LOWE'S COMPANIES, INC.
P. O. Box 1111
North Wilkesboro, NC 28656
Dear Lowe's Shareholder:
1996 is Lowe's 50th anniversary year. Consequently, we are more
delighted than ever to invite you, on behalf of the Board of Directors, to
attend Lowe's 1996 Annual Meeting of Shareholders to be held on Friday, May
31, 1996, at 10:00 a.m. at our corporate headquarters in North Wilkesboro,
North Carolina. At this year's meeting, shareholders will be asked to elect
four Class I Directors for a term of three years and to approve the
appointment of Deloitte & Touche LLP as our independent auditors for Fiscal
1996. The meeting will include a report on Lowe's business for the fiscal
year ended January 31, 1996, and there will be an opportunity for shareholders
to comment and ask questions of Lowe's management team.
Whether or not you plan to attend the meeting, it is important that you
be represented and that your shares be voted. Accordingly, after reviewing
the attached Proxy Statement, we ask you to complete, sign and date the Proxy
Card and return it as soon as possible in the postage-paid envelope provided.
Early return of your proxy will permit us to avoid the expense of soliciting
the votes of shareholders who are late sending in their Proxy Cards.
We look forward to greeting you if your plans permit attendance at Lowe's
1996 Annual Meeting.
Sincerely,
Robert L. Strickland Leonard G. Herring
Chairman of the Board President & CEO
April 17, 1996
LOWE'S COMPANIES, INC.
P. O. Box 1111
North Wilkesboro, NC 28656
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 31, 1996
The Annual Meeting of Shareholders of Lowe's Companies, Inc. (the
"Company") will be held at the Company's corporate headquarters, Highway 268
East, North Wilkesboro, North Carolina, on Friday, May 31, 1996, at 10:00 a.m.
to consider and act upon the following proposals:
1. To elect four Class I Directors for a term of three years;
2. To approve the appointment of Deloitte & Touche LLP as independent
3. certified public accountants for the fiscal year ending January 31,
4. 1997; and
5. To transact such other business as may be properly brought before the
6. Annual Meeting.
Shareholders of record at the close of business on April 8, 1996, are
entitled to notice of and to vote at the meeting. All properly executed
proxies delivered pursuant to this solicitation will be voted at the meeting
in accordance with instructions, if any. If two or more proxies are submitted
by the same shareholder, the proxy bearing the later date will revoke the
prior proxy. Any proxy delivered before the meeting may be revoked by
attending the meeting and voting in person.
You are cordially invited to attend and we look forward to seeing you at
the meeting.
Sincerely,
Robert L. Strickland Leonard G. Herring
Chairman of the Board President & CEO
North Wilkesboro, North Carolina
April 17, 1996
IF YOU DO NOT PLAN TO ATTEND THE MEETING, PLEASE DATE AND SIGN THE PROXY AND
MAIL AT ONCE IN THE ENCLOSED ENVELOPE.
LOWE'S COMPANIES, INC.
P. O. Box 1111
North Wilkesboro, North Carolina 28656
910/651-4000
Proxy Statement
for
Annual Meeting of Shareholders
May 31, 1996
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors of Lowe's Companies, Inc. (the
"Company") of proxies to be voted at the Annual Meeting of Shareholders to be
held at the Company's corporate headquarters, Highway 268 East, North
Wilkesboro, North Carolina, on Friday, May 31, 1996, at 10:00 a.m. It is
anticipated that this Proxy Statement and the enclosed form of proxy will be
sent to shareholders on April 17, 1996.
Only shareholders of record at the close of business on April 8, 1996,
are entitled to notice of and to vote at the meeting or any adjournment
thereof. On April 8, 1996, there were 161,232,836 shares of Common Stock of
the Company outstanding and entitled to vote. Shareholders are entitled to
one vote for each share held on all matters to come before the meeting.
The shares represented by a proxy will be voted as directed unless the
proxy is revoked. Any proxy may be revoked before it is exercised by filing
with the Secretary of the Company an instrument revoking the proxy or a proxy
bearing a later date. A proxy is revoked if the person who executed the proxy
is present at the meeting and elects to vote in person.
Abstentions and shares held of record by a broker or its nominee ("broker
shares") that are voted on any matter are included in determining the number of
votes present or represented at the meeting. Broker shares that are not voted
on any matter at the meeting are not included in determining whether a quorum
is present. The vote required on matters to be considered is disclosed under
the caption for such matters. Votes that are withheld and broker shares that
are not voted (commonly referred to as "broker non-votes") are not included in
determining the number of votes cast in the election of Directors or on other
matters.
ELECTION OF CLASS I DIRECTORS
There are currently 11 members of the Board of Directors, which is
divided into three classes, with one class to be elected each year for a
three-year term. The term of Class I Directors is expiring at the 1996 Annual
Meeting. The four nominees listed below have been nominated by the Board of
Directors, as recommended by the Governance Committee (acting as a nominating
committee), to a three-year term as Class I Directors. Claudine B. Malone was
elected by the Board of Directors on August 2, 1995, to fill a Class I vacancy
created by a bylaw amendment increasing the number of Directors from 10 to 11.
If elected, each Class I nominee will serve three consecutive years with
his/her term expiring in 1999 or until a successor is elected and qualifies.
The election of each nominee requires the affirmative vote of the holders of a
plurality of the shares of Common Stock cast in the election of Directors.
Unless authority to vote in the election of Directors is withheld, it is the
intention of the persons named as Proxies to vote FOR the four nominees named
below, all of whom currently serve as Directors. If at the time of the meeting
any of these nominees shall become unavailable for election as a Director for
any reason, which is not expected to occur, the persons named as Proxies will
vote for such substitute nominee or nominees, if any, as shall be designated by
the Board of Directors.
INFORMATION CONCERNING CLASS I NOMINEES
Nominees for Election for Three-Year Term (Class I Directors to serve until
the 1999 Annual Meeting)
Director Business Experience, Directorships, and
Name and Age Since Positions within the Last Five Years
William A. Andres, 69...1986 Chairman of Governance Committee, Member
Compensation Committee and Executive
of Committee of the Company. Previously
Chairman of the Board and Chief Executive
Officer (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;
Hannaford Bros., Scarborough, Me., since
1986.
John M. Belk, 76........1986 Member of Audit Committee, Compensation
Committee and Governance Committee 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.
Claudine B. Malone, 59 1995 Member of Audit Committee, Governance
Committee and Government/Legal Affairs
Committee of the Company. President,
Financial & Management Consulting, Inc.,
McLean, Va., since 1984. Other
directorships: Chairman, Federal Reserve
Bank, Richmond, Va., since 1996 (Member
since 1994); Dell Computer Corporation,
Austin, Tex., since 1993; Hannaford
Brothers, Scarborough, Me., since 1991;
Hasbro, Inc., Pawtucket, R.I., since
1992; Houghton Mifflin, Boston, Mass.,
since 1982; LaFarge Corporation, Reston,
Va., since 1994; The Limited, Inc.,
Columbus, Oh., since 1982; Mallinckrodt
Group Inc., St. Louis, Mo., since 1994;
Penn Mutual Life Insurance Company,
Philadelphia, Pa., since 1978; SAIC-
Science Applications International
Corporation, San Diego, Calif., since
1993; Union Pacific Resources Corporation,
Fort Worth, Tex., since 1995.
Robert L. Strickland, 65.1961 Chairman of the Board since 1978, Chairman
of Executive Committee and Member of
Government/Legal Affairs Committee of the
Company. Other directorships: Deputy
Chairman, Federal Reserve Bank, Richmond,
Va., since 1996; T. Rowe Price
Associates, Inc., Baltimore, Md., since
1991; Hannaford Bros., Scarborough, Me.,
since 1994.
INFORMATION CONCERNING CONTINUING DIRECTORS
The Directors whose terms expire after 1996 are:
Class II Directors, term expiring in 1997
Director Business Experience, Directorships, and
Name and Age Since Positions within the Last Five Years
Carol A. Farmer, 51.....1994 Member of Audit Committee, Governance
Committee and Government/Legal Affairs
Committee of the Company. President,
Carol Farmer Associates, Inc. (Trend
Forecasting and Consulting), Boca Raton,
Fla., since 1985. Other directorships:
The Sports Authority, Inc., Ft.
Lauderdale, Fla., since 1995.
Leonard G. Herring, 68 1956 President and Chief Executive Officer
since 1978, Member of Executive Committee
and Government/ Legal Affairs Committee
of the Company. Other directorships:
First Union Corporation, Charlotte, N.C.,
since 1986.
Robert G. Schwartz, 68 1973 Chairman of Compensation Committee, Member
of Audit Committee and Governance
Committee 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 Reader's
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., Stamford, Conn., since
1994; Ascent Entertainment Group, Inc.,
Denver, Colo., since 1995.
Class III Directors, term expiring in 1998
Director Business Experience, Directorships, and
Name and Age Since Positions within the Last Five Years
Gordon E. Cadwgan, 82 1961 Chairman of Audit Committee, Member of
Compensation Committee and Governance
Committee of the Company. Cadwgan
Associates, Inc. (Trustee and Financial
Consultant), affiliated with Tucker
Anthony, Inc., Boston, Mass., since 1979.
Other directorships: Third Century Fund,
Inc., Providence, R.I., since 1981.
Petro Kulynych, 74 1952 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.
Russell B. Long, 77 1987 Chairman of Government/Legal Affairs
Committee, Member of Compensation
Committee and Governance Committee of the
Company. Partner, Long Law Firm
(Attorneys-at-Law), Washington, D.C.,
since 1988. Other directorships:
Catalyst Vidalia Corp., Vidalia, La.,
since 1989. Other: Member of Advisory
Board, Metropolitan Life Insurance
Company, New York, N.Y., since 1992;
United States Senator 1948-1987; Member,
Senate Finance Committee 1952-1987
(Chairman 1965-1981).
Robert L. Tillman, 52 1994 Senior Executive Vice President and Chief
Operating Officer of the Company since
1994, having previously served as
Executive Vice President - Merchandising
(1991-1994), Member of Executive
Committee and Government/Legal Affairs
Committee of the Company. Other
directorships: Wachovia Bank of North
Carolina, N.A., Winston-Salem, N. C.,
since 1994; Home Center Institute,
Chicago, Ill., since 1994.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD
Classification of Directors. Each Lowe's Director is classified as an
"Independent Director" or a "Management Director". A "Management Director"
includes present and former employees who serve as Directors. An "Independent
Director" describes those individuals contemplated by rulings by the
Securities and Exchange Commission (SEC) defining "disinterested directors"
and by IRS regulations defining "outside directors". Lowe's Bylaws define a
"Founding Director" as a person who was a Director when Lowe's became a public
company in 1961 and who has served continuously as a Director since then.
Compensation of Directors - Standard Arrangements. Employee Directors
receive no Director or Committee compensation with the exception of fees paid
to a Director of one of the Company's wholly owned subsidiaries as discussed
below. Directors (other than Founding Directors) who are not otherwise
employed by the Company are paid an annual retainer of $30,000 plus $5,000
annually for serving as a Committee Chairman and $1,000 per Board meeting or
Committee meeting attended (with the maximum annual amount payable to any one
Director being $60,000). Non-employee Founding Directors are paid an annual
retainer of $60,000 each with no additional fees for attendance at meetings or
for Committee Chairmanship (Gordon E. Cadwgan and Petro Kulynych are non-
employee Founding Directors). Mr. Cadwgan received an additional $4,500
(plus expenses) and Mr. Herring (an Employee Director) received an additional
$2,500 for serving as a Director of one of the Company's wholly owned
subsidiaries.
Compensation of Directors - Other Arrangements. The Director compensation
arrangement also provides that once a Founding Director elects to retire from
the Board, such Director may be designated a Director Emeritus and, if so,
will be compensated for life at an annual rate equal to 50% of the basic
annual Founding Director fee in effect at the time the Founding Director
becomes a Director Emeritus.
In 1989, the Company's shareholders approved the Lowe's Companies, Inc.
1989 Non-Employee Directors' Stock Option Plan. Under this Plan, each non-
employee Director was granted annually an immediately exercisable stock option
to purchase 4,000 shares of Common Stock at the first Directors' Meeting
following the Annual Meeting in 1989, 1990, 1991, 1992 and 1993. The option
price equals the shares' fair market value on the date of grant. In
accordance with a formula set forth in the option agreement, the Company makes
a federal income tax deposit on behalf of Directors who exercise options. Two
hundred thousand shares of Common Stock were reserved under the Plan for the
granting of options, of which options covering 140,000 shares were granted.
No options were granted under this Plan during Fiscal 1995 and no options will
be granted under this Plan in the future.
During Fiscal 1995, Mr. Cadwgan exercised options for 4,000 shares and
realized a net gain on the shares of $65,125 (representing the difference
between the market value at the date of exercise and the option exercise
price). In accordance with the provisions of the option agreement, the
Company applied part of the gross proceeds of the option exercise price to
make federal income tax deposits ($41,875) on behalf of Mr. Cadwgan.
In 1995, the Company's shareholders approved the Lowe's Companies, Inc.
Directors' Stock Incentive Plan. This Plan provides for each non-employee
Director to be awarded 500 shares of Company Common Stock at the first
Directors' Meeting following the Annual Meeting in 1994, 1995, 1996, 1997 and
1998. Up to 25,000 shares may be issued under this Plan. During Fiscal 1995,
3,500 shares (having a fair market value of $27.00 per share on May 26,
1995) were awarded to seven non-employee Directors (500 shares each to non-
employee Directors Andres, Belk, Cadwgan, Farmer, Kulynych, Long and
Schwartz).
Board of Directors - During Fiscal 1995, the Board of Directors held six
meetings. The Board has five standing committees which met the number of
times set forth in parentheses: Executive (1), Audit (4), Compensation (4),
Governance (4) and Government/Legal Affairs (1). All Directors attended at
least 75% of the meetings of the Board and committees on which they served
with the exception of Mr. Andres who attended 71% of such meetings.
Audit Committee - The Audit Committee consists of one Management and five
Independent Directors: Gordon E. Cadwgan (Chairman), John M. Belk, Carol A.
Farmer, Petro Kulynych, Claudine B. Malone and Robert G. Schwartz. The Audit
Committee meets independently with the internal auditing staff, with
representatives of the Company's independent accountants and with
representatives of senior management. The Committee reviews the general scope
of the Company's annual audit and the fee charged by the independent
accountants, determines the duties and responsibilities of the internal
auditors, reviews financial statements and the accounting principals being
applied and reviews audit results and other matters relating to internal
control and compliance with the Company's code of ethics. In addition, the
Audit Committee recommends annually the engagement of the Company's
independent accountants.
Compensation Committee - The Compensation Committee consists of five
Independent Directors: Robert G. Schwartz (Chairman), William A. Andres, John
M. Belk, Gordon E. Cadwgan and Russell B. Long. This Committee reviews and
sets the compensation of Directors who are employees of the Company; reviews
the compensation of all other employees whose annual salary and bonus
opportunities exceed $125,000; reviews and approves all annual bonus plans;
reviews and approves all forms of compensation which exceed one year in
duration, including employee stock option and deferred compensation awards;
administers and interprets all provisions of all compensation, employee stock
option, stock appreciation rights and other incentive plans; and approves
awards pursuant to the terms of any employee stock option or stock
appreciation rights plan.
Executive Committee - The Executive Committee consists of four Management
and one Independent Directors: Robert L. Strickland (Chairman), William A.
Andres, Leonard G. Herring, Petro Kulynych and Robert L. Tillman. The
Executive Committee exercises all of the powers of the Board of Directors
between Board meetings, except as otherwise limited by law.
Governance Committee - The Governance Committee (previously known as the
Committee of Independent Directors) consists of seven non-employee Directors:
William A. Andres (Chairman), John M. Belk, Gordon E. Cadwgan, Carol A.
Farmer, Russell B. Long, Claudine B. Malone and Robert G. Schwartz. This
Committee serves as the Committee on corporate governance which includes the
responsibilities of screening suggestions for new Board members and making
recommendations to the full Board; conducting an annual, formal performance
evaluation of the Chief Executive Officer; and conducting an annual review of
the performance of the full Board and structure of the Board Committees. In
addition, this Committee functions as a nominating committee by recommending
nominees for election as Directors of the Company. This Committee considers
nominees recommended by shareholders. Any such recommendation should be
submitted in writing to the Secretary of the Company no later than 120 days
prior to the date of mailing the proxy materials for each annual meeting
(generally, not later than the end of November preceding the annual meeting).
Such recommendation should include information that will enable the Committee
to evaluate the qualifications of the proposed nominee.
Government/Legal Affairs Committee - The Government/Legal Affairs
Committee consists of four Management and three Independent Directors:
Russell B. Long (Chairman), Carol A. Farmer, Leonard G. Herring, Petro
Kulynych, Claudine B. Malone, Robert L. Strickland and Robert L. Tillman.
This Committee assists the Board of Directors with the Company's relationships
with federal, state and local governments. The Committee also assists the
Board and management in responding to and initiating legislative proposals at
all three governmental levels.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership as of April 8, 1996,
except as noted, of Common Stock of each incumbent Director of the Company,
each nominee for election as a Director of the Company, the Officers named in
the Summary Compensation Table, each shareholder known to the Company to be
the beneficial owner of more than 5% of the Company's Common Stock, and
Directors and Executive Officers as a group:
Name or Number Percent
of Persons in Group Number of Shares (1) of Class
William A. Andres 40,000 *
John M. Belk 40,025 *
Gordon E. Cadwgan 99,116 *
Carol A. Farmer 1,600 *
Leonard G. Herring 1,825,194 (2) 1.132
Petro Kulynych 2,057,745 (3) 1.276
Russell B. Long 77,400 *
Claudine B. Malone 1,000 *
Dale C. Pond 9,819 *
R. Michael Rouleau 18,056 *
Robert G. Schwartz 41,000 *
Robert L. Strickland 1,407,021 *
Robert L. Tillman 129,458 *
Harry B. Underwood II 73,885 *
Incumbent Directors, Director Nominees
and Executive Officers as a Group
(19 in total) 5,974,155 (5) 3.703
Lowe's Companies Employee Stock
Ownership Trust
P.O. Box 1111
North Wilkesboro, NC 28656 22,091,240 (5) 13.701
FMR Corp.
82 Devonshire Street
Boston, MA 02109 23,650,644 (6) 14.669
* Less than 1%.
(1) Includes shares that may be acquired within 60 days under the Company's
Stock Option Plans as follows: Mr. Andres 20,000 shares; Mr. Belk 20,000
shares; Mr. Cadwgan 4,000 shares; Mr. Kulynych 20,000 shares; Mr. Rouleau
7,500 shares; Mr. Schwartz 20,000 shares; Mr. Tillman 7,500 shares; with
aggregate shares for all Executive Officers and Directors as a group (19)
being 99,000. Also includes Stock Awards (Performance Accelerated Restricted
Stock) that have been granted but not vested as follows: Mr. Herring 37,500
shares; Mr. Pond 9,000 shares; Mr. Strickland 37,500 shares; Mr. Tillman
27,000 shares; with aggregate shares for all Executive Officers and Directors
as a group (19) being 168,000.
(2) Includes 72,200 shares of shared voting and investment power.
(3) Includes 82,000 shares of shared voting and investment power and
1,315,000 shares in a self-directed individual retirement account.
(4) Includes 164,000 shares of shared voting and investment power.
(5) Shares allocated to participants' ESOP accounts are voted by the
participants, via proxy solicitations from Wachovia Bank of North Carolina,
N.A. (the "Trustee"). The ESOP's Management Committee directs the Trustee in
the manner in which shares not allocated to participants' accounts are to be
voted. The Management Committee has 13 members, including Messrs. Herring,
Strickland and Tillman. At April 8, 1996, there were 314,025 unallocated
shares.
(6) Shares held at December 31, 1995, according to Schedules 13G filed with
the Securities and Exchange Commission.
Each Director or Executive Officer that participates in the Employee
Stock Ownership Plan or is granted Stock Awards or Stock Options under the
1994 Incentive Plan is required to file an annual statement on Form 5. Also,
Ms. Farmer and Mr. Andres each filed late one Form 4 with respect to one
purchase of shares. With those exceptions, based solely on its review of the
forms required to be filed by Section 16(a) of the Securities Exchange Act of
1934 that have been received by the Company and written representations from
certain reporting persons that no annual statements on Form 5 were required,
the Company believes that all filing requirements under Section 16(a)
applicable to its Officers, Directors and beneficial owners have been complied
with.
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received by the Company's
Chief Executive Officer and the five remaining most highly paid Executive
Officers for the three fiscal years ended January 31, 1996:
SUMMARY COMPENSATION TABLE
Long-term Compensation
Awards Payouts
Restricted Stock Stock Options LTIP All Other
Awards (1) (#) Payouts Compensation (2)
Annual Compensation
Fiscal Year Other Annual
Ended Jan. 31 Salary Bonus Compensation
Name & Principal Position
Leonard G. Herring 1996 $625,000 $96,259 $156,424 (3)
15,000 shares 0 $0 $21,000
President & CEO
1995 575,000 402,500 246,056
12,500 shares 0 0 19,500
1994 535,000 373,750 173,523
10,000 shares 0 0 19,500
Robert L. Strickland 1996 575,000 88,558 162,040 (4)
15,000 shares 0 0 21,000
Chairman of the Board
1995 525,000 367,500 285,916
12,500 shares 0 0 19,500
1994 497,500 341,250 157,961
10,000 shares 0 0 19,500
Robert L. Tillman 1996 400,000 46,204 83,430 (5)
12,500 shares 0 0 21,000
Senior Executive Vice President
& Chief Operating Officer
1995 350,385 195,000 185,019
8,500 shares 10,000 0 19,500
1994 321,000 180,000 82,910
6,000 shares 0 0 19,500
R. Michael Rouleau 1996 375,000 43,316 77,937 (7)
0 shares 0 0 21,000
Executive Vice President -
Store Operations (6)
1995 345,096 195,000 380,692
7,500 shares 10,000 0 19,500
1994 321,000 180,000 0
6,000 shares 0 0 16,298
Harry B. Underwood II 1996 350,807 0 1,125 (9)
0 shares 0 0 0
Senior Vice President &
Treasurer (CFO) (8)
1995 220,000 132,000 142,252
5,000 shares 0 0 19,500
1994 203,846 118,500 43,160
5,000 shares 0 0 19,500
Dale C. Pond 1996 239,231 23,615 40,074(10)
3,000 shares 0 0 21,000
Senior Vice President -
Marketing
1995 226,154 123,750 0
3,000 shares 0 0 18,388
1994 21,635(11) 0 0
3,000 shares 0 0 0
Footnotes:
(1) The 1996 Awards represents shares of Performance Accelerated Restricted
Stock (PARS) awarded as of January 31, 1996, under the 1994 Incentive Plan.
One-half of the PARS shares will vest on January 31, 1999, if the Company's
average annual return for the three-year period is at least 12.5%. The
remaining PARS shares (or all of the PARS shares if none became vested in
accordance with the preceding sentence), will vest on January 31, 2001, if the
Company's average annual return for the five-year period is at least 12.5%.
Any PARS shares not previously vested will vest on January 31, 2003. PARS
shares will also vest if the participant dies or becomes disabled during
employment with the Company. PARS shares will vest following a participant's
retirement at age 60 or later if the Company's average annual return for the
seven-year period is at least 8%. Otherwise, non-vested PARS shares will be
forfeited upon the participant's separation from service.
(2) Amounts shown are employer contributions to the Employee Stock Ownership
Plan.
(3) Amount shown is the total of a payment under the Company's Benefit
Restoration Plan ($142,010), dividends on restricted stock shares awarded in
grants dated January 31, 1994, and January 31, 1995 ($3,600), taxable value of
group term life insurance in excess of $50,000 ($4,760), and taxable value of
personal use of corporate aircraft ($6,054).
(4) Amount shown is the total of a payment under the Company's Benefit
Restoration Plan ($128,970), dividends on restricted stock shares awarded in
grants dated January 31, 1994, and January 31, 1995 ($3,600), taxable value of
group term life insurance in excess of $50,000 ($5,940), and taxable value of
personal use of corporate aircraft ($23,530).
(5) Amount shown is the total of a payment under the Company's Benefit
Restoration Plan ($79,470), dividends on restricted stock shares awarded in
grants dated January 31, 1994, and January 31, 1995 ($2,300), and taxable
value of group term life insurance in excess of $50,000 ($1,660).
(6) Mr. Rouleau retired effective February 28, 1996. His Restricted Stock
Awards for 1994 and 1995 were forfeited in accordance with the terms of the
Plan.
(7) Amount shown is the total of a payment under the Company's Benefit
Restoration Plan ($73,190), dividends on restricted stock shares awarded in
grants dated January 31, 1994, and January 31, 1995 ($2,160), and taxable
value of group term life insurance in excess of $50,000 ($2,587).
(8) Mr. Underwood's employment with the Company ended October 13, 1995. His
Restricted Stock Awards for 1994 and 1995 were forfeited in accordance with
the terms of the Plan.
(9) Amount shown represents dividends on restricted stock shares awarded in
grants dated January 31, 1994 and January 31, 1995.
(10) Amount shown is the total of a payment under the Company's Benefit
Restoration Plan ($38,260), dividends on restricted stock shares awarded in
grants dated January 31, 1994, and January 31, 1995 ($975), taxable value of
group term life insurance in excess of $50,000 ($435),and taxable value of a
non-cash award ($404).
(11) Mr. Pond was employed effective December 1993.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to stock options
and SARs granted to the named Executive Officers during Fiscal 1995:
Individual Grants
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for
Option/SAR Term
5% (3) 10% (4)
% of Total
Options/SARS
Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (2) Fiscal Year $/Sh Date
Leonard G. Herring 0/5,000 units 0/1.4 $31.125 1/31/99
$24,550 $37,500
Robert L. Strickland 0/5,000 units 0/1.4 31.125 1/31/99
24,550 37,500
Robert L. Tillman 0/5,000 units 0/1.4 31.125 1/31/99
24,550 37,500
R. Michael Rouleau 0/0 units 0/0.0
Harry B. Underwood II 0/0 units 0/0.0
Dale C. Pond 0/2,500 units 0/0.7 31.125 1/31/99
12,275 18,750
(1) No options were granted in Fiscal 1995.
(2) Awards denominated in Units represent stock appreciation rights (STARs)
awarded as of January 31, 1996, under the 1994 Incentive Plan. With respect
to each Unit, the STAR award entitles the participant to receive a cash
payment based on the appreciation in the value of one share of the Company's
common stock between the Beginning Valuation and the Final Valuation. The
Beginning Valuation, $31.125, is the closing price of the Company's common
stock on the date of award. The Final Valuation will be the average closing
price of the Company's common stock during January 1999. The maximum amount
payable for each STAR Unit is $7.50.
(3) The amount payable pursuant to STAR awards under this assumption is $4.91
per Unit, the difference between the assumed Final Valuation ($36.03) on
January 31, 1999, and the Beginning Valuation ($31.125).
(4) The amount payable pursuant to STAR awards under this assumption is $7.50
per Unit, the maximum amount payable under the STAR awards which is less than
the 10% growth assumption.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
No options or SARs were exercised by any of the six named Executive
Officers during Fiscal 1995. The following table provides information
concerning unexercised options/SARs held by each of the named Executive
Officers at January 31, 1996:
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Value Table
Number of Unexercised
Options/SARs at FY-End (1)
Name Exercisable Unexercisable
Value of Unexercised In-the-Money
Options/SARs at FY-End ($) ($31.125 on 1/31/96)
Exercisable
Aggregate Annualized(2) Unexercisable
Leonard G. Herring 0 Shares 0 Shares $0 $0 $0
0 Units 15,000 Units 3,125 2,083 0
Robert L. Strickland 0 Shares 0 Shares 0 0 0
0 Units 15,000 Units 3,125 2,083 0
Robert L. Tillman 7,500 Shares 2,500 Shares 0 0 0
0 Units 13,000 Units 2,500 1,667 0
R. Michael Rouleau 7,500 Shares 2,500 Shares 0 0 0
0 Units 12,000 Units 2,500 1,667 0
Harry B. Underwood II 0 Shares 0 Shares 0 0 0
0 Units 0 Units 0 0 0
Dale C. Pond 0 Shares 0 Shares 0 0 0
0 Units 7,500 Units 1,563 1,042 0
(1) Awards denominated in Shares represent options; Awards denominated in
Units represent stock appreciation rights (STARs).
(2) This column shows the annualized value of the unexercised in-the-money
options and SARs which had not been exercised at fiscal year end.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The Company does not maintain a Long-Term Incentive Plan.
REPORT OF THE COMPENSATION COMMITTEE
This report by the Executive Compensation Committee is required by rules
of the Securities and Exchange Commission. It is not to be deemed
incorporated by reference by any general statement which incorporates by
reference this Proxy Statement into any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, and it is not to be otherwise
deemed filed under either such Act.
The Compensation Committee (the "Committee") of the Board of Directors
comprises five Independent Directors and is responsible for administering the
Company's Executive Compensation Program for all executives at a compensation
level set by the Company's Bylaws. In carrying out its responsibilities, the
Committee:
* Articulates the Company's executive compensation philosophies and policies
to executive management, participates in compensation program development, and
has authority for approval of plans and programs except where shareholder
approval is required;
* Monitors and approves on-going base salary and incentive compensation
programs for executive management, including participation, performance goals
and criteria, interpretation of provisions and determination of award payouts;
* Reviews and approves base salary recommendations for Executive Officers of
the Company; and
* Initiates all compensation actions for the President and Chief Executive
Officer and the Chairman of the Board, subject to final Board approval.
The Committee has retained a national consulting firm to be a source of
on-going advice to both the Committee and management, but to report to the
Committee.
Executive Compensation Principles
The Company's Executive Compensation Program has been designed to
establish a strong link between the creation of shareholder value and the
compensation earned by its senior executives. It is the intention of the
Committee that all compensation paid under the Executive Compensation Program
of the Company will be tax deductible to the Company in the year paid to the
executive. The fundamental objectives of the Program are to:
* Align executive compensation with the Company's mission, values and
business strategies;
* Attract, motivate, retain and reward the executives whose leadership and
performance are critical to the Company's success in enhancing shareholder
value; and
* Provide compensation which is commensurate with the Company's performance
and the contributions made by executives toward this performance.
The Program is intended to provide compensation which is competitive with
comparable companies in the retailing industry (with particular emphasis on
specialty hardgoods retailers and major U.S. retailers) when the Company is
meeting its targeted financial goals. At the same time, the Program seeks to
provide above average compensation when the Company's targeted goals are
exceeded, and below average compensation when targeted performance goals are
not achieved.
The Program provides for larger portions of total compensation to vary on
the basis of Company performance for higher levels of executives (i.e., the
most senior Executive Officers have more of their total compensation at risk
on the basis of Company performance than do lower levels of executives). All
Executive Officers participate in the same direct compensation programs as the
other executives of the Company, with the only differences being the degree of
compensation risk and the overall magnitude of the potential awards.
The Committee believes that Executive Officers of the Company should be
encouraged to own significant holdings of the Company's Common Stock to align
their interests with those of the Company's shareholders. Through the
operation of the Company's Employee Stock Ownership Plan, the Employee Savings
and Investment Plan and the 1994 Incentive Plan, vehicles are provided to
enable executives to acquire Company Stock, subject to regulatory limitations.
Elements in the Executive Compensation Program
The Company's Executive Compensation Program comprises 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 retailing
industry.
Executive Officers' base salaries are reviewed annually and are approved
by the 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.
1994 Incentive Plan
The purpose of the 1994 Incentive Plan is 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 and to assure deductibility of executive
compensation for federal and state income tax purposes.
The 1994 Incentive Plan authorizes the grant of stock options. The
option price cannot be less than the market price of the Company's Common
Stock on the date on which the option is granted. Consequently, stock options
granted under the 1994 Incentive Plan measure performance and create
compensation solely on the basis of the appreciation in the price of the
Company's Common Stock.
Stock appreciation rights (STARs) also may be granted under the 1994
Incentive Plan. STARs entitle the recipient to receive a cash payment based
on the appreciation in the Company's Common Stock following the date of the
award and, accordingly, measure performance and create compensation only if
the price of the Company's Common Stock appreciates.
Company Common Stock also may be issued under stock awards pursuant to
the 1994 Incentive Plan. The stock awards that have been made to date provide
that the shares are subject to forfeiture and nontransferable for seven years
following the award. Accelerated vesting is permitted if the Company achieves
certain financial objectives during the three- and five-year periods following
the award.
The Management Bonus Program is the final component of the 1994 Incentive
Plan. The Management Bonus Program provides bonus opportunities which can be
earned upon achievement by the Company of preset annual financial goals. No
bonuses are paid if performance is below the threshold level of corporate
profitability. Additional bonus amounts are earned on a proportionate scale
up to 100% of the stated bonus opportunity if the preset financial goals are
met. Maximum bonuses were paid for the fiscal years ended January 31, 1994,
and January 31, 1995, because the Company's financial results exceeded the
preset performance goals. A partial bonus equal to 25.669% of the basic bonus
opportunity was paid for the year ended January 31, 1996, because financial
results exceeded the minimum performance threshold but were below the goals
established for full bonus payment.
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.
The CEO's Compensation in the Fiscal Year Ended January 31, 1996
Effective February 1, 1996, the Committee increased Mr. Herring's annual
base salary from $625,000 to $700,000. The Committee based its decision on
the combination of the progress made by the Company in establishing and
implementing its new retailing strategies, the operating performance of the
Company, Mr. Herring's leadership, and the Committee's assessment that his
prior base salary was below market when compared to other chief executive
officers of similarly situated companies.
The Committee authorized payment to Mr. Herring of an annual bonus of
$96,259 under the 1995 Management Bonus Program. The Committee determined Mr.
Herring's bonus solely on the basis of the Company's earnings performance
versus the goals for such performance which the Committee established at the
beginning of the year.
Mr. Herring was granted a Stock Appreciation Rights (STAR) award of 5,000
units with a Beginning Valuation of $31.125 per unit. The award has a three-
year term and maximum appreciation has been set at $7.50 per unit. The
Committee also approved the grant to Mr. Herring of 15,000 shares of
Performance Accelerated Restricted Stock as of January 31, 1996, which will
vest after seven years, but provide for accelerated vesting if certain
performance measures are met after three years and/or five years. Mr. Herring
earned a Benefit Restoration Plan payment of $142,010 for the fiscal year
ended January 31, 1996.
The Committee believes that the payments described herein were necessary
to maintain the competitiveness of Mr. Herring's compensation package in
comparison to those of other chief executive officers of similarly situated
companies.
* * *
The Committee believes that the Company's Executive Compensation Program
has been strongly linked to the Company's performance and the enhancement of
shareholder value. The Committee intends to continually evaluate the
Company's compensation philosophies and plans to ensure that they are
appropriately configured to align the interests of executives and shareholders
and to ensure that the Company can attract, motivate and retain talented
management personnel.
Robert G. Schwartz, Chairman
William A. Andres
John M. Belk
Gordon E. Cadwgan
Russell B. Long
April 17, 1996
PERFORMANCE GRAPH
The following graph compares the total returns (assuming reinvestment of
dividends) of the Company's Common Stock, the S&P 500 Index and the S&P Retail
Index. The graph assumes $100 invested on January 31, 1991, in the Company's
Common Stock and each of the indices.
Comparison of Five Year Cumulative Return of
Lowe's Companies, Inc., the S & P 500 and S & P Retail Index
Jan. '91 Jan. '92 Jan. '93 Jan. '94 Jan. '95 Jan. '96
LOWE'S 100 163.51 223.27 496.86 601.51 512.63
S&P 500 100 122.64 135.60 153.00 153.81 213.21
S&P RETAIL INDEX 100 135.05 177.57 173.58 172.44 160.63
Note: All data as of January 31.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Banking and Financial Transactions. During Fiscal 1995, the Company
entered into a $300 million revolving credit facility with a syndicate of 13
banks, one of which is First Union National Bank, a subsidiary of First Union
Corporation. The facility expires on April 10, 2000 and is used to support
the Company's commercial paper program and for short-term borrowings. First
Union National Bank's portion of this facility is $25 million. At January 31,
1996, there were no unsecured borrowings being held, nor any amounts
outstanding under this credit facility. The current applicable interest rate
for this credit facility is the Bank's reference rate or the LIBOR rate plus
16 basis points. Under this arrangement, the Company paid an annual fee of 9
basis points on the $25 million line of credit. The Company also has an
arrangement with First Union National Bank for a $35 million line of credit
for the purpose of issuing letters of credit and bankers acceptances as well
as an arrangement for a $8.1 million line of credit for letters of credit
issued on a standby basis. Other than a commission fee on letters of credit
issued under these arrangements, there are no fees charged for maintaining
these lines of credit. Leonard G. Herring, President and a Director of the
Company, is a member of the Board of Directors of First Union Corporation.
Other Transactions. The Company extended a $180,000 "bridge" loan to J.
Gregory Dodge, Senior Vice President - Real Estate/Engineering and
Construction, to assist Mr. Dodge in acquiring his principal residence in
Wilkes County, N. C. The terms of the loan were negotiated at the time Mr.
Dodge was hired as an Executive Officer. The loan is due in 1997 and bears
interest at the annual rate of 5%.
Except as discussed above and under "Compensation of Directors - Standard
Arrangements", to the knowledge of management, no Director, Officer, or
associate of any Director or Officer had any material interest, direct or
indirect, in any material transaction during the year ended January 31, 1996,
nor in any proposed transaction in which the Company was or will be a party.
The Company believes the terms of the transactions described above are
comparable to terms available for similar transactions with entities
unaffiliated with its Directors and Officers.
RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee of the Board, the Board of
Directors has appointed, subject to ratification by shareholders, Deloitte &
Touche LLP as the firm of independent certified public accountants to audit
the financial statements of the Company and its subsidiaries for the fiscal
year ending January 31, 1997. Deloitte & Touche LLP has served as independent
auditors for the Company since 1982. A majority of the votes cast is required
for ratification of Deloitte & Touche LLP as the Company's independent
auditors.
While the Board of Directors is not required to seek shareholder
ratification of the Board's appointment of the Company's independent certified
public accountants, it has been Board policy for many years to do so.
Representatives of Deloitte & Touche LLP have been invited to and are
expected to attend the Annual Meeting with the opportunity to make statements
if they so desire and to be available to respond to appropriate questions from
shareholders.
The Board of Directors recommends a vote FOR approval of the appointment
of Deloitte & Touche LLP as the Company's independent certified public
accountants.
GENERAL
The cost of solicitations of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited personally, by
telephone, by telegraph or by certain employees of the Company. The Company
may reimburse brokers or other persons holding stock in their names or in the
names of nominees for their expense in sending proxy materials to principals
and obtaining their proxies. The Company has engaged the proxy soliciting
firm of D. F. King & Co., Inc. to solicit proxies for the Annual Meeting at an
anticipated cost of $7,000 (plus handling fees).
The shares represented by a proxy will be voted as directed unless the
proxy is revoked. Any proxy may be revoked before it is exercised by filing
with the Secretary of the Company an instrument revoking the proxy or a proxy
bearing a later date. A proxy is revoked if the person who executed the proxy
is present at the meeting and elects to vote in person.
Where a choice is specified with respect to any matter to come before the
meeting, the shares represented by the proxy will be voted in accordance with
such specifications.
Where a choice is not so specified, the shares represented by the proxy
will be voted FOR Proposals 1 and 2 as set forth in the Notice of Annual
Meeting and Proxy Card.
Management is not aware that any matters other than those specified
herein will be presented for action at the meeting, but if any other matters
do properly come before the meeting, the persons named as Proxies will vote
upon such matters in accordance with their best judgment.
In the election of Directors, a specification to withhold authority to
vote for the slate of management nominees will not constitute an authorization
to vote for any other nominee.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1997 Annual
Meeting must be received by the Board of Directors for consideration for
inclusion in the Proxy Statement and form of proxy relating to that meeting on
or before December 19, 1996.
ANNUAL REPORT
The Annual Report to shareholders accompanies this Proxy Statement. The
Company's report to the Securities and Exchange Commission on Form 10-K for
the fiscal year ended January 31, 1996, is available upon written request
addressed to Lowe's Companies, Inc., Investor Relations Department, P. O. Box
1111, North Wilkesboro, NC 28656.
North Wilkesboro, North Carolina
April 17, 1996
LOWE'S COMPANIES, INC.
P. O. Box 1111, North Wilkesboro, NC 28656
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints B. Yates McConnell and Imogene B. Osborne as
Proxies, each with the power to appoint his/her substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares
of Common Stock of Lowe's Companies, Inc. held of record by the undersigned
on April 8, 1996, at the Annual Meeting of Shareholders to be held on May 31,
1996, or any adjournment thereof. The Board of Directors recommends a vote
FOR Proposals 1 and 2.
1. ELECTION OF CLASS I DIRECTORS Note: Make marks in one section ONLY --
Voting in Section A will take
precedence over any votes in
Section B.
SECTION A -- to vote for all Class I Director Nominees as a group, mark
in this section
* FOR all nominees listed below * WITHHOLD AUTHORITY for all
nominees listed below
- ------------------------------------------------------------------------------
SECTION B -- to vote for Class I Director Nominees individually, mark in
this section
* FOR * WITHHOLD AUTHORITY William A. Andres
* FOR * WITHHOLD AUTHORITY Claudine B. Malone
* FOR * WITHHOLD AUTHORITY John M. Belk
* FOR * WITHHOLD AUTHORITY Robert L. Strickland
2. PROPOSAL TO APPROVE THE APPOINTMENT OF DELOITTE & TOUCHE LLP as the
independent certified public accountants of the Company for the fiscal year
ending January 31, 1997
* FOR * AGAINST * ABSTAIN
(continued and to be signed on reverse side)
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy
will be voted FOR Proposals 1 and 2.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
DATED ______________________________________, 1996
__________________________________________________
Signature
__________________________________________________
Signature if held jointly
Please mark, sign, date and return the Proxy Card
promptly using the enclosed envelope.
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