Lowe's is an American retail company based in Mooresville, Iredell County, North Carolina. The focus of business is on home improvement and household appliances. The company is listed in the Standard & Poorโs 100 stock index.
Lowe's was founded in North Wilkesboro, North Carolina in 1946. The company's shares have been traded on the New York Stock Exchange since 1961. Loweโs has 1,840 stores in 49 states across the United States and around 266,000 employees. The chain is also represented in Canada (33 branches) and Australia. In May 2015, the chain acquired 13 branches from Target Canada. Hardware store chain The Home Depot is Lowe's biggest competitor.
-1- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended August 3, 2001 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 1-7898 LOWE'S COMPANIES, INC. (Exact name of registrant as specified in its charter) NORTH CAROLINA 56-0578072 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1605 CURTIS BRIDGE ROAD, WILKESBORO, N.C. 28697 (Address of principal executive offices) (Zip Code) (336) 658-4000 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 31, 2001 Common Stock, $.50 par value 773,125,913 16 TOTAL PAGES
-2- LOWE'S COMPANIES, INC. - INDEX - Page No. PART I - Financial Information: Consolidated Balance Sheets - August 3, 2001 (Unaudited), July 28, 2000 (Unaudited) and February 2, 2001 3 Consolidated Statements of Current and Retained Earnings (Unaudited) - quarter and six months ended August 3, 2001 and July 28, 2000 4 Consolidated Statements of Cash Flows (Unaudited) - six months ended August 3, 2001 and July 28, 2000 5 Notes to Unaudited Consolidated Financial Statements 6-8 Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 Independent Accountants' Report 13 PART II - Other Information 14 Item 4 - Submission of Matters to a vote of Security Holders Item 6 (a) - Exhibits Item 6 (b) - Reports on Form 8-K EXHIBIT INDEX 16
-3- <TABLE> Lowe's Companies, Inc. Consolidated Balance Sheets In Thousands <CAPTION> (Unaudited) (Unaudited) August 3, July 28, February 2, 2001 2000 2001 Assets <s> <c> <c> <c> Current assets: Cash and cash equivalents $629,293 $570,233 $455,658 Short-term investments 36,408 11,272 12,871 Accounts receivable - net 213,430 183,749 160,985 Merchandise inventory 3,651,191 3,167,436 3,285,370 Deferred income taxes 98,508 59,077 81,044 Other assets 216,241 185,528 161,498 Total current assets 4,845,071 4,177,295 4,157,426 Property, less accumulated depreciation 7,829,205 5,932,792 7,034,960 Long-term investments 30,985 37,500 34,690 Other assets 162,131 94,992 131,091 Total assets $12,867,392 $10,242,579 $11,358,167 Liabilities and Shareholders' Equity Current liabilities: Short-term borrowings $100,000 $100,000 $249,829 Current maturities of long-term debt 43,993 41,905 42,341 Accounts payable 1,910,317 1,691,471 1,714,370 Employee retirement plans 90,279 63,347 75,656 Accrued salaries and wages 181,197 138,060 166,392 Other current liabilities 820,145 624,008 662,410 Total current liabilities 3,145,931 2,658,791 2,910,998 Long-term debt, excluding current maturities 3,291,605 2,217,006 2,697,669 Deferred income taxes 273,382 210,988 251,450 Other long-term liabilities 3,220 3,858 3,165 Total liabilities 6,714,138 5,090,643 5,863,282 Shareholders' equity: Preferred stock - $5 par value, none issued - - - Common stock - $.50 par value; Issued and Outstanding August 3, 2001 772,749 July 28, 2000 765,574 February 2, 2001 766,484 386,374 382,786 383,242 Capital in excess of par 1,723,515 1,574,927 1,595,148 Retained earnings 4,043,810 3,201,989 3,518,356 Unearned compensation- restricted stock awards (1,067) (7,580) (2,312) Accumulated other comprehensive income (loss) 622 (186) 451 Total shareholders' equity 6,153,254 5,151,936 5,494,885 Total liabilities and shareholders' equity $12,867,392 $10,242,579 $11,358,167 See accompanying notes to unaudited consolidated financial statements. </TABLE>
-4- <TABLE> Lowe's Companies, Inc. Consolidated Statements of Current and Retained Earnings (Unaudited) In Thousands, Except Per Share Data <CAPTION> Three Months Ended Six Months Ended August 3, 2001 July 28, 2000 August 3, 2001 July 28, 2000 Current Earnings Amount Percent Amount Percent Amount Percent Amount Percent <S> <C> <C> <C> <C> <C> <C> <C> <C> Net sales $6,126,726 100.00 $5,264,252 100.00 $11,403,091 100.00 $9,731,366 100.00 Cost of sales 4,409,018 71.96 3,812,225 72.42 8,191,854 71.84 7,031,223 72.25 Gross margin 1,717,708 28.04 1,452,027 27.58 3,211,237 28.16 2,700,143 27.75 Expenses: Selling, general and administrative 999,706 16.32 857,052 16.28 1,939,451 17.01 1,663,760 17.10 Store opening costs 28,470 0.46 27,852 0.53 64,262 0.56 53,637 0.55 Depreciation 124,571 2.03 98,495 1.87 243,649 2.14 191,983 1.97 Interest 42,614 0.70 26,224 0.50 83,940 0.73 52,237 0.54 Total expenses 1,195,361 19.51 1,009,623 19.18 2,331,302 20.44 1,961,617 20.16 Pre-tax earnings 522,347 8.53 442,404 8.40 879,935 7.72 738,526 7.59 Income tax provision 193,264 3.16 162,805 3.09 325,572 2.86 271,778 2.79 Net earnings $329,083 5.37 $279,599 5.31 $554,363 4.86 $466,748 4.80 Shares outstanding - Basic 771,667 765,458 770,042 765,234 Basic earnings per share $0.43 $0.37 $0.72 $0.61 Shares outstanding - Diluted 795,087 768,740 791,282 769,104 Diluted earnings per share $0.42 $0.36 $0.71 $0.61 Retained Earnings Balance at beginning of period $3,730,174 $2,935,756 $3,518,356 $2,761,964 Net earnings 329,083 279,599 554,363 466,748 Cash dividends (15,447) (13,366) (28,909) (26,723) Balance at end of period $4,043,810 $3,201,989 $4,043,810 $3,201,989 See accompanying notes to unaudited consolidated financial statements. </TABLE>
-5- <TABLE> Lowe's Companies, Inc. Consolidated Statements of Cash Flows (Unaudited) In Thousands <CAPTION> For the Six Months Ended August 3, July 28, Periods Ended On 2001 2000 <S> <C> <C> Cash Flows From Operating Activities: Net Earnings $554,363 $466,748 Adjustments to Reconcile Net Earnings to Net Cash Provided By Operating Activities: Depreciation & Amortization 251,539 192,336 Deferred Income Taxes 4,375 5,106 Loss on Disposition/Writedown of Fixed and Other Assets 27,196 15,813 Tax Effect of Stock Options Exercised 24,138 3,756 Changes in Operating Assets and Liabilities: Accounts Receivable - Net (52,445) (35,848) Merchandise Inventory (365,821) (355,075) Other Operating Assets (54,743) (58,067) Accounts Payable 195,947 124,525 Employee Retirement Plans 54,273 (38,667) Other Operating Liabilities 173,543 201,644 Net Cash Provided by Operating Activities 812,365 522,271 Cash Flows from Investing Activities: (Increase) Decrease in Investment Assets: Short-Term Investments (19,990) 71,045 Purchases of Long-Term Investments (979) (10,673) Proceeds from Sale/Maturity of Long-Term Investments 1,400 - Increase in Other Long-Term Assets (50,143) (21,494) Fixed Assets Acquired (1,063,863) (974,317) Proceeds from the Sale of Fixed and Other Long-Term Assets 22,933 31,780 Net Cash Used in Investing Activities (1,110,642) (903,659) Cash Flows from Financing Activities: Net Increase (Decrease) in Short-Term Borrowings (149,829) 7,525 Long-Term Debt Borrowings 611,392 519,912 Repayment of Long-Term Debt (28,751) (47,840) Proceeds from Employee Stock Purchase Plan 16,176 - Proceeds from Stock Options Exercised 51,833 7,625 Cash Dividend Payments (28,909) (26,723) Net Cash Provided by Financing Activities 471,912 460,499 Net Increase in Cash and Cash Equivalents 173,635 79,111 Cash and Cash Equivalents, Beginning of Period 455,658 491,122 Cash and Cash Equivalents, End of Period $629,293 $570,233 See accompanying notes to unaudited consolidated financial statements. </TABLE>
-6- Lowe's Companies, Inc. Notes to Unaudited Consolidated Financial Statements Note 1: The accompanying Consolidated Financial Statements (unaudited) have been reviewed by independent certified public accountants, and in the opinion of management, they contain all adjustments necessary to present fairly the financial position as of August 3, 2001 and July 28, 2000, and the results of operations and the cash flows for the six months ended August 3, 2001 and July 28, 2000. These interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Lowe's Companies, Inc. (the Company) Annual Report on Form 10-K for the fiscal year ended February 2, 2001. The financial results for the interim periods may not be indicative of the financial results for the entire fiscal year. Note 2: On May 25, 2001, the Company's Board of Directors approved a two- for-one split of the Company's common stock. As a result, shareholders received one additional share on June 29, 2001, for each share held as of the record date on June 8, 2001. The par value of the Company's common stock remained $.50. All financial information presented, including per share data, has been adjusted to reflect the effect of the stock split. Note 3: Diluted earnings per share are calculated on the weighted average shares of common stock as adjusted for the potential dilutive effect of stock options and convertible notes at the balance sheet date. The calculation is detailed below (in thousands, except per share data): <TABLE> <CAPTION> Three Months Ended Six Months Ended August 3, July 28, August 3, July 28, 2001 2000 2001 2000 <s> <c> <c> <c> <c> Net earnings $329,083 $279,599 $554,363 $466,748 Weighted average number of shares outstanding 771,677 765,458 770,042 765,234 Basic earnings per share $ 0.43 $ 0.37 $ 0.72 $ 0.61 Net earnings $329,083 $279,599 $554,363 $446,748 Tax-effected interest expense attributable to 2.5% convertible notes (Note 8) 2,413 - 4,445 - Net earnings assuming dilution $331,496 $279,599 $558,808 $446,748 Weighted average number of common shares outstanding 771,667 756,458 770,042 765,234 Effect of potentially dilutive securities: 2.5% convertible notes 16,530 - 15,350 - Employee stock option plans 6,890 3,282 5,890 3,870 Weighted average number of common shares assuming dilution 795,087 768,740 791,282 769,104 Diluted earnings per share $ 0.42 $ 0.36 $ 0.71 $ 0.61 </TABLE>
-7- <TABLE> Note 4: Net interest expense is composed of the following (in thousands): <CAPTION> Three Months Ended Six Months Ended August 3, July 28, August 3, July 28, 2001 2000 2001 2000 <s> <c> <c> <c> <c> Long-term debt $45,546 $28,882 $90,616 $51,272 Capitalized leases 9,964 10,352 20,299 20,691 Short-term debt 1,135 1,697 2,979 4,052 Amortization of loan cost 724 292 1,392 529 Short-term interest income (7,283) (8,659) (15,579) (13,569) Interest capitalized on construction in progress (7,472) (6,340) (15,767) (10,738) Net interest expense $42,614 $26,224 $83,940 $52,237 </TABLE> Note 5: Property is shown net of accumulated depreciation of $1.8 billion at August 3, 2001, $1.4 billion at July 28, 2000 and $1.6 billion at February 2, 2001. Note 6: Supplemental disclosures of cash flow information (in thousands): Six Months Ended August 3, 2001 July 28, 2000 Cash paid for interest (net of capitalized) $ 115,388 $ 70,869 Cash paid for income taxes 238,461 179,059 Non-cash investing and financing activities: Common stock issued to ESOP 39,650 - Fixed assets acquired under capital lease 5,057 1,769 Note 7: In January 2001, the Board of Directors authorized the funding of the fiscal 2000 ESOP contribution primarily with the issuance of new shares of the Company's common stock. During the first six months of fiscal 2001, the Company issued a total of 1,232,669 shares, with a market value of $39.7 million to fund the fiscal 2000 ESOP contribution. Note 8: In February 2001, the Company issued $1.005 billion principal of convertible notes at an issue price of $608.41 per note. Interest will not be paid on the notes prior to maturity on February 16, 2021 at which time the holders will receive $1,000 per note, representing a yield to maturity of 2.5%. Holders may convert their notes at any time on or before the maturity date, unless the notes have been purchased or redeemed previously, into 16.448 shares of the Company's common stock per note. Holders of the notes may require the Company to purchase all or a portion of their notes on February 16, 2004 at a price of $655.49 per note or on February 16, 2011 at a price of $780.01 per note. On either of these
-8- dates, the Company may choose to pay the purchase price of the notes in cash or common stock, or a combination of cash and common stock. In addition, if a change in the control of the Company occurs on or before February 16, 2004, each holder may require the Company to purchase, for cash, all or a portion of their notes. Note 9: On August 2, 2001, the Company completed a new $800 million senior credit facility. The facility is split into a $400 million five- year tranche, expiring on August 2, 2006 and a $400 million 364-day tranche, expiring on August 2, 2002 Loans available under each facility include base rate loans, Euro-Dollar loans and money market loans. Each base rate loan bears interest on the outstanding principle amount and is payable quarterly in arrears. The base interest rate is the higher of the prime rate in effect or one-half of one percent above the federal funds rate. Each Euro-Dollar loan will bear an interest rate equal to the applicable margin plus the applicable adjusted London Interbank Offered Rate for such period. Money market loans shall bear interest on the outstanding principle at a rate per annum equal to the money market rate quoted by the bank making the loan. Sixteen banking institutions are participating in the $800 million senior credit facility and, as of August 3, 2001, there were no outstanding loans under the facility. Note 10: Total comprehensive income, comprised of net earnings and unrealized holding gains (losses) on available-for-sale securities was $329.2 and $279.7 million, compared to net earnings of $329.1 and $279.6 million for the quarters ended August 3, 2001 and July 28, 2000, respectively. Total comprehensive income was $554.5 and $467.0 million, compared to net earnings of $554.4 and $466.7 for the six months ended August 3, 2001 and July 28, 2000, respectively. Note 11: In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Obligations Associated with the Retirement of Long-Lived Assets". SFAS No. 143 will require the accrual, at fair value, of the estimated retirement obligation for tangible long-lived assets if the company is legally obligated to perform retirement activities at the end of the related asset's life. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. Management is currently evaluating the impact of the adoption of SFAS 143 and its effect on the Company's financial statements.
-9- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion summarizes the significant factors affecting the Company's consolidated operating results and liquidity and capital resources during the quarter and six months ended August 3, 2001. This discussion should be read in conjunction with the financial statements and financial statement footnotes that are included in the Company's fiscal 2000 Form 10-K. On May 25, 2001, the Company's Board of Directors approved a two-for- one split of the Company's common stock. As a result, shareholders received one additional share on June 29, 2001 for each share held as of the record date on June 8, 2001. The par value of the Company's common stock remained $.50. All financial information presented, including per share data, has been adjusted to reflect the effects of the stock split. OPERATIONS For the second quarter of fiscal 2001, sales increased 16% to $6.1 billion, comparable store sales for the quarter increased 1.7%, and net earnings rose 18% to $329.1 million compared to last year's second quarter earnings of $279.6 million. Diluted earnings per share were $.42 compared to $.36 for the comparable quarter of last year. For the six months ended August 3, 2001, sales increased 17% to $11.4 billion, comparable store sales decreased 0.5%, and net earnings increased 19% to $554.4 million compared to the first six months of fiscal year 2000. Diluted earnings per share for the first six months of 2001 increased 16% to $.71 per share over the same period a year ago. The sales increase during the second quarter was primarily attributable to the addition of 14 million square feet of retail selling space relating to new and relocated stores since last year's second quarter. Stabilization in lumber and building material prices as well as improved sales in most merchandise categories brought about the comparable store increase. Gross margin was 28.04% of sales for the quarter ended August 3, 2001 compared to 27.58% for last year's comparable quarter. Gross margin for the six months ended August 3, 2001 was 28.16% versus 27.75% during the first six months of 2000. The increase in margin rate for the second quarter and the first six months of 2001 is primarily due to lower acquisition costs through the line review process and additional foreign sourcing, and favorable product mix changes. Selling, general and administrative expenses (SG&A) were 16.32% of sales versus 16.28% in last year's second quarter. SG&A increased by 17% compared to the 16% increase in sales for the quarter. The slight increase in SG&A as a percent of sales is primarily attributable to higher insurance and bank card costs offset by controlling and leveraging payroll costs. During the first six months of 2001, SG&A was 17.01% compared to 17.10% for the same period a year ago. SG&A increased 16.6% during the first six months of 2001 compared to a 17.2% increase in sales for this same period. This leverage was due primarily to carefully controlling expenses, particularly store payroll.
-10- Store opening costs were $28.5 million for the quarter ended August 3, 2001 compared to $27.9 million last year, representing costs associated with the opening of 23 stores during the current year's second quarter (21 new and 2 relocated) compared to 22 stores for the comparable period last year (15 new and 7 relocated). Charges in this quarter for future and prior openings were $15.2 million compared to $9.4 million in last year's second quarter. Store opening costs for the six months ended August 3, 2001 were $64.3 million compared to $53.6 million last year. These costs were associated with the opening of 53 new stores and relocating 7 stores during the first six months of 2001 compared to 27 new stores and 9 relocated stores in the first six months of 2000. The Company's 2001 expansion plans are discussed under "Liquidity and Capital Resources" below. Depreciation was $124.6 million for the quarter ended August 3, 2001 and $243.6 million for the six months then ended. This represents increases of 26% and 27% over last year's comparable periods. These increases were primarily due to additions of buildings, fixtures, displays and computer equipment relating to the Company's ongoing expansion program. Interest expense increased from $26.2 and $52.2 million to $42.6 and $83.9 million for the quarter and six months ended August 3, 2001, respectively. Interest has increased during the current year's second quarter primarily due to interest expense relating to the issuance of $1.005 billion principal of convertible notes in February of 2001 as well as interest on $500 million principal of 8.25% Notes issued in May of 2000 and $500 million principal of 7.5% Notes issued in December of 2000. The increase in interest expense was partially offset by increases in investment income and interest capitalized on construction projects. The Company's effective income tax rate was 37.0% for the quarter and six months ended August 3, 2001 and 36.8% for last year's second quarter and first six months. The higher rate during 2001 is primarily related to expansion into states with higher income tax rates. LIQUIDITY AND CAPITAL RESOURCES The primary sources of liquidity during the first six months of 2001 were cash flows from operating activities and certain financing activities. Net cash provided by operating activities was $812.4 million for the six months ended August 3, 2001 compared to $522.3 million for the first six months of fiscal 2000. The $290.1 million increase in the current year resulted primarily from an increase in net earnings, increased accounts payable, and the funding of the Company's ESOP with the issuance of common stock as compared to cash in the prior year. The Company's working capital was $1.7 billion at August 3, 2001 compared to $1.5 billion at July 28, 2000 and $1.2 billion at February 2, 2001. The primary component of net cash used in investing activities continues to be new store facilities in connection with the Company's expansion plan. Cash acquisitions of fixed assets were $1,063.9 million and $974.3 million for the six months ended August 3, 2001 and July 28, 2000, respectively. At August 3, 2001, the Company operated 700 stores in 40 states with 74.5 million square feet of retail selling space, a 22.3% increase over the selling space as of July 28, 2000. Cash flows provided by financing activities were $471.9 million for the six months ended August 3, 2001. For the six months ended July 28, 2000, cash flows provided by financing activities were $460.4 million. The major source of cash from financing activities during the first six months of 2001 and 2000
-11- involved long-term debt proceeds, partially offset by debt repayments and cash dividend payments. Property has increased as a result of the Company's plan to continue its expansion of retail sales floor square footage by entering new markets, increasing our market presence and by relocating smaller format stores to larger ones. The Company's 2001 capital budget is $2.7 billion, inclusive of approximately $286 million in operating or capital leases. Approximately 89% of this planned commitment is for store expansion and new distribution centers. Expansion plans for 2001 consist of approximately 115 stores (including the relocation of 12 to 13 smaller format stores). This planned expansion is expected to increase sales floor square footage by approximately 18% to 20%. Expansion in the second quarter of fiscal 2001 included 21 new stores and 2 relocations representing 2.6 million square feet of new incremental retail space. The Company also operates six distribution centers. Construction continues on regional distribution centers in Cheyenne, Wyoming and Findlay, Ohio. During the third quarter of 2001, construction is scheduled to begin on a distribution center in Northampton County, North Carolina. In February 2001, the Company issued $1.005 billion principal of convertible notes at an issue price of $608.41 per note. Interest will not be paid on the notes prior to maturity on February 16, 2021 at which time the holders will receive $1,000 per note, representing a yield to maturity of 2.5%. Holders may convert their notes at any time on or before the maturity date, unless the notes have been purchased or redeemed previously, into 16.448 shares of the Company's common stock per note. Holders of the notes may require the Company to purchase all or a portion of their notes on February 16, 2004 at a price of $655.49 per note or on February 16, 2011 at a price of $780.01 per note. On either of these dates, the Company may choose to pay the purchase price of the notes in cash or common stock, or a combination of cash and common stock. In addition, if a change in the control of the Company occurs on or before February 16, 2004, each holder may require the Company to purchase, for cash, all or a portion of their notes. On August 2, 2001, the Company completed a new $800 million senior credit facility. The facility is split into a $400 million five-year tranche, expiring on August 2, 2006 and a $400 million 364-day tranche, expiring on August 2, 2002. Loans available under each facility include base rate loans, Euro-Dollar loans and money market loans. Each base rate loan bears interest on the outstanding principle amount and is payable quarterly in arrears. The base interest rate is the higher of the prime rate in effect or one-half of one percent above the federal funds rate. Each Euro-Dollar loan will bear an interest rate equal to the applicable margin plus the applicable adjusted London Interbank Offered Rate for such period. Money market loans shall bear interest on the outstanding principle at a rate per annum equal to the money market rate quoted by the bank making the loan. Sixteen banking institutions are participating in the $800 million senior credit facility and, as of August 3, 2001, there were no outstanding loans under the facility. The Company believes that funds from operations, debt issuances, leases and existing credit agreements will be adequate to finance the 2001 expansion plan and other operating requirements.
-12- MARKET RISK As discussed in the annual report to shareholders for the year ended February 2, 2001, the Company's major market risk exposure is the potential loss arising from changing interest rates and its impact on long-term debt. The Company's policy is to manage interest rate risks by maintaining a combination of fixed and variable rate financial instruments. The Company's market risk has not changed materially since February 2, 2001 with the exception of new debt issued during 2001. NEW ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Obligations Associated with the Retirement of Long-Lived Assets". SFAS No. 143 will require the accrual, at fair value, of the estimated retirement obligation for tangible long- lived assets if the company is legally obligated to perform retirement activities at the end of the related asset's life. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. Management is currently evaluating the impact of the adoption of SFAS 143 and its effect on the Company's financial statements. FORWARD-LOOKING STATEMENTS This news release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although the company believes that comments reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Possible risks and uncertainties regarding these statements include, but are not limited to, the direction of general economic trends, as Lowe's expands into major metropolitan markets, the availability of real estate for expansion and its successful development may lengthen the timelines for store openings, the availability of sufficient labor to facilitate growth, fluctuations in prices and availability of product, unanticipated increases in competition and weather conditions that affect sales.
-13- INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors Lowe's Companies, Inc.: We have reviewed the accompanying consolidated balance sheets of Lowe's Companies, Inc. and subsidiaries (the "Company") as of August 3, 2001 and July 28, 2000, and the related consolidated statements of current and retained earnings for the three-month and six-month periods ended August 3, 2001 and July 28, 2000 and consolidated statements of cash flows for the six-months ended August 3, 2001 and July 28, 2000. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Lowe's Companies, Inc. and subsidiaries as of February 2, 2001, and the related consolidated statements of earnings, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 20, 2001, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of February 2, 2001 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Deloitte & Touche LLP Charlotte, North Carolina August 15, 2001
-14- Part II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders (a) - The annual meeting of shareholders was held May 25, 2001. (b) - Directors elected at the meeting: Robert L. Tillman, Leonard L. Berry, Paul Fulton, Dawn E. Hudson and Robert A. Ingram. Incumbent Directors whose terms expire in subsequent years are: Kenneth D. Lewis, Richard K. Lochridge, Claudine B. Malone, Thomas O'Malley, Peter C. Browning and Robert G. Schwartz. (c) - The matters voted upon at the meeting and the results of the voting were as follows (Adjusted for the two-for-one stock split effective June 29, 2001): (1) Election of Directors: FOR WITHHELD Robert L. Tillman 702,172,222 4,326,280 Leonard L. Berry 702,625,056 3,873,446 Paul Fulton 702,508,372 3,990,130 Dawn E. Hudson 702,493,028 4,005,474 Robert A. Ingram 702,529,546 3,968,956 (2) Proposal to approve the Lowe's Companies, Inc. 2001 Incentive Plan FOR AGAINST ABSTAIN 627,265,590 75,567,508 3,659,552 (3) Proposal concerning global workplace standards FOR AGAINST ABSTAIN 52,042,504 538,176,424 30,966,184 Item 6 (a) - Exhibits (3.1) Restated and Amended Charter, May 25, 2001 Refer to the Exhibit Index on page 16.
-15- Item 6 (b) - Reports on Form 8-K There were no reports filed on Form 8-K during the quarter ended August 3, 2001. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LOWE'S COMPANIES, INC. September 14, 2001 /s/ Kenneth W. Black, Jr. Date____________________ ___________________________________________ Kenneth W. Black, Jr. Senior Vice President and Chief Accounting Officer
-16- EXHIBIT INDEX Page No. Exhibit 3.1 - Restated and Amended Charter, May 25, 2001 17 - 32