Lowe's 2010 Annual Report Download

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CONSIDER THE POSSIBILITIES
2010 ANNUAL REPORT

Table of contents

  • Page 1
    CONSIDER THE POSSIBILITIES 2010 ANNUAL REPORT

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    Robert A. Niblock Chairman of the Board and Chief Executive Officer

  • Page 3
    ... great price. Additionally, we provided strong credit offers and affordable delivery and installation options. Further, we completed the roll-out of our District Commercial Account Specialist (DCAS) and Project Specialist Exteriors (PSE) programs to more effectively reach customers at their job site...

  • Page 4
    ...provide inspiration, products and support to customers whenever and wherever they choose, often still in their local store - or perhaps through our contact center, on the Web, or with a Lowe's representative in their home or at their job site. As you can see, being a home improvement company quickly...

  • Page 5
    Our customers never stop finding ways to make their homes even better. Lowe's shares that same passion to constantly look for ways to make the home improvement experience an even better one for our customers - to always CONSIDER THE POSSIBILITIES.

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    2 CONSIDER THE POSSIBILITIES

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    ...to helping bring customers' home improvement ideas to life. Utilizing Lowe's Creative Ideasâ„¢ magazine and website, customers are able to view ideas and tips that will make their project unique. Then they can easily purchase the products that appeal to them by referring to the product number listed...

  • Page 8
    ... IT'S POSSIBLE TO... HAVE A SHOWROOM EXPERIENCE WITH BIG BOX VALUE Fashion Plumbing Customers can experience the interactive feel of a designer showroom while taking advantage of Lowe's low prices. Nursery Customers can find inspiration for a simple weekend project that will beautify their yard.

  • Page 9
    ... products would look in their own homes. Flooring Whether they are looking for carpet, ceramic, hardwoods or laminates, customers can experience hundreds of alternative textures and colors, many available for immediate purchase or on a quick-ship basis. We also offer installation at a great price...

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    6 CONSIDER THE POSSIBILITIES

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    ...employees have the tools and skills necessary to help customers plan for and complete a wide range of exterior projects for their homes, including windows, doors, roofs, gutters, siding, decks and fences. Many customers want the convenience to shop, obtain expert advice, make selections and purchase...

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    8 CONSIDER THE POSSIBILITIES

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    LOWE'S 2010 ANNUAL REPORT 9 IT'S POSSIBLE TO... SUPPORT A HOMEOWNER WITH A COMMUNITY OF EXPERTISE We know that our customers' time is precious. This is why we continue to identify more ways to assist them both inside and outside the store. In 2010, our store employees began using a business ...

  • Page 14
    "To further our success we must continue to operate with RETAIL EXCELLENCE, offer a SEAMLESS customer experience and make the process SIMPLE for customers and our employees." Larry D. Stone President and Chief Operating Officer

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    ... we adapt our assortments, pricing and advertising to each market we serve, while always adhering to the fundamentals of customer service and store environment that make Lowe's unique. We made two important changes to our pricing strategy in 2010. First, we increased the number of patch areas, or...

  • Page 16
    ... excited about our updated Lowes.com platform and the mobile site we launched in December 2010. Our Lowes.com platform has improved search capabilities, new navigation and expanded marketing reach. With our mobile site, we have built a foundation that will allow customers to start or continue their...

  • Page 17
    LOWE'S 2010 ANNUAL REPORT 13 retail excellence GOING LOCAL AND OPTIMIZING OPERATIONS DRIVE PERFORMANCE products and quantities to offer in each store based on market requirements, demographics, customer shopping preferences and local store employee knowledge. We expect to begin realizing the bene...

  • Page 18
    ... is also on simplifying customers' experiences when planning projects and buying products. We want to make the process simpler for our employees, too. So, we have embarked on an initiative called Services Platform, which will replace legacy systems with package applications that are more efficient...

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    LOWE'S 2010 ANNUAL REPORT 15 District Commercial Account Specialist Our District Commercial Account Specialist (DCAS) serves the role of account representative, cultivating existing relationships as well as building new relationships with commercial customers. DCASs leverage stores within their ...

  • Page 20
    ...and our employees, and will allow customers to directly access their transaction history and extended protection plan information. Additionally, they will be able to subscribe to have certain maintenance products shipped directly to their homes at selected intervals. We have reached another point in...

  • Page 21
    ...'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 27 28 30 31 32 33 34 47 48 49 50 MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONSOLIDATED STATEMENTS OF EARNINGS CONSOLIDATED BALANCE SHEETS...

  • Page 22
    ... •฀Operations •฀Lowe's฀Business฀Outlook •฀Financial฀Condition,฀Liquidity฀and฀Capital฀Resources •฀Off-Balance฀Sheet฀Arrangements •฀Contractual฀Obligations฀and฀Commercial฀Commitments •฀Critical฀Accounting฀Policies฀and฀Estimates customers with...

  • Page 23
    ...teams to manage the process. By shipping replacement parts to stores and repairing returned defective units in our technology service center฀we฀expect฀ongoing฀savings฀of฀approximately฀$14฀million฀ per year. 2010 Net sales 100.00% 100.00% Gross margin 35.14 34.86 Expenses: Selling...

  • Page 24
    ... right products in the right markets, helped drive comparable store sales increases above the company average for our appliances category. In addition, our PSE program, along with focused Special Order Sales promotions, helped customers take advantage of the฀higher฀tax฀credits฀for฀energy...

  • Page 25
    ... declined 1.0%, and comparable store average ticket declined 5.7% compared to 2008. Customers continued to focus on routine maintenance and repairs instead฀of฀larger฀discretionary฀projects฀during฀fiscal฀2009.฀We฀experienced solid sales performance in paint and nursery as a result...

  • Page 26
    ...primary฀ source of our liquidity. The decrease in net cash provided by operating activities for 2010 versus 2009 was driven by changes in working capital, primarily฀related฀to฀accounts฀payable฀and฀income฀tax฀payments.฀The฀ increase in net cash used in investing activities for...

  • Page 27
    ... do not include taxes, common area maintenance, insurance or contingent rent because these amounts have historically been insignificant. 2 Represents commitments related to certain marketing and information technology programs and purchases of merchandise inventory. 3 Letters of credit are issued...

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    ...฀flows฀associated฀with฀an฀individual฀operating฀ store, management makes assumptions, incorporating local market conditions, about key store variables including sales growth rates, gross฀margin฀and฀controllable฀expenses,฀such฀as฀store฀payroll฀and฀ occupancy฀expense...

  • Page 29
    ...revenue recognition policies. The following accounting estimates relating to revenue recognition require management to make assumptions and apply judgment regarding the effects of future events that cannot be determined with certainty. ฀ We฀sell฀separately-priced฀extended฀protection฀plan...

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    26 LOWE'S 2010 ANNUAL REPORT DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS We speak throughout this Annual Report to Lowe's Shareholders in forward-looking statements about our future, particularly in the "Letter to Shareholders" and "Management's Discussion and Analysis of Financial Condition...

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    ...฀Exchange฀Act฀of฀1934,฀as฀ amended. Our Internal Control was designed to provide reasonable assurance to our management and the Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements. All internal...

  • Page 32
    ...of Lowe's Companies, Inc. Mooresville, North Carolina We have audited the accompanying consolidated balance sheets of Lowe's Companies, Inc. and subsidiaries (the "Company") as of January 28, 2011 and January 29, 2010, and the related consolidated statements฀of฀earnings,฀shareholders'฀equity...

  • Page 33
    ...'S 2010 ANNUAL REPORT 29 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Lowe's Companies, Inc. Mooresville, North Carolina We have audited the internal control over financial reporting of Lowe's Companies, Inc. and subsidiaries (the "Company...

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    30 LOWE'S 2010 ANNUAL REPORT LOWE'S COMPANIES, INC. CONSOLIDATED STATEMENTS OF EARNINGS (In฀millions,฀except฀per฀share฀and฀percentage฀data) Fiscal years ended on Net sales Cost of sales Gross margin Expenses: Selling, general and administrative Depreciation Interest - net Total ...

  • Page 35
    ... Common฀stock฀-฀$.50฀par฀value;฀ Shares issued and outstanding January 28, 2011 January 29, 2010 ฀ Retained earnings Accumulated other comprehensive income Total shareholders' equity Total liabilities and shareholders' equity See accompanying notes to consolidated financial statements...

  • Page 36
    32 LOWE'S 2010 ANNUAL REPORT LOWE'S COMPANIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Capital in Excess of Par Value Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity (In millions) Common Stock Shares Amount Retained Earnings Balance February 1, 2008 ...

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    ...2010 ANNUAL REPORT 33 LOWE'S COMPANIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Fiscal years ended on January 28, 2011 January 29, 2010 January 30, 2009 Cash ï¬,ows from operating activities: ฀ Net฀earnings฀฀ Adjustments to reconcile net earnings to net cash provided...

  • Page 38
    ... TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED JANUARY 28, 2011, JANUARY 29, 2010 AND JANUARY 30, 2009 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Lowe's Companies, Inc. and subsidiaries (the Company) is the world's second-largest home improvement retailer and operated 1,749 stores in...

  • Page 39
    ...to฀customers฀by฀GE.฀All฀credit฀program-related฀services฀ are performed and controlled directly by GE. The Company has the option, but no obligation, to purchase the receivables at the end of the agreement in December 2016. Tender costs, including amounts associated with accepting the...

  • Page 40
    ... merchandise returns is provided through a reduction of sales and cost of sales in the period that the related sales are recorded. Revenues from product installation services are recognized when the installation is completed. Deferred revenues associated with amounts received for which customers...

  • Page 41
    ...฀$789฀million฀in฀2010,฀2009฀and฀2008,฀respectively.฀ Shipping and Handling Costs - The Company includes shipping and handling costs relating to the delivery of products directly from vendors to customers by third parties in cost of sales. Shipping and handling costs, which include...

  • Page 42
    ...cash฀flows฀associated฀with฀an฀individual฀operating฀store,฀management฀ made assumptions, incorporating local market conditions, about key store variables, including sales growth rates, gross margin and controllable฀expenses฀such฀as฀store฀payroll฀and฀occupancy฀expense...

  • Page 43
    ...fied as long-term at January 28, 2011, will mature in one to 41 years, based on stated maturity dates. The Company has elected the fair value option for certain investments maintained in conjunction with certain employee benefit plans. These investments are reported as trading securities, which...

  • Page 44
    ... LOWE'S 2010 ANNUAL REPORT Short-term and long-term investments include restricted balances pledged฀as฀collateral฀for฀the฀Company's฀extended฀protection฀plan฀ program and for a portion of the Company's casualty insurance and Installed Sales program liabilities. Restricted balances...

  • Page 45
    ... ฀ Authorized฀shares฀of฀common฀stock฀were฀5.6฀billion฀($.50฀par฀value)฀ at January 28, 2011 and January 29, 2010. ฀ The฀Company฀has฀a฀share฀repurchase฀program฀that฀is฀executed฀ through purchases made from time to time either in the open market or through...

  • Page 46
    ... model for options granted in 2010, 2009 and 2008 are as follows: 2010 2009 2008 Performance Accelerated Restricted Stock Awards (PARS) PARS are valued at the market price of a share of the Company's common stock on the date of grant. In general, these awards vest at the end of a five-year service...

  • Page 47
    ... share-based payment expense฀is฀recognized฀over฀the฀six-month฀offering฀period.฀The฀ Company issued 3,846,086 shares of common stock pursuant to this plan during the year ended January 28, 2011. Weighted-Average Grant-Date Fair Value Per Share Nonvested฀at฀January฀29,฀2010...

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    44 LOWE'S 2010 ANNUAL REPORT The Company maintains a non-qualified deferred compensation program called the Lowe's Cash Deferral Plan. This plan is designed to permit certain employees to defer receipt of portions of their compensation,฀thereby฀delaying฀taxation฀on฀the฀deferral฀...

  • Page 49
    ... Operating Leases Capitalized Lease Obligations Total 2010 2009 2008 Basic earnings per common share: Net฀earnings฀ Less: Net earnings allocable to participating securities Net earnings allocable to common shares Weighted-average common shares outstanding Basic earnings per common share...

  • Page 50
    46 LOWE'S 2010 ANNUAL REPORT As of January 28, 2011, the Company had non-cancelable commitments฀of฀$633฀million฀related฀to฀certain฀marketing฀and฀ information technology programs, and purchases of merchandise inventory. Payments under these commitments are scheduled to be฀made...

  • Page 51
    ... per common share Diluted earnings per common share Dividends฀per฀share฀ Selected Balance Sheet Data Total฀assets฀ Long-term฀debt,฀excluding฀current฀maturities฀ Selected Quarterly Data (In฀millions,฀except฀per฀share฀data)฀ 2010 Net฀sales฀ Gross margin Net...

  • Page 52
    ... $0.085 As of March 25, 2011, there were 29,962 registered shareholders of Lowe's common stock. * Effective the fourth quarter of 2009 the dividend will be paid in the fiscal month following the record date. Monthly Stock Price and Trading Volume Fiscal 2010 High February฀ March April May June...

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    LOWE'S 2010 ANNUAL REPORT 49 LOWE'S COMPANIES, INC. QUARTERLY REVIEW OF PERFORMANCE Earnings Statements (In฀millions,฀except฀per฀share฀data)฀ (Unaudited) Quarter Ended Net sales Gross margin Expenses: ฀฀ SG&A฀ Depreciation Interest - net Total expenses Pre-tax earnings Income...

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    50 LOWE'S 2010 ANNUAL REPORT LOWE'S COMPANIES, INC. FINANCIAL HISTORY (Unaudited) 10-YEAR FINANCIAL INFORMATION 1 Fiscal Years Ended On Stores and people 1 Number of stores 2 Square footage (in millions) 3 Number of employees 4 Customer transactions (in millions) ฀ ฀ 5฀Average฀purchase฀...

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    LOWE'S 2010 ANNUAL REPORT 51 ...Return on Average Shareholders' Equity: Net Earnings divided by the average of Beginning and Ending Equity 6 Stock price source: The Wall Street Journal * Fiscal year contained 53 weeks. All other years contained 52 weeks. NM = not meaningful CGR = compound growth rate...

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    ... President and Chief Operating Officer, McDonald's Corporation, Oak Brook, IL Marshall O. Larsen 2*, 3, 4 Chairman, President and Chief Executive Officer, Goodrich Corporation, Charlotte, NC David W . Bernauer 1,3, 4* Lead Director, Lowe's Companies, Inc., Mooresville, NC; Retired Chairman and...

  • Page 57
    ... and Commercial Business Customers each week through 1,749 stores in the United States, Canada and Mexico. Founded in 1946 and based in Mooresville, N.C., Lowe's is the secondlargest home improvement retailer in the world and employs more than 234,000 people. Lowe's has been a publicly held company...

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    LOWE'S COMPANIES, INC. 1000 LOWE'S BOULEVARD MOORESVILLE, NC 28117 CONSIDER THE POSSIBILITIES