Lowe's 2010 Annual Report Download - page 49

LOWE’S 2010 ANNUAL REPORT 45
NOTE 11 EARNINGS PER SHARE
The Company calculates basic and diluted earnings per common share
using the two-class method. Under the two-class method, net earnings
are allocated to each class of common stock and participating security
as if all of the net earnings for the period had been distributed. The
Company’s participating securities consist of unvested share-based
payment awards that contain a nonforfeitable right to receive dividends
and therefore are considered to participate in undistributed earnings
with common shareholders.
฀ 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.
The following table reconciles earnings per common share for 2010,
2009 and 2008:
(In฀millions,฀except฀per฀share฀data) 2010 2009 2008
Basic earnings per common share:
Net฀earnings฀ $2,010฀฀ ฀$1,783฀฀ $2,195฀
Less: Net earnings allocable to
participating securities (17) (13) (11)
Net earnings allocable to
common shares $1,993 $1,770 $2,184
Weighted-average common
shares outstanding 1,401 1,462 1,457
Basic earnings per common share $ 1.42 $ 1.21 $ 1.50
Diluted earnings per common share:
Net฀earnings฀ $2,010฀฀ ฀$1,783฀฀ $2,195
Less: Net earnings adjustment for
฀ interest฀on฀convertible฀notes,฀net฀of฀tax฀ ฀–฀ –฀ ฀2฀
Net earnings, as adjusted 2,010 1,783 2,197
Less: Net earnings allocable to
participating securities (17) (13) (11)
Net earnings allocable to
common shares $1,993 $1,770 $2,186
Weighted-average common
shares outstanding 1,401 1,462 1,457
Dilutive effect of non-participating
share-based awards 2 2 3
Dilutive effect of convertible notes – – 8
Weighted-average common shares,
as adjusted 1,403 1,464 1,468
Diluted earnings per common share $ 1.42 $ 1.21 $ 1.49
Stock options to purchase 19.8 million, 21.4 million and 19.1 million
shares of common stock for 2010, 2009 and 2008, respectively, were
excluded฀from฀the฀computation฀of฀diluted฀earnings฀per฀common฀share฀
because their effect would have been anti-dilutive.
NOTE 12 LEASES
The Company leases facilities and land for certain facilities under
agreements with original terms generally of 20 years. The leases
generally฀contain฀provisions฀for฀four฀to฀six฀renewal฀options฀of฀ve฀
years each. Some lease agreements also provide for contingent
rentals฀based฀on฀sales฀performance฀in฀excess฀of฀specied฀minimums฀
or฀changes฀in฀the฀consumer฀price฀index.฀Contingent฀rentals฀were฀not฀
significant for any of the periods presented. The Company subleases
certain properties that are not used in its operations. Sublease income
was not significant for any of the periods presented.
The 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
Fiscal Year Leases Obligations Total
2011฀฀฀ $฀ ฀฀฀418฀ $฀ ฀฀฀68฀ $฀ ฀฀฀486
2012 416 69 485
2013 410 69 479
2014 399 64 463
2015 392 54 446
Later years 3,973 302 4,275
Total minimum lease payments $6,008 $ 626 $6,634
Less amount representing interest (273)
Present value of minimum lease payments 353
Less current maturities (35)
Present value of minimum lease
payments, less current maturities $ 318
฀ Rental฀expenses฀under฀operating฀leases฀were฀$402฀million,฀
$410฀million฀and฀$399฀million฀in฀2010,฀2009฀and฀2008,฀respectively,฀
and฀were฀recognized฀in฀SG&A฀expense.
NOTE 13 COMMITMENTS AND
CONTINGENCIES
The Company is a defendant in legal proceedings considered to be
in the normal course of business, none of which, individually or
collectively,฀are฀expected฀to฀be฀material฀to฀the฀Company’s฀nancial฀
statements. In evaluating liabilities associated with its various legal
proceedings, the Company has accrued for probable liabilities
associated with these matters. The amounts accrued were not
material to the Company’s consolidated financial statements in any
of the years presented. Reasonably possible losses for any of the
individual legal proceedings which have not been accrued were not
material to the Company’s consolidated financial statements.