UNITED STATES
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
For the fiscal year ended January 28, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7898
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.)
1605 CURTIS BRIDGE ROAD, WILKESBORO, N.C. 28697
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (336) 658-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on
Which Registered
Common Stock $.50 Par Value New York Stock Exchange
Pacific Stock Exchange
The Stock Exchange (London)
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. [ x ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant at March 31, 2000, based on a closing price of $58.38 per
share, was $17,726,914,060.
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 March 31, 2000:
382,529,286 shares.
Documents Incorporated by Reference
Annual Report to Security Holders for fiscal year ended January 28, 2000:
Parts I and II. With the exception of specifically referenced information,
the Annual Report to Security Holders for the fiscal year ended January 28,
2000 is not to be deemed filed as part of this report. Proxy Statement for
the 2000 Annual Meeting which will be filed within 120 days after January
28, 2000: Part III.
Part I
Item 1 - Business
General
Lowe's Companies, Inc. (Lowe's) is the second largest retailer of home
improvement products in the world, with specific emphasis on retail do-it-
yourself (DIY) and commercial business customers. Lowe's specializes in
offering products and services for home improvement, home decor, home
maintenance, home repair and remodeling and maintenance of commercial
buildings. Lowe's principal customer groups are DIY retail customers and
commercial business customers. At January 28, 2000, Lowe's operated 576
stores in 37 states from coast to coast with approximately 57 million square
feet of retail selling space.
Lowe's was incorporated in North Carolina in 1952 and has been a
publicly held company since 1961. Lowe's common stock is listed on the New
York Stock Exchange, the Pacific Stock Exchange, and the London Stock
Exchange, with shares trading under the ticker symbol "LOW." Lowe's general
offices are located in Wilkesboro, North Carolina.
Lowe's has one reportable industry segment - the operation of home
improvement retail stores. Therefore, see Item 6 "Selected Financial Data"
for the historical data of revenues, profits and identifiable assets of the
Company.
Store Expansion
Since 1989, Lowe's has been implementing an aggressive store
replacement and expansion strategy, which has transformed Lowe's from a
chain of small stores into a chain of destination home improvement
warehouses. Lowe's current prototype store has a 121,000 square foot sales
floor with a lawn and garden center comprising approximately 35,000
additional square feet. Lowe's 2000 expansion plan calls for opening 95
stores (including the relocation of 17 older, smaller format stores). The
following table illustrates the growth of the Company over the last three
years.
1999 1998 1997
Number of stores, beginning of year 520 477 427
New stores opened 60 50 48
Relocated stores opened 31 31 24
Stores closed (35) (38) (22)
Number of stores, end of year 576 520 477
In April 1998, Lowe's announced plans for a major expansion into the
western United States, with plans to build in excess of 100 new stores in
certain western markets over the next three to four years. During the
fourth quarter of 1999, Lowe's opened six stores in these western markets.
These first stores were located in cities such as Bakersfield and Long
Beach, California and Summerlin, Nevada. In November 1998, the Company
entered into a merger agreement with Eagle Hardware and Garden, Inc.
(Eagle), which operated 36 home improvement centers in the western United
States. The acquisition of Eagle, which closed on April 2, 1999, has
enabled Lowe's to accelerate its West Coast expansion and has provided an
immediate presence in a number of key metropolitan markets in the west.
The Eagle stores are in addition to Lowe's previously announced western
market expansion plans.
Customer Service
Lowe's serves both retail and commercial business customers. Retail
customers are primarily do-it-yourself homeowners and others buying for
personal and family use. Commercial business customers include building
contractors, repair and remodeling contractors, electricians, landscapers,
painters, plumbers and commercial building maintenance professionals. Each
Lowe's store caters to this broad array of customers by combining the
merchandise, sales and service of: a home fashions and interior design center;
a lawn and garden center; an appliance dealer; a hard goods discounter; a
hardware store; an air conditioning, heating, plumbing and electrical supply
center; and a building materials supplier.
Lowe's is committed to providing superior customer satisfaction.
Customer expectations are being met by opening new stores in convenient
shopping locations, by supplying a large selection of in-stock merchandise,
by offering low prices and by providing knowledgeable assistance and fast
service. If a customer is searching for an item that is not carried in a
store, it is likely available through our special order system. The
Everyday Competitive Price ("ECP") strategy guarantees the lowest price in
the market and yet builds profitability for Lowe's by substantially
increasing revenues per store. ECP gives Lowe's customers the confidence
to buy every day without waiting for promotional sales. Customer
questions, problems, returns and exchanges are handled at a convenient
service desk near the main entrance of the store. Our customer-friendly
return policy makes it simple to return or exchange products. Most of our
stores have a separate lumber and building materials cashier and loading
area available for both DIY and commercial business customers.
Additionally, Lowe's offers specific services such as installation (through
subcontractors), delivery, loading, assembly, free how-to clinics, wood and
glass cutting, free kitchen design and a project desk to assist Lowe's
customers in planning their home improvement tasks.
Lowe's offers two proprietary credit cards - one for individual retail
customers and the other for businesses. Lowe's commercial business
customers can also make purchases on credit by using Lowe's in-house
accounts. In addition, Lowe's accepts Visa, MasterCard, Discover and
American Express credit cards.
Products
A typical Lowe's home improvement warehouse stocks more than 40,000
items, with hundreds of thousands of items available through our special
order system. Each Lowe's home improvement warehouse carries a wide
selection of high quality, nationally advertised brand name merchandise.
The Company's merchandise selection is broad enough to supply both the DIY
retail and commercial business customer with practically every item needed
to complete any home improvement, repair or construction project. See Note
14 on page 30 of the Annual Report to Security Holders for fiscal year
ended January 28, 2000 for the table illustrating sales by product category
for each of the last three fiscal years.
The Company sources its products from approximately 6,500 merchandise
vendors worldwide, with no single vendor accounting for as much as 4% of
total purchases. The Company is not dependent upon any single vendor. To
the extent possible, the Company utilizes its global sourcing division to
purchase directly from foreign manufacturers and avoid third party
importers. Management believes that alternative and competitive suppliers
are available for virtually all its products.
In order to maintain appropriate inventory levels in stores and to
improve distribution efficiencies, the Company operates six highly
automated, efficient and state-of-the-art regional distribution centers
(RDC's). The current RDC's are strategically located in North Carolina,
Georgia, Indiana, Pennsylvania, Washington and Texas. Each Lowe's store is
now served by one of these RDC's. The Company also operates nine smaller
support facilities in order to distribute merchandise that requires special
handling due to size or type of packaging, such as lumber, roofing, fencing
or lawn mowers. Approximately 50% of the merchandise purchased by the
Company is shipped through its distribution facilities while the remaining
portion is shipped directly to stores from vendors. The Company has begun
construction on a regional distribution center in Perris, California which
is expected to be operational in early 2001. During 2000, construction
will also begin on another regional distribution center to be located in
Findlay, Ohio which is expected to begin operations in late 2001.
Marketing
The Company reaches target customers through a mixture of television,
radio, direct mail, newspaper and NASCAR sponsorship. Each marketing
initiative is based on understanding current and prospective customers.
The Company has a strategic alliance with the HGTV network that allows it
to control a substantial portion of the airtime in which only the Company's
and its vendors' commercials are aired. This is only one example of how
the Company solicits vendor participation in its advertising programs.
Additionally, the Company hosts customer hospitality events and supports
the wide-ranging activities of Lowe's Home Safety Council.
In 1999, the Company continued to introduce or redefine programs that
respond to the changing needs and lifestyles of targeted customers.
Primary to this effort is the Company's aggressive response to serve
commercial business customers. The Company has responded to the special
needs of this customer group by carrying more professional brands,
increasing in-stock quantities for bigger jobs and testing various
marketing approaches to win the loyalty of commercial customers. The
Company currently has thirty product categories available where customers
can have installation arranged through our stores. In addition, non-
electronic kiosks (electronic kiosks are currently being tested) are
available in departments such as appliances, home decor/flooring,
electrical/lighting, millwork, hardware, seasonal, plumbing and tools.
Competition
The home improvement retailing business is highly competitive. The
principal competitive factors are price, location, customer service,
product selection and name recognition. The Company competes with a number
of traditional hardware, plumbing, electrical and home supply retailers, as
well as other chains of warehouse home improvement stores and lumber yards
in most of its market areas. In addition, the Company competes, with
respect to some of its products, with discount stores, mail order firms,
and warehouse clubs.
Lowe's is the second largest retailer of home improvement products in
the world. Due to the large number and variety of competitors, management
is unable to precisely measure the Company's market share in its existing
market areas. However, Lowe's defines the market segments that it serves
as DIY, repair/remodeling, rugs and carpets, appliances and specialty trade
construction. This total market is estimated to be $300 billion of which
Lowe's share is estimated to be approximately 5%.
Information Systems
The Company is continuously assessing and upgrading its information
systems to support growth, control costs, and enable better decision-
making. During the last six years, the Company has made a substantial
investment in developing and purchasing new computer systems. These new
applications include Distribution, Electronic Data Interchange, Payroll and
Human Resources, General Ledger, Accounts Payable, Forecasting and
Replenishment, and Supply Services. Lowe's has a point of sale system,
electronic bar code scanning system, various design systems and a UNIX
Server in each of its stores. Store information is communicated to the
support center's central computer via a terrestrial based (frame relay)
network with back-up being provided by a satellite based wide area network.
These systems provide efficient customer check-out with automated credit
card approval, store-based inventory management with automatic
replenishment orders, labor planning and item movement experience. These
computers supply the general office functions with the information needed
to support the stores.
Employees
At the end of January 2000, the Company employed approximately 70,000
full-time and 16,000 part-time employees, none of which are covered by any
collective bargaining agreements. Management considers its relations with
its employees to be good.
Item 2 - Properties
At January 28, 2000, the Company operated 576 stores with a total of
57.0 million square feet of selling space. The current prototype large
store is a 121,000 square foot sales floor with a lawn and garden center
comprising approximately 35,000 additional square feet. Of the total
stores operating at January 28, 2000, 357 of the facilities are owned with
the remainder being leased. Approximately one-half of these leases are
capital leases. The Company also owns and operates six regional
distribution centers and nine smaller support facilities, four of which are
reload centers for lumber and building commodities. The Company's general
offices are located in Wilkesboro, North Carolina and occupy several
buildings, the majority of which are owned.
See the "Lowe's Stores" table on page 7 of the Annual Report to
Security Holders for the fiscal year ended January 28, 2000.
Item 3 - Legal Proceedings
See Note 13 on page 30 of the Annual Report to Security Holders for
fiscal year ended January 28, 2000.
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 26, 2000.
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.
Name Age Title
Robert L. Tillman 56 Chairman of the Board since 1998 and
President and Chief Executive Officer
since 1996; Senior Executive Vice
President and Chief Operating
Officer, 1994-1996.
Theresa A. Anderson 42 Senior Vice President, Operations &
Merchandising Support since 2000;
Vice President, Store Support since
1999; Vice President, Merchandising
since 1998; Divisional Merchandising
Manager since 1996; Merchandiser
since 1994.
Kenneth W. Black, Jr. 40 Senior Vice President and Chief
Accounting Officer since 1999; Vice
President and Corporate Controller,
1997 - 1999; Controller,1996 - 1997;
Deloitte & Touche, 1983 - 1996.
Gregory M. Bridgeford 45 Senior Vice President, Business
Development since 1999; Senior Vice
President, Marketing 1998 - 1999;
Senior Vice President and General
Merchandise Manager, 1996 - 1998; Vice
President and General Merchandise
Manager, 1994 - 1996.
Charles W. Canter, Jr. 49 Senior Vice President, Store Operations
Northern Division since 1999; Senior
Vice President and General Merchandise
Manager,Building Materials, 1998 - 1999;
Vice President, Merchandising -
Millwork, 1998; Regional Vice
President, Store Operations, 1993 -
1998.
Robert J. Gfeller, Jr. 38 Senior Vice President, Marketing and
Advertising since 2000; Vice President,
Marketing, 1999 - 2000; Coca-Cola USA
Corp., 1996 - 1999; Nabisco Co. -
Planters Co., Division, 1994 - 1996.
Stephen A. Hellrung 52 Senior Vice President, General Counsel
and Secretary since 1999; The Pillsbury
Company, 1997 - 1998; Bausch & Lomb,
Incorporated, 1982 - 1997.
A. Lee Herring 46 Senior Vice President, Logistics since
1996; Vice President, Logistics, 1993 -
1996.
William L. Irons 56 Senior Vice President, Management
Information Services since 1992.
Perry G. Jennings 42 Senior Vice President, Human Resources
since 1999; Vice President, Operations
and Merchandising Support, 1998;
Director, Merchandising Support and
Administration, 1996 - 1997; Vice
President, Human Resources, 1992 - 1996.
Mark A. Kauffman 41 Senior Vice President and General
Merchandise Manager, Hardlines, since
1998; Senior Vice President, Regional
Merchandising and Product Development,
1998; Vice President, Import
Merchandising, 1996 - 1998; Merchandise
Manager, 1993 - 1996.
Michael K. Menser 46 Senior Vice President and General
Merchandise Manager, Home Decor since
1998; Vice President, Logistics, 1996 -
1998; Senior Director, Logistics, 1994
- 1996.
Robert A. Niblock 37 Senior Vice President, Finance since
1999; Vice President and Treasurer,
1997 - 1998; Senior Director, Taxation,
1996 - 1997; Director, Taxation, 1993 -
1996.
William D. Pelon 50 Senior Vice President, Store Operations
Western Division since 1998; Senior
Vice President, Store Operations, 1997 -
1998; Regional Vice President, Store
Operations, 1996 - 1997; Senior
Director, Sales Communications in 1995;
District Manager, 1991 - 1995.
Dale C. Pond 54 Executive Vice President, Merchandising
and Marketing since 1998; Senior Vice
President, Marketing 1993 - 1998.
David E. Shelton 53 Senior Vice President, Real
Estate/Engineering and Construction
since 1997; Vice President, Store
Operations, 1995 - 1997; Vice
President, Sales Operations, 1992 -
1995.
Larry D. Stone 48 Executive Vice President and Chief
Operating Officer since 1997;
Executive Vice President, Store
Operations 1996 - 1997;
Senior Vice President, Sales Operations,
1995 - 1996; Vice President, General
Merchandising, 1992 - 1995.
William C. Warden, Jr. 47 Executive Vice President and Chief
Administrative Officer since 1999;
Executive Vice President, General
Counsel, Chief Administrative Officer
and Secretary, 1996 - 1999; Senior Vice
President, General Counsel and
Secretary, 1993 - 1996.
Gregory J. Wessling 48 Senior Vice President, Store Operations
- Southern Division since 1999; Senior
Vice President, Store Operations -
Eastern Division, 1998 - 1999; Senior
Vice President and General Merchandise
Manager, 1996 - 1998; Vice President
and General Merchandise Manager, 1994 -
1996.
Thomas E. Whiddon 47 Executive Vice President and Chief
Financial Officer since 1996; Senior
Vice President and Chief Financial
Officer, 1995 - 1996; Senior Vice
President and Treasurer, 1994 - 1995,
Zale Corporation.
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 Stock Exchange in London. The
ticker symbol for Lowe's is LOW. As of January 28, 2000, there were 15,446
holders of record of Lowe's common stock. The table, "Lowe's Quarterly Stock
Price Range and Cash Dividend Payment", on page 32 of the Annual Report to
Security Holders for fiscal year ended January 28, 2000 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.
Item 6 - Selected Financial Data
See page 36 of the Annual Report to Security Holders for fiscal year
ended January 28, 2000.
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 15 through 17 and "Disclosure Regarding
Forward-Looking Statements" on page 13 of the Annual Report to Security
Holders for fiscal year ended January 28, 2000.
Item 7a - Quantitative and Qualitative Disclosures about Market Risk
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Market Risk" beginning on page 17 of the Annual Report
to Security Holders for fiscal year ended January 28, 2000.
Item 8 - Financial Statements and Supplementary Data
See the "Independent Auditors' Report" of Deloitte & Touche LLP on page
14 and the financial statements and notes thereto on pages 19 through 30, and
the "Selected Quarterly Data" on page 36 of the Annual Report to Security
Holders for fiscal year ended January 28, 2000.
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
Part III
Item 10 - Directors and Executive Officers of the Registrant
See "Election of Directors", "Information Concerning Class I Nominees"
and "Information Concerning Continuing Directors" included in the definitive
Proxy Statement which will be filed pursuant to regulation 14A, with the SEC
within 120 days after the fiscal year ended January 28, 2000.
Item 11 - Executive Compensation
See "Compensation of Executive Officers", "Option/SAR Grants in Last
Fiscal Year", "Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-end Option/SAR 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 within 120 days after the fiscal year
ended January 28, 2000. Information included under the captions "Report of
the Compensation Committee" and "Performance Graph" is not incorporated by
reference herein.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
See "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 within 120 days after the fiscal year ended
January 28, 2000.
Item 13 - Certain Relationships and Related Transactions
See "Information about the Board of Directors and Committees of the
Board" included in the definitive Proxy Statement which will be filed pursuant
to regulation 14A, with the SEC within 120 days after the fiscal year ended
January 28, 2000.
Part IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
a) 1. Financial Statements
See the following items and page numbers appearing in the Annual
Report to Security Holders for fiscal year ended January 28, 2000:
Pages
Independent Auditors' Report 14
Consolidated Statements of Earnings for each of the three
fiscal years in the period ended January 28, 2000 19
Consolidated Balance Sheets at January 28, 2000
and January 29, 1999 20
Consolidated Statements of Shareholders' Equity for each of
the three fiscal years in the period ended January 28, 2000 21
Consolidated Statements of Cash Flows for each of the
three fiscal years in the period ended January 28, 2000 22
Notes to Consolidated Financial Statements for each of the
three fiscal years in the period ended January 28, 2000 23-30
2. Financial Statement Schedules
Schedules 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.
3. Exhibits
(3.1) Restated and Amended Charter (filed as Exhibit 3.1 to the
Company's Form 10-Q dated September 14, 1998 and incorporated
by reference herein).
(3.2) Bylaws, as amended.
(4.1) Amended and Restated Rights Agreement, dated December 2, 1999
between the Company and Equiserve Trust Company, N.A., as
Rights Agent, (incorporated herein by reference to Exhibit 2 of
Amendment No. 2 to the Company's Registration Statement on Form
8-A dated February 14, 2000, as amended by Exhibit 1 of
Amendment No. 3 to the Company's Registration Statement on
Form 8-A, Dated March 2, 2000).
(10.1) 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).
(10.2) 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).
(10.3) Indenture dated April 15, 1992 between the Company and Bank
One, N.A., Successor Trustee to 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).
(10.4) Lowe's Companies, Inc. Directors' Deferred Compensation Plan,
effective July 1, 1994 (filed as Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the year ended January 29, 1999,
and incorporated by reference herein).
(10.5) Lowe's Companies, Inc. Director's Stock Incentive Plan (filed
on the Company's Form S-8 dated July 8, 1994 (No. 33-54497) and
incorporated by reference herein).
(10.6) Lowe's Companies, Inc. 1994 Incentive Plan (filed on the
Company's Form S-8 dated July 8, 1994 (No. 33-54499) and
incorporated by reference herein).
(10.7) Amendments to the Lowe's Companies, Inc. 1994 Incentive Plan
dated December 9, 1994. (filed as Exhibit 10.9 to the Company's
Annual Report on Form 10-K for the year ended January 29, 1999,
and incorporated by reference herein).
(10.8) Amendments to the Lowe's Companies, Inc. 1994 Incentive Plan
dated September 17, 1998. (filed as Exhibit 10.10 to the
Company's Annual Report on Form 10-K for the year ended January
29, 1999, and incorporated by reference herein).
(10.9) Amendments to the Lowe's Companies, Inc. 1994 Incentive Plan
dated December 4, 1998. (filed as Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the year ended January
29, 1999, and incorporated by reference herein).
(10.10) Amended and Restated Indenture, dated as of December 1, 1995,
between the Company and Bank One, N.A., formerly known as The
First National Bank of Chicago (filed as Exhibit 4.1 on Form 8-
K dated December 15, 1995, and incorporated by reference
herein).
(10.11) First Supplemental Indenture, dated as of February 23, 1999, to
the Amended and Restated Indenture dated as of December 1, 1995
between the Company and Bank One, N.A., formerly known as The
First National Bank of Chicago (filed as Exhibit 10.13 to the
Company's Annual Report on Form 10-K dated April 19, 1999, and
incorporated by reference herein).
(10.12) Form of the Company's 6 3/8 % Senior Note due December 15, 2005
(filed as Exhibit 4.2 on Form 8-K dated December 15, 1995, and
incorporated by reference herein).
(10.13) Lowe's Companies, Inc. 1997 Incentive Plan (filed on the
Company's Form S-8 dated August 29, 1997 (No. 333-34631) and
incorporated by reference herein).
(10.14) Amendments to the Lowe's Companies, Inc. 1997 Incentive Plan
dated January 25, 1998. (filed as Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the year ended January 29, 1999,
and incorporated by reference herein).
(10.15) Amendments to the Lowe's Companies, Inc. 1997 Incentive Plan
dated September 17, 1998. (filed as Exhibit 10.17 to the
Company's Annual Report on Form 10-K for the year ended January
29, 1999, and incorporated by reference herein).
(10.16) Form of the Company's 6 7/8 % Debenture due February 20, 2028
(filed as Exhibit 4.2 on Form 8-K dated February 20, 1998, and
incorporated by reference herein).
(10.17) Form of the Company's 6 1/2% Debenture due March 15, 2029.
(filed as Exhibit 10.6 to the Company's Annual Report on Form
10-K for the year ended January 29, 1999, and incorporated by
reference herein).
(10.18) Lowe's/Eagle Stock Option Plan (filed as Exhibit 4.2 on the
Company's Form S-8 filed April 7, 1999 (No. 333-75793) and
incorporated by reference herein).
(10.19) Lowe's Companies, Inc. Directors' Stock Option Plan (filed on
the Company's Form S-8 dated October 21, 1999 (No. 333-89471)
and incorporated by reference herein).
(13) Annual Report to Security Holders for fiscal year ended January
28, 2000.
(18) Letter Regarding Change in Accounting Method Dated November 10,
1999 (filed as Exhibit 18 to the Company's Form 10-Q dated
December 13, 1999 and incorporated by reference herein).
(21) List of Subsidiaries.
(23) Consent of Deloitte & Touche LLP
(27) Financial Data Schedule
b) Reports on Form 8-K
There were no reports filed on Form 8-K during the quarter
ended January 28, 2000.
Part IV
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Lowe's Companies, Inc.
March 31, 2000 By: /s/ Thomas E. Whiddon
Date Thomas E. Whiddon
Executive Vice President
and Chief Financial Officer
March 31, 2000 By: /s/ Kenneth W. Black, Jr.
Date Kenneth W. Black, Jr.
Senior Vice President and Chief
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/Robert L. Tillman Chairman of the Board of Directors, 3/31/00
Robert L. Tillman President, Chief Executive Officer Date
and Director
/s/Robert L. Strickland Director 3/31/00
Robert L. Strickland Date
/s/Leonard L. Berry Director 3/31/00
Leonard L. Berry Date
/s/Peter C. Browning Director 3/31/00
Peter C. Browning Date
Director 3/31/00
Carol A. Farmer Date
/s/Paul Fulton Director 3/31/00
Paul Fulton Date
/s/James F. Halpin Director 3/31/00
James F. Halpin Date
/s/Kenneth D. Lewis Director 3/31/00
Kenneth D. Lewis Date
/s/Richard K. Lochridge Director 3/31/00
Richard K. Lochridge Date
/s/Claudine B. Malone Director 3/31/00
Claudine Malone Date
/s/Robert G. Schwartz Director 3/31/00
Robert G. Schwartz Date
EXHIBIT 3.2
BYLAWS OF
LOWE'S COMPANIES, INC.
As Amended and Restated March 31, 2000
INDEX
ARTICLE I. OFFICES 1
ARTICLE II. SHAREHOLDERS 1
SECTION 1. ANNUAL MEETING 1
SECTION 2. SPECIAL MEETINGS 1
SECTION 3. PLACE OF MEETING 1
SECTION 4. NOTICE OF MEETING 2
SECTION 5. CLOSING OF TRANSFER BOOKS OR
FIXING OF RECORD DATE 2
SECTION 6. VOTING LISTS 2
SECTION 7. QUORUM 3
SECTION 8. PROXIES; ELECTRONIC AUTHORIZATION 3
SECTION 9. VOTING OF SHARES 4
SECTION 10. CONDUCT OF MEETINGS 4
ARTICLE III. BOARD OF DIRECTORS 5
SECTION 1. GENERAL POWERS 5
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS 5
SECTION 3. FOUNDING DIRECTOR 5
SECTION 4. QUARTERLY MEETINGS 5
SECTION 5. SPECIAL MEETINGS 6
SECTION 6. NOTICE 6
SECTION 7. QUORUM 6
SECTION 8. MANNER OF ACTING 6
SECTION 9. VACANCIES 6
SECTION 10. COMPENSATION 6
SECTION 11. PRESUMPTION OF ASSENT 6
SECTION 12. ACTION WITHOUT MEETING 7
SECTION 13. INFORMAL ACTION BY DIRECTORS 7
SECTION 14. COMMITTEES GENERALLY 7
SECTION 15. EXECUTIVE COMMITTEE 7
SECTION 16. AUDIT COMMITTEE 8
SECTION 17. COMPENSATION COMMITTEE 8
SECTION 18. GOVERNANCE COMMITTEE 8
SECTION 19. GOVERNMENT/LEGAL AFFAIRS COMMITTEE 8
SECTION 20. SALARY ADMINISTRATION; DIRECTORS
COMPENSATION 9
ARTICLE IV. INDEMNIFICATION 9
SECTION 1. INDEMNIFICATION 9
SECTION 2. LIMITATION ON INDEMNIFICATION 9
SECTION 3. BOARD DETERMINATION 9
SECTION 4. RELIANCE 9
SECTION 5. AGENTS AND EMPLOYEES 10
SECTION 6. EXPENSES 10
SECTION 7. INSURANCE 10
ARTICLE V. OFFICERS 10
SECTION 1. TITLES 10
SECTION 2. ELECTION AND TERM OF OFFICE 10
SECTION 3. REMOVAL 10
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS 11
SECTION 5. VICE CHAIRMEN OF THE BOARD OF DIRECTORS 11
SECTION 6. PRESIDENT 11
SECTION 7. VICE PRESIDENTS 11
SECTION 8. SECRETARY 11
SECTION 9. TREASURER 11
SECTION 10. CONTROLLER 11
ARTICLE VI. DEPARTMENTAL DESIGNATIONS 11
SECTION 1. DEPARTMENTAL DESIGNATIONS 11
ARTICLE VII. CERTIFICATES FOR SHARES AND
THEIR TRANSFER 12
SECTION 1. CERTIFICATES FOR SHARES;
NON-CERTIFICATED SHARES 12
SECTION 2. TRANSFER OF SHARES 12
SECTION 3. LOST CERTIFICATES 13
ARTICLE VIII. FISCAL YEAR 13
ARTICLE IX. DIVIDENDS 13
ARTICLE X. SEAL 13
ARTICLE XI. WAIVER OF NOTICE 14
ARTICLE XII. AMENDMENTS 14
BYLAWS
OF
LOWE'S COMPANIES, INC.
As Amended and Restated March 31, 2000
ARTICLE I. OFFICES
The principal office of the corporation in the State of North Carolina
shall be located in the County of Wilkes. The registered office of the
corporation, required by law to be continuously maintained in the State
of North Carolina, may be, but need not be, identical with the principal
office and shall be maintained at that location identified as the address
of the business office of the registered agent with the North Carolina
Secretary of State. 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.
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
business 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 1, 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.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders for
any purpose or purposes may be called by the Chairman of the Board 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 do not designate the
place of meeting for either an annual or special meeting of the
shareholders, the Chairman of the Board may designate the place of
meeting. If the Chairman of the Board does not designate the place of
meeting, the meeting shall be held at the offices of the corporation in
North Wilkesboro, North Carolina.
SECTION 4. NOTICE OF MEETING. Written 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 10 nor more than 60 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 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 unless a
new record date for the adjourned meeting is or must be fixed, in which
event notice shall be given to shareholders as of the new record date.
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, 60
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 10 days immediately
preceding such meeting. In lieu of closing the 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 70 days and, in case of a meeting of shareholders, not less than 10
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 5, such determination shall apply to any adjournment
thereof if the meeting is adjourned to a date not more than 120 days
after the date fixed for the original meeting.
SECTION 6. VOTING LISTS. The officer or agent having charge of the
Stock transfer books for shares of the corporation shall make before each
meeting of shareholders a complete list of the shareholders entitled to
vote at such meeting arranged in alphabetical order and by voting group
(and within each voting group by class or series of shares), with the
address of and the number of shares held by each. For a period beginning
two business days after notice of the meeting is given and continuing
through the meeting, this list shall be available at the corporation's
principal office for inspection by any shareholder at any time during
usual business hours. The 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. Shares entitled to vote as a separate voting group
may take action on a matter at a meeting if a quorum of that voting group
exists with respect to that matter. In the absence of a quorum at the
opening of any meeting of shareholders, the meeting may be adjourned from
time to time by the vote of the majority of the votes cast on the motion
to adjourn. A majority of the votes entitled to be cast on the matter by
the voting group constitutes a quorum of that voting group for action on
that matter. Once a share is represented for any purpose at a meeting, it
is deemed present for quorum purposes for the remainder of the meeting
and for any adjournment of the meeting unless a new record date is or
must be set for the adjourned meeting. If a quorum exists, action on a
matter (other than the election of directors) by a voting group is
approved if the votes cast within the voting group favoring the action
exceed the votes cast opposing the action, unless the Articles of
Incorporation, a Bylaw adopted by the shareholders, or the North Carolina
Business Corporation Act requires a greater number of affirmative votes.
SECTION 8. PROXIES; ELECTRONIC AUTHORIZATION
(a) 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.
(b) The secretary may approve procedures to enable a shareholder or a
shareholder's duly authorized attorney in fact to authorize another
person or persons to act for him or her as proxy by transmitting or
authorizing the transmission of a telegram, cablegram, internet
transmission, telephone transmission or other means of electronic
transmission to the person who will be the holder of the proxy or to
a proxy solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the holder of
the proxy to receive such transmission, provided that any such
transmission must either set forth or be submitted with information
from which the inspectors of election can determine that the
transmission was authorized by the shareholder or the shareholder's
duly authorized attorney in fact. If it is determined that such
transmissions are valid, the inspectors shall specify the
information upon which they relied. Any copy, facsimile
telecommunications or other reliable reproduction of the
writing or transmission created pursuant to this Section 8 may be
substituted or used in lieu of the original writing or transmission
for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
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 Articles of Incorporation or
Bylaws. Voting on all substantive matters shall be by a ballot vote on
that particular matter. Voting on procedural matters 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 demand a ballot vote on procedural
matters.
SECTION 10. CONDUCT OF MEETINGS. At each meeting of the stockholders,
the Chairman of the Board shall act as chairman and preside. In his
absence, the Chairman of the Board may designate another officer or
director to preside. The Secretary or an Assistant Secretary, or in their
absence, a person whom the Chairman of such meeting shall appoint, shall
act as secretary of the meeting.
At any meeting of stockholders, only business that is properly brought
before the meeting may be presented to and acted upon by stockholders. To
be properly brought before the meeting, business must be brought (a) by
or at the direction of the Board of Directors or (b) by a stockholder who
has given written notice of business he expects to bring before the
meeting to the Secretary not less than 15 days prior to the meeting. If
mailed, such notice shall be sent by certified mail, return receipt
requested, and shall be deemed to have been given when received by the
Secretary. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the meeting (a) a
brief description of the business to be brought before the meeting and
the reasons for conducting such business at the meeting, (b) the name and
address, as they appear on the corporation's books, of the stockholder
proposing such business, (c) the class and number of shares of the
corporation's stock beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. No business shall
be conducted at a meeting of stockholders except in accordance with the
procedures set forth in this Section 10. The chairman of a meeting of
stockholders shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting in
accordance with the provisions of this Section 10, and if he should so
determine, he shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
Any nomination for director made by a stockholder must be made in
writing to the Secretary not less than 15 days prior to the meeting of
stockholders at which Directors are to be elected. If mailed, such notice
shall be sent by certified mail, return receipt requested,
and shall be deemed to have been given when received by the Secretary. A
stockholder's nomination for director shall set forth (a) the name and
business address of the stockholder's nominee, (b) the fact that the
nominee has consented to his name being placed in nomination, (c) the
name and address, as they appear on the corporation's books, of the
stockholder making the nomination, (d) the class and number of shares of
the corporation's stock beneficially owned by the stockholder, and (e)
any material interest of the stockholder in the proposed nomination.
Notwithstanding compliance with this Section 10, the chairman of a
meeting of stockholders may rule out of order any business brought before
the meeting that is not a proper matter for stockholder consideration.
This Section 10 shall not limit the right of stockholders to speak at
meetings of stockholders on matters germane to the corporation's
business, subject to any rules for the orderly conduct of the meeting
imposed by the Chairman of the meeting. The corporation shall not have
any obligation to communicate with stockholders regarding any business or
director nomination submitted by a stockholder in accordance with this
Section 10 unless otherwise required by law.
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 Articles of Incorporation or by the Bylaws.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors
of the Corporation shall be 12, divided into three classes: Class I,
(four), Class II, (four), and Class III, (four). One director shall be
designated and elected by the Board as Chairman of the Board of
Directors, and shall 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. Directors
need not be residents of the State of North Carolina or shareholders of
the corporation. Subject to the Articles of Incorporation, 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, and the number of directors
which shall constitute the class of directors being elected at such
annual meeting. The directors may amend the Bylaws between meetings of
shareholders to increase or decrease the number of directors to make
vacancies available for the election of new directors.
SECTION 3. FOUNDING DIRECTOR. A Founding Director is a person who was
a director when it became a public company in 1961, who was a director on
November 7, 1980, and who has served continuously as a director since
1961.
SECTION 4. QUARTERLY MEETINGS. Quarterly meetings of the Board of
Directors shall be held at a time and place determined by the Chairman
of the Board of Directors. 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 5. 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 two 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 6. NOTICE. Notice of any special meeting shall be given by
either mail, facsimile or telephone. Notice of any special meeting given
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 facsimile or by telephone, it shall be done so at
least two days prior to the special meeting and shall be deemed given at
the time the facsimile is transmitted or 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 7. 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 8. 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 Articles of
Incorporation.
SECTION 9. VACANCIES. Any vacancy occurring in the Board of Directors
shall be filled as provided in the Articles of Incorporation.
SECTION 10. COMPENSATION. The directors may be paid such expenses as
are incurred in connection with their duties as directors. The Board of
Directors may also pay to the directors compensation for their service as
directors.
SECTION 11. 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 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 12. 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 13. INFORMAL ACTION BY DIRECTORS. Action taken by a majority of
the directors without a meeting is action of the Board of Directors if
written consent to the action is signed by all of the directors and filed
with the minutes of the proceedings of the Board of Directors, whether
done before or after the action so taken.
SECTION 14. COMMITTEES GENERALLY. Committees of the Board of
Directors 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 and a committee vice chairman from the membership for
each committee established. In the absence of the designation of a
committee chairman or vice chairman by the Board, a committee by majority
vote may elect a chairman or vice chairman from its own membership.
SECTION 15. EXECUTIVE COMMITTEE. (a) The Board may establish an
Executive Committee comprising not less than three members. This
Committee may exercise all of the authority of the Board of Directors to
the full extent permitted by law, but shall not have power:
i) To declare dividends or authorize distributions;
ii) To approve or propose to shareholders any action that is required
to be approved by shareholders under the North Carolina Business
Corporation Act;
iii) To approve an amendment to the Articles of Incorporation of the
Corporation;
iv) To approve a plan of dissolution; merger or consolidation;
v) To approve the sale, lease or exchange of all or substantially all
of the property of the Corporation;
vi) To designate any other committee, or to fill vacancies in the Board
of Directors or other committees;
vii) To fix the compensation of directors for serving on the Board of
Directors or any committee;
viii) To amend or repeal the Bylaws, or adopt new Bylaws;
ix) To authorize or approve reacquisition of shares, except according
to a formula or method approved by the Board of Directors;
x) To authorize or approve the issuance or sale or contract for sale
of shares, or determine the designation and relative rights, preferences
and limitations of a class or series of shares, unless the Board of
Directors specifically authorizes the Executive Committee to do so within
limits established by the Board of Directors;
xi) To amend, or repeal any resolution of the Board of Directors which
by its terms is not so amendable or repealable; or
xii) To take any action expressly prohibited in a resolution of the
Board of Directors.
SECTION 16. AUDIT COMMITTEE. The Board may establish an Audit
Committee comprising not less than three members, all of whom shall be
non-employee directors. The Committee shall aid the Board in carrying out
its responsibilities for accurate and informative financial reporting,
shall assist the Board in making recommendations with
respect to management's efforts to maintain and improve financial
controls, shall review reports of examination by the independent
auditors, and except as otherwise required by law, shall have authority
to act for the Board in any matter delegated to this Committee by the
Board of Directors. The Committee shall recommend each year an
independent certified public accounting firm as independent auditors for
the Corporation. The Corporation's Head of Internal Audit shall report
to the Audit Committee, and his employment may only be terminated with
the approval of the Committee.
SECTION 17. COMPENSATION COMMITTEE. The Board may establish a
Compensation Committee comprising not less than three members, all of
whom shall be non-employee directors. Except as otherwise required by
law, the Compensation Committee shall have authority to act for the Board
in any matter delegated to this Committee by the Board of Directors.
SECTION 18. GOVERNANCE COMMITTEE. The Board may establish a Governance
Committee comprising not less than three members, all of whom shall be
non-employee directors. Except as otherwise required by law, the
Governance Committee shall have authority to act for the Board in any
matter delegated to this Committee by the Board of Directors.
SECTION 19. GOVERNMENT/LEGAL AFFAIRS COMMITTEE. The Board may
establish a Government/Legal Affairs Committee to consist of not less
than three directors. Except as otherwise required by law, the
Government/Legal Affairs Committee shall have authority to act for the
Board in any manner delegated to this Committee by the Board of
Directors.
SECTION 20. SALARY ADMINISTRATION; DIRECTORS COMPENSATION.
The compensation of employees not covered by the Compensation Committee
duties shall be the responsibility of the Chief Executive Officer. The
compensation of independent directors shall be recommended to the Board
of Directors by the Chief Executive Officer.
ARTICLE IV. INDEMNIFICATION
SECTION 1. INDEMNIFICATION. In addition to any indemnification required
Or permitted by law, and except as otherwise provided in these Bylaws,
any person who at any time serves or has served as a director or officer
of the corporation, or in such capacity at the request of the corporation
for any other corporation, partnership, joint venture, trust or other
enterprise, shall have a right to be indemnified by the corporation to
the fullest extent permitted by law against (i) reasonable expenses,
including attorneys' fees, actually and necessarily incurred by him in
connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative,
seeking to hold him liable by reason of the fact that he is or was acting
in such capacity, and (ii) payments made by him in satisfaction of any
judgment, money decree, fine, penalty or reasonable settlement for which
he may have become liable in any such action, suit or proceeding.
SECTION 2. LIMITATION ON INDEMNIFICATION. The corporation shall not
indemnify any person hereunder against liability or litigation expense he
may incur on account of his activities which were at the time taken known
or believed by him to be clearly in conflict with the best interests of
the corporation. The corporation shall not indemnify any director with
respect to any liability arising out of N.C.G.S. Section 55-8-33
(relating to unlawful declaration of dividends) or any transaction from
which the director derived an improper personal benefit as provided in
N.C.G.S. Section 55-2-02(b)(3).
SECTION 3. BOARD DETERMINATION. If any action is necessary or
appropriate to authorize the corporation to pay the indemnification
required by this Bylaw the Board of Directors shall take such action,
including (i) making a good faith evaluation of the manner in which the
claimant for indemnity acted and of the reasonable amount of
indemnify due him, (ii) giving notice to, and obtaining approval by, the
shareholders of the corporation, and (iii) taking any other action.
SECTION 4. RELIANCE. Any person who at any time after the adoption of
this Bylaw serves or has served in any of the capacities indicated in
this Bylaw shall be deemed to be doing or to have done so in reliance
upon, and as consideration for, the right of indemnification provided
herein. Such right shall inure to the benefit of the legal
representatives of any such person and shall not be exclusive of any
other rights to which such person may be entitled apart from the
provision of this Bylaw.
SECTION 5. AGENTS AND EMPLOYEES. The provisions of this Bylaw shall not
be deemed to preclude the corporation from indemnifying persons serving
as agents or employees of the corporation, or in such capacity at the
request of the corporation for any other corporation, partnership, joint
venture, trust or other enterprise, to the extent permitted by law.
SECTION 6. EXPENSES. The corporation shall be entitled to pay the
expenses incurred by a director or officer in defending a civil or
criminal action, suit or proceeding in advance of final disposition upon
receipt of an undertaking by or on behalf of the director or officer to
repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation against such expenses.
SECTION 7. INSURANCE. As provided by N.C.G.S. Section 55-8-57, the
Corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the corporation, or who is or was serving at the request of the
corporation as a director, officer or employee or agent of another
corporation, partnership, joint venture, trust or other enterprise or as
a trustee or administrator under an employee benefit plan against any
liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such, whether or not the corporation has
the power to indemnify him against such liability.
ARTICLE V. OFFICERS
SECTION 1. TITLES. The officers of the corporation may consist of the
Chairman of the Board of Directors, Vice Chairmen, the President, and
such Vice Presidents as shall be elected 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.
SECTION 3. REMOVAL. Since officers serve at the pleasure of the Board,
any officer may be removed at any time by the Board of Directors, with or
without cause. Termination of an officer's employment with the
Corporation by the appropriate official (and by the Audit Committee for
the Head of Internal Audit) shall also end his term as an officer.
SECTION 4. 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 shall preside at meetings of the Board of
Directors, 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, subject to the general supervision and control of the
Board of Directors. The Chairman 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 Chairman shall vote as agent for the
corporation the capital stock held or owned by the corporation in any
corporation. The Chairman is authorized to delegate the authority to vote
capital stock held or owned by the corporation and to execute and deliver
agreements and other instruments to other officers of the corporation.
SECTION 5. VICE CHAIRMEN OF THE BOARD OF DIRECTORS. The Board of
Directors may elect one or more Vice Chairmen from their members. A Vice
Chairman shall preside at meetings of the Board of Directors in the
absence of the Chairman.
SECTION 6. PRESIDENT. The President perform such duties and have such
responsibilities as are assigned by the Board of Directors or the Chief
Executive Officer.
SECTION 7. VICE PRESIDENTS. The Vice Presidents shall perform such
duties and have such responsibilities as are assigned by the Board of
Directors or the Chief Executive Officer.
SECTION 8. SECRETARY. The Secretary shall perform such duties and have
such responsibilities as are assigned by the Board of Directors or the
Chief Executive Officer.
SECTION 9. TREASURER. The Treasurer shall perform such duties and have
such responsibilities as are assigned by the Board of Directors or the
Chief Executive Officer.
SECTION 10. CONTROLLER. The Controller shall perform such duties and
have such responsibilities as are assigned by the Board of Directors or
the Chief Executive Officer.
ARTICLE VI. DEPARTMENTAL DESIGNATIONS
SECTION 1. DEPARTMENTAL DESIGNATIONS. The Chief Executive Officer may
establish such departmental or functional designations or titles
pertaining to supervisory personnel as the Chief Executive Officer 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 Chief
Executive Officer 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. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES; NON-CERTIFICATED SHARES
(a)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 Chairman of the Board 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 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.
(b)The Board of Directors may authorize the issuance of some or all of
the shares of any or all of the corporation's classes or series of stock
without certificates. Such authorization shall not affect shares already
represented by certificates until such shares are surrendered to the
corporation. Within a reasonable time after the issuance or transfer of
shares without certificates, the corporation shall send the shareholder a
written statement with information required on certificates by North
Carolina General Statutes 55-6-25(b) and (c), and, if applicable, North
Carolina General Statutes 55-6-27, or any successor law.
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, N.A., Rights
Agent, dated as of September 9, 1998, is deemed to constitute a
restriction on the transfer of any securities of the Company, including,
without limitation, the Rights, as defined therein, such restriction is
hereby authorized by the Bylaws of the Company.
Transfer of shares not represented by certificates shall be made in
accordance with such requirements with respect to transfer as appear in
Article 8 of the Uniform Commercial Code as in effect from time to time
in North Carolina.
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 VIII. FISCAL YEAR
The fiscal year of the Corporation shall end on the Friday nearest to
January 31 of each year. The fiscal year shall consist of four quarterly
periods, each comprising 13 weeks, with the 13-week periods divided into
three periods of four weeks, five weeks, and four weeks. Every six to
eight years, the fiscal year shall be a 53-week year, with the fourth
period comprising four weeks, five weeks, and five weeks, to reflect the
365th day of each year and the 29th day of February in leap year.
ARTICLE IX. 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 X. 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 XI. 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 XII. 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 repeal any Bylaws and to enact Bylaws
which, if expressly so provided, may not be amended, altered or repealed
by the Board of Directors.
EXHIBIT 13
Page 7:
"Lowe's Stores" table showing the number of Lowe's stores in each applicable
state, including projected store openings in fiscal 2000.
State Number of Stores State Number of Stores
Alabama 20 Alaska 1
Arizona 5 Arkansas 8
California 24 Colorado 7
Connecticut 4 Delaware 4
Florida 39 Georgia 28
Hawaii 2 Idaho 2
Illinois 14 Indiana 22
Iowa 5 Kansas 3
Kentucky 22 Louisiana 12
Maryland 16 Massachusetts 1
Michigan 19 Mississippi 9
Missouri 13 Montana 1
Nevada 5 New Jersey 3
New Mexico 1 New York 11
North Carolina 72 Ohio 48
Oklahoma 9 Oregon 1
Pennsylvania 31 South Carolina 30
Tennessee 32 Texas 53
Utah 5 Virginia 41
Washington 18 West Virginia 12
Page 13:
Disclosure Regarding Forward Looking Statements
Our Annual Report talks about our future, particularly in the "Letter to
Shareholders" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." While we believe our expectations are reasonable,
we can't guarantee them and you should consider this when thinking about
statements we make that aren't historical facts. Some of the things that
could cause our actual results to differ substantially from our expectations
are:
Our sales are dependent upon the general economic health of the country,
variations in the number of new housing starts, the level of repairs,
remodeling and additions to existing homes, commercial building activity, and
the availability and cost of financing. An economic downturn can impact sales
because much of our inventory is purchased for discretionary projects, which
can be delayed.
Our expansion strategy may be impacted by environmental regulations, local
zoning issues and delays, availability and development of land, and more
stringent land use regulations than we have traditionally experienced.
Many of our products are commodities whose prices fluctuate erratically
within an economic cycle, a condition true of lumber and plywood.
Our business is highly competitive, and as we expand to larger markets, and
to the Internet, we may face new forms of competition which do not exist in
some of the markets we have traditionally served.
The ability to continue our everyday competitive pricing strategy and
provide the products that customers want depends on our vendors providing a
reliable supply of inventory at competitive prices.
On a short-term basis, weather may impact sales of product groups like lawn
and garden, lumber, and building materials.
Page 14:
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Lowe's Companies, Inc.
We have audited the accompanying consolidated balance sheets of Lowe's
Companies, Inc. and subsidiaries as of January 28, 2000 and January 29, 1999,
and the related consolidated statements of earnings, shareholders' equity, and
cash flows for each of the three fiscal years in the period ended January 28,
2000. 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. The consolidated financial statements give
retroactive effect to the 1999 merger of the Company and Eagle Hardware &
Garden, Inc., which has been accounted for as a pooling of interests as
described in Note 2 to the consolidated financial statements. We did not
audit the balance sheet of Eagle Hardware & Garden, Inc. as of January 29,
1999, or the related statements of earnings, shareholders' equity, and cash
flows of Eagle Hardware & Garden, Inc. for each of the fiscal years ended
January 29, 1999 and January 30, 1998, which statements reflect total assets
of $719.8 million as of January 29, 1999, and total revenues of $1,085.7
million and $971.5 million for each of the fiscal years ended January 29, 1999
and January 28, 1998, respectively. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Eagle Hardware & Garden, Inc. for fiscal
years 1998 and 1997, is based solely on the report of such other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 and the report of the other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Lowe's Companies, Inc. and
subsidiaries at January 28, 2000 and January 29, 1999, and the results of
their operations and their cash flows for each of the three fiscal years in
the period ended January 28, 2000 in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, effective for
the year ended January 28, 2000, the Company has given retroactive effect to
the change in its method of accounting for a substantial portion of its
inventories from the LIFO (last-in, first-out) method to the FIFO (first-in,
first-out) method.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 17, 2000
Pages 15-17:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion summarizes the significant factors affecting the
Company's consolidated operating results and liquidity and capital resources
during the three-year period ended January 28, 2000 (i.e., fiscal years 1999,
1998 and 1997). This discussion should be read in conjunction with the
Letter to Shareholders, financial statements, and financial statement
footnotes included in this annual report.
The Company changed its method of accounting for substantially all of
its inventories from the Last-In-First-Out (LIFO) method to the First-In-
First-Out (FIFO) method effective for the fiscal year ended January 28, 2000.
The Company has been experiencing reduced costs in most product categories
resulting from a combination of better buying, increased imports and
logistics efficiencies. Therefore, management believes the FIFO method
provides a better measurement of operating results. The change will also aid
in financial statement comparability within the retail home improvement
industry segment.
Prior period consolidated financial statements have been restated for
the retroactive effect of the change in accounting method. A LIFO adjustment
was not required during 1999 because the calculated effect was minimal;
therefore there was no effect on current year earnings. The effect of this
change on the Company's net earnings and retained earnings for the years
ended January 29, 1999 and January 30, 1998 was a decrease of $18.4 million
($.05 per share diluted) and $4.4 million ($.01 per share diluted),
respectively.
The Company completed its merger with Eagle Hardware & Garden, Inc.
(Eagle) on April 2, 1999. The transaction, which was valued at approximately
$1.3 billion, was structured as a tax-free exchange of the Company's common
stock for Eagle's common stock, and was accounted for as a pooling of
interests. As a result, all current and historical financial information is
presented on a combined basis.
OPERATIONS
Net earnings for 1999 increased 34% to $672.8 million or 4.2% of sales
compared to $500.4 million or 3.8% of sales for 1998. Diluted earnings per
share were $1.75 for 1999 compared to $1.34 for 1998 and $1.04 for 1997.
Return on beginning assets was 9.5% for 1999 compared to 8.5% for 1998; and
return on beginning shareholders' equity was 18.6% for 1999 compared to 16.8%
for 1998.
Net earnings for 1999, excluding the one-time charge of $.04 per share
for costs relating to the merger with Eagle, increased 38% to $689.8 million
or 4.3% of sales. Diluted earnings per share, excluding the one-time charge,
were $1.79 for 1999. Excluding the one-time charge, return on beginning
assets was 9.7% for 1999; and return on beginning shareholders' equity was
19.1% for 1999.
The Company's sales were $15.9 billion in 1999, a 19% increase over
1998 sales of $13.3 billion. Sales for 1998 were 20% higher than 1997
levels. Comparable store sales increased 6.2% in 1999. The increases in
sales are attributable to the Company's ongoing store expansion and
relocation program along with the growth in comparable store sales.
Comparable store sales increases are driven by the Company's focus on
commercial business, special order, and installed sales initiatives, which is
combined with the continued strategy of employing an expanded inventory
assortment, everyday competitive prices and an emphasis on customer service.
The following table presents sales and store information:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
Sales (in millions) $15,906 $13,331 $11,108
Sales Increases 19% 20% 19%
Comparable Store Sales Increases 6% 6% 4%
At end of year:
Stores 576 520 477
Sales Floor Square Feet (in millions) 57.0 47.8 39.9
Average Store Size Net Selling
Square Feet (in thousands) 99 92 84
</TABLE>
Gross margin in 1999 was 27.5% of sales compared to 26.8% in 1998. Both of
these years showed improvement over the 26.6% rate achieved in 1997. Lower
product acquisition costs, along with adherence to careful pricing
disciplines in the execution of the Company's everyday competitive pricing
strategy, and changes in product mix resulting from the expanded merchandise
selection available in larger stores continued to provide margin improvements
during 1999 and 1998. In addition, an increase in the level of controls
relating to inventory shrinkage also contributed to gross margin improvements
in 1999.
Selling, general and administrative expenses (SG&A) were $2.8 billion
or 17.4% of sales in 1999. SG&A in the two previous years were $2.3 and $2.0
billion or 17.5% and 17.6% of sales, respectively. The 10 basis point
decrease in 1999 and 1998 resulted primarily from lower net advertising
costs, increased credit card program income and leveraging of expenses.
Store opening costs were $98.4 million for 1999 compared to $75.6 and
$72.7 million in 1998 and 1997, respectively, and were expensed as incurred.
These costs are associated with the opening of 91 stores in 1999 (60 new and
31 relocated). This compares to 81 stores in 1998 (50 new and 31 relocated)
and 72 stores in 1997 (48 new and 24 relocated). As a percentage of sales,
store opening costs were 0.6% for both 1999 and 1998 and 0.7% for 1997.
Store opening costs averaged approximately $1.0 million per store in 1999.
Depreciation, reflecting continued fixed asset expansion, increased
17% to $337.4 million in 1999, compared to increases of 13% and 22% in 1998
and 1997, respectively. Depreciation as a percentage of sales was 2.1% for
1999, a slight decrease from 2.2% in 1998 and 2.3% in 1997. Approximately
29% of new stores opened in the last three years have been leased, of which
approximately 47%, 43% and 25% in 1999, 1998 and 1997, respectively, were
under capital leases. Property, less accumulated depreciation, increased to
$5.2 billion at January 28, 2000 compared to $4.1 billion at January 29,
1999. The increase in property resulted primarily from the Company's store
expansion program, including land, building, store equipment, fixtures and
displays.
Net interest costs as a percent of sales were 0.5% for 1999 and 0.6%
for 1998 and 1997. Net interest costs totaled $84.9 million in 1999, $80.9
million in 1998 and $71.6 million in 1997. Interest costs relating to
capital leases were $42.6, $39.3 and $38.4 million for 1999, 1998 and 1997,
respectively. See the discussion of liquidity and capital resources below.
The Company's effective income tax rates were 36.7%, 36.4% and 36.0%
in 1999, 1998 and 1997, respectively. The higher rates in 1999 and 1998 were
primarily related to expansion into states with higher state income tax
rates. The rate increase in 1999 is also attributable to the impact of non-
deductible merger expenses.
LIQUIDITY AND CAPITAL RESOURCES
Primary sources of liquidity are cash flows from operating activities
and certain financing activities. Net cash provided by operating activities
was $1.2 billion for 1999. This compares to $741.6 and $691.0 million in
1998 and 1997, respectively. The increase in net cash provided by operating
activities for 1999 and 1998 is primarily related to increased earnings and
various operating liabilities which were offset by an increase in inventory,
net of an increase in accounts payable from year to year. Working capital at
January 28, 2000 was $1.3 billion compared to $942.6 million at January 29,
1999.
The primary component of net cash used in investing activities
continues to be new store facilities in connection with the Company's
expansion plan. Cash acquisitions of fixed assets were $1.5 billion for
1999. This compares to $1.1 billion and $826.2 million for 1998 and 1997,
respectively. Retail selling space as of January 28, 2000 increased 19% over
the selling space as of January 29, 1999. The January 29, 1999 selling space
total of 47.8 million square feet represents a 20% increase over 1997.
Financing and investing activities also include noncash transactions of
capital leases for new store facilities and equipment, the result of which is
to increase long-term debt and property. During 1999, 1998 and 1997, the
Company acquired fixed assets (primarily new store facilities) under capital
leases of $27.6, $47.3 and $32.7 million, respectively.
Cash flows provided by financing activities were $593.4, $287.5 and
$265.1 million in 1999, 1998 and 1997, respectively. The major cash
components of financing activities in 1999 included increased cash from the
issuance of $400 million principal amount of 6.5% debentures due March 15,
2029 in a private offering, and $348.3 million in net proceeds from a common
stock offering, offset by a decrease in cash from the payment of $47.6
million in cash dividends and $108.3 million in scheduled debt maturities.
In 1998, financing activities included the issuance of $300 million principal
amount of 6.875% debentures, $50.8 million in cash dividend payments and
$23.3 million in scheduled debt repayments. Major financing activities
during 1997 included cash received from the issuance of $268 million
aggregate principal of Medium Term Notes, offset by cash dividend payments of
$28.7 million and $36.3 million of scheduled debt repayments. The ratio of
long-term debt to equity plus long-term debt was 27.6%, 28.9% and 28.9% as of
year end 1999, 1998 and 1997, respectively. The decrease in 1999 was
primarily due to proceeds from a common stock offering as previously
described.
At January 28, 2000, the Company had a $300 million revolving credit
facility with a syndicate of eleven banks, available lines of credit
aggregating $218 million for the purpose of issuing documentary letters of
credit and standby letters of credit and $50 million available, on an
unsecured basis, for the purpose of short-term borrowings. At January 28,
2000, outstanding letters of credit aggregated $108.8 million. The revolving
credit facility has $100 million expiring in November 2000, with the remaining
$200 million expiring in November 2001. In addition, the Company has a $100
million revolving credit and security agreement from a financial institution
with $92.5 million outstanding at January 28, 2000.
The Company's 2000 capital budget is currently at $2.2 billion,
inclusive of approximately $225 million of operating or capital leases.
Approximately 85% of this planned commitment is for store expansion and new
distribution centers. Expansion plans for 2000 consist of approximately 95
stores (including the relocation of 17 older, smaller format stores). This
planned expansion is expected to increase sales floor square footage by
approximately 18%. Approximately 10% of the 2000 projects will be leased and
90% will be owned. The Company has begun construction on a regional
distribution center located in Perris, California. The 1.2 million square
foot facility is expected to be operational in the first quarter of 2001.
During 2000, construction will also begin on another distribution center in
Findlay, Ohio which is expected to be operational in late 2001. At January
28, 2000, the Company operated six regional distribution centers and nine
smaller support facilities. The Company believes that funds from operations,
funds from debt issuances, leases and existing short-term credit agreements
will be adequate to finance the 2000 expansion plan and other operating
requirements.
YEAR 2000
The Company, as well as most other businesses, committed a significant
amount of time and resources to ensure that its information technology (IT)
systems were year 2000 compliant. The Company also took steps to prevent or
lessen any potential adverse effects on overall operations, which included
assessing the readiness of merchandise vendors and other entities with which
it does business. As a result of these preparations, the Company achieved a
smooth transition into the year 2000.
Preparations for the year 2000 required expenditures to convert the
Company's existing IT systems. These costs have been estimated to total
approximately $5 million and were expensed as incurred. In addition,
approximately $19 million of computer hardware was purchased to replace
existing non-compliant hardware. The cost of the new hardware was
capitalized and is being depreciated over useful lives ranging from three to
five years. The cost to convert systems was mitigated by substantial
investments in new computer equipment over the past six years. The Company
continuously makes investments in technology in order to improve customer
service and the availability of information to management.
MARKET RISK
During 1999 and 1998, the Company utilized an interest rate swap
agreement to manage interest rates on certain mortgages. Variable rates on
mortgages, totaling $25 million, are being swapped for a fixed rate of 7.94%
until the year 2007. The swap agreement limits the Company's exposure to the
possibility of rising interest rates.
The Company's major market risk exposure is the potential loss arising
from changing interest rates and its impact on long-term investments and
long-term debt. The Company's policy is to manage interest rate risks by
maintaining a combination of fixed and variable rate financial instruments.
At January 28, 2000, long-term investments consisted of $31.1 million in
municipal obligations and preferred stocks, classified as available-for-sale
securities. Although the fair value of these securities, like all fixed
income securities, would fall if interest rates increase, the Company has the
ability to hold its fixed income investments until maturity and not
experience an adverse impact on earnings or cash flows. The following table
summarizes the Company's market risks associated with long-term debt. The
table presents principal cash outflows and related interest rates by year of
maturity. Fair values included below were determined using quoted market
rates or interest rates that are currently available to the Company on debt
with similar terms and remaining maturities.
<TABLE>
Long-Term Debt Maturities by Fiscal Year
(Dollars in Millions)
<CAPTION>
There- Fair
2000 2001 2002 2003 2004 After Total Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate $61.1 $43.3 $61.5 $31.8 $80.2 $1,560.5 $1,838.4 $2,021.4
Average
interest rate 7.51% 8.27% 8.15% 8.67% 8.32% 7.61%
Variable Rate $ 0.2 $ 0.1 $ 0.1 $ 0.1 $ 0.1 $ 2.2 $ 2.8 $2.8
Average
interest rate 4.25% 4.25% 4.25% 4.25% 4.25% 3.63%
</TABLE>
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133) was issued in June
1998. SFAS 133 is effective for the Company in the year beginning February
3, 2001. SFAS 133 requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those
instruments at fair value. Management is currently evaluating the impact of
the adoption of SFAS 133 and its effect on the Company's financial
statements.
Pages 19-30:
<TABLE>
Lowe's Companies, Inc.
Consolidated Statements of Earnings
In Thousands, Except Per Share Data
<CAPTION>
January 28, % January 29, % January 30, %
Years Ended on 2000 Sales 1999 Sales 1998 Sales
<S> <C> <C> <C> <C> <C> <C>
Net Sales $15,905,595 100.0% $13,330,540 100.0% $11,108,378 100%
Cost of Sales 11,525,013 72.5 9,756,645 73.2 8,155,332 73.4
Gross Margin 4,380,582 27.5 3,573,895 26.8 2,953,046 26.6
Expenses:
Selling, General
and Administrative 2,772,428 17.4 2,341,410 17.5 1,954,440 17.6
Store Opening Costs 98,448 0.6 75,571 0.6 72,666 0.7
Depreciation 337,359 2.1 288,607 2.2 255,694 2.3
Interest (Note 14) 84,852 0.5 80,941 0.6 71,615 0.6
Nonrecurring Merger
Costs (Note 2) 24,378 0.2 - - - -
Total Expenses 3,317,465 20.8 2,786,529 20.9 2,354,415 21.2
Pre-Tax Earnings 1,063,117 6.7 787,366 5.9 598,631 5.4
Income Tax Provision
(Note 12) 390,322 2.5 286,992 2.1 215,601 1.9
Net Earnings $672,795 4.2% $500,374 3.8% $383,030 3.5%
Basic Earnings Per Share (Note 8) $1.76 $1.35 $1.04
Diluted Earnings
Per Share (Note 8) $1.75 $1.34 $1.04
Cash Dividends Per Share $0.13 $0.12 $0.11
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Lowe's Companies, Inc.
Consolidated Balance Sheets
In Thousands
<CAPTION>
January 28, % January 29, %
2000 Total 1999 Total
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and Cash Equivalents $491,122 5.5% $228,874 3.2%
Short-Term Investments (Note 3) 77,670 0.9 20,343 0.3
Accounts Receivable - Net (Note 5) 147,901 1.6 143,928 2.0
Merchandise Inventory (Note 1) 2,812,361 31.2 2,384,700 33.6
Deferred Income Taxes (Note 12) 53,145 0.6 41,814 0.6
Other Current Assets 127,342 1.4 47,201 0.7
Total Current Assets 3,709,541 41.2 2,866,860 40.4
Property, Less Accumulated
Depreciation (Notes 4 and 6) 5,177,222 57.5 4,085,798 57.7
Long-Term Investments (Note 3) 31,114 0.3 28,716 0.4
Other Assets (Note 1) 94,446 1.0 105,508 1.5
Total Assets $9,012,323 100.0% $7,086,882 100.0%
Liabilities and Shareholders' Equity
Current Liabilities:
Short-Term Borrowings (Note 5) $92,475 1.0% $117,075 1.7%
Current Maturities of Long-Term Debt (Note 6) 59,908 0.7 107,893 1.5
Accounts Payable 1,566,946 17.4 1,220,543 17.2
Employee Retirement Plans (Note 11) 101,946 1.1 85,466 1.2
Accrued Salaries and Wages 164,003 1.8 123,545 1.7
Other Current Liabilities 400,676 4.5 269,734 3.8
Total Current Liabilities 2,385,954 26.5 1,924,256 27.1
Long-Term Debt, Excluding
Current Maturities (Note 6, 7 and 10) 1,726,579 19.2 1,364,278 19.3
Deferred Income Taxes (Note 12) 199,824 2.2 175,372 2.5
Other Long-Term Liabilities 4,495 - 3,209 -
Total Liabilities 4,316,852 47.9 3,467,115 48.9
Shareholders' Equity (Note 9):
Preferred Stock - $5 Par Value, none issued - -
Common Stock - $.50 Par Value;
Issued and Outstanding
January 28, 2000 382,359
January 29, 1999 374,388 191,179 2.1 187,194 2.6
Capital in Excess of Par Value 1,755,616 19.5 1,325,816 18.7
Retained Earnings 2,761,964 30.6 2,136,727 30.2
Unearned Compensation-Restricted Stock Awards (12,868) (0.1) (30,387) (0.4)
Accumulated Other Comprehensive Income (Loss) (420) - 417 -
Total Shareholders' Equity 4,695,471 52.1 3,619,767 51.1
Total Liabilities and Shareholders' Equity $9,012,323 100.0% $7,086,882 100.0%
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Lowe's Companies, Inc.
Consolidated Statements of Shareholders' Equity
In Thousands
<CAPTION>
Unearned Accumulated
Capital in Compensation Other
Common Stock Excess of Retained Restricted Comprehensive Total
Shares Amount Par Value Earnings Stock Awards Income Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
January 31, 1997 365,298 $182,649 $1,070,940 $1,287,505 $(18,434) $(341) $2,522,319
Cumulative Adjustment
From Change in
Accounting Method
(Note 1) 45,228 45,228
Comprehensive Income:
Net Earnings 383,030
Other Comprehensive
Income, Net
of Income Taxes
($268) and
Reclassification
Adjustments:
Unrealized Gain
on Available-for-
Sale Securities 529
Total Comprehensive
Income 383,559
Tax Effect of
Non-qualified -
Stock Options
Exercised 875 875
Cash Dividends (38,239) (38,239)
Stock Options
Exercised (Note 9) 144 72 1,155 1,227
Stock Issued to
ESOP (Note 11) 2,984 1,492 55,136 56,628
Shares issued
to Directors 8 4 153 157
Unearned Compensation
- Restricted
Stock Awards (Note 9) 804 402 20,108 (14,260) 6,250
Balance
January 30, 1998 369,238 184,619 1,148,367 1,677,524 (32,694) 188 2,978,004
Comprehensive Income:
Net Earnings 500,374
Other Comprehensive
Income, Net
of Income Taxes
and Reclassification
Adjustments:
Unrealized Gain on
Available-for-Sale
Securities (Note 9) 229
Total Comprehensive
Income 500,603
Tax Effect of
Non-qualified
Stock Options
Exercised 4,371 4,371
Cash Dividends (41,171) (41,171)
Stock Options
Exercised (Note 9) 676 338 12,853 13,191
Stock Issued
to ESOP (Note 11) 1,666 833 59,691 60,524
Conversion of
Convertible Debt
to Stock 3,060 1,530 84,862 86,392
Shares issued
to Directors 12 6 469 475
Unearned Compensation
- Restricted
Stock Awards
(Note 9) (264) (132) 15,203 2,307 17,378
Balance
January 29, 1999 374,388 187,194 1,325,816 2,136,727 (30,387) 417 3,619,767
Comprehensive Income:
Net Earnings 672,795
Other Comprehensive
Income, Net
of Income Taxes
and Reclassification
Adjustments:
Unrealized Loss on
Available-for-
Sale Securities
(Note 9) (837)
Total
Comprehensive
Income 671,958
Tax Effect of
Non-qualified
Stock Options
Exercised 9,888 9,888
Cash Dividends (47,558) (47,558)
Common Stock
Offering 6,207 3,103 345,197 348,300
Stock Options
Exercised (Note 9) 832 416 20,620 21,036
Stock Issued
to ESOP
(Note 11) 1,078 539 58,973 59,512
Shares issued
to Directors 16 8 43 51
Unearned Compensation
- Restricted
Stock Awards
(Note 9) (162) (81) (4,921) 17,519 12,517
Balance
January 28, 2000 382,359 $191,179 $1,755,616 $2,761,964 $(12,868) $(420) $4,695,471
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Lowe's Companies, Inc.
Consolidated Statements of Cash Flows
In Thousands
<CAPTION>
January 28, January 29, January 30,
2000 1999 1998
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Net Earnings $672,795 $500,374 $383,030
Adjustments to Reconcile Net Earnings to Net Cash
Provided By Operating Activities:
Depreciation 337,359 288,607 255,694
Amortization of Original Issue Discount 463 445 192
Increase in Deferred Income Taxes 13,439 8,226 8,024
Loss on Disposition/Writedown of Fixed and Other Assets 51,520 24,018 14,263
Changes in Operating Assets and Liabilities:
Accounts Receivable - Net (3,973) (25,520) (846)
Merchandise Inventory (427,661) (399,660) (130,246)
Other Operating Assets (77,704) (7,937) 7,346
Accounts Payable 346,403 184,660 57,658
Employee Retirement Plans 76,024 75,675 61,860
Other Operating Liabilities 182,223 92,757 33,999
Net Cash Provided by Operating Activities 1,170,888 741,645 690,974
Cash Flows from Investing Activities:
<S> <C> <C> <C>
(Increase) Decrease in Investment Assets:
Short-Term Investments (50,998) 19,848 57,103
Purchases of Long-Term Investments (12,413) (19,866) (15,384)
Proceeds from Sale/Maturity of Long-Term Investments 2,531 2,644 4,811
Increase in Other Long-Term Assets (36,643) (21,723) (9,940)
Fixed Assets Acquired (1,472,348) (1,078,107) (826,246)
Proceeds from the Sale of Fixed and
Other Long-Term Assets 67,837 38,202 31,183
Net Cash Used in Investing Activities (1,502,034) (1,059,002) (758,473)
Cash Flows from Financing Activities:
<S> <C> <C> <C>
Net Increase (Decrease) in Short-Term Borrowings (24,600) 18,971 17,199
Long-Term Debt Borrowings 394,588 328,159 310,795
Repayment of Long-Term Debt (108,309) (23,318) (36,252)
Proceeds from Stock Offering 348,300 - -
Proceeds from Stock Options Exercised 30,973 14,473 1,988
Cash Dividend Payments (47,558) (50,757) (28,653)
Net Cash Provided by Financing Activities 593,394 287,528 265,077
Net Increase (Decrease) in Cash and Cash Equivalents 262,248 (29,829) 197,578
Cash and Cash Equivalents, Beginning of Year 228,874 258,703 61,125
Cash and Cash Equivalents, End of Year $491,122 $228,874 $258,703
See accompanying notes to consolidated financial statements.
</TABLE>
LOWE'S COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 28, 2000, JANUARY 29, 1999 AND JANUARY 30, 1998
NOTE 1 - Summary of Significant Accounting Policies:
The Company is the world's second largest home improvement retailer serving
more than four million do-it-yourself and commercial business customers weekly.
The Company operated 576 stores in 37 states from coast to coast at January
28, 2000. Below are those accounting policies considered to be significant.
Fiscal Year - The Company's fiscal year ends on the Friday nearest January 31.
The fiscal years ended January 28, 2000, January 29, 1999 and January 30, 1998
each had 52 weeks. All references herein for the years 1999, 1998 and 1997
represent the fiscal years ended January 28, 2000, January 29, 1999 and
January 30, 1998, respectively.
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.
Stock Split - On May 29, 1998, the Board of Directors declared a two-for-one
stock split on the Company's common stock. One additional share was issued
on June 26, 1998 for each share held by shareholders of record on June 12,
1998. The accompanying consolidated financial statements, including per share
data, have been adjusted to reflect the effect of the stock split.
Use of Estimates - The preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents - Cash and cash equivalents include cash on hand,
demand deposits, and short-term investments with original maturities of three
months or less when purchased.
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 five years. Investments, exclusive of cash equivalents,
with a maturity date of one year or less from the balance sheet date are
classified as short-term investments. Investments with maturities greater than
one year are classified as long-term. Investments consist primarily of
tax-exempt notes and bonds, municipal preferred tax-exempt stock and
repurchase agreements.
The Company has classified all investment securities as available-for-sale,
and they are carried at fair market value. Unrealized gains and losses on such
securities are included in accumulated other comprehensive income in
shareholders' equity.
Derivatives - The Company does not use derivative financial instruments for
trading purposes. Interest rate swap and cap agreements, which are
occasionally used by the Company in the management of interest rate exposure,
are accounted for on a settlement basis. Income and expense are recorded in
the same category as that arising from the related liability. The Company is
currently utilizing an interest rate swap agreement to manage interest rates
on certain mortgages. Variable rates on mortgages, totaling $25 million, are
being swapped for a fixed rate of 7.94% until the year 2007. The swap
agreement limits the Company's exposure to the possibility of rising interest
rates.
Accounts Receivable - The majority of accounts receivable arise from sales to
commercial business customers. The allowance for doubtful accounts is based on
historical experience and a review of existing receivables. The allowance for
doubtful accounts was $2.0 million at January 28, 2000 and January 29, 1999.
Sales generated through the Company's private label credit card are not
reflected in receivables. Under an agreement with Monogram Credit Card Bank
of Georgia (the Bank), a wholly owned subsidiary of General Electric Capital
Corporation, consumer credit is extended directly to customers by the Bank and
all credit program related services are performed directly by the Bank.
Merchandise Inventory - Inventory is stated at the lower of cost or market.
In an effort to provide a better measure of operating results and to
increase comparability with other companies in the retail home improvement
industry, cost is determined using the first-in, first-out (FIFO) method. The
cost of inventory also includes certain costs associated with the preparation
of inventory for resale.
The Company changed its method of accounting for substantially all of its
inventories from the Last-In-First-Out (LIFO) method to the First-In-First-Out
(FIFO) method effective for the fiscal year ended January 28, 2000. The
Company has been experiencing reduced costs in most product categories
resulting from a combination of better buying, increased imports and
logistics efficiencies. Therefore, management believes the FIFO method
provides a better measurement of operating results. The change will also aid
in financial statement comparability within the retail home improvement
industry segment.
Prior period consolidated financial statements have been restated for the
retroactive effect of the change in accounting method. A LIFO adjustment was
not required during 1999 because the calculated effect was minimal; therefore
there was no effect on current year earnings. The effect of this change on
the Company's net earnings and retained earnings for the years ended January
29, 1999 and January 30, 1998 was a decrease of $18.4 million ($.05 per share
diluted) and $4.4 million ($.01 per share diluted), respectively.
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 are 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.
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, and the charge to earnings 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. The tax effects of such differences are reflected in the
balance sheet at the enacted 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.
Impairment/Store Closing Costs - Losses related to impairment of long-lived
assets and for long-lived assets to be disposed of are recognized when
expected future cash flows are less than the assets' carrying value. At the
time management commits to close or relocate a store location, the Company
evaluates the carrying value of the assets in relation to its expected future
cash flows. If the carrying value of the assets is greater than the expected
future cash flows, a provision is provided for the impairment of the assets.
When a leased location becomes impaired, a provision is provided for the
present value of future lease obligations, net of anticipated sublease
income. Provisions for impairment and store closing costs are included in
selling, general and administrative expenses.
The estimated realizable value of closed store real estate is included in
other assets and amounted to $56.4 and $62.3 million at January 28, 2000 and
January 29, 1999, respectively.
Revenue Recognition - The Company recognizes revenues when sales transactions
occur and customers take possession of the merchandise.
Advertising - Costs associated with advertising are charged to operations as
incurred. Advertising expenses were $69.2, $116.5 and $133.7 million for
1999, 1998 and 1997, respectively.
Recent Accounting Pronouncements - Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
(SFAS 133) was issued in June 1998. SFAS 133 is effective for the Company in
the year beginning February 3, 2001. SFAS 133 requires an entity to
recognize all derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value. Management is currently
evaluating the impact of the adoption of SFAS 133 and its effect on the
Company's financial statements.
Note 2 - Merger
The Company completed its merger with Eagle Hardware & Garden, Inc. (Eagle) on
April 2, 1999. The transaction was structured as a tax-free exchange of the
Company's common stock for Eagle's common stock, and was accounted for as a
pooling of interests. Lowe's issued .64 shares of common stock for each
share of Eagle outstanding common stock. Approximately 21.8 million shares of
the Company's common stock were issued as a result of the merger, and Eagle's
outstanding stock options were converted into options to purchase
approximately 923,000 common shares. The Company incurred $24.4 million of
merger related costs which were charged to operations during the first quarter
of fiscal year 1999. These costs consisted of $15.7 million relating to the
write-off of nonusable Eagle properties, $1.5 million for severance
obligations to former Eagle executives, and $7.2 million in direct merger
costs such as accounting, legal, investment banker and other miscellaneous
fees.
As a result of the merger, all current and historical financial information is
being presented on a combined basis. No adjustments were necessary to conform
the accounting principles of the two Companies.
The following table presents a reconciliation of net sales and net earnings
previously reported by the Company to those presented in the accompanying
consolidated statements of earnings.
<TABLE>
<CAPTION>
January 29, 1999 January 30, 1998
(In thousands)
<S> <C> <C>
Net Sales:
Lowe's $12,244,882 $10,136,890
Eagle 1,085,658 971,488
Combined $13,330,540 $11,108,378
Net Earnings:
Lowe's $464,043 $353,114
Eagle 36,332 29,916
Combined $500,375 $383,030
</TABLE>
NOTE 3 - Investments
The amortized cost, gross unrealized holding gains and losses and fair values
of investment securities, all of which are classified as available-for-sale
securities, at January 28, 2000 and January 29, 1999 are as follows:
<TABLE>
<CAPTION>
January 28, 2000 January 29, 1999
(In Thousands) Amortized Gross Unrealized Fair Amortized Gross Unrealized Fair
Type Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal Obligations $10,668 $12 $10 $10,670 $20,211 $132 - $20,343
Money Market Preferred Stock 67,000 - - 67,000 - - - -
Classified as Short-Term 77,668 12 10 77,670 20,211 132 - 20,343
Municipal Obligations
Classified as Long-Term 31,761 8 655 31,114 28,207 554 $45 28,716
Total $109,429 $20 $665 $108,784 $48,418 $686 $45 $49,059
The proceeds from sales of available-for-sale securities were $17.1, $37.5 and
$14.3 million for 1999, 1998 and 1997, respectively. Gross realized gains and
losses on the sale of available-for-sale securities were not significant for
any of the periods presented. Municipal obligations classified as long-term
at January 28, 2000 will mature in 1 to 5 years.
</TABLE>
NOTE 4 - Property and Accumulated Depreciation
Property is summarized below by major class:
January 28, January 29,
2000 1999__ _
(In Thousands)
Cost:
Land $ 1,488,896 $ 1,051,458
Buildings 2,516,951 2,049,533
Store, Distribution and Office Equipment 2,147,532 1,777,621
Leasehold Improvements 293,945 234,681
Total Cost 6,447,324 5,113,293
Accumulated Depreciation and Amortization (1,270,102) (1,027,495)
Net Property $5,177,222 $4,085,798
The estimated depreciable lives, in years, of the Company's property are:
buildings, 20 to 40; store, distribution and office equipment, 3 to 10;
leasehold improvements, generally the life of the related lease.
Net property includes $478.6 and $466.5 million in assets under capital leases
at January 28, 2000 and January 29, 1999, respectively.
NOTE 5 - Short-Term Borrowings and Lines of Credit:
The Company has a $300 million revolving credit facility with a syndicate of
11 banks. The facility has $100 million expiring November 2000, with the
remaining $200 million expiring November 2001. The facility is used to
support the Company's commercial paper program and for short-term borrowings.
Facility fees ranging from .06% to .075% are paid on the unused amount of
these facilities. The revolving credit facility contains certain restrictive
covenants including maintenance of specific financial ratios. There were no
borrowings outstanding under this revolving credit facility as of January 28,
2000 or January 29, 1999.
The Company had short-term borrowings of $24.6 million outstanding as of
January 29, 1999 under a $75 million revolving credit facility. This credit
facility expired June 30, 1999.
Seven banks have extended lines of credit aggregating $218.2 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 ranging from .25% to .50% per annum are paid on
the amounts of standby letters of credit issued. At January 28, 2000,
outstanding letters of credit totaled $108.8 million.
A $100 million revolving credit and security agreement, expiring in November
2000 and renewable annually, is available from a financial institution.
Interest rates under this agreement are determined at the time of borrowing.
Under the current terms of the agreement, borrowings are based upon commercial
paper rates plus 29 basis points. At January 28, 2000 and January 29, 1999,
there were $92.5 million outstanding under this credit and security agreement
and $146.7 and $132.1 million, respectively, of the Company's accounts
receivable were pledged as collateral.
In addition, $50 and $80 million was available, on an unsecured basis, for the
purpose of short-term borrowings on a bid basis from various banks as of
January 28, 2000 and January 29, 1999. These lines are uncommitted and are
reviewed periodically by both the banks and the Company. There were no
borrowings outstanding under these lines of credit as of January 28, 2000 or
January 29, 1999.
The weighted average interest rate on short-term borrowings outstanding at
January 28, 2000 and January 29, 1999 was 5.91% and 5.64%, respectively.
NOTE 6 - Long-Term Debt
Fiscal Year
of Final January 28, January 29,
Debt Category Interest Rates Maturity 2000 1999
(In Thousands)
Secured Debt1:
Industrial Revenue Bonds 3.35% * 2020 $ 2,353 $ 2,536
Industrial Revenue Bonds2 4.39% * 2005 700 900
Mortgage Notes 7.35% to 9.25% 2008 79,927 88,223
Other Notes 3.87% to 9.50% 2006 6,071 7,826
Unsecured Debt:
Debentures 6.50% to 6.88% 2029 691,167 296,284
Medium Term Notes - Series A 6.50% to 8.20% 2022 155,000 238,999
Medium Term Notes3 - Series B 6.70% to 7.61% 2037 266,067 266,004
Senior Notes 6.38% 2005 99,386 99,282
Capital Leases 6.12% to 19.57% 2029 485,816 472,117
Total Long-Term Debt 1,786,487 1,472,171
Less Current Maturities 59,908 107,893
Long-Term Debt, Excluding
Current Maturities $1,726,579 $1,364,278
*Interest rate varies as a percentage of prime rate or other interest index.
Interest rates shown are as of January 28, 2000. Prime rate was 8.50% at
January 28, 2000.
Debt maturities, exclusive of capital leases, for the next five fiscal years
are as follows (in millions): 2000, $45.3; 2001, $26.1; 2002, $42.7; 2003,
$11.3; 2004, $58.5.
The Company's debentures, senior notes and medium term notes contain certain
financial covenants, including the maintenance of specific financial ratios.
Notes:
1 Real properties pledged as collateral for secured debt had net book values
at January 28, 2000, as follows: industrial revenue bonds - $9.6 million,
mortgage notes - $147.9 million and other notes - $7.3 million.
2 With certain restrictions, the floating rate demand industrial revenue bonds
can be converted to a fixed interest rate based on a fixed interest index at
the Company's option.
3 Approximately 37% of these Medium Term Notes may be put at the option of the
holder on either the tenth or twentieth anniversary date of the issue. None
of these notes are currently putable.
NOTE 7 - Financial Instruments
Cash and cash equivalents, accounts receivable, short-term borrowings, trade
accounts payable, and accrued liabilities are reflected in the financial
statements at cost which approximates fair value. Short and long-term
investments, classified as available-for-sale securities, are reflected in the
financial statements at fair value. The following are financial instruments
whose estimated fair value amounts are different from their carrying amounts.
Estimated fair values have been determined using available market information
and appropriate valuation methodologies. However, considerable judgment 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.
The fair value of the Company's interest rate swap is insignificant. The fair
value of the Company's long-term debt is as follows:
January 28, 2000 January 29, 1999
Carrying Fair Carrying Fair
(In Thousands) Amount Value Amount Value
Liabilities:
Long-Term Debt $1,786,487 $2,024,274 $1,472,171 $1,618,008
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.
NOTE 8 - Earnings Per Share
Basic earnings per share (EPS) excludes dilution and is computed by dividing
net earnings by the weighted-average number of common shares outstanding for
the period. Diluted EPS includes the dilutive effects of common stock
equivalents and convertible debt, as applicable. Following is the
reconciliation of EPS for 1999, 1998, and 1997.
(In Thousands, Except Per Share Data)
1999 1998 1997
Basic Earnings per Share:
Net Earnings $672,795 $500,374 $383,030
Weighted Average Shares Outstanding 381,240 370,812 367,111
Basic Earnings per Share $1.76 $1.35 $1.04
Diluted Earnings per Share:
Net Earnings $672,795 $500,374 $383,030
Net Earnings Adjustment for
Convertible Debt - 3,589 3,675
Net Earnings, as Adjusted $672,795 $503,963 $386,705
Weighted Average Shares Outstanding 381,240 370,812 367,111
Dilutive Effect of Stock Options 2,614 1,954 459
Dilutive Effect of Convertible Debt - 2,985 3,062
Weighted Average Shares, as Adjusted 383,854 375,751 370,632
Diluted Earnings per Share $1.75 $1.34 $1.04
NOTE 9 - Shareholders' Equity
Authorized shares of common stock were 1.4 billion at January 28, 2000 and
January 29, 1999.
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 for $152.50. 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 commences a
tender offer for 15% or more of Lowe's common stock. The purchase rights
are not exercisable or transferable by the person or group acquiring the
stock or commencing the tender offer. The rights will expire in 2008, unless
the Company redeems or exchanges them earlier.
The Company has two stock incentive plans, referred to as the "1994" and
"1997" Incentive Plans, under which incentive and non-qualified stock options,
stock appreciation rights, restricted stock awards and incentive awards may
be granted to key employees. No awards may be granted after January 31, 2004
under the 1994 plan and 2007 under the 1997 plan. Stock options generally
have terms ranging from 5 to 10 years, normally vest evenly over 3 years, and
are assigned an exercise price of not less than the fair market value on the
date of grant. At January 28, 2000, there were 104,703 and 6,462,742 shares
available for grants under the 1994 and 1997 plans, respectively.
Option information is summarized as follows:
Key Employee Stock Option Plans Weighted-Average
Shares Exercise Price Per Share
(In Thousands)
Outstanding at January 31, 1997 3,288 $16.97
Granted 1,612 22.25
Canceled or Expired (33) 17.48
Exercised (120) 5.96
Outstanding at January 30, 1998 4,747 $19.03
Granted 1,991 $41.20
Canceled or Expired (306) 20.04
Exercised (688) 18.83
Outstanding at January 29, 1999 5,744 $26.69
Granted 1,144 $49.93
Canceled or Expired (620) 42.76
Exercised (735) 21.46
Outstanding at January 28, 2000 5,533 $32.36
________________________________________________________________________
Exercisable at January 28, 2000 3,270 $25.61
________________________________________________________________________
<TABLE>
<CAPTION>
Outstanding Exercisable
________________________________________________ _____________________________
Weighted- Weighted- Weighted-
Average Average Average
Range of Options Remaining Exercise Options Exercise
Exercise Prices (In Thousands) Term Price (In Thousands) Price _____
<C> <C> <C> <C> <C> <C> <C>
$ 2.87 - $4.31 133 1.5 $ 3.09 133 $ 3.09
10.36 - 15.54 170 4.8 11.77 170 11.77
17.39 - 26.09 2,379 2.4 21.07 1,952 20.69
26.37 - 39.56 373 7.0 30.76 319 30.08
41.41 - 62.12 2,474 6.0 46.55 695 45.02
$62.31 - $64.07 4 9.2 63.03 1 63.03
Totals 5,533 4.3 $32.36 3,270 $25.61
</TABLE>
Stock appreciation rights were denominated in units, which were comparable to
a share of common stock for purposes of determining the amount payable under
an award. An award entitled the participant to receive the excess of the
final value of the unit over the fair market value of a share of common stock
on the first day of the performance period, generally three years. The final
value was the average closing price of a share of common stock during the
last month of the performance period. Limits were established with respect to
the amount payable on each unit. No stock appreciation rights were awarded in
the last two years. A total of 253,700 stock appreciation rights were paid
out at the maximum level of $1.9 million during 1998 with no remaining awards
outstanding at January 29, 1999 and January 28, 2000. The costs of these
rights were expensed over the performance periods and reduced pre-tax earnings
by $0.3 and $0.9 million in 1998 and 1997, respectively.
Restricted stock awards of 10,000, and 870,700 shares, with per share
weighted-average fair values of $35.13, and $24.80, were granted to certain
executives in 1998 and 1997, respectively. No restricted stock awards were
granted in 1999. These shares are nontransferable and subject to forfeiture
for periods prescribed by the Company. These shares may become transferable
and vested earlier based on achievement of certain performance measures.
During 1999, a total of 31,100 shares were forfeited and 525,150 shares
became vested. At January 28, 2000, grants totaling 1,517,650 shares are
included in shareholders' equity and are being amortized as earned over
periods not exceeding seven years. Related expense (charged to compensation
expense) for 1999, 1998 and 1997 was $12.5, $18.5, and $6.2 million,
respectively.
In 1999, the Company's shareholders approved the Lowe's Companies, Inc.
Directors' Stock Option Plan. During the term of the Plan, each member of the
Company's Board of Directors will be awarded 2,000 options on the date of the
first board meeting after each annual meeting of the Company's shareholders
(the award date). The maximum number of shares available for grant under the
Plan is 250,000, subject to adjustment. No awards may be granted under the
Plan after the award date in 2008. The options vest evenly over three years,
expire after seven years and are assigned a price equal to the fair market
value of the Company's common stock on the date of grant. During 1999, 18,000
shares were granted under the Plan at a price of $51.69 per share. The
Directors' Stock Option Plan is intended to replace the Directors' Stock
Incentive Plan which expired on May 29, 1998. This Plan provided that, at the
first Board meeting following each annual meeting of shareholders, the Company
would issue each non-employee Director 500 shares of common stock. Up to
50,000 shares were available for issuance under this Plan. In 1998 and 1997,
12,000, and 8,000 shares, respectively, were issued under the Plan. Prior to
its expiration in 1994, 280,000 stock options were granted under a
Non-Employee Directors' Stock Option Plan. In 1999, 1998 and 1997, 16,000,
40,000 and 24,000 shares, respectively, were exercised under this Plan. No
shares were canceled under the Plan in 1999, 1998, and 1997. At January 28,
2000, 88,000 shares were exercisable. Of the remaining outstanding options at
January 28, 2000, the exercise price per share ranges from $4.31 to $9.44 and
their weighted-average remaining term is 2.0 years.
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its stock option
plans. Accordingly, no compensation expense has been recognized for
stock-based compensation where the option price of the stock approximated the
fair market value of the stock on the date of grant, other than for
restricted stock grants and stock appreciation rights. Had compensation for
1999, 1998 and 1997 stock options granted been determined consistent with
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," the Company's net earnings and earnings per share
(EPS) amounts for 1999, 1998 and 1997 would approximate the following pro
forma amounts (in thousands, except per share data):
<TABLE>
<CAPTION>
1999 1998 1997
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
<S> <C> <C> <C> <C> <C> <C>
Net Earnings $672,795 $652,786 $500,374 $491,151 $383,030 $376,609
Basic EPS $1.76 $1.71 $1.35 $1.32 $1.04 $1.03
Diluted EPS $1.75 $1.70 $1.34 $1.32 $1.04 $1.03
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the assumptions listed below.
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Weighted average fair value per option $26.05 $17.48 $ 9.42
Assumptions used:
Weighted average expected volatility 38.10% 34.20% 36.10%
Weighted average expected dividend yield 0.52% 0.31% 0.55%
Weighted average risk-free interest rate 6.24% 4.78% 6.06%
Weighted average expected life, in years 7.0 7.3 5.4
The Company reports comprehensive income in its consolidated statement of
shareholders' equity. Comprehensive income represents changes in
shareholders' equity from non-owner sources. For the three years ended January
28, 2000, unrealized holding gains (losses) on available-for-sale securities
is the only comprehensive income component for the Company. The following
schedule summarizes the activity in other comprehensive income for the years
ended January 28, 2000 and January 29, 1999:
<CAPTION>
____________________1999___________________ _____________________1998_______________
Pre Tax After Pre Tax After
(In Thousands) Tax (Expense)/ Tax Tax (Expense)/ Tax
Gain/(Loss) Benefit Gain/(Loss) Gain/(Loss) Benefit Gain/(Loss)
<S> <C> <C> <C> <C> <C> <C>
Unrealized net holding gains/
losses arising during the year $(1,245) $435 $(810) $417 $(177) $240
Less: Reclassification adjustment
for gains/losses included in net
earnings 42 (15) 27 17 (6) 11
Unrealized net gains/losses on
available-for-sale securities,
net of reclassification
adjustment $(1,287) $450 $(837) $400 $(171) $229
</TABLE>
NOTE 10 - Leases
The Company leases certain store facilities under agreements with original
terms generally of twenty years. Some agreements provide for contingent
rental based on sales performance in excess of specified minimums. In fiscal
years 1999, 1998, and 1997, contingent rentals have been nominal. The leases
usually 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 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 Estate Equipment Real Estate Equipment Total
(In Thousands)
2000 $ 150,268 $2,799 $ 56,036 $1,177 $ 210,280
2001 148,211 2,312 56,115 797 207,435
2002 143,669 1,346 56,115 342 201,472
2003 142,426 18 56,115 257 198,816
2004 142,038 - 56,298 46 198,382
Later Years 1,808,808 - 653,410 - 2,462,218
Total Minimum
Lease Payments $2,535,420 $6,475 $934,089 $2,619 $3,478,603
Total Minimum Capital
Lease Payments $936,708
Less Amount Representing
Interest 450,892
_____________________________________________________________________________
Present Value of Minimum
Lease Payments 485,816
Less Current Maturities 15,312__________________
Present Value of Minimum
Lease Payments,
Less Current Maturities $ 470,504
Rental expenses under operating leases for real estate and equipment were
$144.0, $113.3 and $87.5 million in 1999, 1998 and 1997, respectively.
NOTE 11 - Employee Retirement Plans
The Company's contribution to its Employee Stock Ownership Plan (ESOP) is
determined annually by the Board of Directors. The ESOP generally covers all
Lowe's employees after completion of one year of employment and 1,000 hours
of service during that year. Contributions are allocated to participants based
on their eligible compensation relative to total eligible compensation.
Contributions may be made in cash or shares of the Company's common stock and
are usually made in the following year. ESOP expense for 1999, 1998 and 1997
was $84.7, $84.4 and $67.4 million, respectively. At January 28, 2000, the
ESOP held approximately 7.4% of the outstanding common stock of the Company.
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 the ESIP for 1999, 1998 and 1997 were
$11.5, $10.6 and $8.7 million, respectively. The Company's common stock is an
investment option for participants in the ESIP. Shares held in the ESIP are
voted by the trustee as directed by an administrative committee of the ESIP.
<TABLE>
NOTE 12 - Income Taxes
<CAPTION>
1999 1998 1997
Statutory Rate Reconciliation __
<S> <C> <C> <C> <C> <C> <C>
Statutory Federal Income Tax Rate 35.0% 35.0% 35.0%
State Income Taxes-Net of Federal
Tax Benefit 2.8 2.3 2.2
Other, Net (1.1) (0.8) (1.2)
Effective Tax Rate 36.7% 36.5% 36.0%
(In Thousands) Components of Income Tax Provision_
Current
Federal $334,239 $251,848 $188,899
State 43,626 26,918 18,679
Total Current 377,865 278,766 207,578
Deferred
Federal 10,321 7,305 6,975
State 2,136 921 1,048
Total Deferred 12,457 8,226 8,023
Total Income Tax Provision $390,322 $286,992 $215,601
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 28, 2000 and January 29, 1999 is as follows
(in thousands):
<CAPTION>
January 28, 2000 January 29, 1999
Assets Liabilities Total Assets Liabilities Total
<S> <C> <C> <C> <C> <C> <C>
Excess Property and
Store Closing Costs $28,033 - $28,033 $20,046 - $20,046
Insurance 15,839 - 15,839 17,036 - 17,036
Depreciation $(228,707) (228,707) - $(195,241) (195,241)
Other, Net 47,216 (9,060) 38,156 37,579 (8,239) 29,340
Less Valuation Allowance - - - (4,739) - (4,739)
Total $91,088 $(237,767) $(146,679) $69,922 $(203,480) $(133,558)
The valuation allowance decreased $4,739,000 in 1999, increased $66,000 in
1998, and decreased $316,000 in 1997.
</TABLE>
NOTE 13 - Litigation
The Company is a defendant in legal proceedings considered to be in the
normal course of business, none of which, singularly or collectively, are
considered material to the Company.
NOTE 14 - Other Information
Net interest expense is composed of the following:
1999 1998 1997__
(In Thousands)
Long-Term Debt $86,675 $68,800 $40,139
Mortgage Interest 6,686 7,044 3,441
Capitalized Leases 42,552 39,255 38,447
Short-Term Debt 5,847 5,578 7,917
Amortization of Loan Costs 801 1,144 931
Interest Income (38,373) (23,300) (10,293)
Interest Capitalized (19,336) (17,580) (8,967)
Net Interest Expense $84,852 $80,941 $71,615
_________________________________________________________________________
Supplemental Disclosures of Cash Flow Information:
1999 1998 1997___
(In Thousands)
Cash Paid for Interest
(Net of Amount Capitalized) $128,265 $112,383 $ 83,209
Cash Paid for Income Taxes $408,366 $280,230 $209,620
_________________________________________________________________________
Noncash Investing and Financing Activities:
Fixed Assets Acquired under
Capital Leases $27,573 $47,303 $32,738
Termination of Capital Leases - 10,401 -
Common Stock Issued to ESOP (Note 10) 59,544 60,074 56,630
Common Stock Issued to Executives and
Directors, net of Unearned Compensation 12,488 17,853 6,407
Conversion of Debt to Common Stock - 87,270 -
Notes Received in Exchange for Assets 1,980 - 600
Notes Issued in Exchange for Assets $ - $ 6,014 $ 2,200
_________________________________________________________________________
Sales by Product Category:
1999 1998 1997
(Dollars in Millions) Total Total Total
Product Category Sales % Sales % Sales %
Fashion Plumbing & Electrical $1,803 11% $1,630 12% $1,372 12%
Tools 1,626 10 1,321 10 1,082 10
Building Materials 1,333 8 1,139 9 995 9
Hardware 1,251 8 983 7 804 7
Outdoor Hardlines 1,188 8 957 7 812 7
Appliances 1,169 7 921 7 676 6
Lumber 1,152 7 1,091 8 1,035 9
Nursery & Gardening Products 1,133 7 989 7 786 7
Floors, Windows & Walls 1,086 7 914 7 711 7
Millwork 1,020 6 803 6 664 6
Paint & Sundries 960 6 830 6 691 6
Rough Plumbing & Electrical 910 6 681 5 562 5
Cabinets & Furniture 613 4 467 4 382 3
Other 662 5 605 5 536 6
Totals $15,906 100% $13,331 100% $11,108 100%
Page 32:
<TABLE>
Lowe's Quarterly Stock Price Range and Cash Dividend Payment*
<CAPTION>
Fiscal 1999 Fiscal 1998 Fiscal 1997
High Low Dividend High Low Dividend High Low Dividend
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter $66 7/16 $51 5/16 $.030 $36 7/32 $25 7/8 $.028 $20 1/8 $16/3/16 $.028
2nd Quarter 60 49 11/16 .030 45 1/8 33 7/8 .030 19 15/16 16 27/32 .028
3rd Quarter 55 15/16 43 .030 42 1/4 24 15/16 .030 22 5/32 16 31/32 .028
4th Quarter $60 $43 1/16 $.035 $58 5/16 $34 7/16 $.030 $25 25/32 $20 25/32 $.028
*Adjusted for 2-for-1 stock split to shareholders of record on June 12, 1998,
as applicable.
</TABLE>
Page 36:
<TABLE>
LOWE'S COMPANIES, INC.
SELECTED FINANCIAL DATA
(Unaudited)
(In Thousands, Except Per Share Data)
<CAPTION>
1999 1998 1997 1996 1995____
<S> <C> <C> <C> <C> <C>
Selected Statement of Earnings Data:
Net Sales $15,905,595 $13,330,540 $11,108,378 $9,361,204 $7,691,116
Gross Margin 4,380,582 3,573,895 2,953,046 2,437,414 1,937,901
Net Earnings 672,795 500,374 383,030 314,730 242,363
Basic Earnings
Per Share 1.76 1.35 1.04 .90 .72
Diluted Earnings
Per Share 1.75 1.34 1.04 .88 .70
Dividends
Per Share $ .13 $ .12 $ .11 $ .10 $ .10
________________________________________________________________________________________________
Selected Balance Sheet Data:
Total Assets $9,012,323 $7,086,882 $5,861,790 $4,999,566 $3,967,337
Long-Term Debt, Excluding
Current Maturities $1,726,579 $1,364,278 $1,191,406 $ 875,754 $ 967,725
________________________________________________________________________________________________
Selected Quarterly Data First Second Third Fourth
1999
Net Sales $3,771,919 $4,435,219 $3,909,188 $3,789,269
Gross Margin 1,007,090 1,187,286 1,089,549 1,096,657
Net Earnings 124,958 230,217 168,688 148,932
Basic Earnings Per Share .33 .60 .44 .39
Diluted Earnings Per Share $ .33 $ .60 $ .44 $ .39
1998
Net Sales $3,149,779 $3,733,642 $3,278,298 $3,168,821
Gross Margin 830,503 986,877 882,135 874,380
Net Earnings 100,727 178,837 121,892 98,918
Basic Earnings Per Share .27 .48 .33 .27
Diluted Earnings Per Share $ .27 $ .48 $ .33 $ .26
</TABLE>
EXHIBIT 21 - SCHEDULE OF SUBSIDIARIES
LOWE'S COMPANIES, INC. AND SUBSIDIARY COMPANIES
NAME AND DOING BUSINESS AS: STATE OF INCORPORATION
Lowe's Home Centers, Inc. North Carolina
The Contractor Yard, Inc. North Carolina
Sterling Advertising, Ltd. North Carolina
LF Corporation Delaware
Lowe's Home Centres (Canada), Inc. Canada
LG Sourcing, Inc. North Carolina
Lowe's H I W, Inc. Virginia
Eagle Hardware & Garden, Inc. Washington
Eagle Hardware & Garden Distribution Services, Inc. Washington
Anchorage Eagle, LCC Alaska
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
Lowe's Companies, Inc.
We consent to the incorporation by reference in Registration Statement No.
33-54497 on Form S-8, Registration Statement No. 33-54499 on Form S-8,
Registration Statement No. 333-34631 on Form S-8, Registration Statement
No. 333-75793 on Form S-8, and Registration Statement No. 333-89471 on Form
S-8 of our report dated February 17, 2000, appearing in or incorporated by
reference in this Annual Report on Form 10-K of Lowe's Companies, Inc. for
the year ended January 28, 2000.
/s/Deloitte & Touche LLP
Charlotte, North Carolina
April 25, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000060667
<NAME> LOWE'S COMPANIES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-28-2000
<PERIOD-START> JAN-30-1999
<PERIOD-END> JAN-28-2000
<CASH> 491,122
<SECURITIES> 77,670
<RECEIVABLES> 147,901
<ALLOWANCES> 0
<INVENTORY> 2,812,361
<CURRENT-ASSETS> 3,709,541
<PP&E> 5,177,222
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,012,323
<CURRENT-LIABILITIES> 2,385,954
<BONDS> 0
0
0
<COMMON> 191,179
<OTHER-SE> 4,504,292
<TOTAL-LIABILITY-AND-EQUITY> 9,012,323
<SALES> 15,905,595
<TOTAL-REVENUES> 15,905,595
<CGS> 11,525,013
<TOTAL-COSTS> 11,525,013
<OTHER-EXPENSES> 3,232,613
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,852
<INCOME-PRETAX> 1,063,117
<INCOME-TAX> 390,322
<INCOME-CONTINUING> 672,795
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 672,795
<EPS-BASIC> 1.76
<EPS-DILUTED> 1.75
</TABLE>
