Lowe's Reports Record Second Quarter Earnings

MOORESVILLE, N.C., Aug. 15 /PRNewswire-FirstCall/ -- Lowe's Companies, Inc. , the world's second largest home improvement retailer, today reported net earnings of $838 million for the quarter ended July 29, 2005, a 19.7 percent increase over the same period a year ago. Diluted earnings per share increased 20.7 percent to $1.05 from $0.87 in the second quarter of 2004. For the six months ended July 29, 2005, net earnings grew 24.0 percent to $1.43 billion while diluted earnings per share increased 24.5 percent to $1.78.

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Sales for the quarter increased 17.3 percent to $11.9 billion, up from $10.2 billion in the second quarter of 2004. Comparable store sales for the second quarter increased 6.5 percent. For the six months ended July 29, 2005, sales increased 15.9 percent to $21.8 billion. Comparable store sales increased 5.2 percent in the first half of 2005.

"Building on the strong sales trends we experienced in April, our stores delivered solid comparable store sales across all three months of the quarter," explained Robert A. Niblock, Lowe's chairman, president and CEO. "Comp sales above our original guidance were driven by our Big 3 sales initiatives of Installed Sales, Special Order Sales and sales to Commercial Business Customers, all of which remain core to our performance. Successful traffic-driving marketing campaigns, in conjunction with great merchandising and store execution, led to comparable store increases in both average ticket and transaction counts in the quarter."

"Favorable social and demographic trends, a robust housing market and an unwavering organizational commitment to provide unmatched service and solutions for our customers continue to give us confidence in the future for Lowe's," Niblock added. "We remain committed to invest in all areas of our business with well-trained employees, industry-leading stores and state-of- the-art systems to ensure we execute our vision to be the first choice for home improvement in each and every market we serve."

During the quarter, Lowe's opened 27 new stores including one relocation. As of July 29, 2005, Lowe's operated 1,138 stores in 49 states representing 129.4 million square feet of retail selling space, a 13.7 percent increase over last year.

A conference call to discuss second quarter 2005 operating results is scheduled for today (Monday, August 15) at 9:00 a.m. EDT. Please dial 888- 817-4020 (international callers dial 706-679-3245) to participate. A webcast of the call will take place simultaneously and can be accessed by visiting Lowe's website at http://www.lowes.com/investor and clicking on Lowe's Second Quarter 2005 Earnings Conference Call Webcast. A replay of the call will be archived on Lowes.com until November 13, 2005.

Lowe's Business Outlook Third Quarter 2005 (comparisons to third quarter 2004) - The company expects to open 34 stores reflecting square footage growth of approximately 13 percent - Total sales are expected to increase approximately 16 percent - The company expects to report a comparable store sales increase of 4 to 6 percent - Operating margin (defined as gross margin less SG&A and depreciation) is expected to increase approximately 10 basis points - Store opening costs are expected to be approximately $36 million - Diluted earnings per share of $0.76 to $0.78 are expected - Lowe's third quarter ends on October 28, 2005 with operating results to be publicly released on Monday, November 14, 2005

Fiscal Year 2005 - a 53-week Year (comparisons to fiscal year 2004 - a 52-week year)

- The company expects to open 150 stores in 2005 reflecting total square footage growth of approximately 13 percent - Total sales are expected to increase approximately 17 percent for the year - The company expects to report a comparable store sales increase of approximately 5 percent - Operating margin (defined as gross margin less SG&A and depreciation) is expected to increase 20 to 30 basis points - Store opening costs are expected to be approximately $132 million - Diluted earnings per share of $3.31 to $3.37 are expected for the fiscal year ending February 3, 2006 Disclosure Regarding Forward-Looking Statements

This news release includes "forward-looking statements" within the meaning the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements of the company's expectations for sales growth, comparable store sales, earnings and performance, capital expenditures, store openings, demand for services, and any statement of an assumption underlying any of the foregoing, constitute "forward-looking statements" under the Act. Although the company believes that the expectations, opinions, projections, and comments reflected in its forward-looking statements are reasonable, it can give no assurance that such statements will prove to be correct. A wide-variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results expressed or implied by our forward-looking statements including, but not limited to: (i) changes in general economic conditions which can negatively affect our customers' spending patterns; (ii) decreases in the number of new housing starts and the level of repairs, remodeling, and additions to existing homes, as well as general reduction in commercial building activity; (iii) ability to secure, develop, and otherwise implement new technologies and processes designed to enhance our efficiency and competitiveness; (iv) ability to attract, train, and retain highly-qualified associates; (v) ability to locate, secure, and develop new sites for store development; (vi) fluctuations in the prices and availability of services, supplies, and products; (vii) growth and impact of competition; (viii) ability to address legal and regulatory matters; and (ix) impact of unanticipated weather conditions. Additional information regarding these and other risks and uncertainties are provided in our periodic filings with the Securities and Exchange Commission. The forward-looking statements contained in this news release speak only as of the date of this release and the company does not assume any obligation to update any such statements.

With fiscal year 2004 sales of $36.5 billion, Lowe's Companies, Inc. is a FORTUNE(R) 50 company that serves approximately 11 million customers a week at more than 1,125 home improvement stores in 49 states. Based in Mooresville, N.C., the 59-year old company is the second-largest home improvement retailer in the world. For more information, visit Lowes.com.

Lowe's Companies, Inc. Consolidated Statements of Current and Retained Earnings (Unaudited) In Millions, Except Per Share Data Three Months Ended July 30, 2004 July 29, 2005 As Restated Current Earnings Amount Percent Amount Percent Net sales $11,929 100.00 $10,169 100.00 Cost of sales 7,892 66.16 6,780 66.68 Gross margin 4,037 33.84 3,389 33.32 Expenses: Selling, general and administrative 2,363 19.81 1,969 19.36 Store opening costs 25 0.21 18 0.17 Depreciation 247 2.07 221 2.18 Interest 39 0.33 45 0.44 Total expenses 2,674 22.42 2,253 22.15 Pre-tax earnings 1,363 11.42 1,136 11.17 Income tax provision 525 4.40 436 4.29 Net earnings $838 7.02 $700 6.88 Weighted average shares outstanding - Basic 774 776 Basic earnings per share $1.08 $0.90 Weighted average shares outstanding - Diluted 803 806 Diluted earnings per share $1.05 $0.87 Cash dividends per share $0.06 $0.04 Retained Earnings Balance at beginning of period $10,193 $8,002 Net earnings 838 700 Cash dividends (47) (30) Balance at end of period $10,984 $8,672 Lowe's Companies, Inc. Consolidated Statements of Current and Retained Earnings (Unaudited) In Millions, Except Per Share Data Six Months Ended July 30, 2004 July 29, 2005 As Restated Current Earnings Amount Percent Amount Percent Net sales $21,842 100.00 $18,850 100.00 Cost of sales 14,390 65.89 12,591 66.80 Gross margin 7,452 34.11 6,259 33.20 Expenses: Selling, general and administrative 4,499 20.60 3,822 20.28 Store opening costs 50 0.23 40 0.21 Depreciation 495 2.26 434 2.30 Interest 86 0.39 93 0.49 Total expenses 5,130 23.48 4,389 23.28 Pre-tax earnings 2,322 10.63 1,870 9.92 Income tax provision 894 4.09 718 3.81 Net earnings $1,428 6.54 $1,152 6.11 Weighted average shares outstanding - Basic 774 781 Basic earnings per share $1.84 $1.47 Weighted average shares outstanding - Diluted 804 812 Diluted earnings per share $1.78 $1.43 Cash dividends per share $0.10 $0.07 Retained Earnings Balance at beginning of period $9,634 $7,574 Net earnings 1,428 1,152 Cash dividends (78) (54) Balance at end of period $10,984 $8,672 Lowe's Companies, Inc. Consolidated Balance Sheets In Millions, Except Par Value Data (Unaudited) (Unaudited) July 29, July 30, 2004 January 28, 2005 As Restated 2005 Assets Current assets: Cash and cash equivalents $1,112 $696 $642 Short-term investments 307 335 171 Accounts receivable - net 19 41 9 Merchandise inventory - net 6,340 5,286 5,982 Deferred income taxes 95 82 95 Other assets 94 62 75 Total current assets 7,967 6,502 6,974 Property, less accumulated depreciation 14,782 12,722 13,911 Long-term investments 190 155 146 Other assets 198 217 178 Total assets $23,137 $19,596 $21,209 Liabilities and shareholders' equity Current liabilities: Current maturities of long-term debt $632 $34 $630 Accounts payable 2,981 2,452 2,687 Accrued salaries and wages 329 250 386 Other current liabilities 2,357 1,995 2,016 Total current liabilities 6,299 4,731 5,719 Long-term debt, excluding current maturities 2,810 3,664 3,060 Deferred income taxes 691 656 736 Other long-term liabilities 252 103 159 Total liabilities 10,052 9,154 9,674 Shareholders' equity: Preferred stock - $5 par value, none issued - - - Common stock - $.50 par value; Shares issued and outstanding July 29, 2005 780 July 30, 2004 772 January 28, 2005 774 390 386 387 Capital in excess of par 1,710 1,385 1,514 Retained earnings 10,984 8,672 9,634 Accumulated other comprehensive income (loss) 1 (1) - Total shareholders' equity 13,085 10,442 11,535 Total liabilities and shareholders' equity $23,137 $19,596 $21,209 Lowe's Companies, Inc. Consolidated Statements of Cash Flows (Unaudited) In Millions Six Months Ended July 30, 2004 July 29, 2005 As Restated Cash Flows From Operating Activities: Net earnings $1,428 $1,152 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 505 443 Deferred income taxes (45) 42 Loss on disposition/writedown of fixed and other assets 17 21 Stock-based compensation expense 38 36 Tax effect of stock options exercised 40 12 Changes in operating assets and liabilities: Accounts receivable - net (10) 105 Merchandise inventory - net (358) (702) Other operating assets (19) 44 Accounts payable 294 240 Other operating liabilities 336 324 Net cash provided by operating activities 2,226 1,717 Cash flows from investing activities: (Increase) decrease in short-term investments (55) 460 Purchases of long-term investments (132) (78) Proceeds from sale/maturity of long- term investments 8 6 Increase in other long-term assets (35) (17) Fixed assets acquired (1,365) (1,320) Proceeds from the sale of fixed and other long-term assets 37 53 Net cash used in investing activities (1,542) (896) Cash flows from financing activities: Repayment of long-term debt (16) (60) Proceeds from employee stock purchase plan 32 30 Proceeds from stock options exercised 147 46 Cash dividend payments (78) (54) Repurchase of common stock (299) (1,000) Net cash used in financing activities (214) (1,038) Net increase (decrease) in cash and cash equivalents 470 (217) Cash and cash equivalents, beginning of period 642 913 Cash and cash equivalents, end of period $1,112 $696