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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 31, 1994
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-94
LOWE'S COMPANIES, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56 0578072
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
P. 0. BOX 1111, NORTH WILKESBORO, N.C. 28656-0001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (919) 651-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Which Registered
New York Stock Exchange
Pacific Stock Exchange
The Stock Exchange (London)
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Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such report(s), and (2) has been
subject to such filing requirements for the past 90 days.
Yes x , No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-
K is not contained herein, and will not be contained, to the best of the registrant's knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non affiliates of the registrant as
of April 8, 1994: $3,892,555,310.
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the
latest practicable date.
Class: COMMON STOCK, $.50 PAR VALUE, Outstanding at April 8, 1994: 148,210,288
shares.
Documents Incorporated by Reference
Annual Report to Security Holders for fiscal year ended January 31, 1994: Parts I and II. With
the exception of specifically referenced information, the Annual Report to Security Holders for
the fiscal year ended January 31, 1994 is not to be deemed filed as part of this report. Proxy
Statement for Annual Meeting to be filed by May 1, 1994: Part III.
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Part I
Item 1 Business
Reference is made to the back cover and to pages 4 through 14 of the
Annual Report to Security Holders for fiscal year ended January 31, 1994
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Item 2 Properties
Reference is made to pages 14 and 15 and to notes 1, 4, 6 and 12 on
pages 23, 24, 25, 28 and 29 of the Annual Report to Security Holders
for fiscal year ended January 31, 1994.
Item 3 Legal Proceedings
Reference is made to Note 13 on page 29 of the Annual Report to
Security Holders for fiscal year ended January 31, 1994.
Item 4 Submission of Matters to a Vote of Security Holders
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10 K, the following list is
included as an unnumbered item in Part I of this Report in lieu of being
included in the Proxy Statement for the Annual Meeting of Stockholders to be
held on May 27, 1994.
The following is a list of names and ages of all of the executive officers of the
registrant indicating all positions and offices with the registrant held by each
such person and each person's principal occupations or employment during the
past five years.
PART I
EXECUTIVE OFFICERS OF THE REGISTRANT
Leonard G. Herring, 66
President and Chief Executive Officer since 1978.
Robert L. Strickland, 63
Chairman of the Board since 1978.
J. Gregory Dodge, 46
Senior Vice President - Real Estate/Engineering and Construction since
1993; Sudberry Properties, Inc., Vice President 1988 - 1993; The
Alexander Haaggen Company, Senior Developer 1988.
Richard D. Elledge, 52
Vice President (Chief Accounting Officer) since 1981; Assistant
Secretary since 1991; Secretary 1978 - 1990.
William L. Irons, 50
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Senior Vice President - Management Information Systems since 1992;
Partner with Ernst & Young 1987 - 1992.
Michael Rouleau, 55
Executive Vice President - Sales/Store Operations since 1992; Office
Warehouse, President/Chief Operating Officer 1988 - 1992.
Robert L. Tillman, 50
Executive Vice President - Merchandising since 1991; Senior Vice
President - Merchandising 1989-1991; Vice President Store Operations
1986-1989.
Harry B. Underwood II, 51
Senior Vice President and Treasurer (Chief Financial Officer) since 1985
William C. Warden, Jr., 41
Senior Vice President, General Counsel and Secretary since 1993;
Assistant Secretary 1985 - 1993; partner in the law firm McElwee,
McElwee & Warden which served as General Counsel for the Company
1979 - 1993.
Part II
Item 5 Market for the Registrant's Common Stock and Related Security
Holder Matters.
The principal market for trading in Lowe's common stock is the
New York Stock Exchange, Inc. (NYSE). Lowe's common stock is
also listed on the Pacific exchange in the United States and the
London exchange. The ticker symbol for Lowe's is LOW. As of
January 31, 1994, there were 7,446 holders of record of Lowe's
common stock. The table, "Lowe's Quarterly Stock Price Range and
Cash Dividend Payment", on page 31 of the Annual Report to
Security Holders for fiscal year ended January 31, 1994 sets forth,
for the periods indicated, the high and low sales prices per share of
the common stock as reported by the NYSE Composite Tape, and
the dividends per share declared on the common stock during such
periods, as adjusted for a 2-for-1 stock split to shareholders of
record on June 12, 1992 and a 2-for-1 stock split to shareholders of
record on March 16, 1994. The Company is party to certain
agreements which may limit its ability to declare dividends under
certain circumstances. See Note 6 on page 25 of the Annual Report
to Security Holders for fiscal year ended January 31, 1994.
Reference is also made to notes 10 and 11 on pages 27 and 28 of the
Annual Report to Security Holders for fiscal year ended January 31, 1994
Item 6 Selected Financial Data
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Reference is made to page 30 of the Annual Report to Security
Holders for fiscal year ended January 31, 1994.
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Reference is made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 17 through
19 of the Annual Report to Security Holders for fiscal year ended
January 31, 1994.
Item 8 Financial Statements and Supplementary Data
Reference is made to the "Independent Auditors' Report" on page 16
and to the financial statements and notes thereto on pages 20
through 29, and to the "Selected Quarterly Data" on page 30 of the
Annual Report to Security Holders for fiscal year ended January 31, 1994
Item 9 Disagreements on Accounting and Financial Disclosure
Not applicable.
Part III
Item 10 Directors and Executive Officers of the Registrant
Reference is made to "Lowe's Board of Directors" on pages 34 and
35 and "Board of Directors Nominee" on page 36 of the Annual
Report to Security Holders for fiscal year ended January 31, 1994,
and to Part I Executive Officers of the Registrant.
Item 11 Executive Compensation
Reference is made to "Compensation of Executive Officers",
Option Grants in Last Fiscal Year, "Aggregated Option Exercises
in Last Fiscal Year and Fiscal Year-end Option Values", and
Long-term Incentive Plans - Awards in Last Fiscal Year included
in the definitive Proxy Statement which will be filed, pursuant to
regulation 14A with the SEC by May 1, 1994, and is hereby
incorporated by reference.
The Company's Executive Compensation Program is comprised
of the following elements:
Base Salary
Salaries for Executive Officers are established on the basis of the
qualifications and experience of the executive, the nature of the
job responsibilities and salaries for competitive positions in the
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retailing industry.
Executive Officers' base salaries are reviewed annually and are
approved by the Compensation/Employee Stock Option
Committee of the Board of Directors (Committee). Salaries of
Executive Officers are compared with those of comparable
executive positions in the retailing industry throughout the United
States. The Committee uses the median level of base salary as a
guideline, in conjunction with the executive's performance and
qualifications, for establishing salary levels.
Management Bonus Program
All Executive Officers participate in the Company's Management
Bonus Program. This Plan provides award opportunities which
can be earned upon achievement by the Company of pre-set
annual financial goals. Based on the annual business plan
developed by management, the Committee establishes financial
goals for each fiscal year as well as the award opportunities
provided to each participant and the relationship between the
performance goals and the award opportunities.
Under the Plan, no bonuses are paid if performance is below the
threshold level of Corporate profitability set by the Committee at
the beginning of the year. If the threshold level is achieved, a
minimum bonus payment is earned, typically 25 % of the stated
bonus opportunity for the executive. Additional bonus amounts
are earned on a proportionate scale up to 100% of the stated
bonus opportunity if pre-set financial goals are met. Designated
senior managers and executives can earn a bonus premium
ranging from 27% to 43% of stated bonus opportunity if financial
goals are exceeded. The maximum bonus, including bonus
premium, which can be earned by any executive of the Company
for 1994 is 70% of base annual salary.
Stock Appreciation Incentive Plan
The Stock Appreciation Incentive Plan is a "phantom stock"
incentive plan which provides participating executives with the
opportunity to earn cash incentive awards based on the
Company's stock price appreciation during a defined performance
cycle. Each participant is granted a specified number of units
(reflecting the nature and magnitude of the executive's position
and competitive marketplace long term incentive compensation
opportunities). The amount of award earned by the participant for
the performance cycle is equal to the difference between the price
of the Company's Common Stock at the beginning of the cycle
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and the two month average stock price as measured at the end of
the period, multiplied by the number of units granted to the
participant. The amount of incentive compensation which can be
paid to any participant for a performance cycle is limited to
$6,250 per 1,000 units.
The term of the Stock Appreciation Incentive Plan has expired
and no further awards may be made under the Plan.
1985 Stock Option Plan
The 1985 Stock Option Plan allows the Committee to make grants
of non-qualified stock options and/or incentive stock options. The
Committee is empowered to set the option price on any grant
(with the requirement that the option price on any incentive stock
options cannot be less than the market price of the Company's
Common Stock on the date on which the incentive stock option is
granted). Non qualified stock options may be granted at market
price, below market price or above market price, as of the date
the options are granted. All stock options which have been
granted under the Plan measure performance and create
compensation solely on the basis of the appreciation in the price
of the Company's Common Stock above the fair market value on
the date of the grant.
All options under the Plan must be granted prior to March 25,
1995, and no option may have a term exceeding ten years. Four
million shares of the Company's Common Stock were originally
authorized for grants under the Plan. Of that amount, options
covering 2,814,000 shares had been granted by January 31, 1994,
and 154,220 shares continued to be outstanding and unexercised
on that date.
1994 Incentive Plan
On January 31, 1994, the Board of Directors voted to amend and
restate the 1985 Stock Option Plan as the 1994 Incentive Plan.
The 1994 Incentive Plan is submitted for shareholder approval in
the Proxy and described therein.
The purpose of the 1994 Incentive Plan is to enable the Company
to attract, motivate, retain and reward the executives whose
leadership and performance are critical to the Company's success
in enhancing shareholder value, to place further emphasis on
executive ownership of Company Stock, to continue previously
established incentive compensation practices under a single plan
and to assure deductibility of executive compensation.
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Benefit Restoration Plan
The Benefit Restoration Plan was adopted by the Company in
May 1990, to provide qualifying executives with benefits
equivalent to those received by all other employees under the
Company's basic qualified employee benefit plans. Qualifying
executives are those executives whose annual additions and other
benefits, as normally provided to all participants under those
qualified plans, would be curtailed by the effect of Internal
Revenue Code restrictions, and who are selected by the
Committee to participate in the Plan. The Benefit Restoration
Plan benefits are determined annually. Participating executives
may elect annually to defer benefits or to receive a current cash
payment.
Other Compensation
The Company's Executive Officers participate in the various
qualified and non qualified employee benefit plans sponsored by
the Company. The Company makes only nominal use of
perquisites in compensating its Executive Officers.
Item 12 Security Ownership of Certain Beneficial Owners and
Management
Reference is made to "Security Ownership of Certain Beneficial
Owners and Management" included in the definitive Proxy
Statement which will be filed pursuant to regulation 14A, with the
SEC by May 1, 1994, and is hereby incorporated by reference.
Item 13 Certain Relationships and Related Transactions
Reference is made to "Information About the Board of Directors
and Committees of the Board", "Certain Relationships and Related
Transactions" included in the definitive Proxy Statement which
will be filed, pursuant to regulation 14A, with the SEC by May 1,
1994, and is hereby incorporated by reference.
Part IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8 K
a) 1 Financial Statements
Reference is made to the following items and page numbers appearing
in the Annual Report to Security Holders for fiscal year ended January
31, 1994:
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Pages
Independent Auditors' Report 16
Consolidated Statements of Current and Retained
Earnings for each of the fiscal years in the three-
year period ended January 31, 1994 20
Consolidated Balance Sheets at January 31, 1994, 1993 21
Consolidated Statements of Cash Flows for each of the
fiscal years in the three-year period ended
31-Jan-94 22
Notes to Consolidated Financial Statements for each
of the fiscal years in the three year period ended
31-Jan-94 23-29
a) 2 Financial Statement Schedules
Included in Part IV of this report:
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Independent Auditors' Report on Financial Statement Schedules
For the three fiscal years ended January 31, 1994, 1993 and 1992:
Schedule V Property, Improvements and Equipment
Schedule VI Accumulated Depreciation and Amortization
The above listed financial statements are presented on a consolidated basis only since the
Company is primarily an operating company and its subsidiaries included for the periods
presented in the consolidated financial statements are totally held subsidiaries.
Schedules other than those listed above are omitted because of the absence of conditions
under which they are required or because information required is included in financial
statements or the notes thereto.
Part IV
a) 3 Exhibits
3.1 Restated and Amended Charter.
3.2 Bylaws, as amended.
4.1 Rights Agreement dated as of September 9, 1988 between the
Company and Wachovia Bank and Trust Co., N.A., as Rights
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Agent (filed as Exhibit 4.1 to the Company's Form 8 K dated
September 9, 1988 and incorporated by reference herein).
-10.1 Lowe's Companies, Inc. 1985 Stock Option Plan (filed as
Exhibit C to the Company's Proxy Statement dated May 31,
1985 and incorporated by reference herein).
-10.2 Post Effective Amendment No. 1 to Lowe's Companies, Inc.
1985 Stock Option Plan (filed on the Company's Form S 8 dated
June 23, 1987 (No. 33 2618) and incorporated by reference
herein).
-10.3 Lowe's Companies, Inc. 1989 Non Employee Directors' Stock
Option Plan (filed as Exhibit A to the Company's Proxy
Statement dated June 9, 1989 and incorporated by reference
herein).
-10.4 Lowe's Companies, Inc. 1990 Benefit Restoration Plan (filed as
Exhibit 10.4 to the Company's Annual Report on Form 10 K for
the year ended January 31, 1991, and incorporated by reference
herein).
-10.5 Lowe's Companies, Inc. Stock Appreciation Incentive Plan (filed
as Exhibit 10.5 to the Company's Annual Report on Form 10-K
for the year ended January 31, 1992, and incorporated by
reference herein).
-10.6 Indenture dated April 15, 1992 between the Company and
Chemical Bank, as Trustee (filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-3 (No. 33-47269)
and incorporated by reference herein).
-10.7 Indenture dated July 22, 1994 between the Company and
Wachovia Bank of North Carolina, N.A., as Trustee (filed as
Exhibit 4.1 to the Company's Registration Statement on Form S-
3 (No. 33-64560) and incorporated by reference herein).
-10.8 Form of Indenture between the Company and Chemical Bank, as
Trustee (filed as Exhibit 4.1 to the Company's Registration
Statement on Form S-3 (No. 33-51865) and incorporated by
reference herein).
-10.9 Form of Indenture between the Company and Wachovia Bank of
North Carolina, N.A., as Trustee (filed as Exhibit 4.2 to the
Company's Registration Statement on Form S-3 (No. 33-51865)
and incorporated by reference herein).
-13 Annual Report to Security Holders for fiscal year ended January
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31, 1994.
-21 List of Subsidiaries.
-23 Consent of Deloitte & Touche
-27 Financial Data Schedule
b) Reports on Form 8 K
There were no reports on Form 8-K filed by the registrant during the last quarter
of the period covered by this report.
Part IV
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registra
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
_____/s/ Lowe's ComInc.______________
Lowe's Companies, Inc.
By:_______/s/ Leonard G. Herring
4-30-94 Leonard G. Herring
Date President, Chief Executive Officer
and Director
By:_______/s/ Harry B. Underwood
4-30-94 Harry B. Underwood II
Date Senior Vice President and Treasurer
(Chief Financial Officer)
4-30-94 By:______/s/ Richard D. Elledge
Date
Richard D. Elledge
Vice President,
and Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below b
the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Chairman of the Board of
/s/ Robert L. StricklanDirectors and Director
4-30-94
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Robert L. Strickland Date
President, Chief Executive
/s/ Leonard G. Herring Officer and Director
4-30-94
Leonard G. Herring Date
Director
/s/ Petro Kulynych
4-30-94
Petro Kulynych Date
Director
/s/ John M. Belk
4-30-94
John M. Belk Date
Director
/s/ Gordon E. Cadwgan
4-30-94
Gordon E. Cadwgan Date
Director
/s/ William A. Andres
4-30-94
William A. Andres Date
Director
4-30-94
Russell B. Long Date
Director
/s/ Robert G. Schwartz
4-30-94
Robert G. Schwartz Date
Director
/s/ Jack C. Shewmaker
4-30-94
Jack C. Shewmaker Date
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Lowe's Companies, Inc.:
We have audited the consolidated financial statements of Lowe's Companies, Inc. and
subsidiaries as of January 31, 1994, 1993, and 1992, and for each of the three fiscal years
in the period ended January 31, 1994, and have issued our report thereon dated March 9,
1994; such financial statements and report are included in your 1993 Annual Report to
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Shareholders and are incorporated herein by reference. Our audits also included the
financial statement schedules of Lowe's Companies, Inc. and subsidiaries, listed in Item
14. These financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In our
opinion, such financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE
Charlotte, North Carolina
09-Mar-94
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Part IV
Schedule V
LOWE'S COMPANIES, INC. AND SUBSIDIARY COMPANIES
PROPERTY, IMPROVEMENTS AND EQUIPMENT
(Thousands of Dollars)
Balance Balance
at Net at
Year ended Beginning Additions Retirement Transfers Close
January 31, 1994 of Period at cost or Sale Other Asse of Period
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Land $188,562 $37,202 ($693) ($520) $224,551
Buildings 421,620 146,945 (4,765) (55,825) 507,975
Store & Office Equipment 278,687 140,526 (30,077) -319 388,817
Transportation Equipment 92,315 30,665 (11,263) 18 111,735
Leasehold Improvements 86,756 18,242 (8,333) (12,721) 83,944
$1,067,940 $373,580 ($55,131) ($69,367) $1,317,022
======== ======== ======== ========= ========
Year ended
January 31, 1993
Land $116,382 $78,502 ($299) ($6,023) $188,562
Buildings 400,877 52,179 (1,719) (29,717) 421,620
Store & Office Equipment 218,690 84,962 (24,930) -35 278,687
Transportation Equipment 84,018 19,366 (11,069) 92,315
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Leasehold Improvements 49,823 38,306 (1,373) 86,756
$869,790 $273,315 ($39,390) ($35,775) $1,067,940
======== ======== ======== ========= ========
Year ended
January 31, 1992
Land $99,127 $20,180 ($170) ($2,755) $116,382
Buildings 371,947 38,914 -275 (9,709) 400,877
Store & Office Equipment 182,905 59,248 (22,754) -709 218,690
Transportation Equipment 80,376 13,269 (9,627) 84,018
Leasehold Improvements 42,178 8,120 -475 49,823
$776,533 $139,731 ($33,301) ($13,173) $869,790
======== ======= ======== ======== =======
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Part IV
Schedule VI
LOWE'S COMPANIES, INC. AND SUBSIDIARY COMPANIES
ACCUMULATED DEPRECIATION AND AMORTIZATION
(Thousands of Dollars)
Balance Retirements, Balance
at Addition Renewals Net at
Year ended Beginning Charged and Transfers t Close
January 31, 1994 of Period to IncomReplacements Other Assets of Period
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Buildings $99,942 $18,142 ($2,189) ($17,013) $98,882
Store & Office Equipment 107,544 49,404 (24,095) (171) 132,682
Transportation Equipment 54,698 8,620 (10,747) 5 52,576
Leasehold Improvements 18,559 4,364 (1,284) (8,991) 12,648
$280,743 $80,530 ($38,315) ($26,170) $296,788
======== ======== ========= ========= ========
Year ended
January 31, 1993
Buildings $95,365 $16,671 ($864) ($11,230) $99,942
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Store & Office Equipment 91,331 38,597 (22,292) (92) 107,544
Transportation Equipment 54,876 10,426 (10,604) 54,698
Leasehold Improvements 15,263 4,126 (830) 18,559
$256,835 $69,820 ($34,590) ($11,322) $280,743
======== ======== ========= ========= ========
Year ended
January 31, 1992
Buildings $84,026 $16,007 ($169) ($4,499) $95,365
Store & Office Equipment 82,649 30,900 (21,831) (387) 91,331
Transportation Equipment 55,383 8,799 (9,306) 54,876
Leasehold Improvements 13,011 2,592 (340) 15,263
$235,069 $58,298 ($31,646) ($4,886) $256,835
======== ======== ========= ========= ========
The estimated depreciable lives, in years, of the Company's property are: buildings, 20
40; store and office equipment, 3 to 10; transportation equipment, 5 to 7; leasehold
improvements, generally the life of the related lease.
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PART IV
EXHIBIT 13
Lowe's Profile
Lowe's Companies, Inc. is one of America's top forty retailers, serving the do-it-yourself
home improvement, home decor, home electronics, and home construction markets.
Lowe's 311 stores serve customers in 20 states located mainly in the South Atlantic and
South Central regions. In 1993 our average store did $14.9 million in sales. Our big stores
averaged $18.9 million in sales.
At year-end, our retail sales space totaled approximately 14.2 million square feet. Our
employees numbered 28,843.
Lowe's has been a publicly owned company since October 6, 1961. Our stock has been
listed on the New York Stock Exchange since December 19, 1979; on the Pacific Stock
Exchange since January 26, 1981; and on the London Stock Exchange since October 6,
1981. Shares are traded under the ticker symbol LOW.
Super Store Super Year
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We asked retail experts and some of Lowe's Partners-In-Interest to tell us what they think
of Lowe's today. Here is their take on our big stores, our marketplace, and our future.
Lowe's has broken out of its past molds to meet the demands of today's marketplace on
today's terms, says Wyatt Kash from his office in midtown Manhattan. A longtime
observer of the home improvement retail industry and publisher of National Home Center
News since 1987, Kash is contemplating the manifold success of Lowe's big stores.
The underlying development is that consumers have never had so much choice in what
they could do for their homes, he says. "At the National Homebuilders Show in Las
Vegas. there's an amazing array Of products for home building and remodeling. But most
homeowners don't really have any opportunity to see w hat's possible until they get into a
large format store."
Although big stores have been getting lots of press for several years now, from most
consumers' point of view they are a recent phenomenon.
How big are big stores? Lowe's newest superstore, which opened at the end of March in
Winston-Salem North Carolina, contains 115,000 square feet of selling space and a
30,000-square-foot garden center which includes a year-round nursery. Lowe's completed
57 large store projects in 1993, increasing our total sales floor by 42% to 14.2 million
square feet. Big stores are now 52% of Lowe's chain, up from 13% just three years ago.
Last year these big stores accounted for 54% of Lowe s sales and 55% of operating
earnings.
The precise square footage of Lowe's big stores may vary; more important is our
overriding mandate to dominate our markets by providing a "home improvement
destination" -- a store which not only efficiently fulfills the present needs and desires of
Lowe's customers, but also creates a stimulating context for idea generation.
The store has emerged as a powerful marketing device, because it is a statement of
priorities and values translated into products and assortment, Kash says. He echoes the
consensus opinion that the latest recession and slowdown of the American economy
caused consumers to examine their fiscal priorities. "People have been reevaluating their
commitments to things like vacations, cars, and luxury goods."
In the face of a future that's less certain than it used to seem, the American home has
gained importance as the single biggest investment most consumers ever make. Yet, says
Kash, "Only five cents out of every dollar [of disposable income] currently goes into
home improvement and building materials at the retail level. So there's still lots of growth
potential."
He believes that this is a great time to emphasize the benefits and value of putting more
of America's disposable income into the great American home. Lowe's has developed our
destination stores to be effective vehicles for that message.
Stores that will do the best in the future are the ones that make it fun to shop and easy to
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buy, he says.
Renowned retail consultant Walter Loeb affirms that destination stores are attracting
shoppers by appealing to consumer priorities for the Nineties High on that priorities list,
he says, is efficiency.
Stores today must be clearly focused and oriented to serve the customer efficiently. Self-
service is essential, along with good information at the point of sale and quick checkout
proceedures.
Every trip to the store must be productive, Loeb continues. This means you must offer
deep assortments and good value, and products must be in stock.
Lowe's stores used to be small and builder-oriented. The culture of Lowe's was the
professional builder's culture. The big stores changed that. Now the future is looking very
bight because of the new stores and their effective use of space. Lowe's
service in these stores," says Loeb. "Growth will come mostly from Lowe's retail
customers, but the professional builder will follow the retail customer to the consumer-
oriented store"
In 1993, Lowe's retail sales were up 21% while sales to contractors grew 11%. Our retail
customers supplied an unprecedented 72% of our total sales of $4.5 billion; professional
builders accounted for 28%.
George Lorch is surrounded by tiles in the flooring showroom at the corporate
headquarters of Armstrong World Industries in Lancaster, Pennsylvania. If you've only
looked at flooring in catalogues or small displays, the variety of colors and styles and
materials here is likely to, well, floor you. Right next door is Armstrong's ceiling
showroom with a similarly overwhelming variety of products. George Lorch,
Armstrong's president and CEO, thinks of these rooms as home decor wardrobes
We would like consumers to be able to change their floor coverings as often as they buy
new clothes, he says.
Traditionally, flooring sales have been event driven: you bought flooring if you were
moving or adding a room. We want the desire for fashion, choice, and variety to be
equally powerful incentives. This is not an advertising strategy; it's our business plan.
This is not an advertising strategy; it's our business plan. To make it work, we need
relationships with retailers like Lowe's who are attracting large numbers of customers to
their dominant assortments.
By displaying more merchandise than was ever possible before, Lowe's big stores give
consumers more exciting options and a hands on understanding of the products they are
considering buying for their homes. Whether they intend to do the installation themselves
or to buy the merchandise and hire a professional to do the work, better informed
consumers make smarter decisions. This increases the likelihood that they will be
satisfied with the merchandise and their contractor -- and, ultimately, with Lowe's.
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As consumers put increasing importance on upgrading and personalizing their homes, the
Repair and Remodeling (R&R) industry has thrived. Recognizing the vitality and growth
potential of this market segment, Lowe's has been developing and expanding our Installed
Sales program. We believe that this affords Lowe's yet another opportunity to be a service
leader and to increase project sales.
Wyatt Kash agrees. "The movement toward installed sales is an important trend
supporting growth," he says. "More than half of the top retailers in this industry now offer
some sort of installed sales program which supplies the link between consumers and
reputable contractors."
The effect is to take projects that would otherwise get postponed, and accelerate them
into the current year's sales. I'm talking about installation of doors and windows, toilets,
flooring, fencing--all kinds of products.
A retailer like Lowe's is in the position of being a major source of information to help
customers get their products installed. It's a potentially uncomfortable role, because you
stand to get some grief if the installer doesn't do his job well. But in
Lots of installers just don't understand the products they're working with. When
they don't get good results, the customer blames us."
Dick Stonesifer, president and CEO of General Electric Appliances, sees Lowe's Installed
Sales program going hand in hand with the expanded display capabilities of our big
stores.
Lowe s now carries more of our built in appliances than just about anybody. Customers
want to see how those appliances will look once they're in the home. In Lowe's big stores,
customers can see entire kitchen systems on display.
A basic strength of Lowe's is that you actually supply the whole system -- cabinetry,
appliances, hardware, flooring, etc. With all that installation, too, Lowe's is cutting
a wide swathe in the field of total service, above and beyond just selling.
We've come a long way from the days when Henry Ford could get away with telling the
public that they could have any color Ford they wanted, as long as it was black. In the
fiercely Darwinian competition which defines our Nineties marketplace, the need to be
responsive to consumer preferences has put a premium on rapid flow of information from
the consumer through the retailer to the manufacturer.
Lowe's partnership with our suppliers is strengthened by the high priority we are placing
on state of-the art information systems. By increasing the speed and accuracy of
information flowing from our sales floors to our suppliers' factory floors, we enable
manufacturers to supply us with products that will maximize customer satisfaction. Bill
Corbin is an executive vice president of Weyerhaeuser, one of the nation's leading
manufacturers of wood products. He sees his company's relationship with Lowe's as an
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alliance which depends on shared information about consumers' needs and desires.
Lowe's has demonstrated a good understanding of the consumer, he says. "That's
evident in the increased store space devoted to displays, the availability of quick reliable
service, technical help, installation, and wood that is precut or which can be cut to the
specifications of a particular job."
Our role in partnership with Lowe's has been to be a good listener, Corbin says. "The
better use we make of the information that we receive, the more we can reduce waste in
our system and improve our product quality and service."
The accurate flow of information is also increasing the efficiency of Weyerhaeuser's
delivery systems. "Now we can offer 24 hour supply and direct delivery to a project
location," Corbin explains.
For Armstrong's George Lorch good information flow is the key to meeting the
challenges of today's high fashion home decor marketplace.
We've got to develop new products faster, and manufacture them in shorter runs with
shorter setup times, he says. "We want to put out more products, offer more choice. At
the same time, no retailer wants to carry lots of inventory. So we have to be able to get
products to you quickly and replenish quickly.
With up to the minute information coming from Lowe s, we can develop quick
responses which give us a competitive advantage. Information coming right off the point
of sale helps us eliminate lost time in ordering and shipping. This in turn increases
productivity and helps us deliver the value that is essential to the growth of our business.
In 1961, the year Lowe's went public, Bill Mayo-Smith was an investment adviser working
with the firm of G.H. Walker. Also associated with the firm was Gordon Cadwgan, who
became one of Lowe's founding directors, and it was to G.H. Walker that Cadwgan brought
the underwriting of Lowe's initial public offering. Bill Mayo-Smith became one of Lowe's first
big investors, buying stock in the young growth company at a considerable discount in
1962 following a market setback. He has been a Lowe's shareholder ever since.
My usual practice is to buy stock in new companies and hold it until the character of the
company undergoes a significant change," Mayo Smith says. He is still active, working
these days with the firm of Ingalls and Snyder just a couple of blocks from the New York
Stock Exchange.
Factoring in all the times Lowe's stock has split in the past 32 years, the price I paid for
those first shares comes out at 11 cents per share, he says, grinning. "At today's market
price, that stock has seen approximately 20% appreciation compounded annually for 32
years.
During the whole of that time. I have remained very close to Lowe's people. I've seen
them here, I've visited North Wilkesboro, I've been in dozens of Lowe's stores. I've even
worked on some of Lowe s annual reports! The company has gone through some
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lean periods, but I decided to stick with it because I felt the odds favored Lowe's
ability to reposition itself with a large store format that would attract retail customers.
Lowe's really invented the D0-It-Yourself retailing industry. Mayo-Smith continues.
They were the first to bring mass merchandising techniques to DIY.
In the late Seventies, when very, large stores first appeared, Lowe's was understandably
reluctant to embrace the concept because their strength had always been in small towns,
and they weren't sure that those small towns could support huge stores. But starting about
six years ago, they began to upgrade their existing stores and their new store expansion to
a large format. After the early success of the first few big Lowe s stores, I knew that they
were going to be able to pull off a major transformation. I added to my stock positions,
and the stock has since done extremely well.
The risk factor is now a thing of the past, Mayo Smith asserts. "Lowe s and Home
Depot are the two leaders in DIY retailing, and they will continue as leaders through the
coming years. Both companies have significant growth potential in front of them, in
terms of industry growth and even more in terms of market share. Look at the food
industry or the retail drug industry: the top chains have a lock on as much as 60% of the
total market. After that point, their gains in market share flatten out because the surviving
independents are sharp enough to offer real competition. But early on, at the stage where
DIY retailing is now, good chains can grow very rapidly by taking business away from
less efficient operators.
I believe that Lowe's will continue to achieve success in an above average growth mode
for the next several y ears, Bill Mayo Smith concludes. "I expect an increasing
percentage of Lowe's revenues to come from retail sales.
I've held Lowe's stock for a long time, and I have no intention of selling because I
believe it has a long way to go before hitting serious resistance to further growth.
In every generation, behaviors are driven by attitudes that reflect the impact of that
generation's life experience. That s a generalization that could be applied to just about any
aspect of a society. It's relevant here in terms of consumer behavior that is changing and
defining Lowe's marketplace in the Nineties.
According to Watts Wacker, an energetic young futurist with the firm of Yankelovich
Partners, the way that Americans feel about their homes and the products that go into
them is currently being influenced by a grab bag of societal factors. These include a crisis
of confidence in institutions, the time constraints of the two income family lifestyle, the
flood of useful but sometimes scary technology and the growing belief that America's s
high rolling good times may be gone for good.
As the World War II generation passes the torch of consumption to the Baby Boomers,
says Wacker, we are experiencing a paradigm shift in which concepts retain their
importance while their definitions change.
Look at our definition of 'success,' he says. "It used to mean a killer job that paid more
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money than your overloaded schedule would let you enjoy.
Now success, like satisfaction, has become centered on the home. I don't mean the home
as bunker, I mean the home as familial command center, a celebration place where we
look to replace lost rituals in our search for meaningful structure.
Wacker believes that America's crisis of confidence implicates not only the obvious
formal institutions such as government and corporate America, but also informal
institutions such as spring cleaning, prom night, and Halloween trick-or treating.
Things change, he says simply. "If your marketing strategy is based on outmoded
behaviors, you're dooming yourself to anachronism.
For instance, consider the disappearance of the 'spring cleaning' tradition. For our
mothers, it was a ritual, but neither women nor men have time for it now. Generally
speaking, we don't maintain things anymore; we replace them. Retailers have to be
aware ot these changes and strategize accordingly."
Retailing is currently the focus of tremendus consumer dissatisfaction, Wacker says.
It's part of our cultural schizophrenia: we want great deals, but we don't want to
victimize somebody else. Furthermore, we don't want to be victimized ourselves by
manufacturers and retailers who sometimes seem to regard us as pigeons ripe for
plucking. According to Wacker, the Baby Boom generation doesn't believe advertising --
or at least, not in the same old tired formats.
The technology of mass media makes consumer manipulation easy, he says, and
advertising does it faster than anything else.
On the other hand, he says, technology also facilitates the sort of "lean manufacturing"
that Armstrong's George Lorch refers to when he talks about quick responses and shorter
production runs.
Manufacturing is now a service business, agrees Wacker, "in which technology makes
for personalized distribution."
As for standard retailing formats, Wacker says that the American public finds them sorely
lacking. "Stores are pushing people away," he says. "Only one out of five consumers
thinks that shopping malls are safe; 62% of shoppers say that they have abandoned items
in a stores checkout aisle
Most stores, he says, pay lip service to the familiar mantra of "quality, selection, style,
and service" as criteria influencing consumer shopping habits. When asked, however,
people are most likely to say that they will go to a store if they have had a good
experience there before.
What makes a good shopping experience for these demanding consumers? Wacker agrees
with Walter Loeb (and with Lowe s) that efficient self service is a top priority.
According to the Yankelovich Monitor, shopping convenience ranked even higher than
selection (which came in second) as an important factor in a shopping experience.
Pleasant atmosphere ranked third in importance.
People will invest time in your store, says Wacker, "if the outcome is reduced stress, or
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if the experience provides enough entertainment value to compensate for the lost time."
American consumers today also have social and environmental concerns that retailers and
manufacturers do well to heed. Weyerhaeuser's Bill Corbin says that his company has a
very important message for the consumer: "We are environmentally conscientious, and
our values are the same as your own.
Says Corbin, "Lowe's is helping us inform the public about our environmentally friendly
engineered wood products, which are made with I-beams that use less wood and save
trees. while also being structurally stronger.
We want Lowe's customers to know that we are listening to their concerns, that we are
profoundly interested in conservation; that we do recycle and are working on waste
reduction; and that we try very hard to manufacture with minimal environmental impact.
Dick Stonesifer of GE pledges that "Through our partnership with Lowe's, we will be
unfailingly responsive to our customers' desires. We will continue to invest in products
that save water and energy while also performing quickly, quietly, and without
polluting."
Watts Wacker knows that consumers say they truly want all those things; they also want
not to have to pay any more for products that measure up to those standards. What else
would you expect from a society that wants savings in the future without sacrificing
anything today; that demands better health care for everyone, but doesn't think anyone
should pay more for it; and that hasn't learned yet that it can't have expanded government
services and also pay lower taxes?
We want structure and change, he says, "but not a limiting amount of structure, and not
a scary amount of change. It's a delicate balance, and not easy to find."
Perhaps because Lowe's grew up in small town America's, we have always wanted to be
part of the communities where we operate, above and beyond the call of business. On
local and regional levels we have always donated funds and materials to deserving
individuals and organizations, and we are proud to be thought of as a good neighbor.
Since 1957, we have administered our corporate philanthropy through Lowe's Charitable
and Educational Foundation under the leadership of Pete Kulynych, one of Lowe's
founding directors. In 1981 we co founded the Home Improvement Research Institute to
fulfill a more overtly business related function as an objective and authoritative voice for
our industry.
In 1993 we embarked on a new philanthropic venture -- one which has the potential to
save lives and money by addressing concerns very near the hearts of our home center and
building products partners The new foundation is Lowe's Home Safety Council, and its
mission is to enhance the quality of American homelife by helping families improve the
comfort and security of their homes through good health and safety practices.
Each year, American homes are the scene of nearly 20,000 accidental deaths and more
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than six million disabling injuries. According to the National Safety Council (with whom
Lowe's Home Safety Council is affiliated), these preventable accidents cost the taxpayer
roughly $85 billion, or near half of every dollar of property tax paid in the United States.
The function of the Home Safety Council will be to gather resources and channel them
into a variety of charitable and educational projects. Each of Lowe's stores will serve an
additional function as a home safety center where consumers will find the information
and products they need to make their homes into safe havens.
The council intends to establish a two way flow of energy and communication which will
be generated at the local level by Lowe's store managers and district managers, and at the
national level have an executive director and a highly visible board.
All of Lowe's Partners In Interest, and especially our manufacturing partners, are invited
to join this major home safety initiative. Their participation will reflect a shared concern
for the welfare of the public who use their products, and will be a natural extension of
their involvement in American homelife.
Charter members of Lowe's Home Safety Council include the Honorable Lamar
Alexander, the Honorable Jack Kemp, and the Honorable Louis Sullivan.
Manufacturing charter members are Armstrong Corporation, BRK Electronics/First Alert,
Clairson International, Nibco, Inc., Oatey Company, Osram Sylvania, Inc., R.D. Werner
Co., Regent Lighting Corporation, and United Industries.
The Home Safety Council is affiliated with a group of highly respected national
organizations. These are the American Association of Retired Persons (AARP); the
American Federation of Police; the Consumer Federation of America; the National
Association of Chiefs of Police; the National Association of Pediatric Nurse Associates
and Practitioners (NAPNAP); the National Association for Search and Rescue; the
National Child Safety Council; the National Fire Protection Association; and the National
Safety Council.
Walter Loeb thinks that the establishment of Lowe's Home Safety Council "puts Lowe's
on the leading edge of a very timely issue." Once again, Lowe's takes the initiative in a
cause that will benefit all our partners in interest.
Lowe's Store Locations * denotes Contractor Yard
Alabama 14
Decatur Dothan Florence Gasden
Huntsville Jasper Mobile (West)
Montgomery
Montgomery (South) Muscle Shoals Opelika(pepperell Corners)
Oxford Prattville Tuscaloosa
Arkansas 6
El Dorado Fayetteville Fort Smith Hot
Springs
Jonesboro Pine Bluff
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Delaware 3
Chistiana Dover Sussex County
Florida 16
Fort Pierce Fort Walton Beach Gainesville
Gainesville (SW)
Inverness Kissimmee Lake County Lakeland
Lake Wales Mitland Ocala * Orange
City
Panama City Pensacloa (North) Tallahassee
Tallahassee (NE)
Georgia 18
Albany Athens Augusta Augusta
(West)
Brunswick Carrollton Columbus (North) Fort
Oglethorpe
Gainesville LaGrange Macon Rome
Savannah Savannah (South) Thomasville Thomson
Valdosta Warner Robbins
Illinois 3
Decatur Marion Springfield
Indiana 9
Anderson Clarkesville Indianapolis
Indianapolis (East)
Indianapolis (West) Kokomo Muncie Richmond
Terre Houte
Kentucky 19
Ashland Bowling Green Corbin Danville
Elizabethton Frankfort Glasgow Lexington
Lexington (East) Louisville Owensboro Paducah
Paintsville Pikeville Richmand Saint
Matthews
Somerset Whitesburg Winchester
Louisiana 14
Alexandria Baker Bossier City Hammond
Houma Lafayette (Carenco) Lafayette (Acadiana Square)
Lake Charles Leesville Natchitoches New Iberia
Shreveport Thibodaux West Monroe
Maryland 11
Bowie Charles County Cumberland Easton
Frederick Frederick * Gaithersburg
Hagerstown
Saint Mary's County Salisbury Westminster
Mississippi 7
Columbus Gautier Gulfport
Hattiesburg
Jackson Meridian Tupelo
Missouri 2
Joplin Springfield
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North Carolina 71
Albemarle Asheboro Asheville (East) Asheville
(West)
Banner Elk Boone Burlington Cary
Chapel Hill Charlotte (North) Charlotte * Charlotte
(Crown Point)
Concord Durham * Durham (Oxford Commons)
Elizabeth City Fayettevilee Forest City Franklin
Garner Gastonia Gastonia(Franklin Square)
Goldsboro Greensboro (North) Greensboro (SW)
Greensboro *
Greenville Henderson Hendersonville Hickory
Hickory * High Point High Point (North)
Jacksonville
Kannapolis Kinston Lenoir Lexington
Lincolnton Lumberton Monroe
Mooresville
Morehead City Morganton Mount Airy
Murfreesboro
New Bern Pineville Raleigh * Raleigh
(North)
Reidsville Rockingham Rocky Mount Salisbury
Sanford Shelby Smithfield Southern
Pines
Southport Sparta Statesville
Washington
Waynesville Whiteville Wilkesboro
Wilmington *
Wilmington (University CWilson Winston-
Salem
Winston-Salem (Hanes MalZebulon
Ohio 10
Cincinnati * Circleville Findlay Heath
Lancaster Marion Ontario Springfield
Wheelersburg Wooster
Pennsylvania 7
Altoona Chambersburg Hanover (Hanover Crossings)
Harrisburg Mechanicsburg State College York
South Carolina 22
Aiken Anderson Charleston Columbia
(NE)
Columbia (West) Easley Florence Gaffney
Greenville Greenwood Irmo Laurens
Mount Pleasant Myrtle Beach Orangeburg Rock Hill
Seneca Spartanburg Spartanburg *
Summerville
Sumter Taylors
Tennessee 26
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Athens Bartlett * Chattanooga
Chattanooga (North)
Chattanooga * Clarkesville Cleveland Columbia
Cookeville Crossville Gallatin Greenville
Hermitage Jackson Johnson City Kingsport
Knoxville (North) Knoxville (South) Knoxville (West) Madison
Maryville Morristown Murfreesboro Nashville
Nashville * Tullahoma
Texas 2
Longview Tyler
Virginia 34
Bluefield Bristol Chancellor
Charlottesville *
Charlottesville (Rio HilChesapeake Chester (Breckenridge)Chester *
Christiansburg Churchland Claypool Hill Danville
Denbigh Dublin Fredricksburg Galax
Harrisburg Lynchburg Manassas Marion
Martinsville Newport News * Richmond Richmond
(West)
Richmond (Victorian SquaRoanoke Roanoke *
South Boston Stauton Suffolk
Winchester
Wise County Woodbridge * Woodbridge (Smoketown Station)
West Virgina 17
Barboursville Beckley Belle
Chapmanville
Charleston Charleston (South) Clarksburg Cross
Lanes
Fairmont Huntington Martinsburg Matewan
Morgantown Parkersburg Princeton
Summersville
Teays Valley
</TABLE>
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<TABLE>
<S> <C>
Independent Auditors' Report
To the Board of Directors and Shareholders of Lowe s Companies, Inc.
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W e have audited the accompanying consolidated balance sheets of Lowe s Companies,
Inc. and subsidiaries as of January 31 1994, 1993 and 1992 and the related consolidated
statements of current and retained earnings and cash flows for the fiscal years then ended
These financial statements are the responsibility of the Company's management Our
responsibility is to express an opinion on these financial statements based on our audits
We conducted our audits in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of Lowe's Companies, Inc. and subsidiaries at January 31,
1994, 1993 and 1992, and the results of their operations and their cash flows for the fiscal
years then ended in conformity with generally accepted accounting principles.
Deloitte & Touche
Charlotte, North Carolina
09-Mar-94
</TABLE>
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<TABLE>
Management's Discussion and Analysis of Financial Condition and Results of Operations
Introduction
<S> <C>
This discussion summarizes the significant factors affecting Lowe's consolidated
operating results, financial condition and liquidity/cash flows during the three year period
ended January 31, 1994 (i.e., Fiscal 1993, 1992 and 1991). This discussion should be read
in conjunction with the Letter to Shareholders, financial statements and financial
statement footnotes included in this annual report.
Lowe's embarked upon a large store prototype expansion program beginning in 1989 and
furthered this commitment by recording a one time restructuring charge in Fiscal 1991 of
$71.3 million pre tax to cover expected costs and expenses incident to this expansion
program and transformation. This transformation from small stores into large home
improvement destination centers coupled with "dominant inventory assortments" will
continue to enhance our growth as the large store commitment continues. We ended 1993
with 311 stores and 14.2 million square feet of selling space. This compares to 303 stores
and 10.0 million square feet and 306 stores and 8.0 million square feet for the two prior
fiscal years' end, respectively. Store performance perspective in terms of units, sales and
operating profits is depicted in Tables 1 3.
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Expansion plans for 1994 envision about 50 new stores with 50% in new markets and
50% in relocations for approximately 4.4 million square feet of additional retail space.
Approximately one half of the 1994 projects will be leased and one half will be owned.
Distribution capabilities are a central component of Lowe's operating strategy. At
year end, we operated two distribution facilities along with four smaller "satellite"
support facilities. In addition, a new "high tech" distribution facility of approximately
650,000 square feet is expected to be operational by mid 1994 to Support our expansion
program in new markets, sales floor square footage increases and expanded product
offerings. Plans are under way for a fourth distribution center.
Effective February 1, 1994, a new subsidiary was established (The Contractor Yard, Inc.)
to own and operate Lowe's contractor yards currently in 18 locations. Additional
contractor yards are expected as we continue our restructuring. This move is intended to
represent a more focused marketing effort to building contractor in these locations.
Operations
Record sales of $4.54 billion were achieved during 1993, an 18% increase over 1992
sales of $3.85 billion. Sales for 1992 were 26% higher than 1991. These increases are
attributable to customer receptiveness of the expansion program discussed above.
Positive sales results are continuing into the first quarter of 1994.
Retail sales increased 21% to $3.25 billion, an increase of $.56 billion over 1992. This
category also increased 28% in 1992 from 1991 sales of $2.11 billion.
Contractor sales increased 11 % to $ 1.29 billion, an increase of $.13 billion over 1992.
This category accounted for a 22% increase in 1992 from 1991 sales of $.95 billion.
Gross margin improved to 23.8% from 23.4% in 1992. An Everyday Competitive Pricing
strategy was implemented during 1992 which caused a reduction in margin from 1991's
margin of 24.1 %. This strategy has proved very successful as it creates higher sales
volumes and margin dollars, resulting in a positive leveraged sales impact over expenses.
LIFO charges reduced margins by 34, 25 and 20 basis points for 1993, 1992 and 1991,
respectively. Had inventory costs been stated on a FlFO basis, year end inventory totals
would have been $64.5, $49.0 and $39.5 million higher for these years.
Selling General and Administrative (SG&A) expenses for 1993 were $717.0 million or
15.8% of sales. This tracks favorably with each of the two previous years of 16.7% and
18.0% to sales, respectively. Sales leverage on overall expenses plus cost containment in
key areas such as advertising are major contributors to this favorable trend.
Store opening costs exemplifying Lowe's commitment to its expansion program saw
costs at $29.3 million for 1993 These costs were $11.0 and $3.9 million for 1992 and
1991, respectively. These costs currently average about $550 thousand per store.
Projected costs for 1994 will average about $600 thousand per project.
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Depreciation, reflecting continuing fixed asset expansion, increased 15% to $80.5
million. A 20% increase for 1992 was in line with this program which was computed
from a prior year base of $58.3 million. Depreciation for these years has maintained a
percentage to sales of approximately 18%. About one half of new stores for 1993 are
operating leases, whereas previously a higher percentage of stores was owned.
Employee retirement plans expenses for 1993 were $37.9 million or .8% to sales. This
cost compares favorably with .9% and 1.0% for each of the two previous years. A lower
eligibility rate, because of more new hires relating to expansion, accounts for the lower
percentage costs to sales. See Note 9 to the financial statements for further disclosure.
Interest costs were $18.3 million (4% to sales) and a 17% increase above 1992. Interest
costs were $16.9 million for 1991. Near historic lows in borrowing rates have been
favorable for each of these years. See Notes 5 and 6 to the financial statements for
particulars on short term and long term indebtedness and discussion below on liquidity
and capital resources.
Cash dividends paid to common shareholders were $23.6, $21.2 and $20 0 million in
1993 1992 and 1991, respectively. Lowe s has paid cash dividends each quarter since
becoming a public company in 1961. At January 31 1994 there were 7,470 shareholders
of record. Refer to Stock Performance Chart on page 31 for further particulars on
dividends and stock performance.
Balance Sheet Management
Effective inventory turnover is critical to efficient product management. (Lowe s
calculates "turn" by using cost of sales as the numerator and divides by the average of
beginning inventory plus the subsequent four quarters ending inventories.) In 1993
Lowe's inventory turned 4.7 times, up from 4.6 turns in 1992 and 4.4 turns in 1991. This
improvement represents a savings in inventory financing costs and is noteworthy during
this time of expansion of store size and inventory assortments.
Accounts receivable remained flat with 1992 at $53.3 million. In that year, an undivided
fractional interest in a designated pool of receivables was sold, with this program
continuing into 1993. Accounts receivable totaled $115.7 million for 1991. For more
details, see Note 2 to the financial statements.
Property, less accumulated depreciation increased 30% to $1.02 billion for 1993, with
1992 increasing 28% from 1991. Primarily all of the increase represents a commitment to
the superstore format. Large store investments also include increased purchases of
point of sale equipment, fixtures and displays.
Other assets primarily consist of land and buildings relating to closed and relocated stores
which are available for sale or lease. These properties are carried at their net realizable
value. At January 31, 1994, this value was approximately $44 million; up $4 million from
the previous year. Fourteen properties were under contract to be sold at year end, carrying
value of approximately $10 million.
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Accounts payable, the major source of short term inventory financing, represented 55%
of year end inventory compared to 56% for 1992 and 51% for 1991.
Long term debt, excluding current maturities, at January 31, 1994 was $592.3 million, up
89% from the 1992 balance. The 1991 balance was $113.6 million. During 1993, $287.5
million 3% Convertible Subordinated Notes were issued at a discount, raising $250
million. Medium term notes were issued in both 1993 and 1992 after early retirement of
our long term debt carrying double-digit interest rates. In 1992, most short term debt was
eliminated with this trend carrying over into 1993. Further details on long-term financing
can be found in Note 6 to the financial statements.
The special one time restructuring charge is addressed at the beginning of this MD&A,
and more specifically in Note 14 to the financial statements. This restructuring accrual
associated with relocating and closing stores was $16.0, $10.8 and $2.1 million for 1993,
1992 and 1991, respectively. Also, $3.0 and $5.9 million were used to reduce vacated
stores to their net realizable value in 1993 and 1992, respectively. The remaining
restructuring accrual at January 31, 1994 was $33.5 million.
Shareholders' equity continues to finance the biggest portion of assets. Total shareholders'
equity increased by $140.4 million in 1993 and financed 39.7% of assets at January 31,
1994. This compares to 45.6% for 1992 and 46.4% for 1991
Financial Management
Liquidity and Capital Resources
Primary sources of liquidity are cash provided from operating activities and certain
financing activities. Information on consolidated cash flows (operating, financing and
investing activities is set forth in the Statements of Cash Flows on page 22 of this report
Working capital at January 31, 1994, was $402.7 million as compared to $245.9 million
at January 31,1993, and $181.1 million at January 31,1992
During 1993, Lowe's issued the following debt:
o $32 million medium term notes issued in February 1993, and
o $287.5 million aggregate (net $250 million principal 3% Convertible Subordinated
Notes, issued at a discount in July 1993
During 1992, Lowe's issued the following debt:
o $218 million medium term notes issued in the last three quarters.
During 1993, Lowe's reduced long term debt as follows:
o $6.3 million of scheduled miscellaneous repayments.
During 1992, Lowe's reduced long term debt as follows:
o Redeemed $27.8 million, 11.5% unsecured notes, and
o $8.4 million of scheduled miscellaneous repayments.
During 1991, Lowe's reduced long term debt as follows:
o Redeemed $30 million, 12.75% unsecured notes, and
o $10.7 million of scheduled miscellaneous repayments
Page 30
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Major uses of cash continue to be investments in new store facilities. In 1993, capital
investment was $374 million (cash outlays of $337 million plus capital leases of $29
million and like kind exchanges of $8 million) which did not include operating leases of
$166 million. Lowe's 1994 capital budget is targeted between $575 and $600 million,
inclusive of approximately $220 million of market value of properties to be occupied
under operating leases. Over 80% of this planned commitment is for store expansion.
Present expansion plans are to finance 1994's program through funds from operations,
operating leases, issuance of about $30 million of common stock to the Employee Stock
Ownership Plan and from external financing.
External financing in 1994 may involve a "takedown" under Lowe's Shelf Registration.
On January 10, 1994 (approved effective February 8, 1994, the Company filed with the
Securities and Exchange Commission a shelf registration statement covering $500
million of "unallocated" debt or equity securities. The shelf registration enables the
Company to issue common stock, preferred stock, senior unsecured debt securities, or
subordinated unsecured debt securities from time to time.
Short term capital needs will be financed through utilization of Lowe's bank credit
agreements and commercial paper program. Formal bank credit agreements in place are
discussed in Note 5 to the financial statements.
The ratio of long term debt to equity plus long term debt was 40.4%, 30.0% and 14.0%
with fixed charge coverage at 6.5, 5.7 and 1.2 for 1993,1992 and 1991, respectively.
Other
General inflation has not had a significant impact on Lowe s during the past three years.
With the exception of certain building commodity products, deflation has been
experienced in most product groupings. Lumber products have experienced inflation rates
considerably higher than that of other building commodities due to a combination of price
volatility increased demand and diminished supply. Inflation rates experienced in the
lumber product grouping were 12.0%.9.7% and 4.7% for 1993, 1992 and 1991,
respectively.
Environmental exposures are a common concern to most businesses. Lowe's is subject to
various environmental protection laws and regulations and is operating within such laws
or is taking action aimed at assuring compliance with such laws and regulations. Lowe's
has been identified as a Potentially Responsible Party (PRP) at two Environmental
Protection Agency designated clean up sites. Any cost to Lowe's is not expected to have a
material impact on the consolidated financial statements.
Store Performance Perspective
To further enhance understanding and analysis of the relative pace, progress, and
performance of our new family of stores, compared to two older and smaller store
groups, we are providing the information in the following tables, both in this report, and
quarterly.
Table 1 Store Group Unit Totals, Four Quarter Average
Page 31
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1993 1992 1991 1990
% of % of % of % of
Total Units Total Units Total Units Total Units
Small (1) 25% 77 32% 99 40% 122 45% 137
Medium (2) 31 94 37 113 41 127 42 130
Large (3) 44 134 31 93 19 58 13 40
Total 100% 305 100% 305 100% 307 100% 307
Table 1 Comments: The small stores average less than 9,000 square feet of sales floor
and are being replaced by superstores. The medium stores stem from our 1984-1988
expansion, and average about 24,000 square feet. A few small and medium stores have
been converted into focused contractor yards. These 18 yards are included in our small
store totals. The large stores average about 72,000 square feet, with our current
prototypes being 85,000 to 115,000, plus large garden centers.
Table 2 Sales Contribution by Store Group, Fiscal Year
1993 1992 1991 1990
% of % % of % % of % % of
Total Change Total ChangeTotal Change Total
Small (1) 18% -10% 23% -4% 31% -9% 36%
Medium (2) 28 -11 37 2 45 3 48
Large (3) 54 62% 40 108% 24 63% 16
Total 100% 100% 100% 100%
Table 2 Comments: The results shown in Table 2 need to be read in conjunction with the
changing store numbers in Table I because these are aggregate totals, not comparable
store results. The small store sales decrease of 10% is attributable to their reduction in
number, because the sales per store average increased 19%. The average mid sizer
achieved a 7% sales increase. The average large store's sales growth of 11%, combined
with their numerical increase, provided 54% of total sales, up from 16% in 1990.
Table 3 Operating Profits by Store Group, Fiscal Year
1993 1992 1991 1990
% of % % of % % of % % of
Total Change Total ChangeTotal Change Total
Small (1) 15% 12% 20% 13% 25% -35% 36%
Medium (2) 30 12 39 10 51 -9 50
Large (3) 55 62% 41 151% 24 52% 14
Total 100% 100% 100% 100%
Table 3 Comments: Here is the report card on profitability and growth. Again, these are
not comparable store results but group totals. The 77 small stores, on average, improved
Page 32
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their profit contribution over the average of last year's 99 stores by 44% in spite of a 22%
reduction in number. These units are low cost operations, including some "cash cows"
and our focused Contractor yards, and are obviously able to do well in this business
climate.
The mid sizers are stores of the mid 80's Their average sales per store was 26% higher
than that of the small stores, and they too, on average increased their profit over last year.
The large stores are designed for our customers of the 90's and their results are gratifying.
With average sales per store 72% higher than the average small store, and their average
operating profits 106% greater than the average of the small stores, the large stores
contributed 55% of the year's operating profits while contributing 54% of sales.
Operating profits are determined with consistency period to period, and without any
subsidization of stores or groups. Therefore, the performance shown in Table 3 is a hard
proxy for the relative pre tax profit contribution of these store groups.
1993 1992 1991
Total Sq. FTotal Sq. Total Sq. Ft.
(000,000) (000,000) (000,000)
(1) Pre 1984 Stores; Contrator Avg. 8,810 Sq. Ft. 0.6 0.9 1.2
(2) '84-'88 Stores: Avg. 23,980 Sq. Ft. 2 2.6 3
(3) Post '88 Expansion Stores: Avg. 72,110 Sq. Ft. 11.6 6.5 3.8
</TABLE>
<TABLE>
Consolidated Condensed Balance Sheets
Lowe's Companies, Inc. and Subsidiary Companies
Dollars in thousands
_____________________________________________________________________________________________________
January 31, January 31,
1994 1993
____________ ____________
Assets
__________________
Page 33
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<CAPTION>
<S> <C> <C>
Current assets:
Cash and cash equivalents $73,253 $48,949
Short-term investments 35,215 5,900
Accounts receivable - net 53,301 53,288
Merchandise inventory 853,707 594,195
Other assets 68,431 43,222
____________ ____________
Total current assets 1,083,907 745,554
Property, less accumulated depreciation 1,020,234 787,197
Long-term investments 40,408 23,270
Other assets 57,099 52,856
____________ ____________
Total assets $2,201,648 $1,608,877
============ ============
Liabilities and Shareholders' Equity
_________________________________________
Current liabilities:
Current maturities of long-term debt $49,547 $21,721
Short-term notes payable 2,281 3,193
Accounts payable 467,278 330,584
Employee retirement plans 34,422 32,038
Accrued salaries and wages 45,883 39,472
Other current liabilities 81,765 72,626
____________ ____________
Total current liabilities 681,176 499,634
Long-term debt, excluding current maturities 592,333 313,562
Deferred income taxes 26,165 16,517
Accrued store restructuring costs 28,305 45,944
____________ ____________
Total liabilities 1,327,979 875,657
____________ ____________
Shareholders' equity
Common stock - $.50 par value;
Issued and Outstanding
January 31, 1994 147,886,770
January 31, 1993 145,945,916 73,943 72,973
Capital in excess of par 202,962 171,214
Retained earnings 596,764 489,033
____________ ____________
Total shareholders' equity 873,669 733,220
Page 34
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____________ ____________
Total liabilities and
shareholders' equity $2,201,648 $1,608,877
============ ============
_____________________________________________________________________________________________________
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<TABLE>
Consolidated Condensed Statements of Current and Retained Earnings
Lowe's Companies, Inc. and Subsidiary Companies
Dollars In Thousands, Except Per Share Data
Three months ended For the year ended
January 31, 1994 January 31, 1993 January 31, 1994 January
Current Earnings Amount Percent Amount Percent Amount Percent Amount
___________________________________________________________________________________________________________________
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $1,145,828 100.00 $910,298 100.00 $4,538,001 100.00 $3,846,418
Cost of sales 866,811 75.65 700,961 77.00 3,456,717 76.17 2,945,753
Gross margin 279,017 24.35 209,337 23.00 1,081,284 23.83 900,665
Expenses:
Selling, general and administrative 191,437 16.71 157,628 17.33 717,028 15.82 642,799
Store opening costs 12,585 1.10 2,934 0.32 29,251 0.64 10,983
Depreciation 22,136 1.93 18,956 2.08 80,530 1.77 69,820
Employee retirement plans 7,781 0.68 7,623 0.84 37,873 0.83 35,572
Interest 6,074 0.53 3,682 0.40 18,278 0.40 15,599
Total expenses 240,013 20.95 190,823 20.97 882,960 19.46 774,773
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Pre-tax earnings 39,004 3.40 18,514 2.03 198,324 4.37 125,892
Income tax provision 13,271 1.15 6,191 0.68 66,538 1.47 41,172
Net earnings $25,733 2.25 $12,323 1.35 $131,786 2.90 $84,720
___________________________________________________________________________________________________________________
Shares outstanding (weighted average) 148,099 146,255 147,398 146,152
Earnings per share $0.17 $0.08 $0.89 $0.58
___________________________________________________________________________________________________________________
Retained earnings
___________________________________________________________________________________________________________________
Balance at beginning of period $576,968 $482,555 $489,033 $425,526
Net earnings 25,733 12,323 131,786 84,720
Cash dividends (5,915) (5,838) (23,571) (21,153)
Stock Split (22) (7) (484) (60)
Balance at end of period $596,764 $489,033 $596,764 $489,033
___________________________________________________________________________________________________________________
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Lowe's Companies, Inc. and Subsidiary Companies
Dollars in Thousands
Fiscal Fiscal
1993 1992
__________________________________________________________________________________________________________________
<CAPTION>
<S> <C> <C>
Cash Flows From Operating Activities:
Net Earnings $131,786 $84,720
Adjustments to Reconcile Net Earnings to Net Cash
Provided By Operating Activities:
Depreciation 80,530 69,820
Amortization of Original Issue Discount 1,615
Store Restructuring Accrual
Increase (Decrease) in Deferred Income Taxes 5,860 8,231
Loss on Disposition/Writedown of Fixed and Other Assets 8,969 1,929
Decrease (Increase) in Operating Assets:
Accounts Receivable - Net (13) 62,451
Merchandise Inventory (259,512) 8,600
Other Operating Assets (21,385) (20,352)
Increase (Decrease) in Operating Liabilities:
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Accounts Payable 136,694 22,770
Employee Retirement Plans 32,937 4,173
Accrued Store Restructuring (8,905) (10,765)
Other Operating Liabilities 17,123 19,173
Net Cash Provided by Operating Activities 125,699 250,750
__________________________________________________________________________________________________________________
Cash Flows from Investing Activities:
Decrease (Increase) in Investment Assets:
Short-Term Investments (29,315) (1,174)
Purchases of Long-Term Investments (41,714) (12,500)
Proceeds from Sale/Maturity of Long-Term Investments 24,576 580
Other Long-Term Assets 1,645 (2,213)
Fixed Assets Acquired (336,888) (243,262)
Proceeds from the Sale of Fixed and Other Long-Term Assets 27,641 9,642
Net Cash Used in Investing Activities (354,055) (248,927)
__________________________________________________________________________________________________________________
Cash Flows from Financing Activities:
Sources:
Long-Term Debt Borrowings 281,915 217,969
Net Increase (Decrease) in Short-Term Borrowings (912) (140,640)
Stock Options Exercised 1,504 1,019
Total Financing Sources 282,507 78,348
__________________________________________________________________________________________________________________
Uses:
Repayment of Long-term Debt (6,276) (36,157)
Cash Dividend Payments (23,571) (21,153)
Common Stock Purchased for Retirement
Total Financing Uses (29,847) (57,310)
Net Cash Provided by Financing Activities 252,660 21,038
__________________________________________________________________________________________________________________
Net Increase in Cash and Cash Equivalents 24,304 22,861
Cash and Cash Equivalents, Beginning of Year 48,949 26,088
Cash and Cash Equivalents, End of Year $73,253 $48,949
__________________________________________________________________________________________________________________
See accompanying notes to consolidated financial statements.
</TABLE>
&F
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LOWE'S COMPANIES, INC. AND SUBSIDIARY COMPANIES
FISCAL YEARS ENDED JANUARY 31, 1994, 1993 AND 1992
NOTE 1 Summary of Significant Accounting Policies:
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The Company is one of America's largest retailers serving the do-it-yourself home
improvement, home decor, and home construction markets. Below are those accounting
policies considered to be significant.
Subsidiaries and Principles of Consolidation The consolidated financial statements
include the accounts of the Company and its subsidiaries, all of which are wholly owned.
All material intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents Cash and cash equivalents include cash on hand, demand
deposits, and short-term investments that are readily convertible to cash within three
months of purchase.
Investments The Company has a cash management program which provides for the
investment of excess cash balances in financial instruments which have maturities of up
to three years. Investments that are readily convertible to cash within three months of
purchase are classified as cash equivalents. Investments with a maturity of between three
months and one year are classified as short-term investments and are stated at amortized
cost. Investments with maturities greater than one year are classified as long-term and are
stated at the lower of amortized cost or market value. Investments consist primarily of tax
exempt notes and bonds, auction rate tax exempt securities, and municipal preferred tax
exempt stock.
Effective February 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", which stipulates that debt securities not classified as held-to-maturity
securities and all equity securities will be carried at fair value. Unrealized gains and
losses on such securities will be included in earnings if the securities are classified as
trading securities and will be excluded from earnings and reported as a separate
component of shareholders' equity until realized if classified as available-for-sale. Debt
securities classified as held-to-maturity securities will be carried at amortized cost.
Management does not believe that adoption of SFAS No. 115 will have a material effect
on the Company's financial statements. Future financial statement effects of applying this
new standard will depend on classification and market values of the securities.
Accounts Receivable The majority of the accounts receivable arise from sales to
professional building contractors principally in the South Atlantic and South Central
regions of the United States. The allowance for doubtful accounts is based on historical
experience and a review of existing receivables. Sales generated through the Company's
private label credit card and consumer installment sales are not reflected in receivables.
These receivables are sold, without recourse, to an outside finance company.
Merchandise Inventory Inventory is stated at the lower of cost or market. In an effort
to more closely match inventory costs and related sales, cost is determined using the last-
in, first-out (LIFO) method. Included in inventory cost are administrative, warehousing
and other costs directly associated with buying, distributing and maintaining inventory in
a condition for resale.
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Property and Depreciation Property is recorded at cost. Costs associated with major
additions are capitalized and depreciated. Upon disposal, the cost of properties and
related accumulated depreciation is removed from the accounts with gains and losses
reflected in earnings.
Depreciation is provided over the estimated useful lives of the depreciable assets. Assets
are generally depreciated on the straight-line method. Leasehold improvements are
depreciated over the shorter of their estimated useful lives or term of the related lease.
Other Assets Real property representing closed stores are included in other assets at
their estimated net realizable value.
Leases Assets under capital leases are amortized in accordance with the Company's
normal depreciation policy for owned assets or over the lease term if shorter. The charge
to earnings resulting from amortization of these assets is included in depreciation expense
in the consolidated financial statements.
Income Taxes Income taxes are provided for temporary differences between the tax and
financial accounting bases of assets and liabilities using the liability method under SFAS
No. 109. The tax effects of such differences are reflected in the balance sheet at the tax
rates expected to be in effect when the differences reverse.
Store Pre opening Costs Costs of opening new retail stores are charged to operations
as incurred.
Employee Retirement Plans Since 1957 the Company has maintained benefit plans for
its employees as described in Note 9. The plans are funded annually.
Earnings Per Share Earnings per share are calculated on the weighted average shares
of common stock and dilutive common stock equivalents outstanding each year. Earnings
per share have been retroactively adjusted to reflect the two-for-one stock split described
in Note 10. The Company's 3% Convertible Subordinated Notes due July 22, 2003, are
potentially dilutive securities for purposes of calculating earnings per share; however,
their effect is not material and fully diluted earnings per share is not presented.
NOTE 2 Accounts Receivable
During 1992, the Company entered into an agreement to sell, with limited recourse, an
undivided fractional interest in a designated pool of receivables. As collections reduce
previously sold interests in receivables, an interest in new receivables may be sold under
the agreement. At January 31, 1994 and 1993, the interest in receivables sold totaled
$121.9 and $107.3 million, respectively. At January 31, 1994 and 1993, the Company had
received $90 and $80 million, respectively, in cash and a receivable for $31.9 and $27.3
million, respectively. The $31.9 and $27.3 million receivable are included in Accounts
Receivable - Net in the balance sheet.
The Company maintains an allowance for doubtful accounts because it has retained
substantially the same risk of credit loss as if the receivables had not been sold. The
allowance for doubtful accounts was $4.7, $4.7, and $4.1 million at January 31, 1994,
1993, and 1992, respectively.
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NOTE 3 Merchandise Inventory:
If the FIFO method had been used, inventories would have been $64.5, $49.0 and $39.5
million higher at January 31, 1994, 1993 and 1992, respectively.
NOTE 4 Property and Accumulated Depreciation:
Net property includes $59.0, $33.7 and $13.9 million in assets from capital leases for
Fiscal 1993, 1992 and 1991, respectively.
Property is summarized below by major class:
Janurary 31
1994 1993 1992
(Dollars in Thousands)
Cost:
Land $, 224,551 $188,562 $116,382
Buildings 478,373 421,620 400,877
Store and Office Equipment 500,811 371,002 302,708
Leasehold Improvements 113,287 86,756 49,823
Total Cost 1,317,022 1,067,940 869,790
Accumulated Depreciation and Amortization (296,788) (280,743) (256,835)
Net Property (Note 12) $1,020,234 $787,197 $612,955
NOTE 5 Short-Term Borrowings and Lines of Credit:
The Company has agreements with a group of banks at January 31, 1994, which provide
for short-term unsecured borrowings of up to $140 million with interest at the lower of
prime or bank transaction rate. The agreements expire on May 1, 1994. In addition the
agreements have a commitment fee of .125% annually. The Company expects to renew
these agreements at similar terms. These agreements may also be used to support the
issuance of commercial paper. The agreements may be withdrawn if there is a material
change in the financial condition of the Company. At January 31, 1994, there were no
amounts outstanding under these agreements.
Several banks have extended lines of credit aggregating $140 million for the purpose of
issuing documentary letters of credit and standby letters of credit. These lines do not have
termination dates but are reviewed periodically. Commitment fees of .125% per annum
are paid on the amounts used. At January 31, 1994, unused lines of credit totaled $101.9
million.
In addition $200 million is available for the purpose of short-term borrowings on a bid
basis from various banks. These lines are uncommitted and are reviewed periodically by
both the banks and the Company. At January 31, 1994, there were no amounts
outstanding under these lines.
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The following relates to aggregate short-term borrowings from banks and commercial
paper transactions in Fiscal 1993, 1992 and 1991:
Maximum Average Weighted
Category of WeightedAmount Amount Average
Aggregate Balance Average OutstandinOutstandingInterest Rate
Short-Termat End oInterestAt Any During the During the
BorrowingsYear Rate Month End Year (a) Year (b)
(Dollars in thousands)
Fiscal 1993
Commercial Paper $65,000 $15,408 3.30%
Bank Borrowings 49,000 21,468 3.3
Fiscal 1992
Commercial Paper 150,000 97,892 3.9
Bank Borrowings 127,900 66,946 4
Fiscal 1991
Commercial Pape$97,000 4.3 97,000 54,097 5.4
Bank Borrowings$43,500 4.10% $118,200 $42,792 5.50%
(a) Average of daily ending balances.
(b) Total interest expense on short-term borrowings for the year divided by average
amount outstanding during the year.
</TABLE>
<TABLE>
NOTE 6 Long-Term Debt:
Fiscal Year
Debt of Final Janurary 31
Category Interest Rates Maturity 1994 1993 1992
(Dollars in Thousands)
Secured Debt1:
<CAPTION>
<S> <C> <C> <C> <C>
Insurance Company Notes6.75% to 9% 1998 $534 $1,323 $2,721
Bank Notes 7.0% * 1994 17 50 83
Industrial Revenue Bond4.2% * 1997 833 1,133 1,721
Other Notes 8% to 10% 2005 663 770 892
Unsecured Debt:
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Insurance Company Notes 8.25% 1992 600
Industrial Revenue Bond4.55% to 6.50% * 2020 10,230 11,703 13,086
Industrial Revenue Bond2.25% * 2005 9,600 10,300 11,000
Unsecured Notes 11.50% 1992 27,813
Medium Term Notes 6.50% to 8.20% 2022 249,966 217,959
Convertible Subordinate 3.00% 2003 251,524
Bank Notes 4 2.63% to 2.76% * 1996 57,955 57,955 57,955
Capital Leases (Note 125.99% to 12.00% 2033 60,558 34,090 15,479
Total Long-Term Debt 641,880 335,283 131,350
Less Current Maturities 49,547 21,721 17,700
Long-Term Debt, Excluding
Current Maturities $592,333 $313,562 $113,650
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
* Interest rate varies as a percentage of prime rate or other interest index.
Interest rates shown are as of January 31, 1994, or year of maturity if earlier.
Prime rate was 6.0% at January 31, 1994.
In April 1992, the Company filed a shelf-registration with the Securities and Exchange
Commission registering up to $250 million of Medium Term Notes to be issued in the
future. The Company issued $218 million of these notes in Fiscal 1992. The remaining
$32 million of these notes were issued in February 1993. The notes bear interest rates that
range from 6.50% to 8.20% and are scheduled to mature from 1997 to 2022.
At January 31, 1994, the Company had outstanding 25 interest rate swap agreements with
financial institutions, having a total notional principal amount of $250 million. Under the
agreements with notional amounts of $10 million each, the Company will receive interest
payments at an average fixed rate of 5.71% and will pay interest on the same notional
amounts at a floating rate based on an interest rate index, currently estimated at 3.38%.
These swaps are scheduled to terminate in Fiscal 1995. The Company is exposed to credit
loss in the event of nonperformance by the banks and financial institutions. However,
management does not anticipate such nonperformance.
Debt maturities, exclusive of capital leases (see Note 12), for the next five fiscal years are
as follows (in millions): 1994, $47.8; 1995, $13.6; 1996, $4.6; 1997, $13.6 ; 1998, $1.8.
Notes:
1 Real properties pledged as collateral for secured debt had net book values (in
millions) at January 31, 1994, as follows: insurance company notes $6.1; bank
notes $.5; industrial revenue bonds $1.9; and other notes $3.8.
2 The Company issued notes to secure $11.7 million floating rate monthly demand
Page 42
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industrial revenue bonds in Fiscal 1985. The interest rates are tied to an interest
index based on comparable securities traded at par and other pertinent financial
market rates. With certain restrictions, the bonds can be converted to a fixed
interest rate based on a fixed interest index at the Company's option.
3 On July 22, 1993, the Company sold $287.5 million aggregate principal of its 3%
Convertible Subordinated Notes due July 22, 2003. The notes are convertible into
Lowe's Common Stock at the conversion rate of 38.32 shares of common stock per
each $1,000 principal amount. The notes were issued at an original price of
$880.27 per $1,000 principal amount, which represented an original issue discount
of 11.973% payable at maturity. Annual interest on the notes at 3% and accretion
of the original issue discount represents an annual yield to maturity of 4.5%. The
notes are callable (subject to certain adjustments) at any time on or after July 22,
1996
4 The unsecured bank notes were obtained for the purpose of acquiring the
Company's common stock to fund the ESOP. These notes require that certain
financial conditions be maintained, restrict other borrowings, and limit the payment
of dividends to $40 million during any one year.
NOTE 7 Disclosures about Fair Values of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is made in
accordance with the requirements of SFAS No. 107, ("Disclosures about Fair Value of
Financial Instruments"). The estimated fair value amounts have been determined, using
available market information and appropriate valuation methodologies. However,
considerable judgement is necessarily required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current market exchange.
The use of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
(Dollars in Thousands) Janurary 31, 1994 Janurary 31, 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets:
Cash, Cash Equivalents and
Short-Term Investments $108,468 $108,493 $54,849 $54,849
Net Receivables 53,301 53,301 53,288 53,288
Long-Term Investments 40,408 40,801 23,270 23,664
Liabilities:
Accounts Payable 467,278 467,278 330,584 330,584
Short-Term Debt 2,281 2,281 3,193 3,193
Long-Term Debt 641,880 772,466 335,283 340,578
Off-Balance Sheet Financial Instruments-
Unrealized Gains
Interest Rate Swap Agreements 4,421 2,434
Page 43
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Cash, cash equivalents and short-term investments, receivables, accounts payable, and
short-term debt The carrying amounts of these items are a reasonable estimate of their
fair value.
Long-term investments The fair value is estimated from quoted market prices for these
or similar investments.
Long-term debt Interest rates that are currently available to the Company for issuance of
debt with similar terms and remaining maturities are used to estimate fair value for debt
issues that are not quoted on an exchange.
Interest rate swap agreements The fair value of interest rate swaps is the amount at
which they could be settled, based on estimates obtained from dealers.
NOTE 8 Income Taxes:
(Dollars in Thousands)
</TABLE>
Page 6
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<TABLE>
Fiscal Years End on January 31 Fiscal 1993 Fiscal 1992 Fiscal 1991
of Following Year Amount % Amount % Amount %
Statutory Rate Reconciliation
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Pre-Tax Earnings $198,324 100.00% $125,892 100.00% $4,951 100.00%
Federal Income Tax at Statutory
Rate 69,413 35 42,803 34 1,683 34
State Income Taxes-Net of Federal
Tax Benefit 2,340 1.2 1,443 1.1 131 2.6
Other (5,215) -2.6 (3,074) -2.4 (3,350) -67.6
Total Income Tax Provision $66,538 33.60% $41,172 32.70% ($1,536) -31.00%
Components of Income Tax Provision
Current
Federal $58,088 87.30% $31,289 76.00% $23,524 -1531.50%
State 2,590 3.9 1,651 4 198 -12.9
Total Current 60,678 91.2 32,940 80 23,722 *********
Deferred
Federal 4,850 7.3 7,697 18.7 (25,258)1,644.40
State 1,010 1.5 535 1.3 0 0
Total Deferred 5,860 8.8 8,232 20 (25,258)1,644.40
Total Income Tax Provision $66,538 100.00% $41,172 100.00% ($1,536) 100.00%
Page 44
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Deferred income taxes arise principally from the temporary differences between financial
reporting and income tax reporting of depreciation and certain other accrued expenses.
During Fiscal Year 1991, the tax effect of the restructuring charge resulted in a deferred
tax benefit representing future tax deductible expenditures which substantially offset
existing deferred tax liabilities.
The tax effect of cumulative temporary differences and carryforwards that gave rise to the
deferred tax assets and liabilities and the related valuation allowance at January 31, 1994,
are as follows (in thousands):
Janurary 31, 1994 Janurary 31, 1993
Assets Liabilities Total Assets Liabilitie Total
Accrued Store Restructuring Cos $22,381 $22,381 $19,152 $19,152
Excess Tax Over Book Depreciation ($46,787) (46,787) ($34,930) (34,930)
Excess Book Over Tax Property T 4,944 (1,038) 3,906 3,445 (1,921) 1,524
Other, Net 18,355 (7,994) 10,361 16,479 (6,924) 9,555
Less Valuation Allowance (3,726) (3,726) (3,306) (3,306)
Total $41,954 ($55,819) ($13,865) $35,770 ($43,775) ($8,005)
The valuation allowance increased $420,000 and $559,000 during the years ended
January 31, 1994 and 1993, respectively.
</TABLE>
<TABLE>
<S> <C> <C> <C>
NOTE 9 Employee Retirement Plans:
The Company's contribution to its Employee Stock Ownership Plan (ESOP) is
determined annually by the Board of Directors. The ESOP covers all employees after
completion of one year of employment and 1000 hours of service during that year.
Contributions are allocated to participants based on their eligible compensation relative to
total eligible compensation. The Board authorized contributions totaling 13% of eligible
compensation for each of the Fiscal Years 1993, 1992 and 1991. Contributions may be
made in cash or shares of Lowe's Companies, Inc. common stock and are generally made
in the following fiscal year.
On January 29, 1993, the Board of Directors authorized the funding of the Fiscal 1992
ESOP contribution primarily with a new issue of the Company's common stock. During
Fiscal 1993, the Company issued 1,696,034 shares with a cost of $30.6 million, or a
weighted average cost per share of $18.02. The remaining Fiscal 1992 contribution was
funded with $1.0 million in cash. On January 31, 1994, the Board of Directors authorized
the funding of the Fiscal 1993 ESOP contribution primarily with the issuance of new
shares of the Company's common stock. As of January 31, 1994, the Employee Stock
Ownership Trust held approximately 21.6% of the outstanding common stock of the
Company and was its largest shareholder.
Shares allocated to ESOP participants accounts are voted by the Trustee according to the
participants' voting instructions. Unallocated shares and shares for which no voting
Page 45
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instructions are received are voted by the Trustee as directed by a management
committee. At January 31, 1994, there were no unallocated shares.
The Board of Directors determines contributions to the Company's Employee Savings
and Investment Plan (ESIP) each year based upon a matching formula applied to
employee contributions. All employees are eligible to participate in the ESIP on the first
day of the month following completion of one year of employment. Company
contributions to this plan for Fiscal 1993, 1992 and 1991 were $3.9, $3.4 and $2.9
million, respectively. The Company's common stock is an investment option for
participants in the ESIP. As of January 31, 1994, the ESIP held approximately .7% of the
outstanding common stock of the Company. Shares held in the ESIP are voted by the
trustee as directed by an administrative committee of the ESIP.
The Company does not believe that it has any material liability for postemployment or
post-retirement benefits.
NOTE 10 Shareholders' Equity:
On March 7, 1994, the Board of Directors announced a two-for-one stock split effective
March 31, 1994 to shareholders of record on March 16, 1994. Accordingly, in the
financial statements, an amount equal to the par value of the additional shares issued has
been transferred from Retained Earnings to Common stock retroactive to January 31,
1991. Shares and per share amounts in the financial statements and footnotes have been
adjusted to give retroactive effect to the split.
In conjunction with the stock split, the Board of Directors increased the authorized
number of shares to 240 million effective March 16, 1994. Authorized shares of common
stock were 120 million at January 31, 1994, 1993 and 1992.
</TABLE>
<TABLE>
Transactions affecting the shareholders' equity section of the consolidated balance sheets
are summarized as follows:
(In Thousands) Shares (In Thousands) Shareholders' Equity
Capital in
Common Excess of Retained Total
OutstandingStock Par Value Earnings Equity
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balance January 31, 1991 145,840 $72,920 $169,177 $440,575 $682,672
Net Earnings 6,487 6,487
Tax Effect of Incentive
Stock Options Exercised (Note 11) 61 61
Cash Dividends (20,020) (20,020)
Stock Options Exercised(Note 11) 232 116 1,269 (87) 1,298
Stock Received for Exercise
Page 46
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of Stock Options (12) (6) (13) (56) (75)
Shares Purchased and Retired (300) (150) (346) (1,373) (1,869)
Balance January 31, 1992 145,760 72,880 170,148 425,526 668,554
Net Earnings 84,720 84,720
Tax Effect of Incentive
Stock Options Exercised (Note 11) 80 80
Cash Dividends (21,153) (21,153)
Stock Options Exercised (Note 11) 186 93 986 (60) 1,019
Balance January 31, 1993 145,946 72,973 171,214 489,033 733,220
Net Earnings 131,786 131,786
Tax Effect of Incentive
Stock Options Exercised (Note 11) 172 172
Cash Dividends (23,571) (23,571)
Stock Options Exercised(Note 11) 245 122 1,442 (60) 1,504
Stock Issued to ESOP (Note 9) 1,696 848 30,134 (424) 30,558
Balance January 31, 1994 147,887 $73,943 $202,962 $596,764 $873,669
<FN>
On January 10, 1994, the Company filed with the Securities and Exchange Commission a
shelf registration statement covering $500 million of "unallocated" debt or equity
securities. The shelf registration enables the Company to issue common stock, preferred
stock, senior unsecured debt securities or subordinated unsecured debt securities from
time to time. The shelf registration was approved by the Securities and Exchange
Commission effective February 8, 1994.
The Company has 5 million authorized shares of preferred stock ($5 par), none of which
have been issued. The preferred stock may be issued by the Board of Directors (without
action by shareholders) in one or more series, having such voting rights, dividend and
liquidation preferences and such conversion and other rights as may be designated by the
Board of Directors at the time of issuance of the preferred shares.
The Company has a shareholder rights plan which provides for a dividend distribution of
one preferred share purchase right on each outstanding share of common stock. Each
purchase right will entitle shareholders to buy one unit of a newly authorized series of
preferred stock. A shareholder's interest is not diluted by the effects of a stock dividend
or stock split. Each unit is intended to be the equivalent of one share of common stock.
The purchase rights will be exercisable only if a person or group acquires or announces a
tender offer for 20% or more of Lowe's common stock. The purchase rights do not apply
to the person or group acquiring the stock. The purchase rights will expire on September
19, 1998.
Page 47
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NOTE 11 Stock Options:
The Company has a stock option plan under which incentive and non-qualified stock
options may be granted to key employees. Four million common shares were reserved for
option purposes. Options granted are exercisable from the date of grant through
expiration dates which range from 1994 through 1997. At January 31, 1994, there were
1,423,640 shares available for options that could be granted.
</TABLE>
<TABLE>
Option information is summarized as follows:
Key Employee Stock Option Plan
Option Price
Per Share
<CAPTION>
<S> <C> <C>
Outstanding January 31, 1991 764 $4.063, $5.344, $6.375
Canceled or Expired -6 $5.84
Exercised -228 $4.063, $5.344, $6.375
Outstanding January 31, 1992 530 $4.063, $6.375
Granted 30 $10.188
Canceled or Expired -3 $4.063, $6.375
Exercised -186 $4.063, $6.375
Outstanding January 31, 1993 371 $4.063, $6.375, $10.188
Exercised -217 $4.063, $6.375
Outstanding January 31, 1994 154 $6.375, $10.188
<FN>
Prior to Fiscal 1989, all options granted were incentive options whereby the option prices
were at least equal to the fair market values of the stock at the grant dates. Since Fiscal
1989, all options granted have been adjustable non-qualified options exercisable at a
maximum price of $10.188 per share. Upon exercise of a non-qualified option, the
optionee makes a payment to the Company equal to the shares' fair market value on the
date the option was granted. In accordance with a formula set forth in each option
agreement, the Company uses part of the option price to make a federal income tax
deposit on behalf of the optionee.
During Fiscal 1989, shareholders approved a Non-Employee Directors' Stock Option
Plan. This Plan provided that adjustable non-qualified options representing 4,000 shares
of Lowe's common stock would be granted to each outside Director following the Annual
Meeting in 1989, 1990, 1991, 1992 and 1993. Two hundred thousand shares of common
Page 48
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stock were reserved to fulfill the requirements of this Plan. Options representing 28,000
shares were granted under this Plan in each of Fiscal 1989, Fiscal 1990, Fiscal 1991,
Fiscal 1992 and Fiscal 1993, of which options representing 32,000 shares have been
exercised. The option price per share was $6.375 for Fiscal 1989, $10.906 for Fiscal
1990, $8.625 for Fiscal 1991, $10.969 for Fiscal 1992 and $18.875 for Fiscal 1993. The
non-qualified options granted to Directors include the same tax deposit feature described
above with respect to the Key Employee Stock Option Plan.
At January 31, 1994, options for 154,220 shares were exercisable under the Key
Employee Stock Option Plan and options for 108,000 shares were exercisable under the
Non-Employee Directors' Stock Option Plan.
Incentive stock option shares which are sold by the optionee within two years of grant or
one year of exercise result in a tax deduction for the Company equivalent to the taxable
gain recognized by the optionee. For financial reporting purposes, the tax effect of this
deduction is accounted for as a credit to capital in excess of par value rather than as a
reduction of income tax expense. Such optionee sales resulted in a tax benefit to the
Company of approximately $172 thousand, $80 thousand and $61 thousand during Fiscal
Years 1993, 1992 and 1991, respectively.
</TABLE>
<TABLE>
NOTE 12 Leases:
The future minimum rental payments required under capital and operating leases having
initial or remaining noncancelable lease terms in excess of one year are summarized as
follows:
Operating Leases Capital Leases
Fiscal Year Real EstatEquipment Real EstatEquipment Total
(Dollars in Thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C>
1994 $39,624 $1,217 $6,312 $565 $47,718
1995 49,072 482 6,202 355 56,111
1996 48,208 136 6,226 123 54,693
1997 47,323 10 6,246 4 53,583
1998 44,368 10 5,845 50,223
Later Years 638,694 9 101,115 739,818
Total Minimum Lease
Payments $867,289* $1,864 $131,946 $1,047 $1,002,146
Total Minimum Capital
Lease Payments $132,993
Less Amount Representing
Interest 72,435
Present Value of Minimum
Lease Payments 60,558
Less Current Maturities 1,790
Present Value of Minimum
Page 49
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Lease Payments,
Less Current Maturities $58,768
<FN>
* Total minimum payments have not been reduced by minimum sublease rentals of
$1.8 million to be received in the future under noncancelable subleases.
Rental expenses under operating leases for real estate and equipment were $27.2 million,
$20.4 million and $15.1 million in Fiscal 1993, 1992 and 1991, respectively.
The Company leases certain store facilities under agreements with original terms
generally of twenty years. Agreements generally provide for contingent rental based on
sales performance in excess of specified minimums. To date, contingent rentals have been
very nominal. The leases typically contain provisions for four renewal options of five
years each. Certain equipment is also leased by the Company under agreements ranging
from two to five years. These agreements typically contain renewal options providing for
a renegotiation of the lease, at the Company's option, based on the fair market value at
that time.
The Company entered into a lease agreement in January 1993 for ten store properties with
a total cost of approximately $70.6 million. The lease terms will be finalized as the stores
open. The rental amounts will be based on the cost of the property plus the borrowing
cost of the lessor. The agreement also called for the Company to advance part of the
acquisition cost of the properties to be reimbursed by the Lessor. At January 31, 1994, the
Company had a receivable from the Lessor of $44.0 million classified on the balance
sheet under Other Current Assets. The minimum lease payments under this agreement
will be dependent on the final cost and financing of the lessor and are not included in the
table above. The Company expects these leases will be classified as operating leases.
The Company entered into a lease agreement in August 1990 for nine store properties.
The initial terms of these leases are five years with renewal terms for up to an additional
thirty-five years. The rental amounts are based on the cost of the property plus the
borrowing cost of the lessor. Under the agreement, the Company advanced part of the
acquisition cost of the properties and at January 31, 1993 had a receivable from the lessor
of $17.4 million classified on the balance sheet under Other Current Assets.
NOTE 13 Commitments, Contingencies and Litigation:
The Company had purchase commitments at January 31, 1994, of approximately $24.4
million for land, buildings and construction of facilities, and $16.6 million for equipment.
See Note 12 concerning commitments related to lease agreements.
The Company is a defendant in legal proceedings considered to be in the normal course
of business and none of which, singularly or collectively, are considered material to the
Company as a whole. Potential liability in excess of the Company's self-insured retention
under these proceedings is covered by insurance.
Page 50
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NOTE 14 Store Restructuring:
In Fiscal 1991, the Company recorded a pre-tax fourth quarter charge of $71.3 million for
the expected costs and expenses required to accelerate the Company's conversion from a
chain of small stores to a chain of large stores. The restructuring charge is composed
primarily of write-downs of long-lived assets to their net realizable value, principally real
estate for owned locations, certain leasehold improvements, fixtures and equipment. It
also includes certain relocation costs and expenses. The charge included stores relocated
under the restructuring plan in the fourth quarter of Fiscal 1991 and those scheduled for
closing and relocation through Fiscal 1995.
</TABLE>
<TABLE>
NOTE 15 Other Information:
(Dollars in Thousands)
Net interest expense is composed of the following:
Years Ended January 31, 1994 1993 1992
<CAPTION>
<S> <C> <C> <C>
Long-Term Debt $25,146 $12,634 $14,467
Short-Term Debt 1,217 6,529 5,317
Amortization of Loan Costs 272 274 125
Cost of Early Debt Retirement 1,149
Short-Term Interest Income (4,765) (1,989) (3,006)
Interest Capitalized (3,592) (1,849) (1,114)
Net Interest Expense 18,278 15,599 16,938
Supplemental Disclosures of Cash Flow Information:
Years Ended January 31, 1,994 1,993 1,992
Cash Paid for Interest
(Net of Amount Capitalized) 25,677 17,857 22,162
Cash Paid for Income Taxes 58,761 40,042 21,028
Noncash Investing and Financing Activities:
Fixed Assets Acquired under
Capital Leases 29,343 24,566 2,595
Common Stock Issued to ESOP (Note 9) 30,558
Common Stock Received for
Exercise of Stock Options 75
Notes Received in Exchange
for Property 886 1,536 2,478
<FN>
Page 51
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Supplemental Disclosure of Operating Expenses:
Advertising expenses were $59.3, $65.0 and $61.8 million for Fiscal 1993, 1992 and
1991, respectively.
</TABLE>
&F
<TABLE>
SELECTED FINANCIAL DATA
LOWE'S COMPANIES, INC. AND SUBSIDIARY COMPANIES
(Dollars in Thousands, Except Per Share Data)
Fiscal Years End on January 31 of
Following Year (Unaudite 1993 1992 1991 1990 1989
<CAPTION>
Selected Income Statement Data:
<S> <C> <C> <C> <C> <C>
Net Sales $4,538,001 $3,846,418 $3,056,247 $2,833,108 $2,650,547
Net Earnings 131,786 84,720 6,487 71,087 74,912
Earnings Per Common Share:
Net Earnings $0.89 $0.58 $0.04 $0.48 $0.50
Selected Balance Sheet Data:
Total Assets $2,201,648 $1,608,877 $1,441,228 $1,203,052 $1,147,394
Long-Term Debt, Including
Current Maturities $641,880 $335,283 $131,350 $169,441 $178,554
Selected Quarterly Data (Unaudited) *
Three Months Ended Janurary 31October 31 July 31 April 30
Fiscal 1993
Net Sales $1,145,828 $1,158,370 $1,241,691 $992,112
Gross Margin 279,017 275,620 292,480 234,167
Net Earnings 25,733 31,645 44,960 29,448
Earnings Per Share $0.17 $0.21 $0.31 $0.20
Fiscal 1992
Net Sales $910,298 $991,192 $1,061,645 $883,283
Gross Margin 209,337 231,372 246,741 213,215
Net Earnings 12,323 18,900 29,718 23,779
Earnings Per Share $0.08 $0.13 $0.20 $0.16
Fiscal 1991
Net Sales $709,613 $790,274 $863,009 $693,351
Page 52
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Gross Margin 170,539 188,485 208,816 167,418
Net Earnings (Loss) (43,265) 12,992 25,284 11,476
Earnings (Loss) Per Shar ($0.30) $0.09 $0.17 $0.08
</TABLE>
&F
<TABLE>
<S> <C>
* LIFO Adjustment:
Fiscal 1993 The total LIFO effect for the year was a charge of $15.5 million.
A charge of $10.3 million was made against earnings through the first nine
months, resulting in a fourth quarter charge of $5.2 million.
Fiscal 1992 The total LIFO effect for the year was a charge of $9.5 million.
A charge of $3.7 million was made against earnings through the first nine
months, resulting in a fourth quarter charge of $5.8 million. At the end of the
third quarter, lumber and plywood composite prices were at record levels and
due to decreased demand projected, the Company expected the prices to
plateau at then current levels. Prices however, continued to rise through the
end of the year resulting in the fourth quarter charge.
Fiscal 1991 The total LIFO effect for the year was a charge of $6.0 million.
A charge of $.9 million was made against earnings through the first nine
months, resulting in a fourth quarter charge of $5.1 million. Through the year,
the Company experienced slight deflation in products other than building
commodities. In building commodities, particularly lumber, prices had risen
sharply in the second quarter, then dropped as expected during the third and
early fourth quarters. The Company expected this pattern to continue through
the end of the year, however, increased demand for lumber drove prices
upward at the end of the year resulting in the fourth quarter adjustment.
Store Restructuring Charge:
During the fourth quarter of Fiscal 1991, the Company recorded a $71.3
million pre-tax charge to earnings related to the planned conversion from a
chain of small stores to a chain of large stores (See Note 14 to the
Consolidated Financial Statements).
</TABLE>
<TABLE>
<S> <C>
* LIFO Adjustment:
Fiscal 1993 The total LIFO effect for the year was a charge of $15.5 million.
A charge of $10.3 million was made against earnings through the first nine
months, resulting in a fourth quarter charge of $5.2 million.
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Fiscal 1992 The total LIFO effect for the year was a charge of $9.5 million.
A charge of $3.7 million was made against earnings through the first nine
months, resulting in a fourth quarter charge of $5.8 million. At the end of the
third quarter, lumber and plywood composite prices were at record levels and
due to decreased demand projected, the Company expected the prices to
plateau at then current levels. Prices however, continued to rise through the
end of the year resulting in the fourth quarter charge.
Fiscal 1991 The total LIFO effect for the year was a charge of $6.0 million.
A charge of $.9 million was made against earnings through the first nine
months, resulting in a fourth quarter charge of $5.1 million. Through the year,
the Company experienced slight deflation in products other than building
commodities. In building commodities, particularly lumber, prices had risen
sharply in the second quarter, then dropped as expected during the third and
early fourth quarters. The Company expected this pattern to continue through
the end of the year, however, increased demand for lumber drove prices
upward at the end of the year resulting in the fourth quarter adjustment.
Store Restructuring Charge:
During the fourth quarter of Fiscal 1991, the Company recorded a $71.3
million pre-tax charge to earnings related to the planned conversion from a
chain of small stores to a chain of large stores (See Note 14 to the
Consolidated Financial Statements).
</TABLE>
&F
<TABLE>
Lowe's Quarterly Stock Price Range and Cash Dividend Payment*
Fiscal 1993 Fiscal 1992 Fiscal l991
High Low Dividend High Low Dividend High Low Dividend
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter 17.6875 13.3125 $0.04 10.875 8.65625 $0.04 8.71875 6.25 $0.03
2nd Quarter 20 15 0.04 11.8125 9.0625 0.035 9.28125 7.15625 0.035
3rd Quarter 24.6875 18.375 0.04 12.3125 8 0.035 8.75 5.75 0.035
4th Quarter $31 23.1875 $0.04 14.375 9.25 $0.04 10.3437 6.40625 $0.04
Page 54
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Source: The Wall Street Journal
* As restated for a 2-for-1 stock split to shareholders of record March 16, 1994.
</TABLE>
&F
<TABLE>
<S> <C>
Lowe's Board of Directors
William A. Andres
Director since 1986, age 67. Chairman of Committee of Outside Directors, Member of
Audit Committee and Compensation/Employee Stock Option Committee of the
Company. Previously Chairman of the Board (1976 1983), Chairman of Executive
Committee (1983 1985) of Dayton Hudson Corporation (Retail Chain), Minneapolis,
Minn. (Mr. Andres retired in September, 1985.) Other directorships: Jostens, Inc.,
Minneapolis, Minn., since 1985; Scott Paper Company, Philadelphia, Penn., since 1983:
Multifoods, Inc., Minneapolis, Minn., since 1978; Hannaford Bros., Scarborough, Me.,
since 1986.
John M. Belk
Director since 1986, age 74. Member of Audit Committee. Compensation/Employee
Stock Option Committee and Committee of Outside Directors of the Company. Chairman
of the Board, Belk Stores Services, Inc. (Retail Department Stores), Charlotte, N..C.,
since 1980. Other directorships: Coca Cola Bottling Company Consolidated, Charlotte,
N.C., since 1972; Chaparral Steel, Midlothian, Tex., since 1987.
Gordon E. Cadwgan
Director since 1961, age 80. Chairman of Audit Committee, Member of
Compensation/Employee Stock Option Committee, Executive Committee and Committee
of Outside Directors of the Company. Trustee and Financial Consultant, affiliated with
Tucker Anthony, Inc., Boston, Mass., since 1979. Other directorships: Third Century
Fund, Inc., Providence, R.I., since 1981.
Leonard G. Herring
Director since 1956, age 66. President and Chief Executive Officer since 1978, Chairman
of Non Employee Directors' Stock Option Committee, Member of Executive Committee
and Govemment/Legal Affairs Committee of the Company. Other directorships: First
Union Corporation, Charlotte, N.C., since 1986.
Petro Kulynych
Director since 1952, age 72. Member of Audit Committee, Executive Committee and
Government/Legal Affairs Committee of the Company, having previously served as
Managing Director (1978 1983). (Mr. Kulynych retired in December, 1983.) Other
directorships: Local Board. Wachovia Bank of North Carolina. N.A., North Wilkesboro,
N.C., since 1988: Carolina Motor Club. Inc.
Page 55
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Russell B. Long
Director since 1987, age 75. Chairman of Government/Legal Affairs Committee, Member
of Compensation/Employee Stock Option Committee and Committee of Outside
Directors of the Company. Partner, Long Law Firm (Attorneys at Law), Washington,
D.C., since 1988. Other directorships: Catalyst Vidalia Corp. Vidalia, La., since 1989;
The New York Stock Exchange, Inc., New York, N.Y., since 1987. Other: United States
Senator 1948 1987; Member, Senate Finance Committee 1952 1987 (Chairman
1965 1981).
Robert G. Schwartz
Director since 1973, age 66. Chairman of Compensation/Employee Stock Option
Committee, Member of Audit Committee and Committee of Outside Directors of the
Company. Director of Metropolitan Life Insurance Company, New York, N.Y., since
1980. having previously served as Chairman of the Board (1983 1993), President and
Chief Executive Officer (1989 1993) of that company. (Mr. Schwartz, retired in March,
1993.) Other directorships: Potlatch Corporation, San Francisco, Calif., since 1973;
Comsat Corporation, Washington, D.C., since 1986; Mobil Corporation, New York,
N.Y., since 1987; The Readers Digest Association, Inc., Pleasantville, N.Y., since 1989;
Consolidated Edison Company of New York, New York, N.Y., since 1989; CS First
Boston, Inc., New York, N.Y., since 1989; Lone Star Industries, Inc., Stanford, Conn.,
since 1994.
Jack C. Shewmaker
Director since 1985, age 56. Member of Compensation/Employee Stock Option
Committee, Executive Committee and Committee of Outside Directors of the Company.
Director of Wal Mart Stores, Inc. (Discount Retail Chain), Bentonville, Ark., since 1977
having previously served as Vice Chairman of the Board (1984 1988) President and
Chief Operating Officer (1978 1984) of that company . (Mr. Shewmaker retired in
February, 1988.) Other directorships: Vons Companies, Inc., El Monte, Calif., since
1988
Robert L. Strickland
Director since 1961, age 63. Chairman of the Board since 1978, Chairman of Executive
Committee, Member of Government/ Legal Affairs Committee and Non Employee
Directors' Stock Option Committee of the Company. Other directorships: Summit
Communications, Atlanta. Ga., since 1987: T. Rowe Price Associates, Inc., Baltimore,
Md., since 1991.
Board of Directors Nominee
Carol Farmer
Age 49. President of Carol Farmer Associates, Inc. (Trend Forecasting and Consulting)
Boca Raton, Fla., since 1985
</TABLE>
&F
Appendix to EXHIBIT 13
Graphic and Image Material
Page 5 Picture Consultant Walter Loeb: "The future is looking
very bright because of the new stores."
Page 6 Picture Publisher Wyatt Kash: "Make it fun to shop and
Easy to buy."
Page 7 Chart Lowe's Total Market Potential
$Billions
Home Center Market
Building Contractor HomeOwner
New
Housing R&R* DIY Durable Total
1998e $77 $50 $102 $73 $302
1993p 52 37 79 73 215
1992 46 33 74 41 194
1991 39 32 69 39 179
1990 45 36 70 36 187
1985 40 25 53 25 143
1980 24 16 38 14 92
1977 $27 $11 $28 $10 $76
R&R=Repair and Remodel e=estimate
p=preliminary
Source: Home Improvement Research Institute;
Management Horizons
Page 7 Graphs Graphs of above chart.
Page 8 Picture Lowe's Home Safety Council charter menmbers
Meri-K appy of the National Fire Protection
Association and Lamar Alexander meet with
Lowe's David Oliver and Cynthia Haynes in
Washington, D.C. Inset, Charter member Jack
Kemp.
Page 9 Picture Investment adviser Bill Mayo-Smith: "After the
early success of Lowe's first few big stores, I knew
they were going to pull off a major
transformation."
Page 9 Picture George Lorch of Armstrong: "With up-to-the-
minute information coming from Lowe's, we can
develop quick responses."
Page 10Picture GE's Dick Stonesifer: "Lowe'sis cutting a wide
swathe in the field of total service."
Page 10Chart Estimated Disposable Income - 2000
Graph Dollars in Billions
1994 $4,980
1995 5,245
1996 5,532
Page 57
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1997 5,812
1998 6,124
1999 6,461
2000 $6,816
Source: Management Horizons
Page 10 Chart Disposable Personal Income And Savings Rate
Page 1
&F
Savings
As A %
DPI Of DPI
1993p $4,706.00 4.00%
1992 4500.2 5.3
1991 4230.5 4.8
1990 4050.5 4.2
1989 3787.2 4
1987 3289.5 4.3
1986 3131.5 6
1985 2943 6.4
1984 2759.5 8
1983 2493.7 6.8
1982 $2,319.60 8.60%
Source: Departmetn of Commerce, Bureau of
Economic Analysis, Economic Indcators
p=preliminary
Page 11 Picture Watts Wacker of Yankelovich Partners: "Success,
like satisfaction, has become centered on the
home."
Page 12 Picture Weyerhaeuser's Bill Corbin: "we want Lowe's
customers to know we are listening to their
concerns."
Page 13 Picture After the inaugural meeting of Lowe's Home
Safety Council, charter members toured a Lowe's
store in Greensbor, N.C. Dennis Ray Martin,
Diane Imhulse, Dr. Louis Sullivan
Page 13 Chart Housing affordability
Monthly
Mortgage Median-
Effective Payment Priced
Total As A % Existing
Mortagage Household Single-
Rate% Income Family Home
1993p 7.24 19 106,100
1992 8.13 20 103,700
1991 9.31 22.1 100,300
1990 10.04 22.8 95,500
1989 10.12 23.1 93,100
1988 9.29 22 89,300
1987 9.3 21.9 85,600
1986 10.26 23 80,300
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1985 11.71 26.2 75,500
1984 12.48 28.2 72,400
1983 12.82 29.9 70,300
source : Management Horizons, Home Sales,
National Association of Realtors
p=preliminary
Page 14Graph Total Sales Floor Sq. Footage
1989 6,219,018
1990 7,061,925
1991 8,016,136
1992 9,975,537
1993 14,174,889
Page 2
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Page 14 Graph Square Footage By Store Size
Millions of Square Feet
Large Medium Small
1991 3.8 3 1.2
1992 6.5 2.6 0.9
1993 11.6 2 0.6
<TABLE>
Page 14 Chart Merchandise Sales Trends
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.Structural Lumbe 10% 20% $745 16 $622 16 $484 16 $470 19
2.Building Commodities
& Millwork 6 8 979 21 909 24 762 25 720 29
3.Home Decorating &
Illumination 21 23 807 18 656 17 496 16 307 12
4.Kitchen, Bathroom,
& Laundry 16 28 498 11 388 10 311 10 233 9
5.Heating, Cooling, &
Water Syastems 16 27 267 6 211 6 183 6 129 5
6.Home Entertainme 13 18 218 5 184 5 147 5 119 5
7.Yard,Patio,&Gard 17 13 493 11 435 11 329 11 223 9
8.Tools 24 30 259 6 200 5 150 5 88 3
9.Special Order Sa 4 13 272 6 241 6 194 6 228 9
Totals 13% 18% $4,538 100 $3,846 100 $3,056 100 $2,517 100
<FN>
Page 59
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Page 34 Pictures William A. Andres, John M. Belk, Gordon E.
Cadwgan, Leonard G. Herring, Petro Kulnych
Page 35 Pictures Russell B. Long, Robert G> Schwartz, Jack C.
Shewmaker, Robert L. Strickland
Page 36 Picture Carol Farmer
</TABLE>
&F
<TABLE>
<S> <C> <C>
Part IV
LOWE'S COMPANIES, INC. AND SUBSIDIARY COMPANIES
EXHIBIT 21 SCHEDULE OF SUBSIDIARIES
NAME AND DOING BUSINESS AS: STATE OF INCORPORATION
Lowe's Home Centers, Inc. North Carolina
The Contractor Yards, Inc. North Carolina
Sterling Advertising, Ltd. North Carolina
LF Corporation Delaware
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
Lowe's Companies, Inc.
We consent to the incorporation by reference in Registration Statement No. 33-64560 on Form
S-3, Registration Statement No. 33-51865 on Form S-3, Post Effective Amendment No. 1 to
Registration Statement No. 33 2618 on Form S 8 and Registration Statement No. 33 29772 on
Form S 8, of our reports dated March 9, 1994 appearing in or incorporated by reference in this
Annual Report on Form 10 K of Lowe's Companies, Inc. for the year ended January 31, 1994.
DELOITTE & TOUCHE
Charlotte, North Carolina
28-Apr-94
Page 60
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EXHIBIT 27
Financial Data Schedule
Fiscal year ended Jan-31-1994
period end Jan-31-1994
Multiplier 1,000
cash and cash items 73,253
marketable securities 35,215
notes and accounts receivable-trade 58,008
allowances for doubtful accounts (4,707)
inventory 853,707
total current assets 1,083,907
property plant and equipment 1,317,022
accumulated depreciation (296,788)
total assets 2,201,648
total current liabilities 681,176
bonds,mortgages and similar debt 592,333
Page 1
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preferred stock-madatory redemption 0
preferred stock-no mandatory redemption 0
common stock 73,973
other stockholders equity 799,726
total liabilities and stockholders equity 2,201,648
net sales of tangible products 4,538,001
total revenue 4,538,001
costs of tangible goods sold 3,456,717
total costs and expenses applicable to sales 3,456,717
other costs and expenses 864,682
provision for doubtful accounts and notes 0
interest and amortization of debt discount 18,278
income before tax and other items 198,324
income tax expense 66,538
income/loss continuing operations 131,786
discontinued operations 0
extraordinary items 0
cummulative effect-change in accounting principl 0
net income or loss 131,786
earnings per share primary 1
earnings per share-fully diluted 1
</TABLE>
<TABLE>
Page 61
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<S> <C> <C> <C> <C>
PART IV
EXHIBIT 3.1
STATE OF NORTH CAROLINA
Department of The Secretary of State
To all whom these presents shall come, Greetings:
I Rufus L. Edmisten, Secretary of State of the State of
North Carolina, do hereby certify the following and hereto
attached to be a true copy of
ARTICLES OF AMENDMENT
OF
LOWE'S COMPANIES, INC.
the original of which was filed in this office on the 16th
day of March, 1994.
IN WlTNESS WHEREOF, I have hereunto set my hand
and affixed my official seal at the City of Raleigh, this
16th day of March, 1994
/s/ Rufus L. Edmisten
Secretary of State
ARTICLES OF AMENDMENT
TO
RESTATED AND AMENDED CHARTER
OF
LOWE'S COMPANIES, INC.
The undersigned corporation hereby submits these
Articles of Amendment for the purpose of amending its
Restated and Amended Charter:
1 The name of the corporation is
LOWE'S COMPANIES, INC.
2 The Restated and Amended Charter is amended as follows:
The first paragraph of Article 4 of the Restated and Amended
Charter is struck out and the following is substituted therefor:
4 Authorized Stock. The Corporation shall have the
authority to issue 5,000,000 shares of Preferred Stock
of a par value of $5 per share and 240,000,000 shares of
Common Stock of a par value of $ .50 per share.
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3 No shares of Preferred Stock are issued and outstanding.
4 Each issued and unissued share of Common Stock,
upon the effectiveness of these Articles of
Amendment, shall be changed into two shares of Common Stock.
The Corporation shall deliver to
each record holder of Common Stock on March
16, 1994, a new certificate representing the number of
additional shares to which such record holder
is entitled pursuant to the foregoing amendment.
5 The foregoing amendment was adopted on the 7th day of March,
1994, by the Board of Directors of the Corporation pursuant to
North Carolina General Statutes 55-10-2(4) without shareholder
action.
6 These Articles of Amendment shall be effective as of 5:00 p.m. on
March 16, 1994.
Dated: March 7, 1994
LOWE'S COMPANIES, INC.
By: /s/ Leonard G. Herring
President and CEO
STATE OF NORTH CAROLINA
Department of The Secretary of State
To all whom these presents shall come, Greeting:
I, Rufus L. Edmisten, Secretary of State of the State of
North Carolina, do hereby certify the following and hereto
attached (34 sheets) to be a true copy of
CHARTER DOCUMENTS
OF
LOWE'S COMPANIES, INC.
the original of which is now on file and a matter of record
in this office.
In Witness Whereof, I have hereunto set my hand and
affixed my official seal.
Done in Office, at Raleigh, this 6th day of February in the
year of our Lord 1990.
/s/ Rufus L. Edmisten
Secretary of State
Page 63
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RESTATED AND AMENDED CHARTER
OF
LOWE'S COMPANIES, INC.
The undersigned corporation, pursuant to action by its
shareholders, hereby executes this Restated and Amended
Charter for the purpose of integrating into one document
its original articles of incorporation and all amendments
thereto:
1 . Name . The name of the Corporation is Lowe' s
Companies, Inc .
2. Duration. The period of duration of the Corporation is
perpetual .
3. Purpose. The purpose for which the Corporation is
organized is to engage in any lawful act or activity for
which corporations may be organized under the Business
Corporation Act of North Carolina.
4. Authorized Stock. The Corporation shall have the
authority to issue 5,000,000 shares of Preferred Stock of a
par value of $5 per share and 120,000,000 shares of
Common Stock of a par value of $.50 per share.
Preferred Stock. Authority is expressly vested in the
Board of Directors to divide the Preferred Stock into
series and, within the following limitations, to fix and
determine the relative rights and preferences as between
series so established and to provide for the issuance
thereof. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other
series and classes. All shares of Preferred Stock shall be
identical except as to the following relative rights and
preferences, as to which there may be variations between
different series:
( 1 ) The rate of dividend;
( 2 ) The price at and the terms and conditions on which
shares may be redeemed;
(3) The amount payable upon shares in event of
involuntary liquidation;
Page 64
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(4) The amount payable upon shares in event of voluntary
liquidation;
(5) Sinking fund provisions for the redemption or
purchase of shares;
(6) The terms and conditions on which shares may be
converted if the shares of any series are issued with the
privilege of conversion; and
(7) The terms and conditions on which shares may be
voted in the election of Directors or otherwise, either as a
class or together with other voting securities.
Prior to the issuance of any shares of a series of Preferred
Stock the Board of Directors shall establish such series by
adopting a resolution setting forth the designation of the
series and the preferences, limitations and relative rights
thereof to the extent that variations are permitted by the
provisions hereof.
All series of Preferred Stock shall rank on a parity as to
dividends and assets with all other series according to the
respective dividend rates and amounts distributable upon
any voluntary or involuntary liquidation of the
Corporation fixed for each such series; but all shares of
Preferred Stock shall be preferred over Common Stock as
to both dividends and amounts distributable upon any
voluntary or involuntary liquidation of the Corporation.
All shares of any one series shall be identical.
Common Stock. The holders of Common Stock shall, to
the exclusion of the holders of any other class of stock of
the Corporation, have the sole and full power to vote for
the election of Directors and for all other purposes
without limitation except only (i) as otherwise provided in
the resolutions establishing and designating a particular
series of Preferred Stock and (ii) as otherwise expressly
provided by the then existing statutes of the State of North
Carolina . The holders of Common Stock Subject to the
provisions of resolutions establishing and designating
series of Preferred Stock, the holders of shares of
Common Stock shall be entitled to receive dividends if,
when and as declared by the Board of Directors out of
funds legally available therefor and to the net assets
remaining after payment of all liabilities upon voluntary
or involuntary liquidation of the Corporation.
Page 65
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5. Stated Capital. The stated capital of the Corporation is
$18,550,694 as of April 4, 1986, being the date that the
Board of Directors adopted a resolution setting forth this
Restated and Amended Charter for submission to the
shareholders for approval.
6. Shareholders' Preemptive Right. No holder of stock of
the Corporation shall have any preemptive right to
subscribe for or purchase any additional or increased
stock of the Corporation of any class, whether now or
hereafter authorized, including treasury stock, or
obligations convertible into any class of stock, or stock of
any class convertible into stock of any other class, or
obligations, stock or other securities carrying warrants or
rights to subscribe to stock of the Corporation of any
class, whether now or hereafter authorized, but any and all
shares of stock, bonds, debentures or other securities or
obligations, whether or not convertible into stock or
carrying warrants entitling the holders thereof to subscribe
to stock, may be issued, sold or disposed of from time to
time by authority of the Board of Directors to such
persons, firms, corporations or employee stock ownership
plans and for such consideration, as far as it may be
permitted by law, as the Board of Directors shall from
time to time determine.
7. Registered Office. The address of the registered office
of the Corporation in the State of North Carolina is Elkin
Highway, Wilkes County, North Wilkesboro, North
Carolina 28659; and the name of its registered agent at
such address is L. G. Herring.
8. Incorporators. The names and addresses of the original
incorporators of the Corporation are as follows:
NAME ADDRESS
H. C. Buchan, Jr . North Wilkesboro, N C
Ruth Lowe Buchan North Wilkesboro, N. C.
Hal E. Church North Wilkesboro, N. C.
9. Board of Directors.
(a) Number, Election & Term of Directors. The number of
Directors shall be set forth in the Bylaws, but in the
Page 66
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absence of such a provision in the Bylaws, the number of
Directors of the Corporation shall be nine, provided that
the number of Directors set forth in the Bylaws cannot be
increased by more than two during any 1-month period
except by the affirmative vote of the holders of at least
70% of the outstanding Voting Shares. Commencing with
the 1986 Annual Meeting of Shareholders, the Board of
Directors shall be divided into three classes, Class I, Class
II and Class III, as nearly equal in number as possible. At
the 1986 annual meeting of Shareholders, Directors of the
first class (Class I) shall be elected to hold office for a
term expiring at the 1987 Annual meeting of
Shareholders; Directors of the second class ( Class II)
shall be elected to hold office for a term expiring at the
1988 Annual meeting of Shareholders; and Directors of
the third class (Class III) shall be elected to hold office for
a term expiring at the 1989 Annual meeting of
Shareholders. At each Annual meeting of Shareholders
after 1986, the successors to the class of Directors whose
term shall then expire shall be identified as being of the
same class as the Directors they succeed and elected to
hold office for a term expiring at the third succeeding
Annual Meeting of Shareholders. when the number of
Directors is changed, any newly created directorships or
any decrease in directorships shall be so apportioned
among the classes by the Board of Directors as to make
all classes as nearly equal in number as possible.
(b ) Newly Created Directorships and Vacancies . Subject
to the rights of the holders of Preferred Stock then
outstanding, any vacancy occurring in the Board of
Directors, including a vacancy resulting from an increase
by not more than two in the number of Directors, may be
filled by the affirmative vote of a majority of the
remaining Directors though less than a quorum of the
Board of Directors, and Directors so chosen shall hold
office for a term expiring at the Annual Meeting of
Shareholders at which the term of the class to which they
have been elected expires. No decrease in the number of
Directors constituting the Board of Directors shall shorten
the term of any incumbent Director.
(c) Removal of Directors. Subject to the rights of the
holders of Preferred Stock then outstanding, any Director
may be removed, with or without cause, only by the
affirmative vote of the holders of at least 70% of the
outstanding Voting Shares.
Page 67
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(d) Amendment or Repeal. The provisions of this Article
shall not be amended or repealed; nor shall any provision
of this Charter be adopted that is inconsistent with this
Article, unless such action shall have been approved by
the affirmative vote of either:
(i) the holders of at least 70% of the outstanding Voting
Shares; or
(ii) a majority of those Directors who are Disinterested
Directors and the holders of the requisite number of
shares specified under applicable North Carolina law for
the amendment of the charter of a North Carolina
corporation.
(e) Certain Definitions. For purposes of this Article:
(i) " Disinterested Director" means any member of the
Board of Directors who:
(A) was elected to the Board of Directors at the 1986
Annual Meeting of Shareholders; or
( B ) was recommended for election by a majority of the
Disinterested Directors then on the Board, or was elected
by the Board to fill a vacancy and received the affirmative
vote of a majority of the Disinterested Directors then on
the Board.
(ii) "Voting Shares" shall mean the outstanding shares of
all classes or series of the Corporation's stock entitled to
vote generally in the election of Directors.
10. (a) Vote Required for Certain Business Combinations.
(i) Higher Vote for Certain Business Combinations. In
addition to any affirmative vote required by law or this
Charter, and except as otherwise expressly provided in
Section (b ) of this Article:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any
Interested Stockholder (as hereinafter defined) or (b ) any
other Corporation which immediately before such merger
or consolidation is an Affiliate or Associate ( as
hereinafter defined) of an Interested Stockholder; or
Page 68
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(B) any statutory share exchange in which any Interested
Stockholder or any Affiliate or Associate of an Interested
Stockholder acquires the issued and outstanding shares of
any class of Capital Stock of the Corporation or a
Subsidiary; or
(C) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series of
transactions during any 12 month period) to or with any
Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder of any assets of the Corporation or
any Subsidiary having an aggregate Fair Market Value (as
hereinafter defined) in excess of 5% of the Corporation's
consolidated assets as of the date of the most recently
available financial statements; or any guaranty by the
Corporation or any Subsidiary (in one transaction or a
series of transactions during any 12 month period) of
indebtedness of any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder in
excess of 5% of the Corporation's consolidated assets as
of the date of the most recently available financial
statements; or any transaction or series of transactions
involving in excess of 5% of the Corporation's
consolidated assets as of the date of the most recently
available financial statements to which the Corporation or
any Subsidiary and any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder is a
party; or
(D) the sale or other disposition by the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate
or Associate of any Interested Stockholder (in one
transaction or a series of transactions during any 12 month
period) of any securities of the Corporation or any
Subsidiary having an aggregate Fair Market Value in
excess of 5% of the aggregate Fair Market Value of all
outstanding Voting Shares of the Corporation as of the
date on which the Interested Stockholder became an
Interested Stockholder (the " Determination Date" )
except pursuant to a share dividend or the exercise of
rights or warrants distributed or offered on a basis
affording substantially proportionate treatment to all
holders of the same class or series; or
(E) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by
or on behalf of an Interested Stockholder or any Affiliate
or Associate of any Interested Stockholder: or
Page 69
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(F) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation,
or any merger or consolidation of the Corporation with
any of its Subsidiaries or any other transaction ( whether
or not with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly
(in one transaction or a series of transactions during any
12 month period), of increasing by more than 5% the
percentage of any class of securities of the Corporation or
any Subsidiary directly or indirectly owned by any
Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder ;
shall require the affirmative vote of the holders of at least
70% of the outstanding Voting Shares. Such affirmative
vote shall be required notwithstanding the fact that no
vote may be required, or that a lesser percentage may be
specified, by law or in any agreement with any national
securities exchange or otherwise.
(ii) Definition of " Business combination The term
Business Combination as used in this Article shall mean
any transaction which is referred to in any one or more of
clauses (A) through (F) of paragraph (i) of this Section
(a).
(b ) When Higher Vote is not Required for Certain
Business Combination. The provisions of Section (a) of
this Article shall not be applicable to any particular
Business Combination, and such Business Combination
shall require only such approval as is required by law and
any other provision of these Articles of Incorporation, if
consideration will be paid to the holders of each class or
series of Voting Shares and all of the conditions specified
in either of the following paragraphs (i) or (ii) are met.
(i) Approval by Disinterested Directors. The business
Combination shall have been approved by a majority of
those persons who are Disinterested Directors (as
hereinafter defined ) .
(ii) Price and Procedure Requirements.
(A) The aggregate amount of the cash and the Fair Market
Value as of the Valuation Date of consideration other than
cash to be received per share by holders of each class or
series of voting Shares in such Business Combination
Page 70
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shall be at least equal to the highest of the following
(taking into account all stock dividends and stock splits ):
(I) (If applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Stockholder for any
shares of such class or series acquired by it ( 1 ) within the
two year period (the " Preannouncement Period" ) ending
at 11:59 p. m., Eastern time , on the date of the first public
announcement of the proposal of the Business
Combination (the '' Announcement Date" ) or ( 2 ) in the
transaction in which it became an Interested Stockholder,
whichever is higher;
(II) the Fair Market Value per share of such class or series
on the Determination Date or on the day after the
Announcement Date, whichever is higher;
(III) (if applicable) the price per share equal to the Fair
Market Value per share of such class or series determined
pursuant to paragraph (ii) (A) (II) above, multiplied by the
ratio of ( 1 ) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Stockholder for any
shares of such class or series acquired by it within the
Preannouncement Period, to ( 2 ) the Fair Market value
per share of such class or series on the first day during the
Preannouncement Period upon which the Interested
Stockholder acquired any shares of such class or series;
and
(IV) (if applicable), the highest preferential amount, if
any, per share to which the holders of such class or series
are entitled in the event of any voluntary or involuntary
dissolution of the Corporation .
(B) The consideration to be received by the holder of
outstanding shares in such Business Combination shall be
in cash or in the same form as the Interested Stockholder
has previously paid for shares of the same class or series.
If the Interested Stockholder has paid for shares with
varying forms of consideration, the form of consideration
shall be either cash or the form used to acquire the largest
number of shares of such class or series previously
acquired by the Interested stockholder .
(C) During such portion of the three y ear period
preceding the Announcement Date that such Interested
Page 71
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Stockholder has been an Interested Stockholder, except as
approved by a majority of the Disinterested Directors: (a)
there shall have been no failure to declare and pay at the
regular date therefor any full periodic dividends (whether
or not cumulative) on any outstanding shares of the
Corporation; (b) there shall have been ( 1) no reduction in
the annual rate of dividends paid on any class or series of
Voting Shares, (except as necessary to reflect any
subdivision of the class or series ) and ( 2 ) an increase in
such annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction
which has the effect of reducing the number of
outstanding shares of the class or series; and ( c ) such
Interested Stockholder shall have not become the
beneficial owner of any additional Voting Shares except
as part of the transaction which results in such Interested
Stockholder becoming an Interested Stockholder .
(D ) During such portion of the three year period
preceding the Announcement Date that such Interested
Stockholder has been an Interested Stockholder, except as
approved by a majority of the Disinterested Directors,
such Interested Stockholder shall not have received the
benefit, directly or indirectly ( except proportionately as a
stockholder), of any loans, advances, guarantees, pledges
or other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in
anticipation of or in connection with such Business
Combination or otherwise.
(E) Except as otherwise approved by a majority of the
Disinterested Directors, a proxy or information statement
describing the proposed Business Combination and
complying with the requirements of the Securities
Exchange Act of 1934. and the rules and regulations
thereunder (or any subsequent provisions replacing such
Act, rules or regulations) shall be mailed to stockholders
of the Corporation at least 20 days prior to the
consummation of such Business Combination (whether or
not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).
(c) Certain Definitions.
For the purposes of this Article:
(i) A "person" shall mean any individual, firm.
corporation, partnership, joint venture, or other entity .
(ii) "Interested Stockholder" shall mean any person who
or which is the beneficial owner, directly or indirectly, of
20% or more of the outstanding voting Shares of the
Page 72
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Corporation; provided, however, the term. Interested
Stockholder shall not include the Corporation, any
Subsidiary, or any savings, employee stock ownership or
other employee benefit plan of the Corporation or any
Subsidiary, or any fiduciary with respect to any such plan
when acting in such capacity.
For the purposes of determining whether a person is an
Interested Stockholder, the number of shares of voting
Shares deemed to be outstanding shall include shares
deemed owned through application of paragraph (iii) of
this Section (c) but shall not include any other Voting
Shares that may be issuable pursuant to any contract,
arrangement or understanding, or upon exercise of
conversion rights, exchange rights, warrants or options, or
otherwise .
(iii) A person shall be a "beneficial owner" of any Voting
Shares as to which such person and any of such person's
Affiliates or Associates, individually or in the aggregate,
have or share directly, or indirectly through any contract,
arrangement, understanding, relationship, or otherwise:
(A) voting power, which includes the power to vote, or to
direct the voting of the Voting Shares;
(B) investment power, which includes the power to
dispose or to direct the disposition of the Voting Shares;
(C) economic benefit, which includes the right to receive
or control the disposition of income or liquidation
proceeds from the Voting Shares; or
(D) the right to acquire voting power, investment power
or economic benefit (whether such right is exercisable
immediately or only after the passage of time ) pursuant
to any contract, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or
options, or otherwise;
provided, that in no case shall a Director of the
Corporation be deemed to be the beneficial owner of
Voting Shares beneficially owned by another Director of
the Corporation solely by reason of actions undertaken by
such persons in their capacity as Directors of the
Corporation.
(iv) " Affiliate" means a person that directly, or indirectly
through one or more intermediaries, controls or is
Page 73
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controlled by, or is under common control with the person
specified .
(v) "Associate" means as to any specified person:
(A) any entity (other than the Corporation and its
Subsidiaries ) of which such person is an Officer, Director
or partner or is, directly or in directly, the beneficial
owner of 10% or more of the Voting Shares;
(B) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity; or
(C) any relative or spouse of such person, or any relative
of such spouse, who has the same home as such person or
who is an Officer or Director o the Corporation or any of
its Affiliates.
(vi) As to any Corporation, "Subsidiary" means any other
Corporation of which it owns directly or indirectly a
majority of the Voting Shares.
(vii) "Disinterested Director" means any member of the
Board of Directors who:
(A) was elected to the Board of Directors of the
Corporation at the 1986 Annual meeting of Shareholders:
or
(B) was recommended for election by c majority of the
Disinterested Directors then on the Board, or was elected
by the Board to fill a vacancy and received the affirmative
vote of a majority of the Disinterested Directors then on
the Board.
(viii) "Fair Market Value" means:
(A) in the case of stock the highest closing sale price
during the 30 day period ending at 11: 59 p. m., Eastern
time, on the date in question of a share of such stock on
the Composite Tape for New York Stock
Exchange Listed Stocks, or, if such stock is not quoted on
the Composite Tape on the .New York Stock Exchange,
or, if such stock is not listed or. such Exchange, on the
principal United States securities exchange registered
under the Securities Exchange Act of 1934 on which such
stock is listed, or, if such stock is not listed on any such
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exchange, the highest closing bid quotation with respect
to a share of such stock during the 30 day period ending at
11:59 p.m., Eastern time, on the date in question on the
National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use,
or if no such quotations are available, the Fair Market
Value on the date in question of a share of such stock as
determined by a majority of the Disinterested Directors:
and
(B) in the case of property other t. an cash or stock, the
Fair Market Value of such property on the date in
question as determined by a majority of the Disinterested
Directors.
(ix) "Voting; Shares" shall mean the outstanding shares of
all classes or series of the Corporation's stock; entitled to
vote generally in the election of Directors.
(x) " Control" shall mean the possession, directly or
indirectly, through the ownership of voting securities, by
contract, arrangement, understanding, relationship or
otherwise, of the power to direct or cause the direction of
the management and policies of the person. The beneficial
ownership of 20% or more of the Corporation's Voting
Shares shall be deemed to constitute control.
(d) Certain Determinations.
Directors who are Disinterested Directors of the
Corporation shall have the power and duty to determine
for the purpose of this Article, on the basis of information
known to them after reasonable inquiry, (i) whether a
particular person is an Interested Stockholder, (ii) the
number of Voting Shares beneficially owned by such
person, (iii) whether any person is an Affiliate or
Associate of such person, and (iv) whether the assets that
are the subject of any Business Combination involving
such person have an aggregate Fair Market Value in
excess of 5% of the Corporation's consolidated assets as
of the date of the most recently available financial
statement, or the securities to be issued or transferred by
the Corporation or any Subsidiary in any Business
Combination involving such person have an aggregate
Fair Market value in excess of 5% of the aggregate Fair
Market Value of all outstanding Voting Shares of the
Corporation as of the Determination Date .
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(e) No Effect on Certain Obligations.
Nothing contained in this Article shall be construed to
relieve any Interested Stockholder or any Director of the
Corporation from any obligation imposed by law.
( f ) Amendment or Repeal .
The provisions of this Article shall not be amended or
repealed, nor shall any provision of these Articles of
Incorporation be adopted that is inconsistent with this
Article, unless such action shall have been approved by
the affirmative vote o f either:
(i) the holders of at least 70% of the outstanding Voting
Shares; or
(ii) a majority of those Directors who are Disinterested
Directors and the holders of the requisite number of
shares specified under applicable North Carolina law for
the amendment of the charter of a North Carolina
corporation .
11. This Restated and Amended Charter was adopted by
the shareholders of the Corporation on the 16th day of
June, 1986, in the manner prescribed by law for adopting
a charter amendment; and it integrates the original
Articles of Incorporation and all amendments thereto .
12. The number of shares of Common Stock (the only
class of stock outstanding) of the Corporation outstanding
at the time shareholders voted was 39,618,225; and the
number of shares of Common Stock entitled to vote was
37,106,438 .
13. The number of shares of Common Stock voted for
amendment of the Charter to authorize a class of Preferred
Stock consisting of 5 million shares was 24,999,783; the
number of shares of Common Stock voted against
adoption of such proposal was 5,900,610; and the number
of shares of Common Stock abstaining from voting on
such proposal was 1,806,088 .
14. The number of shares of Common Stock voted for
amendment of the Charter to provide for classification of
the Board of Directors into three classes and that directors
cannot be removed during their term of office without the
affirmative vote of holders of a; least 70% of outstanding
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shares of Common Stock was 24,641,126; the number of
shares of Common Stock voted against such proposal was
6,265,258; and the number of shares of Common Stock
abstaining from voting on such proposal was 1,800,097.
15. The number of shares of Common Stock voted for
amendment of the Charter to provide for certain minimum
price procedures or, alternatively, require a higher voting
requirement for certain transactions, was 24,941,586; the
number of shares of Common Stock voted against such
proposal was 5,636,077; and the number of shares of
Common Stock abstaining from voting on such proposal
was 2,128,818.
16. The number of shares of Common Stock voted for
approval of a Restated and Amended Charter
incorporating those of the proposals described in
paragraphs 13, 14 and 15 which were approved by
shareholders was 26,624,636; the number of shares of
Common. Stock voted against such proposal was
4,978,302; and the number of shares of Common Stock
abstaining from voting on such proposal was 1,103,543.
17. Adoption of the proposals described in paragraphs 13,
14, 15 and 16 did not give rise to (i) dissenter's rights,
because the amendments to the Charter and adoption of
the Restated and Amended Charter do not change the
Corporation into a non profit corporation or cooperative
organization and no shares of the Corporation that are
outstanding are entitled to any preference as to dividends
or liquidation, or (ii) class voting rights, because the only
class of stock outstanding is Common Stock.
IN WITNESS WHEREOF, this statement is excuted by
the president and secretary of the corporation this 25th
day of June, 1986.
LOWE'S E' S COMPANIES, INC .
By /s/ Leonard G. Herring
President
By /s/ Richard D. Elledge
Secretary
STATE OF NORTH CAROLINA
COUNTY OF WILKES
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I, Geraldine Bumgarner, a notary public, hereby certify
that on this 25th day of June, 1986: personally appeared
before me Leonard G. Herring and Richard D. Elledge,
each of whom being by me first duly sworn, declared that
he signed the foregoing document in the capacity
indicated, that he was authorized so to sign, and that the
statements therein contained are true.
/s/ Geraldine Bumgarner
Notary Public
My Commission Expires: 9-21-88
ARTICLES OF AMENDMENT OF
LOWE'S COMPANIES, INC .
The undersigned corporation hereby executes these
Articles of Amendment for the purpose of amending its
charter:
1 The name of the corporation is Lowe's Companies, Inc.
2 The following amendment to the charter of the
corporation was adopted by its shareholders on the 5th
day of November, 1987, in the manner prescribed by law:
By adding the following sub paragraph:
9. (f) To the full extent that the North Carolina
Business Corporation Act, as it exists on the date that
this Amendment became effective, permits the
elimination of the liability of Directors, a Director of the
Company shall not be liable for monetary damages for
breach of his duty as a Director.
3 The number ofof the corporation
outstanding at the time of such adoption was 39,630,050;
and the number of shares entitled to vote thereon was
39,630,050
4 The designation and number of outstanding shares
of each class entitled to vote on such amendment as a
class were as follows:
Number of
Class shares
Common 39,630,050
5. The number of shares voted for such amendment was
30,174,450; and the number of shares voted against such
amendment was 2,775,537. Voting within each class
entitled to vote as a class was as follows:
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Number of Shares Voted
Class For Against
Common 30,174,450 2,775,537
6. The amendment herein effected does not give rise to
dissenter's rights to payment for the reason that .he only
effect of such amendment is to add an article to the
Articles of Incorporation limiting the liability of Directors
of the Corporation.
IN WITNESS WHEREOF, these articles are signed by
the president and secretary of the corporation this 6th day
of November 1987.
/s/ Leonard G. Herring, President
/s/ Richard D. Elledge, Secretary
STATE OF NORTH CAROLINA
COUNTY OF WILKES
I, Geraldine Bumgarner, a notary public, hereby certify
that on this 6th day of November, 1987, personally
appeared before me Leonard G. Herring and Richard D.
Elledge, each of whom being first duly sworn, declared
that he signed the foregoing document in the capacity
indicated, that he was authorized so to sign, and that the
statements therein contained are true.
/s/ Geraldine Bumgarner
Notary Public
My Commission Expires: 9-1-88
STATEMENT OF CLASSIFICATION OF SHARES
OF
LOWE'S COMPANIES, INC.
1. The name of the corporation is LOWE' S COMPANIES, INC.
2. On September 9, 1988, pursuant to Sections 55 41 and
55 42 of the North Carolina Business Corporation Act
and the authority conferred upon the Board of Directors
by the Restated and Amended Charter of Corporation, the
Board of Directors of the Corporation duly adopted the
following resolutions creating a series of 160,000 shares
of Preferred Stock designated as Participating Cumulative
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Preferred Stock, Series A:
RESOLVED, that it is hereby declared to be in the best
interests of the Corporation that a new series of Preferred
Stock be created to consist of 160,000 shares and to be
designated as Participating Cumulative Preferred Stock,
Series A, and to determine the preferences, limitations and
relative rights of the Participating Cumulative Preferred
Stock, Series A, by adopting a Statement of Classification
of Shares of Lowe's Companies, Inc. to read in the form
attached hereto as Appendix I.
RESOLVED, that the Statement of Classification of
Shares of the Corporation attached hereto as Appendix I is
hereby adopted and that the appropriate officers of the
Corporation are authorized and directed to prepare and to
file with the North Carolina Secretary of State a Statement
of Classification of Shares of Lowe's Companies, Inc. to
give effect thereto.
3. That Appendix I hereto constitutes the Statement of
Classification of Shares of Lowe's Companies, Inc.
referred to in the foregoing resolutions.
4. That such Statement of Classification of Shares of
Lowe's Companies, Inc. was adopted before the issuance
of the Participating Cumulative Preferred Stock, Series A,
by the Board of Directors of the Corporation on
September 9, 1988. Shareholder action was not required.
Dated: September 9, 1988
LOWE'S COMPANIES, INC.
By: /s/ Robert L. Strickland
Chairman of the Board
Attest: /s/ Richard D. Elledge
Secretary
[Corporate Seal]
Appendix I
The Corporation has designated 160,000 shares of the
authorized but unissued shares of the Corporation's
Preferred Stock, par value $5.00 per share, as
Participating Cumulative Preferred Stock, Series A
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(hereinafter referred to as "Series A Preferred Stock").
The terms of the Series A Preferred Stock, in the respect
in which the shares of such series may vary from shares of
any and all other series of Preferred Stock, are as follows:
(a) Dividends and Distributions.
(1) The holders of shares of Series A Preferred Stock in
preference to the holders of Common Stock and of any
other junior stock, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds
legally available therefor, dividends payable quarterly on
the last business day of each April, July, October and
January (each such date being referred to herein as a
Quarterly Dividend Payment Date), commencing on the
first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $120 or (b) subject
to the provision for adjustment hereinafter set forth, 1,000
times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non cash dividends or
other distributions other than a dividend payable in shares
of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock. In the event the
Corporation shall at any time after September 9, 1988 (the
Rights Declaration Date), (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to
which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding
immediately after such event and the denominator of
which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(2) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in
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paragraph (1) above immediately after it declares a
dividend or distribution on the Common Stock (other than
a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have
been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a
dividend of $120 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(3) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date
of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue
is a Quarterly Dividend Payment Date or is a dale after
the record date for the determination of holders of shares
of Series A Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin
to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of
Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable
on such shares shall be allocated pro rata on a
share by share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series A
Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall
be no more than 30 days prior to the date fixed for the
payment thereof.
(b) Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(1) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle
the holder thereof to 1,000 votes on all matters submitted
to a vote of the shareholders of the Corporation. In the
event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of
votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such
event shall be adjusted by multiplying such number by a
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fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such
event and the denominator of which is the number of
shares of Common Stock that were outstanding
immediately prior to such event.
(2) Except as otherwise provided herein, in the Restated
and Amended Charter, or under applicable law, the
holders of shares of Series A Preferred Stock and the
holders of shares of Common Stock shall vote together as
one voting group on all matters submitted to a vote of
stockholders of the Corporation.
(3) (i) If at any time dividends on any shares of Series A
Preferred Stock shall be in arrears in an amount equal to
six quarterly dividends thereon, the occurrence of such
contingency shall mark the beginning of a period (a
default period) that shall extend until such time when all
accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend
period on all shares of Series A Preferred Stock then
outstanding shall have been declared and paid or set apart
for payment. During each default period, all holders of the
outstanding shares of Series A Preferred Stock together
with any other series of Preferred Stock then entitled to
such a vote under the terms of the Restated and Amended
Charter, voting as a separate voting group, shall be
entitled to elect two members of the Board of Directors of
the Corporation.
(ii) During any default period, such voting right of the
holders of Series A Preferred Stock may be exercised
initially at a special meeting called pursuant to
subparagraph (iii) of this Subsection (b)(3) or at any
annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that neither such
voting right nor the right of the holders of any other series
of Preferred Stock, if any, to increase, in certain cases, the
authorized number of Directors shall be exercised unless
the holders of ten percent (10%) in number of shares of
Preferred Stock outstanding shall be present in person or
by proxy. The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders
of Preferred Stock of such voting right. At any meeting at
which the holders of Preferred Stock shall exercise such
voting right initially during an existing default period,
they shall have the right, voting as a separate voting
group, to elect Directors to fill such vacancies, if any, in
the Board of Directors as may then exist up to two (2)
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Directors, or if such right is exercised at an annual
meeting, to elect two (2) Directors. If the number which
may be so elected at any special meeting does not amount
to the required number, the holders of the Preferred Stock
shall have the right to make such increase in the number
of Directors as shall be necessary to permit the election by
them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect
Directors in any default period and during the continuance
of such period, the number of Directors shall not be
increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the
rights of any equity securities ranking senior to or pari
passu with the Series A Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their
right to elect Directors, the Board of Directors may order,
or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total
number of shares of Preferred Stock outstanding,
irrespective of series, may request, the calling of a special
meeting of the holders of Preferred Stock, which meeting
shall thereupon be called by the Chairman, President, a
Vice President or the Secretary of the Corporation. Notice
of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to
this paragraph (b)(3)(iii) shall be given to each holder of
record of Preferred Stock by mailing a copy of such notice
to him at his last address as the same appears on the books
of the Corporation. Such meeting shall be called for a
time not earlier than 10 days and not later than 60 days
after such order or request. In the event such meeting is
not called within 60 days after such order or request, such
meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not
less than ten percent (10%) of the total number of shares
of Preferred Stock outstanding. Notwithstanding the
provisions of this paragraph (b)(3)(iii), no such special
meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual
meeting of the stockholders.
(iv) In any default period, the holders of Common Stock,
and other classes of stock of the Corporation if applicable,
shall continue to be entitled to elect the whole number of
Directors until the holders of Preferred Stock shall have
exercises their right to elect two (2) Directors voting as a
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separate voting group, after the exercise of which right (x)
the Directors so elected by the holders of Preferred Stock
shall continue in office until their successors shall have
been elected by such holders or until the expiration of the
default period, and (y) any vacancy in the Board of
Directors may (except as provided in paragraph (b)(3)( i))
be filled by vote of a majority of he remaining Directors
theretofore elected by the voting group which elected the
Director whose office shall have become vacant.
References in this paragraph (b)(3)(iv) to Directors
elected by a particular voting group shall include
Directors elected by such Directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period,
(x) the right of the holders of Preferred Stock, as a
separate voting group, to elect Directors shall cease, (y)
the term of any Directors elected by the holders of
Preferred Stock, as a separate voting group, shall
terminate, and (z) the number of Directors shall be such
number as may be provided for in, or pursuant to, the
Restated and Amended Charter or bylaws irrespective of
any increase made pursuant to the provisions of paragraph
5(b)(3)(ii) (such number being subject, however, to
change thereafter in any manner provided by law or in the
Restated and Amended Charter or bylaws). Any vacancies
in the Board of Directors affected by the provisions of
clauses (y) and (z) in the preceding sentence may be filled
by a majority of the remaining Directors, even though less
than a quorum.
(4) Except as set forth herein or as otherwise provided in
the Restated and Amended Charter, holders of Series A
Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
(c) Certain Restrictions.
(1) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as
provided in Subsection (a) are in arrears, thereafter and
until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the
Corporation shall not:
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(i) declare or pay or set apart for payment any dividends
(other than dividends payable in shares of any class or
classes of stock of the Corporation ranking junior to the
Series A Preferred Stock) or make any other distributions
on, any class of stock of the Corporation ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock and shall not
redeem, purchase or otherwise acquire, directly or
indirectly, whether voluntarily, for a sinking fund, or
otherwise any shares of any class of stock of the
corporation ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A
Preferred Stock, provided that, notwithstanding .he
foregoing, the Corporation may at any time redeem,
purchase or otherwise acquire shares of stock of any such
junior class in exchange for, or out of the net cash
proceeds from the concurrent sale of, other shares of stock
of any such junior class;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except
dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable
or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, provided
that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) t~ the Series A Preferred
Stock;
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock,
except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall
Page 86
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determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(2) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation
unless the Corporation could, under paragraph (1) of
Subsection (c), purchase or otherwise acquire such shares
at such time and in such manner.
(d) Reacquired Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled
promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject
to the conditions and restrictions on issuance set forth
herein.
(e) Liquidation, Dissolution or Winding Up.
(1) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock
unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $5.00 per share, plus
an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date
of such payment (the "Series A Liquidation Preference").
Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall
be made to the holders of shares of Series A Preferred
Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share
(the "Common Adjustment") equal to the quotient
obtained by dividing (i) the Series A Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set
forth in subparagraph 3 below to reflect such events as
stock splits, stock dividends and recapitalizations with
respect to the Common Stock) (such number in clause (ii)
being hereinafter referred to as the "Adjustment
Number"). Following the payment of the full amount of
the Series A Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series
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A Preferred Stock and Common Stock, respectively,
holders of Series A Preferred Stock and holders of shares
of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1
with respect to such Series A Preferred Stock and
Common Stock, on a per share basis, respectively.
(2) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A
Liquidation Preference and the liquidation preferences of
all other series of Preferred Stock, if any, then such
remaining assets shall be distributed ratably to the holders
of all such shares in proportion to their respective
liquidation preferences. In the event, however, that there
are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining
assets shall be distributed ratably to the holders of
Common Stock.
(3) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller
number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a
fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such
event and the denominator of which is the number of
shares of Common Stock that were outstanding
immediately prior to such event.
(f) Consolidation, Merger, Share Exchange, etc. In case
the Corporation shall enter into any consolidation, merger,
share exchange, combination or other transaction in which
the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any
other property, then in any such case the shares of Series
A Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to
the provision for adjustment hereinafter set forth) equal to
1,000 times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the
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case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the
Corporation shall at any time after the Rights Declaration
Date (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding
immediately after such event and the denominator of
which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(g) Redemption. The outstanding shares of Series A
Preferred Stock may be redeemed at the option of the
Board of Directors as a whole, but not in part, at any time,
or from time to time, at a cash price per share equal to (i)
100% of the product of the Adjustment Number times the
Average market Value (as such term is hereinafter
defined) of the Common Stock, plus (ii) all dividends
which on the redemption date have accrued on the shares
to be redeemed and have not been paid or declared and a
sum sufficient for the payment thereof set apart, without
interest. The "Average Market Value" is the average of
the closing sale prices of a share of the Common Stock
during the 30 day period immediately preceding the date
before the redemption date on the Composite Tape for
New York Stock Exchange Listed Stocks, or, if such
stock is not quoted on the Composite Tape, on the New
York Stock Exchange, or, if such stock is not listed on
such exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of
1934, as amended, on which such stock is listed, or, if
such stock is not listed on any such exchange, the average
of the closing bid quotations with respect to a share of
Common Stock during such 30 day period on the
National Association of Securities Dealers, Inc.
Automated Quotation System or any system then in use,
or if no such quotations are available, the fair market
value of a share of the Common Stock as determined by
the Board of Directors in good faith.
(h) Ranking. The Series A Preferred Stock shall rank on a
parity with any and all other series of Preferred Stock as
to the payment of dividends and the distribution of assets.
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(i) Amendment. The Restated and Amended Charter shall
not be further amended in any manner that would
adversely affect the preferences, rights or powers of the
Series A Preferred Stock without the affirmative vote of
the holders of more than two thirds of the outstanding
shares of the Series A Preferred Stock, if any, voting
separately as one voting group.
(j) Fractional Shares. Series A Preferred Stock may be
issued in fractions of one one thousandth of a share (and
integral multiples thereof) which shall entitle the holder,
in proportion to such holders' fractional shares, to exercise
voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
ARTICLES OF MERGER
OF
LOWE'S OF OHIO, INC.
INTO
LOWE'S COMPANIES, INC.
The undersigned corporations hereby execute these
Articles of Merger for the purpose of merging the
wholly owned subsidiary corporation into its parent
corporation:
I. The following Plan and Agreement of Merger was duly
approved by the Board of Directors of each of the
undersigned corporations in the manner prescribed by
law:
SEE ATTACHED PLAN AND AGREEMENT OF MERGER
II. At the time of the approval of the foregoing Plan and
Agreement of Merger by the Board of Directors of each of
the undersigned corporations the surviving corporation
was the owner of all the outstanding shares of the other
corporation; and the foregoing Plan and Agreement of
Merger does not provide for any changes in the charter of,
or the issuance of any shares by, the surviving
corporation.
III. The foregoing Plan and Agreement of Merger was
approved by the sole shareholder of Lowe's of Ohio, Inc.
Page 90
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on the 2nd day of December, 1988.
IV. The merger between the corporations shall be
effective as of the close of business for the corporations
on December 31, 1988.
IN WITNESS WHEREOF, these articles are signed by
the President and
Secretary of each corporation this 22nd day of December,
1988, at 11:59 P.M.
LOWE'S OF OHIO, INC.
By: /s/ LEONARD G. HERRING
President,
ATTEST:
/s/ RICHARD D. ELLEDGE
Secretary
(CORPORATE SEAL)
LOWE'S COMPANIES, INC.
By: /s/ LEONARD G. HERRING
President,
ATTEST:
/s/ RICHARD D. ELLEDGE
Secretary
(CORPORATE SEAL)
STATE OF NORTH CAROLINA
COUNTY OF WILKES
I, Gaither M. Keener, Jr., a notary public, hereby certify
that on this 22nd day of December, 1988, personally
appeared before me Leonard G. Herring, President and
Richard D. Elledge, Secretary of Lowe's of Ohio, Inc.;
each of whom being first duly sworn, declared that he
signed the foregoing document in the capacity indicated,
that he was authorized so to sign, and that the statements
therein contained are true.
/s/ Gaither M. Keener, Jr.
Notary Public
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My Commission Expires: 4-30-91
STATE OF NORTH CAROLINA
COUNTY OF WILKES
I, Gaither M. Keener, Jr., a notary public, hereby certify
that on this 22nd day of December 1988, personally
appeared before me Leonard G. Herring, President and
Richard D. Elledge, Secretary of Lowe's Companies, Inc.;
each of whom being first duly sworn, declared that he
signed the foregoing document in the capacity indicated,
that he was authorized so to sign, and that the statements
therein contained are true.
/s/ Gaither M. Keener, Jr.
Notary Public
My Commission Expires: 4-30-91
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this
Agreement) is made as of December 22nd, 1988 by
Lowe's Companies, Inc., a North Carolina corporation
(the "Surviving Corporation") and Lowe's of Ohio, Inc.,
an Ohio corporation (the "Merging Corporation").
RECITALS:
A. The Merging Corporation is a wholly owned
subsidiary of the Surviving Corporation, with the
Surviving Corporation owning all 500 issued and
outstanding shares of common stock of the Merging
Corporation.
B. The Surviving Corporation and the Merging
Corporation have agreed to reorganize by merging the
Merging Corporation into the Surviving Corporation as
provided in this Agreement, with no change to occur in
the Articles of Merger of incorporation of the Surviving
Corporation after the effective date of the merger.
STATEMENT OF AGREEMENT:
In consideration of the mutual covenants contained in this
Agreement, each of the Surviving Corporation and the
Merging Corporation agrees as follows:
ARTICLE 1
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Merger into the Surviving Corporate
Section 1.1. Merger. As of the Effective Date (as
hereinafter defined), the Merging Corporation, as a
constituent corporation within the meaning of Section
1701.01 of the Ohio Revised Code, shall be merged,
pursuant to Sections 1701.79 and 1701.80 of the Ohio
Revised Code and pursuant to Sections 55 108.1 and
55 111 of the north Carolina General Statutes, into the
Surviving Corporation as the surviving corporation within
the meaning of Section 1701.01 of the Ohio Revised Code
and Section 55 110 of the North Carolina General
Statutes. The existing Articles of Merger of incorporation
of the Surviving Corporation shall be the Articles of
Merger of incorporation of the Surviving Corporation
until amended in accordance with law.
Section 1.2. Effective Date. The Effective Date shall be
11:59 p.m., Eastern Standard Time, on December 31,
1988
Section 1.3. Articles and Agreement of Merger. This
Agreement shall serve as the "Articles of Merger" within
the meaning of Section i5 109 of the North Carolina
General Statutes, as well as the ".agreement of Merger"
within the meaning of Sections 1701.79 and 1701.80 of
the Ohio Revised Code.
ARTICLE 2
Extinguishment of Constituent Shares
Section 2.1. Extinguishment of Constituent Shares. At the
Effective Date and as a result of the merger of the
Merging Corporation into the Surviving Corporation, the
shares of each outstanding class of capital stock of the
Merging Corporation shall, automatically and without
further act of either the Merging Corporation or any
holder of any such share, be extinguished.
ARTICLE 3
Process; Qualification
Section 3.1. Service of Process. The Surviving
Corporation hereby agrees that it may be served with
process in the State of Ohio in an,; proceeding for
enforcement of any obligation of the Merging Corporation
as well as for enforcement of any obligation resulting
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from the merger, and hereby irrevocably appoints the
Secretary of State of the State of Ohio as its agent to
accept service of process in any such proceeding. The
address to which a copy of such process shall be mailed
by the Secretary of State of Ohio is Leonard G. Herring,
President, Lowe's Companies, Inc., Box 1111, North
Wilkesboro, North Carolina 28656 0001.
Section 3.2. Foreign Qualification. The Surviving
Corporation desires to transact business in the State of
Ohio as a foreign corporation. The Surviving Corporation
does hereby irrevocably consent that it may be served
with any process in the State of Ohio by service upon C.
T. Corporation Systems, 815 Superior Avenue, North
East, Cleveland, Ohio 44144 (the "named Agent") and
any successor Named Agent that may be appointed
pursuant to Chapter 1703, Ohio Revised Code; and the
Surviving Corporation hereby irrevocably consents to the
service of process upon the Secretary of State of the State
of Ohio as its agent to receive such process in the event
that the Named Agent cannot be found or in any other
event as provided in Chapter 1703, Ohio Revised Code.
ARTICLE 4
Amendment
Section 4.1. Amendment. From time to time and at any
time prior to the Effective Date, this Agreement may be
amended by an agreement in writing authorized by the
respective Boards of Directors of the Surviving
Corporation and the Merging Corporation and executed in
the same manner as this Agreement.
ARTICLE 5
Miscellaneous
Section 5.1. Headings. The captions or headings in this
Agreement are for convenience only and in no way
define, limit or describe the scope or intent of any of the
provisions of this Agreement.
Section 5.2. Counterparts. This Agreement may be
executed in any number of counterparts, each of which
shall be an original and all of which shall constitute one
and the same document.
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Section 5.3. Severability. If any provision of this
Agreement is or becomes invalid, illegal or unenforceable
in any jurisdiction for any reason, such invalidity,
illegality or unenforceability shall not affect the remainder
of this Agreement, and the remainder of this Agreement
shall be construed and enforced as if such invalid, illegal
or unenforceable portion were not contained herein.
Section 5.4. Governing Law. This Agreement shall be
governed by and construed under the laws of the State of
North Carolina.
The Surviving Corporation: The Merging CORPORATION
Lowe's Companies, Inc. Lowe's of Ohio, Inc.
By /s/ Leonard G. Herring By /s/ Leonard G. Herring
Title: President Title: President
Attest: Attest:
/s/ Richard D. Elledge /s/ Richard D. Elledge
Secretary (Corporate Seal) Secretary (Corporate Seal)
STATE OF NORTH CAROLINA
COUNTY OF WILKES
I, Gaither M. Keener, Jr., a notary public, hereby certify
that on this 22nd day of December 1988, personally
appeared before me Leonard G. Herring, President and
Richard D. Elledge, Secretary of Lowe's Companies, Inc.;
each of whom being first duly sworn, declared that he
signed the foregoing document in the capacity indicated,
that he was authorized so to sign, and that the statements
therein contained are true.
/s/ Gaither M. Keener, Jr.
Notary Public
My Commission Expires: 4-30-91
STATE OF NORTH CAROLINA
COUNTY OF WILKES
I, Gaither M. Keener, Jr., a notary public, hereby certify
Page 95
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that on this 22nd day of December, 1988, personally
appeared before me Leonard G. Herring, President and
Richard D. Elledge, Secretary of Lowe's of Ohio, Inc.;
each of whom being first duly sworn, declared that he
signed the foregoing document in the capacity indicated,
that he was authorized so to sign, and that the statements
therein contained are true.
/s/ Gaither M. Keener, Jr.
Notary Public
My Commission Expires: 4-30-91
</TABLE>
&F
<TABLE>
<S> <C> <C> <C> <C>
PART IV
EHHIBIT 3.2
BYLAWS OF
LOWE'S COMPANIES, INC.
INDEX
ARTICLE I OFFICES 1
ARTICLE II SHAREHOLDERS 1-3
SECTION 1 ANNUAL MEETING 1
SECTION 2 SPECIAL MEETING 1
SECTION 3 PLACE OF MEETING 1
SECTION 4 NOTICE OF MEETING 1-2
SECTION 5 CLOSING OF TRANSFER BOOKS OR
FIXING OF RECORD DATE 2
SECTION 6 VOTING LISTS 2-3
SECTION 7 QUORUM 3
SECTION 8 PROXIES 3
SECTION 9 VOTING OF SHARES 3
ARTICLE III BOARD OF DIRECTORS 3-7
SECTION 1 GENERAL POWERS 3
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SECTION 2 NUMBER, TENURE AND QUALIFICATIONS 3-4
SECTION 3 MANAGING DIRECTOR 4
SECTION 4 FOUNDING DIRECTOR 4
SECTION 5 DIRECTOR EMERITUS 4
SECTION 6 REGULAR MEETINGS 4
SECTION 7 SPECIAL MEETINGS 4-5
SECTION 8 NOTICE 5
SECTION 9 QUORUM 5
SECTION 10 MANNER OF ACTING 5
SECTION 11 VACANCIES 5
SECTION 12 COMPENSATION 5
SECTION 13 PRESUMPTION OF ASSENT 5
SECTION 14 ACTION WITHOUT MEETING 5-6
SECTION 15 COMMITTEES 6
SECTION 16 EXECUTIVE COMMITTEE 6
SECTION 17 AUDIT COMMITTEE 6
SECTION 18 COMPENSATION/EMPLOYEE STOCK 6-7
OPTION COMMITTEE
SECTION 19 COMMITTEE OF OUTSIDE DIRECTORS 7
SECTION 20 GOVERNMENT/LEGAL AFFAIRS 7
COMMITTEE
SECTION 21 SALARY ADMINISTRATION 7
ARTICLE IV INDEMNIFICATION 7-10
SECTION 1 DEFINITIONS 7-8
SECTION 2 INDEMNIFICATION 8
SECTION 3 NO PRESUMPTION 8
SECTION 4 EXPENSES 8
SECTION 5 PROCEDURE TO INDEMNIFY 9
SECTION 6 PAYMENT OF EXPENSES IN ADVANCE 9-10
SECTION 7 INSURANCE 10
SECTION 8 FORMER DIRECTORS, OFFICERS,
EMPLOYEES OR AGENTS INDEMNIFIED 10
ARTICLE V OFFICERS 10-12
SECTION 1 TITLES 10-11
SECTION 2 ELECTION AND TERM OF OFFICE 11
SECTION 3 REMOVAL 11
SECTION 4 VACANCIES 11
SECTION 5 CHAIRMAN OF THE BOARD OF DIRECTORS 11
SECTION 6 PRESIDENT 11
SECTION 7 EXECUTIVE VICE PRESIDENTS, SENIOR
VICE PRESIDENTS AND VICE PRESIDENTS 11-12
SECTION 8 SECRETARY 12
SECTION 9 TREASURER 12
SECTION 10 CONTROLLER 12
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ARTICLE VI DEPARTMENTAL DESIGNATIONS 12
SECTION 1 DEPARTMENTAL DESIGNATIONS 12
ARTICLE VII CONTRACTS, LOANS, CHECKS, AND 12-13
DEPOSITS
SECTION 1 CONTRACTS 12-13
SECTION 2 LOANS 13
SECTION 3 CHECKS, DRAFTS, ETC. 13
SECTION 4 DEPOSITS 13
ARTICLE VIIICERTIFICATES FOR SHARES AND THEIR 13-14
TRANSFERS
SECTION 1 CERTIFICATES FOR SHARES 13-14
SECTION 2 TRANSFER OF SHARES 14
SECTION 3 LOST CERTIFICATES 14
ARTICLE IX FISCAL YEAR 14
ARTICLE X DIVIDENDS 15
ARTICLE XI SEAL 15
ARTICLE XII WAIVER OF NOTICE 15
ARTICLE XIIIAMENDMENTS 15
BYLAWS
OF
LOWE'S COMPANIES, INC.
ARTICLE I. OFFICES
The principal and registered office of the corporation in the State of North
Carolina shall be located in the City of North Wilkesboro, County of Wilkes. The
corporation may have such other offices either within or without the State of North
Carolina, as the Board of Directors may designate or the business of the corporation may
require from time to time.
Page 98
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ARTICLE II. SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders
shall be held on the last Friday in the month of May in each year, at an hour to be
designated by the Chairman of the Board, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. The meeting shall be
held on the following day at the same time in the event the last Friday in May shall be a
legal holiday. If the annual meeting shall not be held on the day designated by this
section, a substitute annual meeting shall be called in accordance with the provisions of
Section 2 of this Article II. A meeting so called shall be designated and treated for all
purposes as the annual meeting. The Chairman of the Board of Directors shall chair all
shareholder meetings.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called by the
Chairman of the Board or the President or by a majority of the Board of Directors.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of North Carolina, as the place of meeting for any
annual meeting or for any special meeting called by the Board of Directors. In the event
the directors shall fail to designate the place of meeting for either an annual or special
meeting of the shareholders, the meeting shall be held at the offices of the corporation in
North Wilkesboro, North Carolina.
SECTION 4. NOTICE OF MEETING. Written or printed notice stating the
place, day, and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given not less than ten nor more than
50 days before the day of the meeting, by mail, by or at the direction of the Secretary, or
the officer or persons calling the meeting, to each shareholder of record entitled to vote at
such meeting. Such notice, when mailed, shall be deemed to be delivered when deposited
in the United States mail, addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid. When a meeting is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the
case of an original meeting. When a meeting is adjourned for less than 30 days in any
one adjournment, it shall not be necessary to give any notice of the adjourned meeting
other than by announcement at the meeting at which the adjournment is taken.
SECTION 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD
DATE. For the purpose of determining shareholders entitled to
notice of or to vote at the meeting or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the corporation may provide that the
stock transfer books shall be closed for a stated period but not to exceed, in any case, 50
days. If the stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall
be closed for at least ten days immediately preceding such meeting. In lieu of closing the
Page 99
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stock transfer books, the Board of Directors may fix in advance a date as the record date
for any such determination of shareholders, such date in any case to be not more than 60
days and, in case of a meeting of shareholders, not less than ten days prior to the date on
which the particular action, requiring such determination of shareholders, is to be taken.
If the stock transfer books are not closed and no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders, or of
shareholders entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors declaring
such dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders entitled to vote at
any meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof regardless of its length, except
where the determination has been made through the closing of the stock transfer books
and the stated period of closing has expired.
SECTION 6. VOTING LISTS. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten days before each
meeting of shareholders, a complete list of the shareholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the address of
and the number of shares held by each, which list, for a period of ten days prior to such
meeting, shall be kept on file at the principal office of the corporation and shall be subject
to inspection by any shareholder at any time during usual business hours. Such list shall
also be produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the meeting. The original
stock transfer books shall be prima facie evidence as to who are the shareholders entitled
to examine such list or transfer books or to vote any meeting of shareholders.
SECTION 7. QUORUM. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting
of shareholders. If less than a majority of the outstanding shares are represented at a
meeting, a majority of the shares so represented may adjourn the meeting from time to
time without further notice. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been transacted
at the meeting as originally notified. The shareholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
SECTION 8. PROXIES. At all meetings of shareholders, a shareholder may vote
by proxy executed in writing by the shareholder or by his duly authorized attorney in fact.
Such proxy shall be filed with the secretary of the corporation before or at the time of the
meeting. No proxy shall be valid after 11 months from the date of its execution, unless
otherwise provided in the proxy. If a proxy for the same shares confers authority upon
two or more persons and does not otherwise provide a majority of them present at the
meeting or if only one is present at the meeting then that one may exercise all the powers
conferred by the proxy; but if the proxy holders present at the meeting are divided as to
the right and manner of voting in any particular case, and there is no majority, the voting
of such shares shall be prorated.
Page 100
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SECTION 9. VOTING OF SHARES. Except as otherwise provided by law, each
outstanding share of capital stock of the corporation entitled to vote shall be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders. The vote of a
majority of the shares voted on any matter at a meeting of shareholders at which a
quorum is present shall be the act of the shareholders on that matter, unless the vote of a
greater number is required by law or by the charter or Bylaws of the corporation. Voting
on all matters unless otherwise required by law shall be by voice, vote or by a show of
hands, unless the holders of one-tenth of the shares represented at the meeting shall, prior
to the voting on any matter, demand a ballot vote on that particular matter.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed by the Board of Directors except as otherwise provided by law, by the
charter of the corporation or by the Bylaws of the corporation.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of
directors of the corporation shall not be less than six nor more than 12, one of whom shall
be designated and elected as the Chairman of the Board of Directors, by the Board, and
shall as said Chairman preside at all meetings of the Board of Directors. The Board may
elect a Vice Chairman whose only duties shall be to preside at Board meetings in the
absence of the Chairman. The directors shall be divided into classes and serve terms as
provided in the charter. Directors need not be residents of the State of North Carolina or
shareholders of the corporation. Subject to the charter, the Board of Directors shall each
year prior to the annual meeting determine by appropriate resolution the number of
directors which shall constitute the Board of Directors for the ensuing year. An
appropriate notice of this resolution shall be given to the shareholders prior to the annual
meeting of shareholders.
SECTION 3. MANAGING DIRECTOR. The Board of Directors by majority
vote is authorized to designate any director who is also an employee of the corporation as
Managing Director. The number of Managing Directors at any time shall be determined
by the Board of Directors. Each Managing Director shall perform such duties and have
such responsibilities as are specifically assigned to him by the Board of Directors.
SECTION 4. FOUNDING DIRECTOR. A Founding Director is a director of the
corporation at November 7, 1980, who was elected as a director of the corporation when
it became a public corporation in 1961 and who has served continuously as a Board
Member since that time.
SECTION 5. DIRECTOR EMERITUS. A Director Emeritus is a director with
prior service as a Founding Director. The Board of Directors by majority vote is
authorized to designate such Founding Director as Director Emeritus as they deem wise.
The number of Directors Emeriti at any time shall be determined by the Board of
Directors. The Director Emeritus lifetime benefit will be equal to 50% of the Founding
Director fee in effect at the time the Founding Director (whether an Employee Director or
Page 101
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a Non-Employee Director) becomes a Director Emeritus. Determination of who is and
who is not a Founding Director shall be based on the provisions of Article III, Section 4
of the Bylaws of Lowe's Companies, Inc.
SECTION 6. REGULAR MEETINGS. The regular quarterly meetings of the
Board of Directors shall be held at a time and place as determined by the Chairman of the
Board of Directors. In addition to the provisions hereinbefore provided, any one or more
of the directors or members of a committee designated by the directors may participate in
a meeting of the Board or committee by means of a conference telephone or similar
communications device which allows all persons participating in the meeting to hear each
other and such participation in a meeting will be deemed presence in person.
SECTION 7. SPECIAL MEETINGS. Special Meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board of Directors or
a majority of the directors. The person or persons authorized to call special meetings of
the Board of
Directors may fix any place, either within or without the State of North Carolina, as the
place for holding any special meeting of the Board of Directors called by them.
SECTION 8. NOTICE. Notice of any special meeting shall be given by either
mail or telephone. Notice of any special meeting administered by mail shall be given at
least five days previous thereto. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail properly addressed, with postage thereon
prepaid. If notice is given by telephone, it shall be done so at least two days prior to the
special meeting and shall be deemed given at the time of the telephone call itself. Any
director may waive notice of any meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a meeting
for the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be transacted at nor
the purpose of any regular or special meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting.
SECTION 9. QUORUM. A majority of the number of directors shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors, but if
less than such majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
SECTION 10. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board of
Directors unless otherwise required by the charter.
SECTION 11. VACANCIES. Any vacancy occurring in the Board of Directors
shall be filled as provided in the charter.
SECTION 12. COMPENSATION. By appropriate resolution, the directors may
be paid such expenses as are incurred in connection with their duties as directors. The
Board of Directors may also by appropriate action pay to the directors, or such members
thereof as they designate, other compensation for their services on said Board.
SECTION 13. PRESUMPTION OF ASSENT. A director of the corporation who
is present at a meeting of the Board of Directors at which action on any corporate matter
is taken shall be presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written dissent to such
Page 102
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action with the person acting as secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the corporation
immediately after the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
SECTION 14. ACTION WITHOUT MEETING. Action taken by a majority of
the Board, or a Committee thereof, without a meeting is nevertheless Board, or
Committee, action if written consent to the action in question is signed by all of the
directors, or Committee members, and filed with the minutes of the proceedings of the
Board, or Committee, whether done before or after the action so taken.
SECTION 15. COMMITTEES. Committees, defined pursuant to Article III of
the corporate Bylaws, shall be reestablished annually at the first Board of Directors
Meeting held subsequent to the Annual Shareholders Meeting. Directors designated to
serve on committees shall serve as members of such committees until the first Board of
Directors Meeting following the next succeeding Annual Shareholders Meeting or until
their successors shall have been duly designated. The Board of Directors may designate a
committee chairman from the membership for each committee established. In the
absence of the designation of a committee chairman by the Board, a committee by
majority vote may elect a chairman from its own membership.
SECTION 16. EXECUTIVE COMMITTEE. The Board, by a majority vote,
may establish an Executive Committee composed of not less than three members or more
than six members. This Committee may exercise all of the authority of the Board of
Directors to the fullest extent permitted by law. The chairman shall be appointed by the
Board of Directors.
SECTION 17. AUDIT COMMITTEE. The Board, by a majority vote, may
establish an Audit Committee composed of not more than five and not less than three
members which members shall be selected from the Board of Directors. The Committee
shall from time to time report to the Board of Directors through its Chairman. The
Committee shall aid the Board in carrying out its responsibilities for accurate and
informative financial reporting and shall assist the Board in making recommendations
with respect to management's efforts to maintain and improve financial controls. The
Committee shall recommend to the stockholders at their annual meeting each year an
independent certified public accounting firm as independent auditors for the corporation.
The duties of the Committee shall also include such other functions and responsibilities
as are generally performed by Audit Committees.
SECTION 18. COMPENSATION/EMPLOYEE STOCK OPTION
COMMITTEE. The Board, by a majority vote, may establish a
committee to be designated as a Compensation/Employee Stock Option Committee. This
Committee shall be composed of not more than eight members and not fewer than five
members, all of whom must be non-employee directors. The Committee shall have the
following responsibilities:
(a) Review and set, at least annually, the compensation of directors
who are employees of the corporation.
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(b) Review at least annually the compensation of all other employees
whose annual salary and current bonus opportunity exceeds a dollar
amount oposition is above a certain level as established from
time to time by the Compensation Committee as the threshold for review.
Further, the Compensation Committee my review the salary and bonus
opportunity of any other employee that it chooses to review.
(c) Review and approve all annual bonus plans.
(d) Review and approve all forms of compensation which exceed one year
in duration, including stock options, deferred compensation, etc.
(e) Full authority to administer and interpret all provisions of any
compensation or employee stock option plan approved by the Board.
(f) Grant options pursuant to the terms within any employee stock
option plan.
(g) File reports of such reviews with the Board of Directors, including
such recommendations as are adopted by a majority vote of the
Committee.
SECTION 19. COMMITTEE OF OUTSIDE DIRECTORS. The Board, by a
majority vote, may establish a Committee of Outside Directors to consist of not fewer
than three non-employee directors. Except as otherwise required by law, the Committee
of Outside Directors shall have full authority to act for the Board in any matter designated
to this Committee be a majority of the Board of Directors.
SECTION 20. GOVERNMENT/LEGAL AFFAIRS COMMITTEE. The Board,
by a majority vote, may establish a Government/Legal Affairs Committee to consist of
not fewer than three directors. Except as otherwise required by law, the
Government/Legal Affairs Committee shall have full authority to act for the full Board in
any manner designated to this Committee by a majority of the Board of Directors.
SECTION 21. SALARY ADMINISTRATION. The compensation of employees
not covered by the Compensation Committee duties shall be the responsibility of the
President, except that compensation of the Chairman's staff shall be mutual responsibility
of the Chairman and the President.
ARTICLE IV. INDEMNIFICATION
SECTION 1. DEFINITIONS. In this Bylaw:
Applicant means the person seeking indemnification.
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Expenses include counsel fees.
Liability means the obligation to pay a judgment, settlement, penalty, fine
(including any excise tax assessed with respect to an employee benefit plan) or reasonable
expenses incurred with respect to a proceeding.
Party includes an individual who was, is, or is threatened to be made, a named
defendant or respondent in a proceeding.
Proceeding means any threatened, pending or completed action, suit, or
proceeding, whether civil, criminal, administrative or investigative and whether formal or
informal.
SECTION 2. INDEMNIFICATION. The corporation shall indemnify any person
who was or is a party to any proceeding, including a proceeding by or in the right of the
corporation to procure a judgment in its favor, by reason of the fact that he is or was, or
attributable to his activities as, a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, trustee, partner or officer
of another corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against any liability incurred by him in connection with such proceeding,
provided, however, indemnification shall not be available if, at the time the activities
which are the subject of such proceeding were taken, such person knew or believed that
such activities were clearly in conflict with the best interests of the corporation. The
burden of proving any such knowledge or belief shall be on the corporation. A person is
considered to be serving an employee benefit plan at the corporation's request if his duties
to the corporation also impose duties on, or otherwise involve services by, him to the plan
or to participants in or beneficiaries of the plan. A person's conduct with respect to an
employee benefit plan for a purpose he believed to be in the interests of the participants
and beneficiaries of the plan is conduct that satisfies the requirements of this section.
The indemnification rights provided for herein are intended to provide the
indemnified person with the most complete indemnification permitted by North Carolina
law.
SECTION 3. NO PRESUMPTION. The termination of any proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not of itself create a presumption that the applicant did not meet the
standard of conduct described in Section 2 of this Article.
SECTION 4. EXPENSES. To the extent that the applicant has been successful
on the merits or otherwise in defense of any proceeding referred to in Section 2 of this
Article, or in defense of any claim, issue or matter therein, he shall be indemnified against
expenses actually and reasonably incurred by him in connection therewith.
SECTION 5. PROCEDURE TO INDEMNIFY. Any indemnification under
Section 2 of this Article (unless ordered by a court) shall be made by the corporation only
as authorized in the specific case upon a determination that indemnification of the
applicant is proper in the circumstances because he has met the standard of conduct set
forth in Section 2.
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The determination shall be made:
(a) By the Board of Directors by a majority vote of a quorum con-
sisting of directors not at the time parties to the proceeding;
(b) If a quorum cannot be obtained under subsection (a) of this
section, by a majority vote of a committee duly designated by
the Board of Directors (in which designation directors who are
parties may participate), consisting solely of two or more
directors not at the time parties to the proceeding;
(c) By special legal counsel:
(i) Selected by the Board of Directors or its committee
in the manner prescribed in subsection (a) or (b) of
this section; or
(ii) If a quorum of the Board of Directors cannot be
obtained under subsection (a) of this section and a
committee cannot be designated under subsection (b)
of this section, selected by majority vote of the
full Board of Directors, in which selection directors
who are parties may participate; or
(d) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the pro-
ceeding may not be voted on the determination.
Authorization of indemnification and evaluation as to reasonableness of expenses shall be
made in the same manner as the determination that indemnification is permissible, except
that if the determination is made by special legal counsel, authorization of
indemnification and evaluation as to reasonableness of expenses, shall be made by those
entitled under subsection (c) of this section to select counsel.
SECTION 6. PAYMENT OF EXPENSES IN ADVANCE.
(a) The corporation may pay for or reimburse the expenses incurred
by any applicant who is a party to a proceeding in advance of
final disposition of the proceeding if the applicant furnishes
the corporation with a written undertaking, executed personally
or on his behalf, to repay the advance if it is ultimately
determined that he is not entitled to be indemnified by the
corporation as authorized in this Article or applicable pro-
visions of North Carolina law.
(b) The undertaking required by subsection (a) of this section
shall be an unlimited general obligation of the applicant but
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need not be secured and may be accepted without reference to
financial ability to make repayment.
(c) Determinations and authorizations of payment under this
section shall be made in the manner specified in Section 5.
SECTION 7. INSURANCE. The corporation may purchase and maintain
insurance to indemnify it against the whole or any portion of the liability assumed by it in
accordance with this Article or imposed by North Carolina law and may also procure
such insurance, in such amounts as the Board of Directors may determine, on behalf of
any person who is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against any liability asserted against or incurred by him in any such capacity
or arising from his status as such, whether or not the corporation would have power to
indemnify him against such liability under the provisions of this Article.
SECTION 8. FORMER DIRECTORS, OFFICERS, EMPLOYEES OR
AGENTS
INDEMNIFIED. Every reference herein to directors, officers,
employees or agents shall include former directors, officers, employees, agents and their
respective heirs, executors and administrators. The indemnification hereby provided and
provided hereafter pursuant to the power hereby conferred on the Board of Directors shall
not be exclusive of any other rights to which any person may be entitled, including any
right under policies of insurance that may be purchased and maintained by the
corporation or others, with respect to claims, issues or matters in relation to which the
corporation would not have the power to indemnify such person under the provisions of
this Article.
ARTICLE V. OFFICERS
SECTION 1. TITLES. The officers of the corporation may consist of the
Chairman of the Board of Directors, the President, and such Executive Vice Presidents,
Senior Vice Presidents and Vice Presidents as shall be elected and designated as officers
by the Board of Directors. There shall also be a Secretary, Treasurer, Controller and such
assistants thereto as may be elected by the Board of Directors. Any one person may hold
one or more offices in the corporation. No officer may act in more than one capacity
where action of two or more is required.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
corporation shall be elected annually by the Board of Directors at the first meeting of the
Board held after each annual meeting of the shareholders, or at any other meeting of said
Board. If the election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified or until his death or until
he shall resign or shall have been removed in the manner hereinafter provided.
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SECTION 3. REMOVAL. Any officer or agent of the corporation may be
removed by the Board of Directors, with or without cause, whenever in its judgment the
best interest of the corporation would be served thereby.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board of
Directors for the unexpired portion of the term.
SECTION 5. CHAIRMAN OF THE BOARD OF DIRECTORS. There shall be
a Chairman of the Board of Directors elected by the directors from their members. The
Chairman so elected by the directors shall be responsible to the Board of Directors and
shall seek Board approval and guidance on major corporation strategies, policies, and
objectives, including long-range planning, mergers, acquisitions, consolidations and
liquidations. He shall also issue annual reports and recommend dividend policies for
Board approval and shall perform such other functions as the Board may require from
time to time. The Chairman shall have power to sign any deeds, mortgages, bonds,
contracts, or any other instruments or documents which may be lawfully executed on
behalf of the corporation.
SECTION 6. PRESIDENT. The office of President shall be held by a director of
the corporation duly elected to said office by a majority vote of the Board of Directors,
and shall be the Chief Executive Officer of the corporation, and shall have direct
supervision and control of all of the business affairs of the corporation, not specifically
allocated to the Chairman of the Board in these Bylaws, subject to the general supervision
and control of the Board of Directors. The President shall have power to sign certificates
for shares of the corporation and any deeds, mortgages, bonds, contracts, or any other
instruments or documents which may be lawfully executed on behalf of the corporation.
The President shall vote as agent for this corporation the capital stock held or owned by
this corporation in any corporation.
SECTION 7. EXECUTIVE VICE PRESIDENTS, SENIOR VICE PRESIDENTS
AND VICE PRESIDENTS. The duties of Executive Vice
Presidents, Senior Vice Presidents and Vice Presidents shall be the performance of such
functions and duties as shall be assigned by the President or the Board of Directors. Each
of these officers may sign with the secretary or other proper officer of the corporation
thereunto authorized by the Board of Directors certificates for shares of the corporation,
any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors
has authorized to be executed, except in cases where the signing and execution thereof
shall be expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be otherwise signed and
executed.
SECTION 8. SECRETARY. The Secretary shall perform such duties and
functions as are assigned from time to time by the Board of Directors or the President.
SECTION 9. TREASURER. The Treasurer shall perform such duties and have
such responsibilities as are specifically assigned to him from time to time by the Board of
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Directors or the President.
SECTION 10. CONTROLLER. The Controller shall perform such duties and
have such responsibilities as are specifically assigned to him from time to time by the
Board of Directors or the President.
ARTICLE VI. DEPARTMENTAL DESIGNATIONS
SECTION 1. DEPARTMENTAL DESIGNATIONS. The President may
establish such departmental or functional designations or titles pertaining to supervisory
personnel as the President in his discretion deems wise. The designations or titles may be
that of Senior Vice President, Vice President or such other term or terms as the President
desires to utilize. The designation or title contemplated by this section is for the purpose
of administration within the department or function concerned and is not with the intent
of designating those individuals bearing such titles as general officers of the corporation.
These individuals bearing these titles shall be known as administrative managers of the
corporation.
ARTICLE VII. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority may be
general or confined to specific instances. In the absence of such authorization no officer,
agent, or employee, except the President and Chief Executive Officer, may do or perform
the following acts or deeds, to-wit:
(a) Enter into any contract pledging the funds or the full faith
and credit of the corporation except in the ordinary course
of business.
(b) Sell, lease, agree to sell, or encumber in any manner whatso-
ever any of the real property of the corporation.
(c) Enter into any agreement to purchase, lease or acquire in any
manner real property on behalf of the corporation.
(d) Encumber or pledge in any manner the real or personal property
of the corporation except in the ordinary course of business.
The President and Chief Executive Officer is authorized to enter into the above
transactions and may for any particular transaction designate a particular officer or agent
of the corporation to execute and deliver instruments relating to that particular
transaction.
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SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation
and no evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the Board of Directors. Such authority may be general or confined to
specific instances.
SECTION 3. CHECKS, DRAFTS, ETC.. All checks, drafts, or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, agent or agents of the
corporation and in such manner as shall from time to time be determined be resolution of
the Board of Directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited or invested from time to time to the credit of the corporation in such
banks, trust companies, or other depositories as the Board of Directors or the Chief
Executive Officer may select.
ARTICLE VIII. CERTIFICATES FOR SHARES AND THEIR TRANSFER.
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares
of the corporation shall be in such form as shall be determined by the Board of Directors.
Such certificates shall be signed by the President and by the Secretary, provided that
where a certificate is signed by a transfer agent, assistant transfer agent or co-transfer
agent of the corporation or with the duly designated transfer agent the signatures of such
officers of the corporation upon the certificate may be by facsimile engraved or printed.
Each certificate shall be sealed with the seal of the corporation or a facsimile thereof. All
certificates for shares shall be consecutively numbered or otherwise identified. The name
and address of the person to whom the shares represented thereby are issued, with the
number of shares and class and date of issue, shall be entered on the stock transfer books
of the corporation, as the transfer agent. All certificates surrendered to the corporation
for transfer shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and canceled, except
that in case of a lost, destroyed, or mutilated certificate a new one may be issued therefor
upon such terms and indemnity to the corporation as the Board of Directors may
prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder of records
thereof or by his legal representative, who shall furnish proper evidence of authority to
transfer, or by his attorney thereunto authorized by power of attorney duly executed and
filed with the secretary of the corporation, and on surrender for cancellation of the
certificate for such shares. The person in whose name shares stand on the books of the
corporation shall be deemed by the corporation to be the owner thereof for all purposes.
To the extent that any provision of the Rights Agreement between the Company and
Wachovia Bank and Trust Company, N.A., Rights Agent, dated as of September 9, 1988,
is deemed to constitute a restriction on the transfer of any securities of the Company,
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including, without limitation, the Rights, as defined therein, such restriction is hereby
authorized by the Bylaws of the Company.
SECTION 3. LOST CERTIFICATES. The Board of Directors may authorize the
issuance of a new certificate in place of a certificate claimed to have been lost or
destroyed, upon receipt of an affidavit of such fact from the person claiming the loss or
destruction. In authorizing such issuance of a new certificate, the Board may require the
claimant to give the corporation a bond in such sum as it may direct to indemnify the
corporation against loss from any claim with respect to the certificate claimed to have
been lost or destroyed; or the Board, by resolution reciting that the circumstances justify
such action, may authorize the issuance of the new certificate without requiring such a
bond. This function or duty on the part of the Board may be assigned by the Board to the
transfer agents of the common stock of the corporation.
ARTICLE IX. FISCAL YEAR
The fiscal year of the corporation shall be the 12 months ending January 31 of
each year.
ARTICLE X. DIVIDENDS
The Board of Directors may from time to time declare, and the corporation may
pay, dividends on its outstanding shares in the manner and upon the terms and conditions
provided by law and as provided in a resolution of the Board of Directors.
ARTICLE XI. SEAL
The Board of Directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation, the state of
incorporation, and the word "Seal".
ARTICLE XII. WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or director of the
corporation under the provisions of the charter or under the provisions of applicable law,
a waiver thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
ARTICLE XIII. AMENDMENTS
Unless otherwise prescribed by law or the charter, these Bylaws may be amended
or altered at any meeting of the Board of Directors by affirmative vote of a majority of
the directors. Unless otherwise prescribed by law or the charter, the shareholders entitled
to vote in respect of the election of directors, however, shall have the power to rescind,
amend, alter or repeat any Bylaws and to enact Bylaws which, if expressly so provided,
may not be amended, altered or repealed by the Board of Directors.
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</TABLE>
