Lowe's 2014 Annual Report Download - page 69

accrued penalties. During 2013, the Company recognized $6 million of interest expense and an insignificant decrease in
penalties related to uncertain tax positions. As of January 31, 2014, the Company had $6 million of accrued interest and an
insignificant amount of accrued penalties. During 2012, the Company recognized $27 million of interest income and an
insignificant decrease in penalties related to uncertain tax positions.
The Company is subject to examination by various foreign and domestic taxing authorities. During 2014, the Company was
notified by the Internal Revenue Service (IRS) that its 2012 Federal tax return would be subjected to a limited scope audit. In
addition, the Company was accepted into the IRS's Compliance Assistance Program for the 2014 tax year; this program enables
the Company to work with the IRS in an effort to resolve issues relating to the Company's federal tax liability prior to the filing
of the Company's federal tax return. It is reasonably possible that the Company will resolve $7 million in state related audit
items within the next 12 months. There are ongoing U.S. state audits covering tax years 2007 to 2013. The Company’s
Canadian operations are currently under audit by the Canada Revenue Agency for fiscal years 2009 and 2010. The Company
remains subject to income tax examinations for international income taxes for fiscal years 2007 through 2013. 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 2014, 2013 and 2012:
(In millions, except per share data) 2014 2013 2012
Basic earnings per common share:
Net earnings $ 2,698
$ 2,286 $ 1,959
Less: Net earnings allocable to participating securities (16 ) (16 ) (14)
Net earnings allocable to common shares, basic $ 2,682
$ 2,270
$ 1,945
Weighted-average common shares outstanding 988
1,059 1,150
Basic earnings per common share $ 2.71
$ 2.14
$ 1.69
Diluted earnings per common share:
Net earnings $ 2,698
$ 2,286 $ 1,959
Less: Net earnings allocable to participating securities (16 ) (16 ) (14)
Net earnings allocable to common shares, diluted $ 2,682
$ 2,270
$ 1,945
Weighted-average common shares outstanding 988
1,059 1,150
Dilutive effect of non-participating share-based awards 2
2 2
Weighted-average common shares, as adjusted 990
1,061 1,152
Diluted earnings per common share $ 2.71
$ 2.14
$ 1.69
Stock options to purchase 0.6 million, 1.9 million and 7.5 million shares of common stock for 2014, 2013 and 2012,
respectively, were excluded from the computation of diluted earnings per common share because their effect would have been
anti-dilutive.
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