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This is no t just a ho use,
it’s o ur ho me.
Lowe’s Annual Report 2001

Table of contents

  • Page 1
    This is no t just a ho use, it's o ur ho me. Lowe's Annual Report 2 0 01

  • Page 2
    ... nals who help them achieve it. Co mpany Pro file Lo we's Co mpanies, Inc. is a $22 billio n retailer appro ximately 81 millio n square feet. In 2001, Lo we's o pened 115 new sto res, the majo rity o f which were in metro po litan markets. In 2002, the co mpany plans to o pen 123 new sto res...

  • Page 3
    ...sell. We are c o mmitted to making diversity and inc lusio n a natural part o f the way we do business. Lo we's has been a public ly held c o mpany sinc e Oc to ber 10, 1961. Our sto c k is listed o n the New Yo rk Sto c k Exc hange, with shares trading under the tic ker symbo l LOW. Fo r mo re info...

  • Page 4
    ...0 fisc al ye ar fisc al ye ar Financial Highlights I N TH OU SA N D S, EX CEP T P ER SH A R E D A TA Inc rease o ve r 2000 Sales Gro ss Margin Pretax Earnings Net Earnings Earnings Per Share: Basic Diluted Cash Dividends Per Share * Basis po ints Fisc al 2001 $ 22,111,108 28.80 % $ $ 1,624,251...

  • Page 5
    ... sales mix resulting in higher gro ss margins, tighter co st co ntro ls, and an unrelenting co mmitment to business pro cess impro vement. Our perfo rmance, as repo rted o n o ur financial statements, reflects o nly the numerical successes we enjo y. The real sto ry is what 's behind the numbers...

  • Page 6
    ... fro m o thers. To day, within the Ho me Impro vement Wareho use channel, Lo we 's pro udly pro mo tes great names and exclusive pro ducts manufactured o r licensed by: KitchenAid ® and Whirlpo o l® appliances; Husqvarna® o utdo o r po wer equipment; Jenn-Air® gas grills; Pella® do o rs & windo...

  • Page 7
    ... set the to ne fo r the next decade. Real estate plans result in building better lo cated and mo re efficient sto res which put o ur pro ducts and services within reach of ho meo wners in America's largest cities and to wns. Alliances we 've created with manufacturers are pro viding premium cho ices...

  • Page 8
    ..., and listens to their ambitio ns and ideas, offers a wide selectio n of cho ices and pro vides them expert advice and co unsel. The result: ultimate perso nalizatio n ...ho me. Lowe's caters to customers' needs for personalization - from custom window treatments to just the right appliance. 6

  • Page 9
    It ' s t just wowo o d, sc nails, rews, Itno 's no t just o d, and so me paint. ' s a c hanc and so meItpaint. It 's e a fo r my daug to see her first c hanc ehter fo r my daug hter to g reat rested flyc atc her. seec her first bluebird. 7

  • Page 10
    Lowe's trained associates know the tools of their trade, so they can help a weekend DI Yer or a seasoned pro with in stock products or special order options. W H AT YOU WA N T Co nsumers say they have eno ugh " stuff. " They want quality pro ducts and timely so lutio ns. With mo re than 40,000 pro...

  • Page 11
    They 're no t just 'c usto mers ' to me. I have a c o ntrac to r who needs a water heater delivered to a jo b site, and a ho meo wner who wants to be able to g ive his c hild a warm bath. Two peo ple. Same pro duc t. Different needs. 9

  • Page 12
    This is no t just a go rgeo us flo o r. It 's where my c hildren will learn to c rawl...walk...danc e. 10

  • Page 13
    ... rs. Lo we 's bro ught success ho me in many pro duct catego ries in 2001. Our best paint is no w America's best. Lo we 's exclusive American Traditio n interio r paint was rated a " Best Buy" by a leading co nsumer magazine. In 2001, appliance sales co ntinued to perfo rm well, and by the fo urth...

  • Page 14
    It 's no t just marketing . It 's messages that hit ho me. 12

  • Page 15
    ... AR...9 AZ ...12 CA ...44 CO ...8 CT ...5 DE...5 FL ...50 GA ...37 HI ...2 IA ...5 ID ...2 IL...16 IN ...32 KS ...6 KY ...23 LA ...14 MA ...6 MD ...21 MI ...27 MO ...21 MS...11 MT...1 NC...74 NE...3 NJ ...18 NM ...4 NV...8 NY...16 OH...57 OK...16 OR...5 PA ...35 RI ...3 SC ...31 SD ...1 TN ...36 TX...

  • Page 16
    ..., Lo we 's raised mo re than $6 millio n in cash and pro duct fo r relief fo llo wing the September 11 tragedy. And we demo nstrated the Po wer of Pride with co mmunity events to suppo rt America's military families at ho me and abro ad. Lo we 's helped turn the first sho vel of dirt as a fo unding...

  • Page 17
    It 's no t just a jo b. It 's my c areer and my future. 15

  • Page 18
    ... their lives. We offer the right mix of pro ducts fo r any price range, and are expanding into mo re premium brands and exclusive items that o ur custo mers increasingly tell us they want. Our techno lo gy and infrastructure helps get these pro ducts into custo mers' hands and ho mes quickly. Lo we...

  • Page 19
    This is no t just o ur ho me. It 's an investment. 17

  • Page 20
    ... o ur audits, the co nso lidated financial statements referred to abo ve present fairly, in all material respects, the financial po sitio n of Lo we 's Co mpanies, Inc. and subsidiaries at February 1, 2002 and February 2, 2001, and the results of their o peratio ns and their cash flo ws fo r each of...

  • Page 21
    ... dependent upo n the general eco no mic health of the co untry, variatio ns in the number of new ho using starts and existing ho me sales, the level of repairs, remo deling and additio ns to existing ho mes, co mmercial building activity, and the availability and co st of financing. An eco no mic do...

  • Page 22
    ...lumber and building material prices, as well as impro ved sales in mo st merchandising catego ries, bro ught abo ut the co mparable sto re sales increase. During the year, the Co mpany experienced its stro ngest sales increases in building materials, paint, appliances and flo o ring. The fo llo wing...

  • Page 23
    ...gress in line reviews, better buying and pro duct mix impro vements. Selling, general and administrative expenses ( SG&A) were $3.9 billio n o r 17.7% of sales in 2001. SG&A in the two previo us years were $3.3 and $2.8 billio n o r 17.8% and 17.4% of sales, respectively. During 2001, SG&A increased...

  • Page 24
    ... February 2, 2001 selling space to tal of 67.8 millio n square feet represents a 19% increase o ver 1999. Investing activities also include no ncash transactio ns of capital leases fo r new sto re facilities and equipment, the result of which is to increase lo ng-term debt and pro perty. Cash flo ws...

  • Page 25
    ...in late 2002. The Co mpany believes that funds fro m o peratio ns, funds fro m debt issuances, leases and existing sho rt-term lines of credit will be adequate to finance the 2002 expansio n plan and o ther o perating requirements. Ho wever, general eco no mic do wnturns, fluctuatio ns in the prices...

  • Page 26
    ...retirement activities at the end of the related asset's life. SFAS No . 143 is effective fo r the Co mpany fo r the fiscal year beginning February 1, 2003. Management do es no t believe that the initial ado ptio n of these standards will have a material impact o n the Co mpany's financial statements...

  • Page 27
    ...Per Share Data) Years Ended o n February 1, 2002 % Sales February 2, 2001 % Sales January 28, 2000 % Sales Net Sales Co st o f Sales $ 22,111,108 15, 743, 267 100.0% 71. 2 $ 18,778,559 13, 487, 791 100.0 % 71. 8 $ 15,905,595 11, 525, 013 100.0 % 72. 5 Gross Margin Expenses: Selling , General...

  • Page 28
    Lo we 's Co mpanies, Inc. Co nso lidated Balance Sheets February 1, ( In Tho usands, Exc ept Par Value Data) 2002 % To tal February 2, 2001 % To tal Asset s Current Asset s: Cash and Cash Equivalents Sho rt- Term Investments ( No te 3) Ac c o unts Rec eivable - Net ( No tes 1 and 6) Merc handise ...

  • Page 29
    ... available- fo r- sale sec urities ( No te 10) To tal Co mprehensive Inc o me Tax Effec t o f No n- qualified Sto c k Optio ns Exerc ised Cash Dividends Co mmo n Sto c k Offering Emplo yee Sto c k Optio ns Exerc ised ( No te 10) Sto c k Issued to ESOP ( No tes 12 and 15) Shares Issued to Direc to rs...

  • Page 30
    ... 2, 2001 January 28, 2000 Cash Flows From Operat ing Act ivit ies: Net Earning s Adjustments to Rec o nc ile Net Earning s to Net Cash Pro vided By Operating Ac tivities: Deprec iatio n and Amo rtizatio n Deferred Inc o me Taxes Lo ss o n Dispo sitio n/ Writedo wn o f Fixed and Other Assets Tax...

  • Page 31
    .... Investments co nsist primarily of tax-exempt no tes and bo nds, co rpo rate no tes, municipal preferred tax-exempt sto ck and repurchase agreements. The Co mpany has classified all investment securities as available-fo r-sale, and they are carried at fair market value. Unrealized gains and lo sses...

  • Page 32
    ... n expense has been reco gnized fo r sto ck-based co mpensatio n where the o ptio n price approximated the fair market value of the sto ck o n the date of grant, o ther than fo r restricted sto ck grants. relating to wo rkers' co mpensatio n, auto mo bile, general and pro duct liability claims. The...

  • Page 33
    ... The fair value of the assets is generally based o n internal o r external appraisals and the Co mpany's histo rical experience. Pro visio ns fo r impairment and sto re clo sing co sts are included in selling, general and administrative expenses. The carrying amo unt of clo sed sto re real estate is...

  • Page 34
    ... $400 millio n 364-day tranche, expiring in August 2002, which is renewable annually. The facility is used to suppo rt the Co mpany's $800 millio n co mmercial paper pro gram and fo r sho rtterm bo rro wings. Bo rro wings made are priced based upo n market co nditio ns at the time of funding in acco...

  • Page 35
    ...the financial statements at co st which approximates fair value. Sho rt and lo ng-term investments, classified as available-fo rsale securities, are reflected in the financial statements at fair value. Estimated fair values fo r lo ng-term debt have been determined using available market info rmatio...

  • Page 36
    ...granted after 2011 under the 2001 plan, 2007 under the 1997 plan, and 2004 under the 1994 plan. Sto ck o ptio ns generally have terms ranging fro m 5 to 10 years, no rmally vest evenly o ver three years, and are assigned an exercise price of no t less than the fair market value o n the date of grant...

  • Page 37
    ...approximated the fair market value of the sto ck o n the date of grant, o ther than fo r restricted sto ck grants. Had co mpensatio n expense fo r 2001, 2000, and 1999 sto ck o ptio ns granted been determined using the fair value metho d, the Co mpany's net earnings and earnings per share ( EPS) amo...

  • Page 38
    ..., 938 Present Value of Minimum Lease Payments, Less Current Maturities $ 447,818 Rental expenses under o perating leases fo r real estate and equipment were $188.2, $161.9 and $144.0 millio n in 2001, 2000 and 1999, respectively. The Co mpany has three o perating lease agreements whereby lesso rs...

  • Page 39
    ... wing them to transfer 50% of their shares in the Plan to the Co mpany's 401( k) Plan. Participating emplo yees, with at least 20 years of service, may also elect to receive a o ne-time withdrawal of 50% of their balance. Once a participant reaches age 59 1/ 2, with seven o r mo re years of service...

  • Page 40
    ...o r Fashio n Millwo rk Nursery 2000 1999 2001 Cabinets/ Furniture/ Shelving Fashio n Elec tric al To o ls Flo o ring Fashio n Plumbing Hardware Paint Building Materials Ro ug h Plumbing & Elec tric al Outdo o r Po wer Equipment Lo ng - Term Debt Mo rtg age Interest Capitalized Leases Sho rt- Term...

  • Page 41
    ... Earnings Per Share Earnings St at ement Percent ages 55.1 55.6 55.6% 23.8 23.1 23.1% 17.7 16.2 16.7% 20.4 20.8 20.8% ( 5.4) ( 5.1) ( 5.1) % 19.9 20.5 20.5% 21.5 21.7 21.7% 49.8 48.5 48.5% Perc ent o f sales to nearest hundredth; inc o me tax is % o f pre- tax earning s Fisc al 2001 Quarter...

  • Page 42
    ...015 $ 0. 018 $ 48. 88 * Adjuste d fo r 2-fo r-1 sto ck split to share ho lde rs of re co rd o n June 8, 2001, as applicable. Mont hly St ock Price and Trading Volume Fisc al 2001 Shares Hig h Lo w Traded Hig h Lo w Fisc al 2000 Shares Traded February Marc h April May June July Aug ust September...

  • Page 43
    ...Financial Data ( Unaudited) ( In Tho usands, Exc ept Per Share Data) 2001 2000 1999 1998 1997 Select ed St at ement s of Earnings Dat a: Net Sales Gro ss Marg in Net Earning s Basic Earning s Per Share Diluted Earning s Per Share Dividends Per Share...Select ed Balance Sheet Dat a: To tal Assets Lo ng...

  • Page 44
    ...% 7. 66% 14. 92% Comparat ive Balance Sheet s ( I n Thousands) 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 To tal Current Assets Cash and Sho rt- Term Investments Ac c o unts Rec eivable - Net Merc handise Invento ry Other Current Assets Fixed Assets - Net Other Assets 18. 2 47. 4 7. 1 14. 3 33...

  • Page 45
    ...tax Earnings plus De pre ciatio n and Inte re st. Asse t Turno ve r: Sale s divide d by Be ginning Asse ts. Re turn o n Sale s: Ne t Earnings divide d by Sale s. Re turn o n Asse ts: Ne t Earnings divide d by Be ginning Asse ts. Re turn o n Share ho... = co mpo und gro wth rate 314,730 34, 709 $ 280...

  • Page 46
    ... Senio r Vice President and General Merchandising Manager - Hardlines Senio r Vice President and General Merchandising Manager - Ho me Dé co r Senio r Vice President, Real Estate/ Engineering & Co nstructio n Senio r Vice President and General Merchandising Manager - Building Pro ducts Senio r Vice...

  • Page 47
    ... W EB Media inquiries sho uld be directed to : Chris Ahearn Directo r, Public Relatio ns 336-658-7387 http:/ / www.Lo wes.co m A N N U A L M EETI N G D ATE May 31, 2002 at 10:00 a.m. Park Ho tel Charlo tte, NC Fo r co pies of financial info rmatio n call: 888-34 LOWES ( 888-345-6937) De sign: Pe...

  • Page 48
    Lo we's Co mpanies, Inc. 1 6 0 5 Curt i s Bri dge Road Wi lkesboro, Nort h Caroli na 2 8 6 9 7 www.Lowes.com LOWES- AR- 0 2