MOORESVILLE, N.C., Aug. 21, 2019 /PRNewswire/ -- Lowe's
Companies, Inc. (NYSE: LOW) today reported net earnings of
$1.7 billion and diluted earnings per
share of $2.14 for the quarter ended
Aug. 2, 2019, compared to net
earnings of $1.5 billion and diluted
earnings per share of $1.86 in the
second quarter of 2018.
Excluding $14 million of pre-tax
operating losses associated with the wind-down of the Company's
Mexico retail operations, adjusted
diluted earnings per share1 increased 3.9 percent to
$2.15 from adjusted diluted earnings
per share1 of $2.07 in the
second quarter of 2018.
Sales for the second quarter increased 0.5 percent to
$21.0 billion from $20.9 billion in the second quarter of 2018, and
comparable sales increased 2.3 percent. Comparable sales for the
U.S. home improvement business increased 3.2 percent.
"We capitalized on spring demand, strong holiday event execution
and growth in Paint and our Pro business to deliver strong second
quarter results. Despite lumber deflation and difficult weather, we
are pleased that we delivered positive comparable sales in all 15
geographic regions of the U.S. This is a reflection of a
solid macroeconomic backdrop and continued momentum executing our
retail fundamentals framework," commented Marvin R. Ellison, Lowe's president and
CEO.
"Our transformation is ongoing, and our future is bright. We are
confident that we are on the right path to capitalize on solid
demand in a healthy home improvement market and generate long-term
profitable growth. I would like to thank our associates for
their hard work and continued commitment to serving customers,"
added Ellison.
Delivering on its commitment to return excess cash to
shareholders, the company repurchased $1.96
billion of stock under its share repurchase program and paid
$382 million in dividends in the
second quarter.
As of Aug. 2, 2019, Lowe's
operated 2,003 home improvement and hardware stores in the United States and Canada representing 208.8 million square feet
of retail selling space. Lowe's is actively hiring full- and
part-time associates at its corporate locations, stores and
distribution centers, and has filled more than 14,000 positions
since July 1.
A conference call to discuss second quarter 2019 operating
results is scheduled for today (Wednesday,
Aug. 21) 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 Second Quarter 2019 Earnings Conference Call
Webcast. Supplemental materials will be available
approximately 15 minutes prior to the start of the conference call.
A replay of the call will be archived on Lowes.com/investor until
Nov. 19, 2019.
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 reconciliations between the Company's GAAP
and non-GAAP financial results.
Lowe's Business Outlook
Fiscal Year 2019 (comparisons to fiscal year
2018)
- Total sales are expected to increase approximately 2
percent.
- Comparable sales are expected to increase approximately 3
percent.
- Operating income as a percentage of sales (operating margin) is
expected to increase 310 to 340 basis points.
- Adjusted operating income as a percentage of sales (adjusted
operating margin) is expected to increase 20 to 50 basis
points.
- The effective income tax rate is expected to be approximately
24%.
- The target leverage ratio is 2.75x, therefore the company
expects to repurchase approximately $4
billion of stock.
- Diluted earnings per share of $5.54 to $5.74 are
expected for the fiscal year ending Jan. 31,
2020.
- Adjusted diluted earnings per share1 of $5.45 to $5.65 are
expected for the fiscal year ending Jan. 31,
2020.
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, 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, disruptions caused by our
recent management and key personnel changes, 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
system outages, 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 and
Canada. With fiscal year 2018
sales of $71.3 billion, Lowe's and
its related businesses operate or service more than 2,200 home
improvement and hardware stores and employ approximately 300,000
associates. Founded in 1946 and based in Mooresville, N.C., Lowe's supports the
communities it serves through programs focused on creating safe,
affordable housing and helping to develop the next generation of
skilled trade experts. 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
|
|
Six Months
Ended
|
|
August 2,
2019
|
|
August 3,
2018
|
|
August 2,
2019
|
|
August 3,
2018
|
Current
Earnings
|
Amount
|
|
%
Sales
|
|
Amount
|
|
%
Sales
|
|
Amount
|
|
%
Sales
|
|
Amount
|
|
%
Sales
|
Net
sales
|
$
|
20,992
|
|
|
100.00
|
|
|
$
|
20,888
|
|
|
100.00
|
|
|
$
|
38,733
|
|
|
100.00
|
|
|
$
|
38,247
|
|
|
100.00
|
|
Cost of
sales
|
14,252
|
|
|
67.89
|
|
|
14,003
|
|
|
67.04
|
|
|
26,412
|
|
|
68.19
|
|
|
25,615
|
|
|
66.97
|
|
Gross
margin
|
6,740
|
|
|
32.11
|
|
|
6,885
|
|
|
32.96
|
|
|
12,321
|
|
|
31.81
|
|
|
12,632
|
|
|
33.03
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
4,048
|
|
|
19.29
|
|
|
4,386
|
|
|
20.99
|
|
|
7,909
|
|
|
20.42
|
|
|
8,319
|
|
|
21.75
|
|
Depreciation and
amortization
|
311
|
|
|
1.48
|
|
|
336
|
|
|
1.61
|
|
|
614
|
|
|
1.58
|
|
|
685
|
|
|
1.79
|
|
Operating
income
|
2,381
|
|
|
11.34
|
|
|
2,163
|
|
|
10.36
|
|
|
3,798
|
|
|
9.81
|
|
|
3,628
|
|
|
9.49
|
|
Interest -
net
|
169
|
|
|
0.80
|
|
|
153
|
|
|
0.74
|
|
|
331
|
|
|
0.86
|
|
|
313
|
|
|
0.82
|
|
Pre-tax
earnings
|
2,212
|
|
|
10.54
|
|
|
2,010
|
|
|
9.62
|
|
|
3,467
|
|
|
8.95
|
|
|
3,315
|
|
|
8.67
|
|
Income tax
provision
|
536
|
|
|
2.56
|
|
|
490
|
|
|
2.34
|
|
|
745
|
|
|
1.92
|
|
|
806
|
|
|
2.11
|
|
Net
earnings
|
$
|
1,676
|
|
|
7.98
|
|
|
$
|
1,520
|
|
|
7.28
|
|
|
$
|
2,722
|
|
|
7.03
|
|
|
$
|
2,509
|
|
|
6.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
- basic
|
781
|
|
|
|
|
813
|
|
|
|
|
788
|
|
|
|
|
819
|
|
|
|
Basic earnings per
common share (1)
|
$
|
2.14
|
|
|
|
|
$
|
1.86
|
|
|
|
|
$
|
3.44
|
|
|
|
|
$
|
3.05
|
|
|
|
Weighted average
common shares outstanding
- diluted
|
781
|
|
|
|
|
814
|
|
|
|
|
789
|
|
|
|
|
820
|
|
|
|
Diluted earnings
per common share (1)
|
$
|
2.14
|
|
|
|
|
$
|
1.86
|
|
|
|
|
$
|
3.44
|
|
|
|
|
$
|
3.05
|
|
|
|
Cash dividends per
share
|
$
|
0.55
|
|
|
|
|
$
|
0.48
|
|
|
|
|
$
|
1.03
|
|
|
|
|
$
|
0.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
$
|
3,095
|
|
|
|
|
$
|
5,405
|
|
|
|
|
$
|
3,452
|
|
|
|
|
$
|
5,425
|
|
|
|
Cumulative effect of
accounting change
|
—
|
|
|
|
|
—
|
|
|
|
|
(263)
|
|
|
|
|
33
|
|
|
|
Net
earnings
|
1,676
|
|
|
|
|
1,520
|
|
|
|
|
2,722
|
|
|
|
|
2,509
|
|
|
|
Cash dividends
declared
|
(428)
|
|
|
|
|
(390)
|
|
|
|
|
(810)
|
|
|
|
|
(728)
|
|
|
|
Share
repurchases
|
(1,904)
|
|
|
|
|
(1,018)
|
|
|
|
|
(2,662)
|
|
|
|
|
(1,722)
|
|
|
|
Balance at end of
period
|
$
|
2,439
|
|
|
|
|
$
|
5,517
|
|
|
|
|
$
|
2,439
|
|
|
|
|
$
|
5,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 $1,670 million for the three
months ended August 2, 2019 and $1,515 million for the three
months ended August 3, 2018. Net earnings allocable to common
shares used in the basic and diluted earnings per share calculation
were $2,713 million for the six months ended August 2, 2019
and $2,500 million for the six months ended August 3,
2018.
|
Lowe's Companies,
Inc. Consolidated Statements of Comprehensive Income
(Unaudited) In Millions, Except Percentage Data
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
August 2,
2019
|
|
August 3,
2018
|
|
August 2,
2019
|
|
August 3,
2018
|
|
Amount
|
|
%
Sales
|
|
Amount
|
|
%
Sales
|
|
Amount
|
|
%
Sales
|
|
Amount
|
|
%
Sales
|
Net
earnings
|
$
|
1,676
|
|
|
7.98
|
|
|
$
|
1,520
|
|
|
7.28
|
|
|
$
|
2,722
|
|
|
7.03
|
|
|
$
|
2,509
|
|
|
6.56
|
|
Foreign currency
translation adjustments -
net of tax
|
69
|
|
|
0.33
|
|
|
(70)
|
|
|
(0.34)
|
|
|
36
|
|
|
0.09
|
|
|
(154)
|
|
|
(0.40)
|
|
Other
comprehensive income/(loss)
|
69
|
|
|
0.33
|
|
|
(70)
|
|
|
(0.34)
|
|
|
22
|
|
|
0.05
|
|
|
(154)
|
|
|
(0.40)
|
|
Comprehensive
income
|
$
|
1,745
|
|
|
8.31
|
|
|
$
|
1,450
|
|
|
6.94
|
|
|
$
|
2,744
|
|
|
7.08
|
|
|
$
|
2,355
|
|
|
6.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lowe's Companies,
Inc.
|
Consolidated
Balance Sheets
|
In Millions, Except
Par Value Data
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
August 2,
2019
|
|
August 3,
2018
|
|
February 1,
2019
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
1,796
|
|
|
$
|
2,251
|
|
|
$
|
511
|
|
Short-term
investments
|
|
|
275
|
|
|
391
|
|
|
218
|
|
Merchandise inventory
- net
|
|
|
13,730
|
|
|
11,885
|
|
|
12,561
|
|
Other current
assets
|
|
|
995
|
|
|
956
|
|
|
938
|
|
Total current
assets
|
|
|
16,796
|
|
|
15,483
|
|
|
14,228
|
|
Property, less
accumulated depreciation
|
|
|
18,203
|
|
|
19,172
|
|
|
18,432
|
|
Operating lease
right-of-use assets
|
|
|
3,967
|
|
|
—
|
|
|
—
|
|
Long-term
investments
|
|
|
179
|
|
|
87
|
|
|
256
|
|
Deferred income taxes
- net
|
|
|
512
|
|
|
249
|
|
|
294
|
|
Goodwill
|
|
|
303
|
|
|
1,271
|
|
|
303
|
|
Other
assets
|
|
|
735
|
|
|
843
|
|
|
995
|
|
Total
assets
|
|
|
$
|
40,695
|
|
|
$
|
37,105
|
|
|
$
|
34,508
|
|
|
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
722
|
|
Current maturities of
long-term debt
|
|
|
1,009
|
|
|
894
|
|
|
1,110
|
|
Current operating
lease liabilities
|
|
|
492
|
|
|
—
|
|
|
—
|
|
Accounts
payable
|
|
|
9,499
|
|
|
8,984
|
|
|
8,279
|
|
Accrued compensation
and employee benefits
|
|
|
717
|
|
|
671
|
|
|
662
|
|
Deferred
revenue
|
|
|
1,324
|
|
|
1,449
|
|
|
1,299
|
|
Other current
liabilities
|
|
|
2,794
|
|
|
2,583
|
|
|
2,425
|
|
Total current
liabilities
|
|
|
15,835
|
|
|
14,581
|
|
|
14,497
|
|
Long-term debt,
excluding current maturities
|
|
|
16,538
|
|
|
14,937
|
|
|
14,391
|
|
Noncurrent operating
lease liabilities
|
|
|
4,055
|
|
|
—
|
|
|
—
|
|
Deferred revenue -
extended protection plans
|
|
|
868
|
|
|
828
|
|
|
827
|
|
Other
liabilities
|
|
|
759
|
|
|
978
|
|
|
1,149
|
|
Total
liabilities
|
|
|
38,055
|
|
|
31,324
|
|
|
30,864
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
Preferred stock - $5
par value, none issued
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Common stock - $0.50
par value;
|
|
|
|
|
|
|
|
Shares issued and
outstanding
|
|
|
|
|
|
|
|
August 2,
2019
|
776
|
|
|
|
|
|
|
|
August 3,
2018
|
811
|
|
|
|
|
|
|
|
February 1,
2019
|
801
|
|
|
388
|
|
|
406
|
|
|
401
|
|
Capital in excess of
par value
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Retained
earnings
|
|
|
2,439
|
|
|
5,517
|
|
|
3,452
|
|
Accumulated other
comprehensive loss
|
|
|
(187)
|
|
|
(142)
|
|
|
(209)
|
|
Total
shareholders' equity
|
|
|
2,640
|
|
|
5,781
|
|
|
3,644
|
|
Total liabilities
and shareholders' equity
|
|
|
$
|
40,695
|
|
|
$
|
37,105
|
|
|
$
|
34,508
|
|
|
|
|
|
|
|
|
|
Lowe's Companies,
Inc.
|
Consolidated
Statements of Cash Flows (Unaudited)
|
In
Millions
|
|
Six Months
Ended
|
|
August 2,
2019
|
|
August 3,
2018
|
Cash flows from
operating activities:
|
|
|
|
Net
earnings
|
$
|
2,722
|
|
|
$
|
2,509
|
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
684
|
|
|
751
|
|
Noncash lease
expense
|
228
|
|
|
—
|
|
Deferred income
taxes
|
(121)
|
|
|
(75)
|
|
Loss on property and
other assets - net
|
38
|
|
|
261
|
|
Loss on cost method
and equity method investments
|
12
|
|
|
3
|
|
Share-based payment
expense
|
51
|
|
|
62
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Merchandise inventory
- net
|
(1,153)
|
|
|
(549)
|
|
Other operating
assets
|
(116)
|
|
|
(140)
|
|
Accounts
payable
|
1,202
|
|
|
2,408
|
|
Other operating
liabilities
|
36
|
|
|
557
|
|
Net cash provided
by operating activities
|
3,583
|
|
|
5,787
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Purchases of
investments
|
(245)
|
|
|
(980)
|
|
Proceeds from
sale/maturity of investments
|
272
|
|
|
1,012
|
|
Capital
expenditures
|
(526)
|
|
|
(543)
|
|
Proceeds from sale of
property and other long-term assets
|
42
|
|
|
30
|
|
Other -
net
|
(1)
|
|
|
1
|
|
Net cash used in
investing activities
|
(458)
|
|
|
(480)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Net change in
short-term borrowings
|
(722)
|
|
|
(1,137)
|
|
Net proceeds from
issuance of long-term debt
|
2,972
|
|
|
—
|
|
Repayment of
long-term debt
|
(629)
|
|
|
(24)
|
|
Proceeds from
issuance of common stock under share-based payment plans
|
72
|
|
|
50
|
|
Cash dividend
payments
|
(767)
|
|
|
(678)
|
|
Repurchase of common
stock
|
(2,770)
|
|
|
(1,846)
|
|
Other -
net
|
(7)
|
|
|
(2)
|
|
Net cash used in
financing activities
|
(1,851)
|
|
|
(3,637)
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(1)
|
|
|
(7)
|
|
|
|
|
|
Net increase in cash
and cash equivalents, including cash
classified within current assets held for
sale
|
1,273
|
|
|
1,663
|
|
Less: Net decrease in
cash classified within current assets
held for sale
|
12
|
|
|
—
|
|
Net increase in cash
and cash equivalents
|
1,285
|
|
|
1,663
|
|
Cash and cash
equivalents, beginning of period
|
511
|
|
|
588
|
|
Cash and cash
equivalents, end of period
|
$
|
1,796
|
|
|
$
|
2,251
|
|
|
|
|
|
Lowe's Companies, Inc.
Non-GAAP Financial Measures
Reconciliation (Unaudited)
To provide additional transparency, the company has presented
the non-GAAP financial measure of adjusted earnings per share to
exclude the impact of certain discrete items, as further described
below, not contemplated in Lowe's original Business Outlook for
2019 to assist the user in understanding performance relative to
that Business Outlook.
In addition, as part of its Business Outlook for 2019, the
company has provided a comparison to the non-GAAP financial measure
of adjusted operating margin for fiscal 2018, which excludes the
impact of certain discrete items, as further described below, not
contemplated in Lowe's original Business Outlook for
2018, to assist the user in further understanding the company's
Business Outlook for fiscal 2019 in comparison to fiscal 2018.
The company believes these non-GAAP financial measures provide
useful insight for analysts and investors in evaluating the
company's operational performance.
The company previously announced its intention to exit its
Mexico retail operations and had
planned to sell the operating business. However, in the first
quarter of 2019, after an extensive market evaluation, the decision
was made to instead sell the assets of the business. During
the second quarter, the Company recognized $14 million of pre-tax operating costs for the
ongoing wind-down of the Mexico
retail operations which were offset by $3
million tax benefit (Mexico
adjustments).
During fiscal 2018, the company recognized the following pre-tax
charges, not contemplated in the company's original Business
Outlook for 2018:
- During the fourth quarter of fiscal 2018, the company recorded
$952 million of goodwill impairment
associated with its Canadian operations (Canadian goodwill
impairment);
- 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 recognized additional pre-tax
charges of $208 million primarily
related to lease obligations. Total pre-tax charges for fiscal year
2018 were $561 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 recognized additional pre-tax
charges of $150 million, primarily
associated with severance and lease obligation costs, as well as
accelerated depreciation. Total pre-tax charges for fiscal year
2018 were $271 million (U.S. and
Canada store closure 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. During the fourth quarter, an
additional $222 million of impairment
was recognized. Total charges for fiscal year 2018 were
$244 million (Mexico impairment charges);
- 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. During the
fourth quarter of fiscal 2018, the company recognized additional
pre-tax charges of $32 million. Total
pre-tax charges for fiscal year 2018 were $46 million (Non-core activities charges),
and;
- During the fourth quarter of fiscal 2018, the company recorded
pre-tax charges of $13 million,
associated with severance costs due to the elimination of the
Project Specialists Interiors position (Project Specialists
Interiors charge).
Adjusted diluted earnings per share and adjusted operating
margin should not be considered an alternative to, or more
meaningful indicator of, the company's diluted earnings per share
or operating margin 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 this 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)
|
|
August 2,
2019
|
|
August 3,
2018
|
(in millions, except
per share data)
|
Pre-Tax
Earnings
|
|
Tax
|
|
Net
Earnings
|
|
Pre-Tax
Earnings
|
|
Tax
|
|
Net
Earnings
|
Diluted earnings
per share, as reported
|
|
|
|
|
$
|
2.14
|
|
|
|
|
|
|
$
|
1.86
|
|
Non-GAAP
adjustments - per share impacts
|
|
|
|
|
|
|
|
|
|
|
|
Mexico
adjustments
|
0.02
|
|
|
(0.01)
|
|
|
0.01
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Orchard Supply
Hardware charges
|
—
|
|
|
—
|
|
|
—
|
|
|
0.28
|
|
|
(0.07)
|
|
|
0.21
|
|
Adjusted diluted earnings per
share
|
|
|
|
|
$
|
2.15
|
|
|
|
|
|
|
$
|
2.07
|
|
|
Year
Ended
|
|
(Audited)
|
(in millions, except
operating margin)
|
February 1,
2019
|
Operating income,
as reported
|
$
|
4,018
|
|
Non-GAAP
adjustments
|
|
Canadian goodwill
impairment
|
952
|
|
Orchard Supply
Hardware charges
|
561
|
|
U.S. and Canada store
closure charges
|
271
|
|
Mexico impairment
charges
|
244
|
|
Non-core activities
charges
|
46
|
|
Project Specialists
Interiors charge
|
13
|
|
Adjusted operating
income
|
$
|
6,105
|
|
Adjusted operating
margin
|
8.56
|
%
|
|
|
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SOURCE Lowe's Companies, Inc.