Lowe's 2002 Annual Report Download

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ANNUAL REPORT 2002
ANNUAL REPORT 2002
GROW

Table of contents

  • Page 1
    A N N U A L REPO RT 2002 G RO W A N N U A L R E P O R T 2 0 0 2

  • Page 2
    ...a lawn and garden center averaging an additional 25,000 square feet. At the beginning of 2003, our square footage totaled approximately 95 million square feet. In 2002, Lowe's opened 123 new stores, the majority of which were in metropolitan markets. In 2003, the company plans to open 130 new stores...

  • Page 3
    ... success at home. In 2002, Lowe's grew by expanding into new markets, by forging new alliances, and by bringing even more well-respected brands to its stores and into American homes. Lowe's earned the loyalty of new customers by offering name-brand products they respect and services they trust. That...

  • Page 4
    Robert L. Tillman Chairman of the Board and Chief Executive Officer T O O U R SH A REH O LD ERS 30 1,600 25 1,400 1,200 20 1,000 15 800 600... LES G RO W T H IN B ILLIO N S O F D O LLA RS EA RN IN G S G RO W T H IN M ILLIO N S O F D O LLA RS 2 / 3 LO W E' S C O MPANIES, INC . ANNUAL REPO RT 2 0 0 2

  • Page 5
    ...to offer quality products that provide value across all price points in our lines. Their success is measured by strong sales, higher average tickets and growing margins. In addition, we've continued to capitalize on opportunities provided by our global sourcing offices in Asia and other parts of the...

  • Page 6
    ... improving customer interaction throughout the process. In March, we began rolling out this new program to one district in each region, expanding the test nationwide. Building on this year's 50 percent growth, installation services will be a sales driver for years to come. Our Special Order business...

  • Page 7
    ... our increasingly convenient locations, in-stock products, and every day low prices, Lowe's is becoming a destination for a growing number of categories. We're the nation's second largest and fastest-growing appliance retailer. We have enhanced the lighting category by adding brands once found only...

  • Page 8
    ... and targeted marketing campaigns allow Lowe's to communicate with customers based on the projects or products that interest them most. For example, customers who purchase materials to build a deck, soon thereafter will receive a catalog highlighting our offering of patio furniture and gas grills...

  • Page 9
    ..., with driver J immie J ohnson, has made a winning connection with customers and fans who enjoy NASCAR - America's fastest-growing sport. The Team Lowe's Racing Club grew by 175 percent in 2002 and introduced 324,000 members to brand Lowe's. Much like its customers, Lowe's never stops learning. With...

  • Page 10
    ...and better ways to enjoy their homes. So they seek quality brands they know from a retailer they trust. High-quality products, at every day low prices, allow Lowe's to provide our customers with a means of self-expression in the projects they undertake. In 2002, Lowe's continued to build trust among...

  • Page 11
    ... NickelodeonTM programs. Lowe's is also changing the way Americans shop for appliances. In the past two years, Lowe's has captured more share of the appliance business than any other major retailer. The reason: commitment to exceed customers' expectations with outstanding selection, trusted brands...

  • Page 12
    ...everything from window treatments to water heaters, kitchen countertops to hardwood floors. A dedicated service desk and trained employees who know the business give commercial customers the special attention they have come to expect from Lowe's. 10 / 11 LO W E' S C O MPANIES, INC . ANNUAL REPO RT...

  • Page 13
    ... delivery dates. And, new systems are making it easier than ever to order custom windows, doors and other millwork. Lowe's is in constant pursuit of perfection when it comes to service. Employees are held to a high standard, and they rise to the occasion. Throughout the store, well-trained employees...

  • Page 14
    EX PA N D From small-town America to the nation's largest cities, many new markets eagerly welcomed Lowe's to their communities in 2002. Consumers are embracing our strategy of providing trusted brands and services at every day low prices, and we see years of successful expansion ahead. ADRIAN, MI...

  • Page 15
    ... RO , MA • N. CHARLESTO N, SC • N. LITTLE RO CK, AR • N. MYRTLE BEACH, SC C • NEW CASTLE, PA • NEW HAVEN, CT • NEW IBERIA, LA • NEW PHILADELPHIA, O H • NEW PO RT RICHEY , FL • NEWINGTO N, CT • NEWNAN, GA • NEWPO RT NEWS, VA • NO BLESVILLE, AN, O K • NO RTH BERGEN, NJ • NO...

  • Page 16
    ... is part of their training. It is part of Lowe's culture and its 57-year history. Annual employee surveys show a high degree of commitment and strong intention to recommend the company to their friends and family. Lowe's maintains an extensive management development program. Store manager candidates...

  • Page 17
    ... in 2002 from the Points of Light Foundation. W hen disasters occurred, Lowe's lent a helping hand. Stores in 26 states responded to 106 disasters over the past three years by activating the Lowe's American Red Cross customer donation program and by donating truckloads of needed supplies directly to...

  • Page 18
    .... Ultimately, our goal is to improve our customers' lives with the products and services we offer. The key to Lowe's future is an unwavering desire to better serve our customers in both new and existing markets. We are excited with the reception our new stores receive as we move across the country...

  • Page 19
    I M PRO VE We learn from our customers, aspire to make their home improvement experience rewarding, and work to exceed their expectations every day. At Lowe' s, we thrive on taking all that we have built today to improve your tomorrow. That is how we grow. That is how we improve home improvement.

  • Page 20
    ... statements of shareholders' equity. 28. Consolidated statements of cash flows. 29. Notes to consolidated financial statements. 39. Quarterly review of performance. 40. Stock performance, stock splits and stock dividends. 41. Selected financial data. 42. 10-year financial history. IN D EP...

  • Page 21
    ... 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 22
    ... in-store service related costs and other vendor funds received as a reimbursement of specific, incremental and identifiable costs are recognized as a reduction of the related expense. Cooperative advertising allowances provided by vendors have historically been used to off-set the Company's overall...

  • Page 23
    ... in appliances, cabinets, flooring, home organization, outdoor power equipment, paint, rough plumbing and walls and windows. The following table presents sales and store information: 2002 2001 2000 cated) and 100 stores in 2000 (80 new and 20 relocated). Because store opening costs are expensed as...

  • Page 24
    ..., the three operating leases were terminated. The Company's 2003 capital budget is $2.9 billion, inclusive of approximately $181 million of operating or capital leases. Approximately 80% of this planned commitment is for store expansion and new distribution centers. Expansion plans for 2003 consist...

  • Page 25
    ... of older stores. This planned expansion is expected to increase sales floor square footage by approximately 15% - 16%. Approximately 1% of the 2003 projects will be build-to-suit leases, 19% will be ground leased properties and 80% will be owned. At J anuary 31, 2003, the Company operated nine...

  • Page 26
    ... as a reduction of inventory cost unless they represent a reimbursement of specific, incremental, identifiable costs incurred by the customer to sell the vendor's product. Cooperative advertising allowances received from vendors have in the past been both specifically associated with promotions to...

  • Page 27
    ... Per Share Data) Years Ended on January 31, 2003 % Sales February 1, 2002 % Sales February 2, 2001 % Sales Net Sales Cost of Sales $ 26,491 18,465 100.0% 69.7 $ 22,111 15,743 100.0 % 71.2 $ 18,779 13,488 100.0 % 71.8 Gross Margin Expenses: Selling, General and Administrative (Note 4) Store...

  • Page 28
    ... 22 141 35.8 63.0 0.2 1.0 Total Assets Liabilities and Shareholders' Equity Current Liabilities: Short-Term Borrowings (Note 5) Current Maturities of Long-Term Debt (Note 6) Accounts Payable Employee Retirement Plans (Note 11) Accrued Salaries and Wages Other Current Liabilities (Note 4) $ 16,109...

  • Page 29
    ... PA N IES , IN C . C O N S O LID A T ED S TA T EM EN T S O F S H A REH O LD ERS ' EQ UIT Y Unearned Capital in Common Stock (In Millions) Shares Amount Excess of Par Value Retained Earnings CompensationRestricted Stock Awards Accumulated Other Comprehensive Income Total Shareholders' Equity Balance...

  • Page 30
    ...Taxes Loss on Disposition/Writedown of Fixed and Other Assets Tax Effect of Stock Options Exercised Changes in Operating Assets and Liabilities: Accounts Receivable - Net Merchandise Inventory Other Operating Assets Accounts Payable Employee Retirement Plans Other Operating Liabilities (6) (357) (41...

  • Page 31
    ...Capital Corporation (GECC), consumer credit is extended directly to customers by the Bank and GECF . All credit program related services are performed and controlled directly by the Bank and GECF . The Company has the option, but no obligation, at the end of the agreement to purchase the receivables...

  • Page 32
    ...depreciation expense in the consolidated financial statements. Vendor Funds The Company receives funds from vendors in the normal course of business for a variety of reasons including purchase volume rebates, cooperative advertising allowances, and third party in-store service related costs. Volume...

  • Page 33
    ... have a material impact on the Company's financial statements. In J une 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement 2002 2001 2000 Net Income as Reported Deduct: Total stock-based employee compensation expense determined...

  • Page 34
    ...material impact on fiscal 2003. The Company is currently evaluating the impact on fiscal 2004. (In Millions) Type Amortized Cost (In Millions) Type Amortized Cost January 31, 2003 Gross Unrealized Gains Gross Unrealized Losses Fair Value Municipal Obligations Money Market Preferred Stock Corporate...

  • Page 35
    ...Notes2 Series B Senior Notes Convertible Notes Capital Leases Balance at February 1, 2002 Accrual for Store Closing Costs Lease Payments, Net of Sublease Income $ 17 9 (10) Balance at January 31, 2003 $ 16 Note 5: Short-term borrowings and lines of credit. The Company has an $800 million senior...

  • Page 36
    ...49 per note or in February 2011 at a price of $780.01 per note. On either of these dates, the Company may choose to pay the purchase price of the notes in cash or common stock, or a combination of cash and common stock. In addition, if a change in control of the Company occurs on or before February...

  • Page 37
    ... by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is calculated based on the weighted average shares of common stock as adjusted for the potential dilutive effect of stock options and applicable convertible notes as of the balance sheet date. The...

  • Page 38
    ... to 85% of the lower of the closing price at the beginning or the end of each semi-annual stock purchase period. The Company issued 1,341,241, 1,688,966 and 874,448 shares of common stock pursuant to this plan during 2002, 2001 and 2000, respectively. No compensation expense has been recorded in the...

  • Page 39
    ...(k) Plan after completing 90 days of continuous service. The Company's contributions to the 401(k) Plan vest immediately in the participant accounts. Participants are allowed to choose from a group of mutual funds in order to designate how $ 826 Present Value of Minimum Lease Payments Less Current...

  • Page 40
    ... and Financing Activities: Fixed Assets Acquired under Capital Leases Termination of Capital Leases Common Stock Issued to ESOP (Note 11) Common Stock Issued to Executives and Directors, net of Unearned Compensation - $ 4 $ 2 4 $ 8 - Notes Received in Exchange for Sale of Real Estate $ 16 - 79 $ 13...

  • Page 41
    ...LY R E V I E W O F P E R F O R M A N C E ( U N A U D I T E D ) Earnings Statements (In Millions, Except Per Share Data) Fiscal 2002 Quarter Ended 1/31/03 11/1/02 8/2/02 5/3/02 2/1/02 11/2/01 8/3/01 Fiscal 2001 5/4/01 Net Sales Gross Margin Expenses: S,G & A Store Opening Costs Depreciation Interest...

  • Page 42
    ...018 0.018 0.018 $ 0.018 2001: 480 * Adjusted for 2-for-1 stock split to shareholders of record on J une 8, 2001, as applicable. Monthly Stock Price and Trading Volume Fiscal 2002 Shares High Low Traded High Low Fiscal 2001 Shares Traded February March April May June July August September October...

  • Page 43
    ... .06 7,087 1,364 Selected Balance Sheet Data: Total Assets Long-Term Debt, Excluding Current Maturities $ 16,109 $ 3,736 $ 13,736 $ 3,734 $ 11,358 $ 2,698 Selected Quarterly Data: First Second Third Fourth 2002 Net Sales Gross Margin Net Earnings Basic Earnings Per Share Diluted Earnings Per...

  • Page 44
    ... Receivable- Net 26 Merchandise Inventory 27 Other Current Assets 28 Fixed Assets- Net 29 Other Assets 30 Total Assets 31 Total Current Liabilities 32 Accounts Payable 33 Other Current Liabilities 34 Long-Term Debt (Excluding Current Maturities) 35 Total Liabilities 36 Shareholders' Equity 37 Equity...

  • Page 45
    ...Asset Turnover: Sales divided by Beginning Assets. Return on Sales: Net Earnings divided by Sales. Return on Assets: Net Earnings divided by Beginning Assets. Return on Shareholders' Equity: Net Earnings divided by Beginning Equity. Stock Price Source: The Wall Street...11,108 256 926 599 216 $ 9,361...

  • Page 46
    ..., Merchandising Sales & Service Senior Vice President and Chief Accounting Officer Senior Vice President, Business Development Senior Vice President, Store Operations - Western Division Senior Vice President, Store Operations - Northern Division Senior Vice President, Marketing & Advertising Senior...

  • Page 47
    ...sho uld be directed to : Chris Ahearn Directo r , Public Relatio ns 336-658-7387 Certified Public Accountants. Delo itte & To uche LLP 1100 Carillo n Building 227 West Trade Street Charlo tte, N.C. 28202 704-372-3560 LO W LIS TED New Y o rk Sto ck Exchange 20 Bro ad Street New Y o rk, N.Y . 10005...

  • Page 48
    1605 Curtis Brid g e Ro ad Wilke sb o ro , No rth Caro lina 28697 www.Lo we s.co m LOWES-AR-03 LO W E 'S C O M P A N IE S , IN C . A N N U A L RE PO RT 2 0 0 2