Lowe's 2009 Annual Report Download - page 47

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Under the two-class method, net earnings are reduced by the amount
of dividends declared in the period for each class of common stock and
participating security. e remaining undistributed earnings are then
allocated to common stock and participating securities as if all of the
net earnings for the period had been distributed. Basic earnings per
common share excludes dilution and is calculated by dividing net earnings
allocable to common shares by the weighted-average number of common
shares outstanding for the period. Diluted earnings per common share
is calculated by dividing net earnings allocable to common shares by
the weighted-average number of common shares as of the balance sheet
date, as adjusted for the potential dilutive effect of non-participating
share-based awards and convertible notes. e following table reconciles
earnings per common share for 2009, 2008 and 2007:
(In millions, except per share data) 2009 2008 2007
Basic earnings per common share:
Net earnings $1,783 $2,195 $2,809
Less: Net earnings allocable to
participating securities (13) (11) (10)
Net earnings allocable to
common shares $1,770 $2,184 $2,799
Weighted-average common shares
outstanding 1,462 1,457 1,481
Basic earnings per common share $ 1.21 $ 1.50 $ 1.89
Diluted earnings per common share:
Net earnings $1,783 $2,195 $2,809
Net earnings adjustment for interest
on convertible notes, net of tax – 2 4
Net earnings, as adjusted 1,783 2,197 2,813
Less: Net earnings allocable to
participating securities (13) (11) (10)
Net earnings allocable to common shares $1,770 $2,186 $2,803
Weighted-average common shares
outstanding 1,462 1,457 1,481
Dilutive effect of non-participating
share-based awards 2 3 5
Dilutive effect of convertible notes – 8 21
Weighted-average common shares,
as adjusted 1,464 1,468 1,507
Diluted earnings per common share $ 1.21 $ 1.49 $ 1.86
Stock options to purchase 21.4 million, 19.1 million and 7.8 million
shares of common stock for 2009, 2008 and 2007, respectively, were
excluded from the computation of diluted earnings per common share
because their effect would have been anti-dilutive.
NOTE 12 LEASES
e Company leases store facilities and land for certain store and
non-store facilities under agreements with original terms generally
of 20 years. e leases generally contain provisions for four to six
renewal options of five years each. Some lease agreements also provide
for contingent rentals based on sales performance in excess of specified
minimums. Contingent rentals were not significant for any of the
periods presented. e Company subleases certain properties that
are not used in its operations. Sublease income was not significant
for any of the periods presented. Certain equipment is also leased
by the Company under agreements ranging from three to five years.
ese 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.
e future minimum rental payments required under operating leases
and capitalized lease obligations having initial or remaining non-cancelable
lease terms in excess of one year are summarized as follows:
Capitalized
(In millions) Operating Lease
Year Leases Obligations Total
2010 $ 409 $ 66 $ 475
2011 410 66 476
2012 405 65 470
2013 398 65 463
2014 389 59 448
Later years 4,153 266 4,419
Total minimum lease payments $6,164 $587 $6,751
Less amount representing interest (248)
Present value of minimum lease payments 339
Less current maturities (34)
Present value of minimum lease
payments, less current maturities $305
Rental expenses under operating leases for real estate and equipment
were $410 million, $399 million and $369 million in 2009, 2008 and
2007, respectively, and were recognized in SG&A expense.
NOTE 13 COMMITMENTS AND
CONTINGENCIES
e Company is a defendant in legal proceedings considered to be in
the normal course of business, none of which, individually or collectively,
are believed to have a risk of having a material impact on the Company’s
financial statements. In evaluating liabilities associated with its various
legal proceedings, the Company has accrued for probable liabilities
associated with these matters. e amounts accrued were not material
to the Company’s consolidated financial statements in any of the
years presented.
As of January 29, 2010, the Company had non-cancelable
commitments of $673 million related to certain marketing and
information technology programs, purchases of merchandise inventory
and construction of buildings. Payments under these commitments
are scheduled to be made as follows: 2010, $418 million; 2011,
$128 million; 2012, $65 million; 2013, $58 million; 2014, $2 million;
thereafter, $2 million.
e Company had standby and documentary letters of credit
issued under banking arrangements which totaled $327 million as
of January 29, 2010. e majority of the Company’s letters of credits
are issued for the purchase of import merchandise inventories, real
estate and construction contracts, and insurance programs. Payments
under these commitments are scheduled to be made as follows: 2010,
$324 million; 2011, $2 million; 2012, $1 million. Commitment fees
ranging from 0.12% to 1.00% per annum are paid on the letters of
credit amounts outstanding.
In addition, the Company had commitments under surety bonds
which totaled $286 million as of January 29, 2010. e majority of the
Company’s surety bonds are issued by insurance companies to secure
payment of workers’ compensation liability claims in states where the
Company is self-insured. Commitments of $276 million are scheduled
to expire in 2010 and commitments of $10 million are scheduled to
expire in 2011. Premiums ranging from $3.10 to $5.50 per $1,000
of bond coverage per annum are paid on the surety bonds amounts
outstanding.