Lowe's 2012 Annual Report Download - page 41

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27
For the deferral of revenue and cost of sales associated with transactions for which customers have not yet taken possession
of merchandise or for which installation has not yet been completed, there is judgment inherent in our estimates of gross
margin rates.
Effect if actual results differ from assumptions
We have not made any material changes in the methodology used to recognize revenue on our extended protection plan
contracts during the past three fiscal years. We currently do not anticipate incurring any overall contract losses on our
extended protection plan contracts. Although we believe that we have the ability to adequately monitor and estimate
expected losses under the extended protection plan contracts, it is possible that actual results could differ from our
estimates. In addition, if future evidence indicates that the costs of performing services under these contracts are incurred
on other than a straight-line basis, the timing of revenue recognition under these contracts could change. A 10% change in
the amount of revenue recognized in 2012 under these contracts would have affected net earnings by approximately $15
million.
We have not made any material changes in the methodology used to reverse net sales and cost of sales related to amounts
received for which customers have not yet taken possession of merchandise or for which installation has not yet been
completed. We believe we have sufficient current and historical knowledge to record reasonable estimates related to the
impact to cost of sales for these transactions. However, if actual results are not consistent with our estimates or
assumptions, we may incur additional income or expense. A 10% change in the estimate of the gross margin rates applied
to these transactions would have affected net earnings by approximately $7 million in 2012.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
We speak throughout this Annual Report on Form 10-K in forward-looking statements about our future, but particularly in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations”. The words “believe,”
“expect,” “will,” “should,” and other similar expressions are intended to identify those forward-looking statements. While
we believe our expectations are reasonable, they are not guarantees of future performance. Our actual results could differ
substantially from our expectations.
For a detailed description of the risks and uncertainties that we are exposed to, you should read the “Risk Factors” included
elsewhere in this Annual Report on Form 10-K to the United States Securities and Exchange Commission. All forward-
looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the
date of that document. All subsequent written and oral forward-looking statements attributable to us or any person acting
on our behalf are qualified by the cautionary statements in this section and in the “Risk Factors” included elsewhere in this
Annual Report on Form 10-K. We do not undertake any obligation to update or publicly release any revisions to forward-
looking statements to reflect events, circumstances or changes in expectations after the date of this report.
Item 7A - Quantitative and Qualitative Disclosures about Market Risk
In addition to the risks inherent in our operations, we are exposed to certain market risks, including changes in interest
rates, commodity prices and foreign currency exchange rates.
Interest Rate Risk
Fluctuations in interest rates do not have a material impact on our financial condition and results of operations because our
long-term debt is carried at amortized cost and consists of fixed-rate instruments. Therefore, providing quantitative
information about interest rate risk is not meaningful for financial instruments.
Commodity Price Risk
We purchase certain commodity products that are subject to price volatility caused by factors beyond our control. We
believe that the price volatility of these products is partially mitigated by our ability to adjust selling prices. The selling
prices of these commodity products are influenced, in part, by the market price we pay, which is determined by industry
supply and demand.
Foreign Currency Exchange Rate Risk
Although we have international operating entities, our exposure to foreign currency exchange rate fluctuations is not
material to our financial condition and results of operations.