturity of short-term investments	314	171
Purchases of long-term investments	(942)	(1,066)
Proceeds from sale/maturity of long-term investments	135	565
Increase in other long-term assets	0	(37)
Property acquired	(1,022)	(1,620)
Proceeds from sale of property and other long-term assets	13	20
Net cash used in investing activities	(1,668)	(2,062)
Cash flows from financing activities:
Net decrease in short-term borrowings	(987)	(873)
Proceeds from issuance of long-term debt	0	11
Repayment of long-term debt	(16)	(555)
Proceeds from issuance of common stock under employee stock purchase plan	37	39
Proceeds from issuance of common stock from stock options exercised	7	11
Cash dividend payments	(259)	(242)
Repurchase of common stock	0	(2)
Excess tax benefits of share-based payments	0	1
Net cash used in financing activities	(1,218)	(1,610)
Effect of exchange rate changes on cash	12	0
Net increase in cash and cash equivalents	842	196
Cash and cash equivalents, beginning of period	245	281
Cash and cash equivalents, end of period	$1,087	$477

Basis of Presentation

Basis of Presentation
	6 Months Ended Jul. 31, 2009
Note to Consolidated Financial Statements
Basis of Presentation	Note 1: Basis of Presentation - The accompanying consolidated financial statements (unaudited) and notes to consolidated financial statements (unaudited) are presented in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements (unaudited), in the opinion of management, contain all adjustments necessary to present fairly the financial position as of July 31, 2009, and August 1, 2008, and the results of operations for the three and six months ended July 31, 2009, and August 1, 2008, and cash flows for the six months ended July 31, 2009 and August 1, 2008. These interim consolidated financial statements (unaudited) should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Lowe's Companies, Inc. (the Company) Annual Report on Form 10-K for the fiscal year ended January 30, 2009 (the Annual Report). The financial results for the interim periods may not be indicative of the financial results for the entire fiscal year.

Fair Value Measurements and Fin

Fair Value Measurements and Financial Instruments
	6 Months Ended Jul. 31, 2009
Note to Consolidated Financial Statements
Fair Value Measurements and Financial Instruments	Note 2: Fair Value Measurements and Financial Instruments - Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No.157 establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the hierarchy are defined as follows: Level 1 - inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilitiesLevel 2 - inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectlyLevel 3 - inputs to the valuation techniques that are unobservable for the assets or liabilitiesEffective February 2, 2008, the Company adopted SFAS No. 157 for financial assets and liabilities measured at fair value and other non-financial assets and liabilities measured at fair value on a recurring basis.The following tables present the Companys financial assets measured at fair value on a recurring basis as of July 31, 2009, August 1, 2008, and January 30, 2009, classified by SFAS No.157 fair value hierarchy: Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (In millions) July 31, 2009 (Level 1) (Level 2) (Level 3) Cash equivalents Available-for-sale securities $ 37 $ - $ 37 $ - Short-term investments Available-for-sale securities 388 68 320 - Trading securities 36 36 - - Long-term investments Available-for-sale securities 900 - 900 - Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (In millions) August 1, 2008 (Level 1) (Level 2) (Level 3) Short-term investments Available-for-sale securities $ 338 $ 109 $ 229 $ - Trading securities 39 39 - - Long-term investments Available-for-sale securities 798 - 798 - Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (In millions) January 30, 2009 (Level 1) (Level 2) (Level 3) Short-term investments Available-for-sale securities $ 385 $ 81 $ 304 $ - Trading securities 31 31 - - Long-term investments Available-for-sale securities 253 - 253 - When available, quoted prices are used to determine fair value. When quoted prices in active markets are available, investments are classified within Level 1 of the fair value hierarchy. The Companys Level 1 investm

Restricted Investment Balances

Restricted Investment Balances
	6 Months Ended Jul. 31, 2009
Note to Consolidated Financial Statements
Restricted Investment Balances	Note 3: Restricted Investment Balances - Short-term and long-term investments include restricted balances pledged as collateral for letters of credit for the Companys extended warranty program and for a portion of the Companys casualty insurance and Installed Sales program liabilities. Restricted balances included in short-term investments were $188 million at July 31, 2009, $194 million at August 1, 2008, and $214 million at January 30, 2009. Restricted balances included in long-term investments were $192 million at July 31, 2009, $152 million at August 1, 2008, and $143 million at January 30, 2009.

Property

Property
	6 Months Ended Jul. 31, 2009
Note to Consolidated Financial Statements
Property	Note 4: Property - Property is shown net of accumulated depreciation of $9.3 billion at July 31, 2009, $8.2 billion at August 1, 2008, and $8.8 billion at January 30, 2009.

Extended Warranties

Extended Warranties
	6 Months Ended Jul. 31, 2009
Note to Consolidated Financial Statements
Extended Warranties	Note 5: Extended Warranties - Lowes sells separately-priced extended warranty contracts under a Lowes-branded program for which the Company is ultimately self-insured. The Company recognizes revenue from extended warranty sales on a straight-line basis over the respective contract term. Extended warranty contract terms primarily range from one to four years from the date of purchase or the end of the manufacturers warranty, as applicable. The Companys extended warranty deferred revenue is included in other liabilities (non-current) on the consolidated balance sheets. Changes in deferred revenue for extended warranty contracts are summarized as follows: Three Months Ended Six Months Ended (In millions) July 31, 2009 August 1, 2008 July 31, 2009 August 1, 2008 Extended warranty deferred revenue, beginning of period $ 496 $ 430 $ 479 $ 407 Additions to deferred revenue 62 56 114 105 Deferred revenue recognized (37) (30) (72) (56) Extended warranty deferred revenue, end of period $ 521 $ 456 $ 521 $ 456 Incremental direct acquisition costs associated with the sale of extended warranties are also deferred and recognized as expense on a straight-line basis over the respective contract term. Deferred costs associated with extended warranty contracts were $137 million at July 31, 2009, $109 million at August 1, 2008, and $121 million at January 30, 2009. The Companys extended warranty deferred costs are included in other assets (non-current) on the consolidated balance sheets. All other costs, such as costs of services performed under the contract, general and administrative expenses and advertising expenses, are expensed as incurred.The liability for extended warranty claims incurred is included in self-insurance liabilities on the consolidated balance sheets. Changes in the liability for extended warranty claims are summarized as follows: Three Months Ended Six Months Ended (In millions) July 31, 2009 August 1, 2008 July 31, 2009 August 1, 2008 Liability for extended warranty claims, beginning of period $ 18 $ 12 $ 17 $ 14 Accrual for claims incurred 17 13 30 25 Claim payments (14) (8) (26) (22) Liability for extended warranty claims, end of period $ 21 $ 17 $ 21 $ 17

Comprehensive Income

Comprehensive Income
	6 Months Ended Jul. 31, 2009
Note to Consolidated Financial Statements
Comprehensive Income	Note 6: Comprehensive Income - Comprehensive income represents changes in shareholders equity from non-owner sources and is comprised of net earnings plus or minus unrealized gains or losses on available-for-sale securities and foreign currency translation adjustments. The following table reconciles net earnings to comprehensive income for the three and six months ended July 31, 2009, and August 1, 2008. Three Months Ended Six Months Ended (In millions) July 31, 2009 August 1, 2008 July 31, 2009 August 1, 2008 Net earnings $ 759 $ 938 $ 1,235 $ 1,545 Foreign currency translation adjustments 39 1 50 1 Net unrealized investment gains (losses) 2 2 2 (1) Comprehensive income $ 800 $ 941 $ 1,287 $ 1,545

Earnings Per Share

Earnings Per Share
	6 Months Ended Jul. 31, 2009
Note to Consolidated Financial Statements
Earnings Per Share	Note 7: Earnings Per Share - The Company adopted FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities, effective January 31, 2009. FSP EITF 03-6-1 states that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. The retrospective application of the provisions of FSP EITF 03-6-1 reduced previously reported diluted earnings per share by $0.01 for the three and six months ended August 1, 2008. Under the two-class method, net earnings are reduced by the amount of dividends declared in the period for each class of common stock and participating security. The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net earnings for the period had been distributed. Basic earnings per common share excludes dilution and is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares as of the balance sheet date, as adjusted for the potential dilutive effect of non-participating share-based awards and convertible notes. The following table reconciles earnings per common share for the three and six months ended July 31, 2009, and August 1, 2008. Three Months Ended Six Months Ended (In millions, except per share data) July 31, 2009 August 1, 2008 July 31, 2009 August 1, 2008 Basic earnings per common share: Net earnings $ 759 $ 938 $ 1,235 $ 1,545 Less: Net earnings allocable to participating securities (6) (5) (10) (8) Net earnings allocable to common shares $ 753 $ 933 $ 1,225 $ 1,537 Weighted-average common shares outstanding 1,464 1,455 1,463 1,454 Basic earnings per common share $ 0.51 $ 0.64 $ 0.84 $ 1.06 Diluted earnings per common share: Net earnings $ 759 $ 938 $ 1,235 $ 1,545 Net earnings adjustment for interest on convertible notes, net of tax - - - 1 Net earnings, as adjusted 759 938 1,235 1,546 Less: Net earnings allocable to participating securities (6) (5) (10) (8) Net earnings allocable to common shares $ 753 $ 933 $ 1,225 $ 1,538 Weighted-average common shares outstanding 1,464 1,455 1,463 1,454 Dilutive effect of non-participating share-based awards 2 2 2 2 Dilutive effect of convertible notes - 13 - 17 Weighted-average common shares, as adjusted 1,466 1,470 1,465 1,473 Diluted earnings per common share $ 0.51 $ 0.63 $ 0.84 $ 1.04 Stock options to purchase 21.5 million and 22.1 million shares of common stock were excluded from the computation of diluted earnings per common share because their effect would have been anti-dilutive for the three months ended July 31, 2009, and August 1, 2008, respectively. Stock optio

Supplemental Disclosures

Supplemental Disclosures
	6 Months Ended Jul. 31, 2009
Note to Consolidated Financial Statements
Supplemental Disclosure	Note 8: Supplemental Disclosure Net interest expense is comprised of the following: Three Months Ended Six Months Ended (In millions) July 31, 2009 August 1, 2008 July 31, 2009 August 1, 2008 Long-term debt $ 73 $ 73 $ 146 $ 146 Short-term borrowings - 2 2 7 Capitalized leases 7 7 14 16 Interest income (5) (12) (10) (21) Interest capitalized (4) (7) (8) (15) Other 5 6 10 12 Interest - net $ 76 $ 69 $ 154 $ 145 Supplemental disclosures of cash flow information: Six Months Ended (In millions) July 31, 2009 August 1, 2008 Cash paid for interest, net of amount capitalized $ 155 $ 161 Cash paid for income taxes $ 487 $ 655 Non-cash investing and financing activities: Non-cash property acquisitions $ 59 $ 81

Recent Accounting Pronouncement

Recent Accounting Pronouncements
	6 Months Ended Jul. 31, 2009
Note to Consolidated Financial Statements
Recent Accounting Pronouncements	Note 9: Recent Accounting Pronouncements - In May 2009, the FASB issued SFAS No. 165, Subsequent Events, which clarifies that management must evaluate, as of each reporting period, events or transactions that occur after the balance sheet date through the date that the financial statements are issued or are available to be issued. SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009. The Company adopted SFAS No. 165 in the second quarter of 2009. The adoption of SFAS No. 165 did not have a material impact on the Companys consolidated financial statements but did require the Company to disclose the date through which management had evaluated subsequent events. In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets an amendment of FASB Statement No. 140, which amends the derecognition guidance in Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 166 is effective for financial asset transfers occurring in fiscal years beginning after November 15, 2009, and interim periods within those fiscal years. The Company is currently evaluating the impact of SFAS No. 166 on its consolidated financial statements.In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), which amends the consolidation guidance that applies to variable interest entities. SFAS No. 167 is effective for fiscal years beginning after November 15, 2009, and interim periods within those fiscal years. The Company is currently evaluating the impact of SFAS No. 167 on its consolidated financial statements.In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162. Under SFAS No. 168, the FASB Accounting Standards Codification (Codification) will become the sole source of authoritative U.S. GAAP to be applied by nongovernmental entities. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption will have no material impact on the Companys consolidated financial statements but will require that interim and annual filings include references to the Codification.

Subsequent Events

Subsequent Events
	6 Months Ended Jul. 31, 2009
Note to Consolidated Financial Statements
Subsequent Events	Note 10: Subsequent Events The Company has evaluated subsequent events through September 1, 2009, the date the consolidated financial statements (unaudited) were issued. On August 24, 2009, the Company entered into a joint venture agreement with Australias largest retailer, Woolworths Limited, to develop a network of home improvement stores for consumers in Australia. Under the agreement, the Company will be one-third owner of the destination home improvement chain. During the first four years, the Company estimates that it will invest approximately $100 million per year in the venture, with that amount varying depending on how rapidly stores come online.

Document and Entity Information

Document and Entity Information (USD $)
	6 Months Ended Jul. 31, 2009	Aug. 28, 2009	Aug. 01, 2008
Entity and document information
Entity registrant name	LOWE'S COMPANIES, INC.
Entity central index key	0000060667
Document type	10-Q
Document period end date	2009-07-31
Amendment flag	false
Amendment description
Current fiscal year end date	--01-30
Entity well known seasoned issuer	Yes
Entity voluntary filers	No
Entity current reporting status	Yes
Entity filer category	Large Accelerated Filer
Entity public float			$22,800,000,000
Entity common stock shares outstanding		1,477,558,822