Lowe's 2012 Annual Report Download - page 67

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The amounts of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate were $4 million
and $10 million as of February 1, 2013, and February 3, 2012, respectively.
During 2012, the Company recognized $27 million of interest income and an insignificant decrease in penalties related to
uncertain tax positions. As of February 1, 2013, the Company had $12 million of accrued interest and an insignificant
amount of accrued penalties. During 2011, the Company recognized $8 million of interest expense and an insignificant
decrease in penalties related to uncertain tax positions. As of February 3, 2012, the Company had $27 million of accrued
interest and an insignificant amount of accrued penalties. During 2010, the Company recognized $7 million of interest
expense and an insignificant increase in penalties related to uncertain tax positions.
The Company is subject to examination by various foreign and domestic taxing authorities. During 2012, the Company
reached a settlement with the IRS for the exam periods 2004 through 2007. The Company is working to resolve federal
items identified under the previous audit cycles for fiscal years 2008 through 2011. However, the Company does not
believe that these items, as well as the resultant state impact, will be determined within the next 12 months. It is reasonably
possible that the Company will resolve $4 million in state related audit items, within the next 12 months. There are also
ongoing U.S. state audits covering tax years 2004 to 2011. The Company’s Canadian operations are currently under audit
by the Canada Revenue Agency for fiscal years 2008 and 2009. The Company believes appropriate provisions for all
outstanding issues have been made for all jurisdictions and all open years.
Note 12: 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 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 2012, 2011 and 2010:
(In millions, except per share data) 2012 2011 2010
Basic earnings per common share:
N
et earnings ....................................................................................................... $ 1,959 $ 1,839 $ 2,010
Less: Net earnings allocable to participating securities ..................................... (14) (15) (17)
Net earnings allocable to common shares ...................................................... $ 1,945 $ 1,824 $ 1,993
Weighted-average common shares outstanding............................................ 1,150 1,271 1,401
Basic earnings per common share .................................................................. $ 1.69 $ 1.43 $ 1.42
Diluted earnings per common share:
N
et earnings ....................................................................................................... $ 1,959 $ 1,839 $ 2,010
Less: Net earnings allocable to participating securities ..................................... (14) (15) (17)
Net earnings allocable to common shares ...................................................... $ 1,945 $ 1,824 $ 1,993
Weighted-average common shares outstanding ................................................. 1,150 1,271 1,401
Dilutive effect of non-participating share-based awards ................................... 2 2 2
Weighted-average common shares, as adjusted............................................ 1,152 1,273 1,403
Diluted earnings per common share .............................................................. $ 1.69 $ 1.43 $ 1.42
Stock options to purchase 7.5 million, 18.2 million and 19.8 million shares of common stock for 2012, 2011 and 2010,
respectively, were excluded from the computation of diluted earnings per common share because their effect would have
been anti-dilutive.