MOORESVILLE, N.C., Nov. 20, 2018 /PRNewswire/ -- Lowe's
Companies, Inc. (NYSE: LOW) today reported net earnings of
$629 million and diluted earnings per
share of $0.78 for the quarter ended
Nov. 2, 2018, which included pre-tax
charges of $280 million further
described below, compared to net earnings of $872 million and diluted earnings per share of
$1.05 in the third quarter of 2017.
Excluding the impact of the charges, adjusted diluted earnings per
share1 decreased 1.0 percent to $1.04 compared to the prior year.
Management has substantially completed its strategic
reassessment of the business and identified actions to drive focus
on its core home improvement business and improve profitability.
The company intends to exit its Mexico retail operations and is exploring
strategic alternatives. The company has also identified certain
non-core activities within its U.S. home improvement business to
exit, including Alacrity Renovation Services and Iris Smart Home. These actions are in addition
to the previously announced decisions to exit its Orchard Supply
Hardware operations, and close 20 underperforming stores in the
U.S. and 31 stores and other locations in
Canada.
"Our top priority in the third quarter was positioning Lowe's
for long-term success by identifying underperforming or non-core
businesses and stores for divestiture," commented Marvin R. Ellison, Lowe's president and
CEO. "With our strategic reassessment substantially
completed, we can now intensify our focus on the core retail
business.
The $280 million in pre-tax
charges recognized in the third quarter and referenced above
related to this strategic reassessment, and included the
following:
- $123 million of accelerated
depreciation and amortization, lease and severance obligations, and
other costs related to the decision to close all Orchard Supply
Hardware locations;
- $121 million of long-lived asset
impairment and severance obligations related to the decision to
close certain underperforming stores in the U.S. and Canada and other locations in Canada;
- $22 million of long-lived asset
impairment related to the decision to exit retail operations in
Mexico, and;
- $14 million of long-lived asset
impairment and inventory write-down related to the decision to exit
certain non-core activities, including Alacrity Renovation Services
and Iris Smart Home.
Additional pre-tax charges of $460
to $580 million related to these
decisions and consisting of lease obligations, accelerated
depreciation and amortization, severance and other costs are
expected to be incurred in the fourth quarter of fiscal 2018, and
have been reflected in the company's updated business
outlook. The amounts, nature and timing of any additional
charges associated with the intended exit of its
Mexico retail operations will
depend on the plan executed, therefore those amounts are not
reflected in the company's updated business outlook.
Sales for the third quarter increased 3.8 percent to
$17.4 billion over the third quarter
of 2017, and comparable sales increased 1.5 percent. Comparable
sales for the U.S. home improvement business increased 2.0 percent
for the third quarter.
As a result of the new revenue recognition accounting standard
ASU No. 2014-09 adopted in the first quarter of 2018, the company
reclassified certain items within operating income. This change
resulted in an increase to sales of approximately $240 million in the third quarter, driven
primarily by the reclassification of the profit sharing income from
the company's proprietary credit program from selling, general and
administrative expense. This accounting standard has no impact on
comparable sales or diluted earnings per share. It was
adopted on a modified retrospective basis, therefore the prior year
has not been adjusted.
"During the quarter, the favorable macroeconomic environment,
combined with great values, drove traffic to our stores and
website," said Ellison. "However, continued challenges with
inventory out of stocks, poor reset execution, and assortment
concerns in certain categories pressured our ability to turn those
visits into transactions," Ellison added. "Rather than chase
short-term solutions to these problems, we are redesigning
processes and systems to deliver sustainable improvement, and
expect to see positive trends as we enter 2019.
"Our transformation will take time, but we have assembled an
experienced team and developed a comprehensive plan to make steady
progress," Ellison concluded. "I would like to thank our
associates for their hard work and dedication to serving
customers."
Delivering on its commitment to return excess cash to
shareholders, the company repurchased $620
million of stock under its share repurchase program and paid
$390 million in dividends in the
third quarter.
As of Nov. 2, 2018, Lowe's
operated 2,133 home improvement and hardware stores in the United States, Canada and Mexico representing 214.7 million square feet
of retail selling space.
A conference call to discuss third quarter 2018 operating
results is scheduled for today (Tuesday,
Nov. 20) at 9:00 am ET.
The conference call will be available by webcast and can be
accessed by visiting Lowe's website at www.Lowes.com/investor and
clicking on Lowe's Third Quarter 2018 Earnings Conference Call
Webcast. Supplemental slides will be available fifteen
minutes prior to the start of the conference call. A replay of the
call will be archived on Lowes.com/investor until February 26, 2019.
Lowe's Business Outlook
The company has updated its
business outlook to reflect charges associated with its strategic
reassessment, as well as its expectations for fourth quarter
operating results.
The amounts, nature and timing of any additional charges
associated with the intended exit of its Mexico retail operations will depend on the
plan executed, therefore those amounts are not reflected in the
company's updated business
outlook.
Fiscal Year 2018 (comparisons to fiscal year
2017)
- Total sales are expected to increase approximately 4
percent.
- Comparable sales are expected to increase approximately 2.5
percent.
- The company expects to add approximately 8 home improvement
stores.
- Operating income as a percentage of sales (operating margin) is
expected to decrease 240 to 255 basis points2, including
135 to 150 basis points from charges associated with its strategic
reassessment.
- The effective income tax rate is expected to be approximately
24 percent.
- Diluted earnings per share of $4.08 to $4.24 are
expected for the fiscal year ending Feb. 1,
2019.
- Adjusted diluted earnings per share1 are expected to
be $5.08 to $5.13.
1 Adjusted diluted earnings per share is a non-GAAP
financial measure. Refer to the "Non-GAAP Financial Measures
Reconciliation" section of this release for additional information
as well as a reconciliation between the Company's GAAP and non-GAAP
financial results.
2 Includes 4 basis point net negative impact from the
gain on the sale of the company's interest in its Australian joint
venture (2Q 2017) and the one-time bonus paid to eligible hourly
U.S. employees (4Q 2017).
Disclosure Regarding Forward-Looking Statements
This press release includes "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. Statements including words such as "believe", "expect",
"anticipate", "plan", "desire", "project", "estimate", "intend",
"will", "should", "could", "would", "may", "strategy", "potential",
"opportunity" and similar expressions are forward-looking
statements. Forward-looking statements involve estimates,
expectations, projections, goals, forecasts, assumptions, risks and
uncertainties. Forward-looking statements include, but are
not limited to, statements about future financial and operating
results, Lowe's plans, objectives, business outlook, priorities,
expectations and intentions, expectations for sales growth,
comparable sales, earnings and performance, shareholder value,
capital expenditures, cash flows, the housing market, the home
improvement industry, demand for services, share repurchases,
Lowe's strategic initiatives, including those relating to
acquisitions and dispositions by Lowe's and the expected impact of
such transactions on our strategic and operational plans and
financial results, and any statement of an assumption underlying
any of the foregoing and other statements that are not historical
facts. Although we believe that the expectations, opinions,
projections and comments reflected in these forward-looking
statements are reasonable, such statements involve risks and
uncertainties and we can give no assurance that such statements
will prove to be correct. Actual results may differ materially from
those expressed or implied in such statements.
A wide variety of potential risks, uncertainties and other
factors could materially affect our ability to achieve the results
either expressed or implied by these forward-looking statements
including, but not limited to, management and key personnel change,
changes in general economic conditions, such as the rate of
unemployment, interest rate and currency fluctuations, fuel and
other energy costs, slower growth in personal income, changes in
consumer spending, changes in the rate of housing turnover, the
availability of consumer credit and of mortgage financing,
inflation or deflation of commodity prices, recently enacted or
proposed tariffs, and other factors that can negatively affect our
customers, as well as our ability to: (i) respond to adverse trends
in the housing industry, a reduced rate of growth in household
formation, and slower rates of growth in housing renovation and
repair activity, as well as uneven recovery in commercial building
activity; (ii) secure, develop, and otherwise implement new
technologies and processes necessary to realize the benefits of our
strategic initiatives focused on omni-channel sales and marketing
presence and enhance our efficiency, and otherwise successfully
execute on our strategy and implement our strategic initiatives,
including acquisitions, dispositions and the closing of certain
stores and facilities; (iii) attract, train, and retain
highly-qualified associates; (iv) manage our business effectively
as we adapt our operating model to meet the changing expectations
of our customers; (v) maintain, improve, upgrade and protect our
critical information systems from data security breaches,
ransomware and other cyber threats; (vi) respond to fluctuations in
the prices and availability of services, supplies, and products;
(vii) respond to the growth and impact of competition; (viii)
address changes in existing or new laws or regulations that affect
consumer credit, employment/labor, trade, product safety,
transportation/logistics, energy costs, health care, tax,
environmental issues or privacy and data protection; (ix)
positively and effectively manage our public image and reputation
and respond appropriately to unanticipated failures to maintain a
high level of product and service quality that could result in a
negative impact on customer confidence and adversely affect sales;
and (x) effectively manage our relationships with selected
suppliers of brand name products and key vendors and service
providers, including third party installers. In addition, we could
experience impairment losses and other charges if either the actual
results of our operating stores are not consistent with the
assumptions and judgments we have made in estimating future cash
flows and determining asset fair values, or we are required to
reduce the carrying amount of our investment in certain
unconsolidated entities. With respect to acquisitions and
dispositions, potential risks include the effect of such
transactions on Lowe's and the target company's or operating
business's strategic relationships, operating results and
businesses generally; our ability to integrate or divest personnel,
labor models, financial, IT and other systems successfully;
disruption of our ongoing business and distraction of management;
hiring additional management and other critical personnel;
increasing or decreasing the scope, geographic diversity and
complexity of our operations; significant integration or
disposition costs or unknown liabilities; and failure to realize
the expected benefits of the transaction. For more information
about these and other risks and uncertainties that we are exposed
to, you should read the "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of
Operations—Critical Accounting Policies and Estimates" included in
our most recent Annual Report on Form 10-K filed with the U.S.
Securities and Exchange Commission (the "SEC") and the description
of material changes thereto, if any, included in our Quarterly
Reports on Form 10-Q or subsequent filings with the SEC.
The forward-looking statements contained in this news release
are expressly qualified in their entirety by the foregoing
cautionary statements. The foregoing list of important factors that
may affect future results is not exhaustive. When relying on
forward-looking statements to make decisions, investors and others
should carefully consider the foregoing factors and other
uncertainties and potential events. All such forward-looking
statements are based upon data available as of the date of this
release or other specified date and speak only as of such date. All
subsequent written and oral forward-looking statements attributable
to us or any person acting on our behalf about any of the matters
covered in this release are qualified by these cautionary
statements and in the "Risk Factors" included in our most recent
Annual Report on Form 10-K and the description of material changes
thereto, if any, included in our Quarterly Reports on Form 10-Q or
subsequent filings with the SEC. We expressly disclaim any
obligation to update or revise any forward-looking statement,
whether as a result of new information, change in circumstances,
future events or otherwise, except as may be required by law.
Lowe's Companies, Inc.
Lowe's Companies, Inc. (NYSE: LOW) is a FORTUNE® 50 home
improvement company serving more than 18 million customers a week
in the United States, Canada and Mexico. With fiscal year 2017 sales of
$68.6 billion, Lowe's and its related
businesses operate or service more than 2,240 home improvement and
hardware stores and employ over 310,000 people. Founded in 1946 and
based in Mooresville, N.C., Lowe's
supports the communities it serves through programs that focus on
K-12 public education and community improvement projects. For more
information, visit Lowes.com.
Lowe's Companies,
Inc.
Consolidated
Statements of Current and Retained Earnings
(Unaudited)
In Millions, Except
Per Share and Percentage Data
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
November 2,
2018
|
|
November 3,
2017
|
|
November 2,
2018
|
|
November 3,
2017
|
Current
Earnings
|
Amount
|
|
|
%
Sales
|
|
|
Amount
|
|
|
%
Sales
|
|
|
Amount
|
|
|
%
Sales
|
|
|
Amount
|
|
|
%
Sales
|
|
Net
sales
|
$
|
17,415
|
|
|
100.00
|
|
|
$
|
16,770
|
|
|
100.00
|
|
|
$
|
55,662
|
|
|
100.00
|
|
|
$
|
53,125
|
|
|
100.00
|
|
Cost of
sales
|
11,755
|
|
|
67.50
|
|
|
11,057
|
|
|
65.93
|
|
|
36,791
|
|
|
66.10
|
|
|
34,942
|
|
|
65.77
|
|
Gross
margin
|
5,660
|
|
|
32.50
|
|
|
5,713
|
|
|
34.07
|
|
|
18,871
|
|
|
33.90
|
|
|
18,183
|
|
|
34.23
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
4,270
|
|
|
24.51
|
|
|
3,808
|
|
|
22.71
|
|
|
13,147
|
|
|
23.62
|
|
|
11,615
|
|
|
21.87
|
|
Depreciation and
amortization
|
433
|
|
|
2.49
|
|
|
358
|
|
|
2.13
|
|
|
1,138
|
|
|
2.04
|
|
|
1,080
|
|
|
2.03
|
|
Operating
income
|
957
|
|
|
5.50
|
|
|
1,547
|
|
|
9.23
|
|
|
4,586
|
|
|
8.24
|
|
|
5,488
|
|
|
10.33
|
|
Interest -
net
|
153
|
|
|
0.88
|
|
|
160
|
|
|
0.96
|
|
|
467
|
|
|
0.84
|
|
|
479
|
|
|
0.91
|
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
464
|
|
|
0.87
|
|
Pre-tax
earnings
|
804
|
|
|
4.62
|
|
|
1,387
|
|
|
8.27
|
|
|
4,119
|
|
|
7.40
|
|
|
4,545
|
|
|
8.55
|
|
Income tax
provision
|
175
|
|
|
1.01
|
|
|
515
|
|
|
3.07
|
|
|
981
|
|
|
1.76
|
|
|
1,652
|
|
|
3.10
|
|
Net
earnings
|
$
|
629
|
|
|
3.61
|
|
|
$
|
872
|
|
|
5.20
|
|
|
$
|
3,138
|
|
|
5.64
|
|
|
$
|
2,893
|
|
|
5.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding - basic
|
806
|
|
|
|
|
831
|
|
|
|
|
815
|
|
|
|
|
843
|
|
|
|
Basic earnings per
common share (1)
|
$
|
0.78
|
|
|
|
|
$
|
1.05
|
|
|
|
|
$
|
3.84
|
|
|
|
|
$
|
3.42
|
|
|
|
Weighted average
common shares outstanding - diluted
|
807
|
|
|
|
|
832
|
|
|
|
|
816
|
|
|
|
|
844
|
|
|
|
Diluted earnings
per common share (1)
|
$
|
0.78
|
|
|
|
|
$
|
1.05
|
|
|
|
|
$
|
3.83
|
|
|
|
|
$
|
3.42
|
|
|
|
Cash dividends per
share
|
$
|
0.48
|
|
|
|
|
$
|
0.41
|
|
|
|
|
$
|
1.37
|
|
|
|
|
$
|
1.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
$
|
5,517
|
|
|
|
|
$
|
5,253
|
|
|
|
|
$
|
5,425
|
|
|
|
|
$
|
6,241
|
|
|
|
Cumulative effect of
accounting change
|
—
|
|
|
|
|
—
|
|
|
|
|
33
|
|
|
|
|
—
|
|
|
|
Net
earnings
|
629
|
|
|
|
|
872
|
|
|
|
|
3,138
|
|
|
|
|
2,893
|
|
|
|
Cash dividends
declared
|
(387)
|
|
|
|
|
(341)
|
|
|
|
|
(1,115)
|
|
|
|
|
(984)
|
|
|
|
Share
repurchases
|
(603)
|
|
|
|
|
(495)
|
|
|
|
|
(2,325)
|
|
|
|
|
(2,861)
|
|
|
|
Balance at end of
period
|
$
|
5,156
|
|
|
|
|
$
|
5,289
|
|
|
|
|
$
|
5,156
|
|
|
|
|
$
|
5,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
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 $628 million for the three
months ended November 2, 2018 and $870 million for the three
months ended November 3, 2017. Net earnings allocable to
common shares used in the basic and diluted earnings per share
calculation were $3,128 million for the nine months ended
November 2, 2018 and $2,883 million for the nine months ended
November 3, 2017.
|
Lowe's Companies,
Inc.
Consolidated
Statements of Comprehensive Income (Unaudited)
In Millions, Except
Percentage Data
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
November 2,
2018
|
|
November 3,
2017
|
|
November 2,
2018
|
|
November 3,
2017
|
|
Amount
|
|
|
%
Sales
|
|
|
Amount
|
|
|
%
Sales
|
|
|
Amount
|
|
|
%
Sales
|
|
|
Amount
|
|
|
%
Sales
|
|
Net
earnings
|
$
|
629
|
|
|
3.61
|
|
|
$
|
872
|
|
|
5.20
|
|
|
$
|
3,138
|
|
|
5.64
|
|
|
$
|
2,893
|
|
|
5.45
|
|
Foreign currency
translation adjustments - net of tax
|
(21)
|
|
|
(0.13)
|
|
|
173
|
|
|
1.03
|
|
|
(176)
|
|
|
(0.32)
|
|
|
278
|
|
|
0.52
|
|
Net unrealized
investment losses - net of tax
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other
comprehensive income/(loss)
|
(22)
|
|
|
(0.13)
|
|
|
173
|
|
|
1.03
|
|
|
(177)
|
|
|
(0.32)
|
|
|
278
|
|
|
0.52
|
|
Comprehensive
income
|
$
|
607
|
|
|
3.48
|
|
|
$
|
1,045
|
|
|
6.23
|
|
|
$
|
2,961
|
|
|
5.32
|
|
|
$
|
3,171
|
|
|
5.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lowe's Companies,
Inc.
Consolidated
Balance Sheets
In Millions, Except
Par Value Data
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
November 2,
2018
|
|
November 3,
2017
|
|
February 2,
2018
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
1,668
|
|
|
$
|
743
|
|
|
$
|
588
|
|
Short-term
investments
|
|
|
208
|
|
|
85
|
|
|
102
|
|
Merchandise inventory
- net
|
|
|
12,365
|
|
|
12,393
|
|
|
11,393
|
|
Other current
assets
|
|
|
897
|
|
|
788
|
|
|
689
|
|
Total current
assets
|
|
|
15,138
|
|
|
14,009
|
|
|
12,772
|
|
Property, less
accumulated depreciation
|
|
|
18,923
|
|
|
19,818
|
|
|
19,721
|
|
Long-term
investments
|
|
|
290
|
|
|
370
|
|
|
408
|
|
Deferred income taxes
- net
|
|
|
285
|
|
|
347
|
|
|
168
|
|
Goodwill
|
|
|
1,272
|
|
|
1,327
|
|
|
1,307
|
|
Other
assets
|
|
|
805
|
|
|
912
|
|
|
915
|
|
Total
assets
|
|
|
$
|
36,713
|
|
|
$
|
36,783
|
|
|
$
|
35,291
|
|
|
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
$
|
—
|
|
|
$
|
171
|
|
|
$
|
1,137
|
|
Current maturities of
long-term debt
|
|
|
1,117
|
|
|
297
|
|
|
294
|
|
Accounts
payable
|
|
|
9,283
|
|
|
8,903
|
|
|
6,590
|
|
Accrued compensation
and employee benefits
|
|
|
806
|
|
|
808
|
|
|
747
|
|
Deferred
revenue
|
|
|
1,356
|
|
|
1,404
|
|
|
1,378
|
|
Other current
liabilities
|
|
|
2,507
|
|
|
2,155
|
|
|
1,950
|
|
Total current
liabilities
|
|
|
15,069
|
|
|
13,738
|
|
|
12,096
|
|
Long-term debt,
excluding current maturities
|
|
|
14,460
|
|
|
15,570
|
|
|
15,564
|
|
Deferred revenue -
extended protection plans
|
|
|
827
|
|
|
794
|
|
|
803
|
|
Other
liabilities
|
|
|
963
|
|
|
939
|
|
|
955
|
|
Total
liabilities
|
|
|
31,319
|
|
|
31,041
|
|
|
29,418
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
Preferred stock - $5
par value, none issued
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Common stock - $0.50
par value;
|
|
|
|
|
|
|
|
Shares issued and
outstanding
|
|
|
|
|
|
|
|
November 2,
2018
|
806
|
|
|
|
|
|
|
|
November 3,
2017
|
831
|
|
|
|
|
|
|
|
February 2,
2018
|
830
|
|
|
403
|
|
|
415
|
|
|
415
|
|
Capital in excess of
par value
|
|
|
—
|
|
|
—
|
|
|
22
|
|
Retained
earnings
|
|
|
5,156
|
|
|
5,289
|
|
|
5,425
|
|
Accumulated other
comprehensive income/(loss)
|
|
|
(165)
|
|
|
38
|
|
|
11
|
|
Total
shareholders' equity
|
|
|
5,394
|
|
|
5,742
|
|
|
5,873
|
|
Total liabilities
and shareholders' equity
|
|
|
$
|
36,713
|
|
|
$
|
36,783
|
|
|
$
|
35,291
|
|
|
|
|
|
|
|
|
|
Lowe's Companies,
Inc.
Consolidated
Statements of Cash Flows (Unaudited)
In
Millions
|
|
|
Nine Months
Ended
|
|
November 2,
2018
|
|
November 3,
2017
|
Cash flows from
operating activities:
|
|
|
|
Net
earnings
|
$
|
3,138
|
|
|
$
|
2,893
|
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
1,206
|
|
|
1,148
|
|
Deferred income
taxes
|
(139)
|
|
|
(118)
|
|
Loss on property and
other assets - net
|
400
|
|
|
21
|
|
Loss on
extinguishment of debt
|
—
|
|
|
464
|
|
(Gain) loss on cost
method and equity method investments
|
6
|
|
|
(86)
|
|
Share-based payment
expense
|
79
|
|
|
78
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Merchandise inventory
- net
|
(1,030)
|
|
|
(1,783)
|
|
Other operating
assets
|
(94)
|
|
|
186
|
|
Accounts
payable
|
2,708
|
|
|
2,251
|
|
Other operating
liabilities
|
524
|
|
|
318
|
|
Net cash provided
by operating activities
|
6,798
|
|
|
5,372
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Purchases of
investments
|
(1,298)
|
|
|
(680)
|
|
Proceeds from
sale/maturity of investments
|
1,309
|
|
|
870
|
|
Capital
expenditures
|
(846)
|
|
|
(787)
|
|
Proceeds from sale of
property and other long-term assets
|
50
|
|
|
21
|
|
Acquisition of
business - net
|
—
|
|
|
(509)
|
|
Other -
net
|
(3)
|
|
|
13
|
|
Net cash used in
investing activities
|
(788)
|
|
|
(1,072)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Net change in
short-term borrowings
|
(1,137)
|
|
|
(340)
|
|
Net proceeds from
issuance of long-term debt
|
—
|
|
|
2,968
|
|
Repayment of
long-term debt
|
(288)
|
|
|
(2,836)
|
|
Proceeds from
issuance of common stock under share-based payment plans
|
73
|
|
|
87
|
|
Cash dividend
payments
|
(1,068)
|
|
|
(947)
|
|
Repurchase of common
stock
|
(2,498)
|
|
|
(3,054)
|
|
Other -
net
|
(3)
|
|
|
(8)
|
|
Net cash used in
financing activities
|
(4,921)
|
|
|
(4,130)
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(9)
|
|
|
15
|
|
|
|
|
|
Net increase in cash
and cash equivalents
|
1,080
|
|
|
185
|
|
Cash and cash
equivalents, beginning of period
|
588
|
|
|
558
|
|
Cash and cash
equivalents, end of period
|
$
|
1,668
|
|
|
$
|
743
|
|
|
|
|
|
Lowe's Companies, Inc.
Non-GAAP Financial Measures
Reconciliation (Unaudited)
To provide additional transparency, the company has presented
the non-GAAP financial measures of adjusted diluted earnings per
share and forecasted adjusted diluted earnings per share to exclude
the impacts of certain discrete items, as further described below,
not contemplated in Lowe's original Business Outlook for 2018 to
assist the user in understanding performance relative to that
Business Outlook. The company believes these non-GAAP
financial measures provide useful insight for analysts and
investors in evaluating what management considers the company's
operational performance.
In the second and third quarters of 2018, the company performed
a strategic reassessment that resulted in the following pre-tax
charges, not contemplated in the company's original Business
Outlook, being reflected in our results for the third quarter of
fiscal 2018, and our forecasted results for fiscal 2018:
- 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 long-lived 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 expects to recognize additional pre-tax charges of
$270 million to $350 million related to lease obligations.
Total pre-tax charges for fiscal year 2018 are estimated to range
from $623 million to $703 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 expects to
recognize additional pre-tax charges of $190
million to $230 million,
primarily associated with accelerated depreciation and lease
obligation costs. Total pre-tax charges for fiscal year 2018
are estimated to range from $311
million to $351 million (U.S.
and Canada closing 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
(Mexico impairment charge),
and;
- 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 (Non-core
activities charges).
Adjusted diluted earnings per share and forecasted adjusted
diluted earnings per share should not be considered alternatives
to, or more meaningful indicators of, the company's actual or
forecasted diluted earnings per share 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 these 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)
|
|
(Unaudited)
|
|
November 2,
2018
|
|
November 3,
2017
|
|
Pre-Tax
Earnings
|
|
|
Tax
|
|
|
Net
Earnings
|
|
|
Pre-Tax
Earnings
|
|
|
Tax
|
|
|
Net
Earnings
|
|
Diluted earnings
per share, as reported
|
|
|
|
|
$
|
0.78
|
|
|
|
|
|
|
$
|
1.05
|
|
Non-GAAP
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
Orchard Supply
Hardware charges
|
0.15
|
|
|
(0.03)
|
|
|
0.12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
U.S. and Canada
closing charges
|
0.15
|
|
|
(0.04)
|
|
|
0.11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Mexico impairment
charge
|
0.02
|
|
|
—
|
|
|
0.02
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-core activities
charges
|
0.02
|
|
|
(0.01)
|
|
|
0.01
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Adjusted diluted
earnings per share
|
|
|
|
|
$
|
1.04
|
|
|
|
|
|
|
$
|
1.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2018 Lowe's
Business Outlook
|
|
Low End of
Guidance Range
|
|
High End of
Guidance Range
|
|
Pre-Tax
Impact
|
|
|
Tax
Impact
|
|
|
Net
Earnings
Impact
|
|
|
Pre-Tax
Impact
|
|
|
Tax
Impact
|
|
|
Net
Earnings
Impact
|
|
Forecasted diluted
earnings per share
|
|
|
|
|
$
|
4.08
|
|
|
|
|
|
|
$
|
4.24
|
|
Non-GAAP
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
Orchard Supply
Hardware charges
|
0.86
|
|
|
(0.22)
|
|
|
0.64
|
|
|
0.76
|
|
|
(0.19)
|
|
|
0.57
|
|
U.S. and Canada
closing charges
|
0.44
|
|
|
(0.11)
|
|
|
0.33
|
|
|
0.39
|
|
|
(0.10)
|
|
|
0.29
|
|
Mexico impairment
charge 1
|
0.02
|
|
|
—
|
|
|
0.02
|
|
|
0.02
|
|
|
—
|
|
|
0.02
|
|
Non-core activities
charges
|
0.02
|
|
|
(0.01)
|
|
|
0.01
|
|
|
0.02
|
|
|
(0.01)
|
|
|
0.01
|
|
Forecasted
adjusted diluted earnings per share
|
|
|
|
|
$
|
5.08
|
|
|
|
|
|
|
$
|
5.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
The amounts, nature
and timing of any additional charges associated with the intended
exit of the Mexico retail operations will depend on the plan
executed, and therefore, such amounts are not reflected in the
company's updated Business Outlook.
|
View original content to download
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SOURCE Lowe's Companies, Inc.