8-K
LOWES COMPANIES INC (LOW)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 18, 2020
LOWE’S COMPANIES, INC.
(Exact name of registrant as specified in its charter)
| North Carolina | 1-7898 | 56-0578072 | |||
|---|---|---|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission File<br>Number) | (IRS Employer<br> Identification No.) | 1000 Lowes Blvd., Mooresville, NC | 28117 | |
| --- | --- | ||||
| (Address of principal executive offices) | (Zip Code) | ||||
| Registrant’s telephone number, including area code | (704) 758-1000 |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.50 per share | LOW | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| ☐ | Emerging growth company | | --- | --- || ☐ | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | | --- | --- |
Item 2.02 Results of Operations and Financial Condition.
On November 18, 2020, Lowe’s Companies, Inc. (the “Company”) issued a press release and related infographic, furnished as Exhibits 99.1 and 99.2, respectively, and incorporated herein by reference, announcing the Company’s financial results for its third quarter ended October 30, 2020.
The information provided pursuant to Item 2.02, including the exhibits attached hereto, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
SIGNATURE
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 hereunto duly authorized.
| LOWE’S COMPANIES, INC. | ||
|---|---|---|
| Date: November 18, 2020 | By: | /s/ Dan C. Griggs, Jr. |
| Dan C. Griggs, Jr.<br>Vice President, Chief Accounting Officer |
Document
Exhibit 99.1
November 18, 2020
For 6:00 am ET Release
LOWE’S REPORTS THIRD QUARTER 2020 SALES AND EARNINGS RESULTS
— U.S. Comparable Sales Increased 30.4% —
— Diluted EPS of $0.91 which Includes $1.05 Negative Impact from Extinguishment of Debt —
— Adjusted Diluted EPS of $1.981 —
— Lowes.com Sales Increased 106% —
— Company Invested over $1.1 Billion Year-to-Date to Support Associates, Store Safety and Communities
in Response to COVID-19 —
— Company Provides Fourth Quarter 2020 Financial Outlook —
MOORESVILLE, N.C. - Lowe’s Companies, Inc. (NYSE: LOW) today reported net earnings of $692 million and diluted earnings per share (EPS) of $0.91 for the quarter ended October 30, 2020, which included a $1.1 billion pre-tax loss on extinguishment of debt in connection with the company’s third quarter $3.0 billion cash tender offer, compared to net earnings of $1.0 billion and diluted EPS of $1.36 in the third quarter of 2019. Excluding these charges, third quarter adjusted diluted EPS increased 40 percent to $1.98 from adjusted diluted EPS of $1.41 in the third quarter of 20191.
Sales for the third quarter were $22.3 billion compared to $17.4 billion in the third quarter of 2019, and comparable sales increased 30.1 percent. Comparable sales for the U.S. home improvement business increased 30.4 percent for the third quarter.
In the third quarter, the Company invested $245 million in COVID-related support of frontline hourly associates, bringing its total COVID-related associate financial support to more than $800 million this year. As a reflection of its commitment to supporting its associates and communities, Lowe’s has invested more than $1.1 billion in COVID-related support for its associates, store safety and community pandemic relief through the first nine months of fiscal 2020.
For the third quarter in a row, hourly associates at 100% of stores earned their “Winning Together” profit-sharing bonus, which totaled $104 million. For further information on the Company’s safety protocols in response to COVID-19, please visit corporate.lowes.com/covid-19-response.
“Strong execution enabled us to meet continued broad-based demand, as we delivered over 15% growth in all merchandising departments, over 20% growth across all geographic regions. and triple-digit growth online. We continued to invest in the future growth of the company, including a $100 million investment in the quarter as part of an ongoing effort to reset the layout of our U.S. stores, making them easier to shop with improved product adjacencies, especially for Pro customers. Our omni-channel transformation continued in the third quarter with further investments in Lowes.com and our supply chain. I remain confident that we are making the right strategic investments to deliver sustainable, long-term growth. I would also like to thank our outstanding frontline associates for their unwavering commitment to customer service and safety,” commented Marvin R. Ellison, Lowe’s president and CEO.
Capital Allocation
The Company reinstated its share repurchase program, and repurchased 3.6 million shares for $621 million during the quarter, while it also paid $416 million in dividends.
During the quarter, the Company made a cash tender offer for $3.0 billion of higher-coupon bonds, and issued $4.0 billion of senior unsecured notes at a weighted average interest rate of 2.17%, which is a record low in company history. These actions further strengthened the Company’s balance sheet by lowering its annual interest expense.
At quarter-end, the Company had $8.2 billion of cash and cash equivalents as well as $3.0 billion in undrawn capacity on its revolving credit facilities, which will be available for any unanticipated liquidity needs.
1 Adjusted diluted earnings per share is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures Reconciliation” section of this release for additional information as well as reconciliations between the Company’s GAAP and non-GAAP financial results.
As of October 30, 2020, Lowe’s operated 1,969 home improvement and hardware stores in the United States and Canada representing 208 million square feet of retail selling space.
A conference call to discuss third quarter 2020 operating results is scheduled for today, Wednesday, November 18, at 9:00 am ET. The conference call will be available by webcast and can be accessed by visiting Lowe’s website at ir.lowes.com and clicking on Lowe’s Third Quarter 2020 Earnings Conference Call Webcast. Supplemental slides will be available approximately 15 minutes prior to the start of the conference call. A replay of the call will be archived at ir.lowes.com.
| Lowe’s Business Outlook |
|---|
On May 20, 2020, the Company withdrew its financial guidance for fiscal year 2020 due to limited visibility into future business trends in this unprecedented operating environment. While the business environment remains uncertain, the Company is providing the following outlook for the operating results of the fourth quarter of 2020.
Fourth Quarter 2020 Financial Outlook (comparisons to fourth quarter 2019)
•Total and comparable sales growth of approximately 15 to 20 percent.
•Adjusted operating income as a percentage of sales (adjusted operating margin) is expected to be essentially flat to prior-year levels, given ongoing COVID-related operating expenses, $150 million expense related to the reset of the layout of our U.S. stores, and investments in expanding the supply chain network.2
•Effective income tax rate of approximately 27%.
•Expected repurchase of approximately $3.0 billion of stock.
•Diluted earnings per share and adjusted diluted earnings per share1 of $1.10 - $1.20.
For fiscal 2020, the Company expects capital expenditures of approximately $1.7 billion.
| Lowe’s Companies, Inc. |
|---|
Lowe’s Companies, Inc. (NYSE: LOW) is a FORTUNE® 50 home improvement company serving approximately 18 million customers a week in the United States and Canada. With fiscal year 2019 sales of $72.1 billion, Lowe’s and its related businesses operate or service more than 2,200 home improvement and hardware stores and employ approximately 300,000 associates. Based in Mooresville, N.C., Lowe’s supports the communities it serves through programs focused on creating safe, affordable housing and helping to develop the next generation of skilled trade experts. For more information, visit Lowes.com.
| Disclosure Regarding Forward-Looking Statements |
|---|
This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements including words such as “believe”, “expect”, “anticipate”, “plan”, “desire”, “project”, “estimate”, “intend”, “will”, “should”, “could”, “would”, “may”, “strategy”, “potential”, “opportunity”, “outlook”, “guidance”, and similar expressions are forward-looking statements. Forward-looking statements involve, among other things, expectations, projections, and assumptions about future financial and operating results, objectives, business outlook, priorities, sales growth, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for products and services, share repurchases, Lowe’s strategic initiatives, including those relating to acquisitions and dispositions and the impact of such transactions on our strategic and operational plans and financial results. Such statements involve risks and uncertainties and we can give no assurance that they will prove to be correct. Actual results may differ materially from those expressed or implied in such statements.
A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by these forward-looking statements including, but not limited to, changes in general economic conditions, such as the rate of unemployment, interest rate and currency fluctuations, fuel and other energy costs, slower growth in personal income, changes in consumer spending, changes in the rate of housing turnover, the availability of consumer credit and of mortgage financing, changes in commodity prices, changes or threatened changes in tariffs, outbreak of public health crises, such as the COVID-19 pandemic, availability and cost of goods from suppliers, changes in our management and key personnel, and other factors that can negatively affect our customers.
2 The Company expects to complete the reset of over 90% of its U.S. stores by the end of the fiscal year.
Investors and others should carefully consider the foregoing factors and other uncertainties, risks and potential events including, but not limited to, those described in “Item 1A - Risk Factors” in our most recent Annual Report on Form 10-K and as may be updated from time to time in Item 1A in our quarterly reports on Form 10-Q or other subsequent filings with the SEC. All such forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update these statements other than as required by law.
| Contacts: | Shareholder/Analyst Inquiries: | Media Inquiries: |
|---|---|---|
| Kate Pearlman | Jackie Pardini Hartzell | |
| 704-775-3856 | 704-758-4317 | |
| kate.pearlman@lowes.com | jaclyn.pardini@lowes.com |
Lowe’s Companies, Inc.
Consolidated Statements of Current and Retained Earnings (Unaudited)
In Millions, Except Per Share and Percentage Data
| Three Months Ended | Nine Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| October 30, 2020 | November 1, 2019 | October 30, 2020 | November 1, 2019 | |||||||||
| Current Earnings | Amount | % Sales | Amount | % Sales | Amount | % Sales | Amount | % Sales | ||||
| Net sales | $ | 22,309 | 100.00 | $ | 17,388 | 100.00 | $ | 69,286 | 100.00 | $ | 56,121 | 100.00 |
| Cost of sales | 15,009 | 67.28 | 11,748 | 67.56 | 46,170 | 66.64 | 38,159 | 67.99 | ||||
| Gross margin | 7,300 | 32.72 | 5,640 | 32.44 | 23,116 | 33.36 | 17,962 | 32.01 | ||||
| Expenses: | ||||||||||||
| Selling, general and administrative | 4,770 | 21.38 | 3,772 | 21.69 | 13,985 | 20.18 | 11,682 | 20.82 | ||||
| Depreciation and amortization | 355 | 1.59 | 310 | 1.79 | 1,008 | 1.46 | 924 | 1.65 | ||||
| Operating income | 2,175 | 9.75 | 1,558 | 8.96 | 8,123 | 11.72 | 5,356 | 9.54 | ||||
| Interest – net | 221 | 0.99 | 177 | 1.02 | 644 | 0.93 | 508 | 0.90 | ||||
| Loss on extinguishment of debt | 1,060 | 4.75 | — | — | 1,060 | 1.53 | — | — | ||||
| Pre-tax earnings | 894 | 4.01 | 1,381 | 7.94 | 6,419 | 9.26 | 4,848 | 8.64 | ||||
| Income tax provision | 202 | 0.91 | 332 | 1.90 | 1,562 | 2.25 | 1,077 | 1.92 | ||||
| Net earnings | $ | 692 | 3.10 | $ | 1,049 | 6.04 | $ | 4,857 | 7.01 | $ | 3,771 | 6.72 |
| Weighted average common shares outstanding – basic | 752 | 769 | 753 | 782 | ||||||||
| Basic earnings per common share (1) | $ | 0.92 | $ | 1.36 | $ | 6.42 | $ | 4.81 | ||||
| Weighted average common shares outstanding – diluted | 754 | 770 | 754 | 783 | ||||||||
| Diluted earnings per common share (1) | $ | 0.91 | $ | 1.36 | $ | 6.41 | $ | 4.80 | ||||
| Cash dividends per share | $ | 0.60 | $ | 0.55 | $ | 1.70 | $ | 1.58 | ||||
| Retained Earnings | ||||||||||||
| Balance at beginning of period | $ | 4,134 | $ | 2,439 | $ | 1,727 | $ | 3,452 | ||||
| Cumulative effect of accounting change | — | — | — | (263) | ||||||||
| Net earnings | 692 | 1,049 | 4,857 | 3,771 | ||||||||
| Cash dividends declared | (452) | (423) | (1,284) | (1,233) | ||||||||
| Share repurchases | (432) | (827) | (1,358) | (3,489) | ||||||||
| Balance at end of period | $ | 3,942 | $ | 2,238 | $ | 3,942 | $ | 2,238 |
(1) Under the two-class method, earnings per share is calculated using net earnings allocable to common shares, which is derived by reducing net earnings by the earnings allocable to participating securities. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $689 million for the three months ended October 30, 2020 and $1,046 million for the three months ended November 1, 2019. Net earnings allocable to common shares used in the basic and diluted earnings per share calculation were $4,837 million for the nine months ended October 30, 2020 and $3,760 million for the nine months ended November 1, 2019.
Lowe’s Companies, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
In Millions, Except Percentage Data
| Three Months Ended | Nine Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| October 30, 2020 | November 1, 2019 | October 30, 2020 | November 1, 2019 | |||||||||
| Amount | % Sales | Amount | % Sales | Amount | % Sales | Amount | % Sales | |||||
| Net earnings | $ | 692 | 3.10 | $ | 1,049 | 6.04 | $ | 4,857 | 7.01 | $ | 3,771 | 6.72 |
| Foreign currency translation adjustments – net of tax | 18 | 0.08 | 24 | 0.13 | (27) | (0.04) | 60 | 0.11 | ||||
| Cash flow hedges – net of tax | 24 | 0.11 | (1) | — | (84) | (0.12) | (15) | (0.03) | ||||
| Other | (2) | (0.01) | — | — | 2 | — | — | — | ||||
| Other comprehensive income/(loss) | 40 | 0.18 | 23 | 0.13 | (109) | (0.16) | 45 | 0.08 | ||||
| Comprehensive income | $ | 732 | 3.28 | $ | 1,072 | 6.17 | $ | 4,748 | 6.85 | $ | 3,816 | 6.80 |
Lowe’s Companies, Inc.
Consolidated Balance Sheets (Unaudited)
In Millions, Except Par Value Data
| October 30, 2020 | November 1, 2019 | January 31, 2020 | ||||
|---|---|---|---|---|---|---|
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 8,249 | $ | 794 | $ | 716 |
| Short-term investments | 1,852 | 127 | 160 | |||
| Merchandise inventory – net | 15,712 | 13,716 | 13,179 | |||
| Other current assets | 1,103 | 1,025 | 1,263 | |||
| Total current assets | 26,916 | 15,662 | 15,318 | |||
| Property, less accumulated depreciation | 18,683 | 18,371 | 18,669 | |||
| Operating lease right-of-use assets | 3,823 | 3,873 | 3,891 | |||
| Long-term investments | 202 | 363 | 372 | |||
| Deferred income taxes – net | 241 | 479 | 216 | |||
| Other assets | 1,015 | 1,016 | 1,005 | |||
| Total assets | $ | 50,880 | $ | 39,764 | $ | 39,471 |
| Liabilities and shareholders' equity | ||||||
| Current liabilities: | ||||||
| Short-term borrowings | $ | — | $ | 637 | $ | 1,941 |
| Current maturities of long-term debt | 609 | 574 | 597 | |||
| Current operating lease liabilities | 530 | 499 | 501 | |||
| Accounts payable | 12,759 | 8,822 | 7,659 | |||
| Accrued compensation and employee benefits | 1,117 | 779 | 684 | |||
| Deferred revenue | 1,614 | 1,222 | 1,219 | |||
| Other current liabilities | 2,935 | 2,530 | 2,581 | |||
| Total current liabilities | 19,564 | 15,063 | 15,182 | |||
| Long-term debt, excluding current maturities | 21,185 | 16,635 | 16,768 | |||
| Noncurrent operating lease liabilities | 3,907 | 3,942 | 3,943 | |||
| Deferred revenue – extended protection plans | 1,007 | 875 | 894 | |||
| Other liabilities | 1,144 | 791 | 712 | |||
| Total liabilities | 46,807 | 37,306 | 37,499 | |||
| Shareholders' equity: | ||||||
| Preferred stock, $5 par value: Authorized – 5.0 million shares; Issued and outstanding – none | — | — | — | |||
| Common stock, $0.50 par value: Authorized – 5.6 billion shares; Issued and outstanding – 752 million, 768 million, and 763 million shares, respectively | 376 | 384 | 381 | |||
| Capital in excess of par value | — | — | — | |||
| Retained earnings | 3,942 | 2,238 | 1,727 | |||
| Accumulated other comprehensive loss | (245) | (164) | (136) | |||
| Total shareholders' equity | 4,073 | 2,458 | 1,972 | |||
| Total liabilities and shareholders' equity | $ | 50,880 | $ | 39,764 | $ | 39,471 |
Lowe’s Companies, Inc.
Consolidated Statements of Cash Flows (Unaudited)
In Millions
| Nine Months Ended | ||||
|---|---|---|---|---|
| October 30, 2020 | November 1, 2019 | |||
| Cash flows from operating activities: | ||||
| Net earnings | $ | 4,857 | $ | 3,771 |
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||
| Depreciation and amortization | 1,152 | 1,029 | ||
| Noncash lease expense | 356 | 341 | ||
| Deferred income taxes | 5 | (88) | ||
| Loss on property and other assets – net | 114 | 93 | ||
| Loss on extinguishment of debt | 1,060 | — | ||
| Share-based payment expense | 107 | 75 | ||
| Changes in operating assets and liabilities: | ||||
| Merchandise inventory – net | (2,545) | (1,129) | ||
| Other operating assets | 147 | (96) | ||
| Accounts payable | 5,099 | 523 | ||
| Other operating liabilities | 1,133 | (408) | ||
| Net cash provided by operating activities | 11,485 | 4,111 | ||
| Cash flows from investing activities: | ||||
| Purchases of investments | (2,548) | (563) | ||
| Proceeds from sale/maturity of investments | 1,032 | 556 | ||
| Capital expenditures | (1,172) | (927) | ||
| Proceeds from sale of property and other long-term assets | 60 | 71 | ||
| Other – net | (24) | — | ||
| Net cash used in investing activities | (2,652) | (863) | ||
| Cash flows from financing activities: | ||||
| Net change in commercial paper | (941) | (85) | ||
| Net proceeds from issuance of debt | 7,929 | 2,972 | ||
| Repayment of debt | (5,582) | (1,092) | ||
| Proceeds from issuance of common stock under share-based payment plans | 102 | 78 | ||
| Cash dividend payments | (1,252) | (1,195) | ||
| Repurchases of common stock | (1,528) | (3,649) | ||
| Other – net | (32) | (7) | ||
| Net cash used in financing activities | (1,304) | (2,978) | ||
| Effect of exchange rate changes on cash | 4 | 1 | ||
| Net increase in cash and cash equivalents, including cash <br> classified within current assets held for sale | 7,533 | 271 | ||
| Less: Net decrease in cash classified within current <br> assets held for sale | — | 12 | ||
| Net increase in cash and cash equivalents | 7,533 | 283 | ||
| Cash and cash equivalents, beginning of period | 716 | 511 | ||
| Cash and cash equivalents, end of period | $ | 8,249 | $ | 794 |
Lowe’s Companies, Inc.
Non-GAAP Financial Measures Reconciliation (Unaudited)
To provide additional transparency, the Company has presented the non-GAAP financial measure of adjusted diluted earnings per share for comparing its operating performance for the three months ended October 30, 2020, with the respective period ended November 1, 2019. This measure excludes the impact of certain discrete items, as further described below, not contemplated in Lowe’s Original Business Outlook to assist analysts and investors in understanding operational performance for the third quarter of fiscal 2020 and fiscal 2019.
In addition, in the Business Outlook for the fourth quarter of fiscal 2020, the Company has provided a comparison to the non-GAAP financial measure of adjusted operating income and adjusted operating margin for the fourth quarter of fiscal 2019, which exclude the impacts of certain discrete items not contemplated in Lowe's Business Outlook for 2019, to assist the user in further understanding the Company's forecasted performance for the fourth quarter of fiscal 2020 in comparison to the same period of fiscal 2019.
Fiscal 2020 Impacts
For fiscal 2020, the Company has recognized financial impacts from the following discrete items, not contemplated in the Company’s Original Business Outlook for the third quarter of fiscal 2020:
•Beginning in the third quarter of fiscal 2019, the Company began a strategic review of its Canadian operations, and in the fourth quarter of fiscal 2019, the Company announced additional actions to improve future performance and profitability of its Canadian operations. As a result of this review and related actions, in the third quarter of fiscal 2020, the Company recognized $13 million of pre-tax operating costs related to remaining inventory write-downs and other closing costs (Canada restructuring).
•In the third quarter of fiscal 2020, the Company recognized a $1.1 billion loss on extinguishment of debt in connection with a $3.0 billion cash tender offer (Loss on extinguishment of debt).
Fiscal 2019 Impacts
During fiscal 2019, the Company recognized financial impacts from the following discrete item, not contemplated in the Company's Business Outlook for the third quarter of fiscal 2019:
•During the third quarter of fiscal 2019, the Company began a strategic review of its Canadian operations, and as a result, recognized pre-tax charges of $53 million associated with long-lived asset impairment (Canada restructuring).
Adjusted diluted earnings per share, adjusted operating income, and adjusted operating margin should not be considered an alternative to, or more meaningful indicator of, the Company’s diluted earnings per share, operating income, or operating margin as prepared in accordance with GAAP. The Company’s methods of determining non-GAAP financial measures may differ from the method used by other companies and may not be comparable.
Detailed reconciliations between the Company’s GAAP and non-GAAP financial results are shown below and available on the Company’s website at www.lowes.com/investor.
| Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Unaudited) | (Unaudited) | |||||||
| October 30, 2020 | November 1, 2019 | |||||||
| (in millions, except per share data) | Pre-Tax Earnings | Tax | Net Earnings | Pre-Tax Earnings | Tax | Net Earnings | ||
| Diluted earnings per share, as reported | $ | 0.91 | $ | 1.36 | ||||
| Non-GAAP adjustments – per share impacts | ||||||||
| Loss on extinguishment of debt | 1.40 | (0.35) | 1.05 | — | — | — | ||
| Canada restructuring | 0.02 | — | 0.02 | 0.07 | (0.02) | 0.05 | ||
| Adjusted diluted earnings per share | $ | 1.98 | $ | 1.41 | ||||
| Three Months Ended | ||||||||
| --- | --- | --- | --- | |||||
| (Unaudited) | ||||||||
| (in millions, except operating margin) | January 31, 2020 | |||||||
| Operating income | $ | 958 | ||||||
| Non-GAAP adjustments | ||||||||
| Canada restructuring | 176 | |||||||
| Mexico adjustments | 9 | |||||||
| Adjusted operating income | $ | 1,143 | ||||||
| Adjusted operating margin | 7.15 | % |
exhibit992-10302020
Exhibit 99.2 “Strong execution enabled us to meet continued broad-based demand, as we delivered over 15% growth in all merchandising departments, over 20% growth across all geographic regions, and triple-digit growth online. We continued to invest in the future growth of the company, including a $100 million investment in the quarter as part of an ongoing effort to reset the layout of our U.S. stores, making them easier to shop with improved product adjacencies, especially for Pro customers. Our omni-channel transformation continued in the third quarter with further investments in Lowes.com and our supply chain. I remain Q3 2020 RESULTS confident that we are making the right strategic investments to deliver sustainable, long-term growth. I would also like to thank our outstanding frontline associates for their unwavering commitment to customer service and safety.” - Marvin R. Ellison, Lowe’s President and CEO FINANCIAL HIGHLIGHTS U.S. COMPARABLE SALES SUMMARY MERCHANDISING DEPARTMENT PERFORMANCE TRANSACTIONS/TICKET LOWES.COM Positive Comps Exceeded 15% in all 15 COMP COMP AVERAGE SALES IN SALES TRANSACTIONS TICKET GROWTH +106% Merchandising Departments $22.3B +28.3% 16.4% 13.7% U.S. COMP COMP SALES BY TICKET SIZE All 15 Regions U.S. +30.4% SALES Delivered Comp Sales >$500 +32.5% Growth Exceeding +20% $50-500 +30.9% GROSS MARGIN 32.72% +28 basis points <$50 +16.9% +31.8% +28.9% +30.0% OPERATING U.S. MONTHLY COMP MARGIN PERFORMANCE 9.75% +79 basis points 2020 2019 2 +3.6% +2.7% +2.7% AUGUST SEPTEMBER OCTOBER DILUTED EPS Invested an Incremental $245 Million in Financial Assistance $0.91 -33% for Associates in Response to COVID-19 Our highest priority will always be protecting the health and safety of our associates and ADJ. DILUTED EPS1 customers through a safe store environment and shopping experience $1.98 +40% Maintaining Enhanced Store Safety Measures Financial Support for Associates All frontline associates required to wear masks Provided bonuses in October and November totaling ~$230 1 Adjusted Diluted EPS is a non-GAAP financial measure. Refer to Nationwide standard for all customers to wear masks million for frontline associates Lowes.com/investor for a reconciliation of non-GAAP measures. Total COVID-Related Support 2 Beginning on 2/1/2020, the Company changed the basis in which it presents Providing free masks for customers who need them the comparable sales metric. Q3 2019 comp sales have not been adjusted. More than $1.1 billion for associates, store safety and community “All comparisons are to Q3 2019” For more information visit: corporate.lowes.com/covid-19-response pandemic relief through first nine months of fiscal 2020
STRATEGIC INITIATIVES SUPPLY CHAIN MERCHANDISING OPERATIONAL CUSTOMER TRANSFORMATION EXCELLENCE EFFICIENCY ENGAGEMENT Fulfillment Improve Productivity Store Own the Pro and Delivery Drive Localization Simplification Associate Optimization Improve In-Stock Engagement Order Management Reset Execution Execution Optimization Best-in-Class Online Experience OMNI-CHANNEL
Q3 2020 Reconciliation of Non-GAAP Measures Management of Lowe's Companies, Inc. (the Company) uses certain non-GAAP financial measures and considers them to be an important supplemental measure of the Company's performance. The Company has presented the non-GAAP financial measure of adjusted diluted earnings per share for comparing its operating performance for the three months ended October 30, 2020, with the respective period ended November 1, 2019. This measure excludes the impacts of certain discrete items, as further described below, not contemplated in Lowe's Original Business Outlook. This non-GAAP financial measure should not be considered an alternative to, or more meaningful indicator of, the Company's diluted earnings per share as prepared in accordance with GAAP. The Company's methods of determining this non-GAAP financial measure may differ from the methods used by other companies and may not be comparable. Fiscal 2020 Impacts For fiscal 2020, the Company has recognized financial impacts from the following discrete items, not contemplated in the Company’s Original Business Outlook for the third quarter of fiscal 2020: • Beginning in the third quarter of fiscal 2019, the Company began a strategic review of its Canadian operations, and in the fourth quarter of fiscal 2019, the Company announced additional actions to improve future performance and profitability of its Canadian operations. As a result of this review and related actions, in the third quarter of fiscal 2020, the Company recognized $13 million of pre-tax operating costs related to remaining inventory write-downs and other closing costs (Canada restructuring). • In the third quarter of fiscal 2020, the Company recognized a $1.1 billion loss on extinguishment of debt in connection with a $3.0 billion cash tender offer (Loss on extinguishment of debt). Fiscal 2019 Impacts During fiscal 2019, the Company recognized financial impacts from the following discrete item, not contemplated in the Company's Business Outlook for the third quarter of fiscal 2019: • During the third quarter of fiscal 2019, the Company began a strategic review of its Canadian operations, and as a result, recognized pre-tax charges of $53 million associated with long-lived asset impairment (Canada restructuring). The following provides a reconciliation of the Company's non-GAAP financial measure to the most directly comparable GAAP financial measure: Three Months Ended October 30, 2020 November 1, 2019 Pre-Tax Net Pre-Tax Net Adjusted Diluted Earnings Per Share Earnings Tax 1 Earnings Earnings Tax 1 Earnings Diluted earnings per share, as reported $ 0.91 $ 1.36 Loss on extinguishment of debt 1.40 (0.35) 1.05 — — — Canada restructuring 0.02 — 0.02 0.07 (0.02) 0.05 Adjusted diluted earnings per share $ 1.98 $ 1.41 1 Represents the corresponding tax benefit or expense related to the item excluded from adjusted diluted earnings per share.
Forward Looking Statements This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements including words such as “believe”, “expect”, “anticipate”, “plan”, “desire”, “project”, “estimate”, “intend”, “will”, “should”, “could”, “would”, “may”, “strategy”, “potential”, “opportunity”, “outlook”, “guidance”, and similar expressions are forward-looking statements. Forward-looking statements involve, among other things, expectations, projections, and assumptions about future financial and operating results, objectives, business outlook, priorities, sales growth, shareholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for products and services, share repurchases, Lowe’s strategic initiatives, including those relating to acquisitions and dispositions and the impact of such transactions on our strategic and operational plans and financial results. Such statements involve risks and uncertainties and we can give no assurance that they will prove to be correct. Actual results may differ materially from those expressed or implied in such statements. A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by these forward-looking statements including, but not limited to, changes in general economic conditions, such as the rate of unemployment, interest rate and currency fluctuations, fuel and other energy costs, slower growth in personal income, changes in consumer spending, changes in the rate of housing turnover, the availability of consumer credit and of mortgage financing, changes in commodity prices, changes or threatened changes in tariffs, outbreak of public health crises, such as the COVID-19 pandemic, availability and cost of goods from suppliers, changes in our management and key personnel, and other factors that can negatively affect our customers. Investors and others should carefully consider the foregoing factors and other uncertainties, risks and potential events including, but not limited to, those described in “Item 1A - Risk Factors” in our most recent Annual Report on Form 10-K and as may be updated from time to time in Item 1A in our quarterly reports on Form 10-Q or other subsequent filings with the SEC. All such forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update these statements other than as required by law.