Lowe's Reports Record Third Quarter Earnings

MOORESVILLE, N.C., Nov. 20 /PRNewswire-FirstCall/ -- Lowe's Companies, Inc. , the world's second largest home improvement retailer, today reported net earnings of $716 million for the quarter ended November 3, 2006, a 10.8 percent increase over the same period a year ago. Diluted earnings per share increased 15.0 percent to $0.46 from $0.40 in the third quarter of 2005. For the nine months ended November 3, 2006, net earnings grew 20.3 percent to $2.49 billion while diluted earnings per share increased 23.3 percent to $1.59.

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Sales for the quarter increased 5.8 percent to $11.2 billion, up from $10.6 billion in the third quarter of 2005. For the nine months ended November 3, 2006, sales increased 12.6 percent to $36.5 billion. Year-to-date total sales results were impacted by the calendar shift described in the business outlook section of this release. Comparable store sales for the third quarter declined 4.0 percent. For the first nine months of 2006, comparable store sales increased 1.7 percent.

"The combined effects of a slowing housing market in parts of the U.S., significant deflation in certain commodity categories, and a difficult comparison to last year's hurricane recovery and rebuilding efforts have created a challenging sales environment for home improvement," commented Robert A. Niblock, Lowe's chairman, president and CEO. "Despite these challenges, we continue to gain market share in key product categories and achieved industry-leading share gains across the total store according to third-party estimates. We continue to see solid performance from our new stores and remain focused on delivering the superior service customers expect from Lowe's.

"We believe many external headwinds will exist through the balance of the year and the first half of fiscal 2007, but as we look to the future, we are confident that solid longer-term drivers of our industry remain," Niblock added. "We will capitalize on this opportunity through ongoing new store expansion and continued investment in existing stores through product resets and re-merchandising projects, while actively managing controllable expenses. We remain focused on delivering the best stores, products and customer service in the industry to ensure Lowe's is the first choice for home improvement."

During the quarter, Lowe's opened 49 new stores. As of November 3, 2006, Lowe's operated 1,330 stores in 49 states representing 150.8 million square feet of retail selling space, a 13.4 percent increase over last year.

A conference call to discuss third quarter 2006 operating results is scheduled for today (Monday, November 20) at 9:00 a.m. EST. 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 Third Quarter 2006 Earnings Conference Call Webcast. A replay of the call will be archived on Lowes.com until February 25, 2007.

Lowe's Business Outlook

Fiscal 2006 annual and fourth quarter comparisons will be negatively impacted by a 52 versus 53 week and 13 versus 14 week comparison, respectively. In addition, our 2006 quarterly comparisons will be impacted by a shift in comparable weeks to 2005. This week shift positively impacts the first quarter and is offset by negative impacts in the second and fourth quarters. The week shift does not impact comparable store sales results. Our 2006 guidance contemplates these factors.

Fourth Quarter 2006 (comparisons to fourth quarter 2005 - a 14-week quarter)

- The company expects to open 58 new stores reflecting square footage growth of approximately 12 percent - Total sales are expected to decline approximately 4 percent (13 weeks versus 14 weeks in 2005) - The company expects to report a comparable store sales decline of 4 to 6 percent - Operating margin (defined as gross margin less SG&A and depreciation) is expected to decline approximately 150 basis points - Store opening costs are expected to be approximately $50 million - Diluted earnings per share of $0.36 to $0.38 are expected - Lowe's fourth quarter ends on February 2, 2007 with operating results to be publicly released on Monday, February 26, 2007

Fiscal Year 2006 - a 52-week Year (comparisons to fiscal year 2005 - a 53- week year)

- The company expects to open 155 stores in 2006 reflecting total square footage growth of approximately 12 percent - Total sales are expected to increase approximately 9 percent (52 weeks versus 53 weeks in 2005) - The company expects comparable store sales to be approximately flat - Operating margin (defined as gross margin less SG&A and depreciation) is expected to increase 10 to 20 basis points - Store opening costs are expected to be approximately $146 million - Diluted earnings per share of $1.95 to $1.97 are expected for the fiscal year ending February 2, 2007 Disclosure Regarding Forward-Looking Statements

This news release includes "forward-looking statements" within the meaning of 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, changes in general economic conditions, such as interest rate and currency fluctuations, fuel and other energy costs, slower growth in personal income and other factors which can negatively affect our customers as well as our ability to: (i) respond to 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; (ii) secure, develop, and otherwise implement new technologies and processes designed to enhance our efficiency and competitiveness; (iii) attract, train, and retain highly-qualified associates; (iv) locate, secure, and develop new sites for store development; (v) respond to fluctuations in the prices and availability of services, supplies, and products; (vi) respond to the growth and impact of competition; (vii) address legal and regulatory matters; and (viii) respond to unanticipated weather conditions. For more information about these and other risks and uncertainties that we are exposed to, you should read the "Risk Factors" included in our Annual Report on Form 10-K to the United States Securities and Exchange Commission and the descriptions of any material changes in those "Risk Factors" included in our subsequent Quarterly Reports on Form 10-Q.

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 2005 sales of $43.2 billion, Lowe's Companies, Inc. is a FORTUNE(R) 50 company that serves approximately 12 million customers a week at more than 1,325 home improvement stores in 49 states. Based in Mooresville, N.C., the 60-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 November 3, 2006 October 28, 2005 Current Earnings Amount Percent Amount Percent Net sales $11,211 100.00 $10,592 100.00 Cost of sales 7,346 65.53 7,012 66.20 Gross margin 3,865 34.47 3,580 33.80 Expenses: Selling, general and administrative 2,320 20.70 2,212 20.88 Store opening costs 44 0.39 35 0.33 Depreciation 297 2.65 246 2.32 Interest 45 0.40 36 0.34 Total expenses 2,706 24.14 2,529 23.87 Pre-tax earnings 1,159 10.33 1,051 9.93 Income tax provision 443 3.94 405 3.83 Net earnings $716 6.39 $646 6.10 Weighted average shares outstanding - basic 1,522 1,559 Basic earnings per share $0.47 $0.41 Weighted average shares outstanding - diluted 1,551 1,608 Diluted earnings per share $0.46 $0.40 Cash dividends per share $0.05 $0.03 Retained Earnings Balance at beginning of period $13,843 $10,944 Net earnings 716 646 Cash dividends (76) (46) Share repurchases (160) - Balance at end of period $14,323 $11,544 Lowe's Companies, Inc. Consolidated Statements of Current and Retained Earnings (Unaudited) In Millions, Except Per Share Data Nine Months Ended November 3, 2006 October 28, 2005 Current Earnings Amount Percent Amount Percent Net sales $36,522 100.00 $32,435 100.00 Cost of sales 24,011 65.74 21,430 66.07 Gross margin 12,511 34.26 11,005 33.93 Expenses: Selling, general and administrative 7,404 20.27 6,711 20.69 Store opening costs 97 0.27 85 0.26 Depreciation 854 2.34 718 2.21 Interest 110 0.30 122 0.38 Total expenses 8,465 23.18 7,636 23.54 Pre-tax earnings 4,046 11.08 3,369 10.39 Income tax provision 1,554 4.26 1,297 4.00 Net earnings $2,492 6.82 $2,072 6.39 Weighted average shares outstanding - basic 1,540 1,552 Basic earnings per share $1.62 $1.34 Weighted average shares outstanding - diluted 1,571 1,608 Diluted earnings per share $1.59 $1.29 Cash dividends per share $0.13 $0.08 Retained Earnings Balance at beginning of period $12,191 $9,597 Net earnings 2,492 2,072 Cash dividends (200) (125) Share repurchases (160) - Balance at end of period $14,323 $11,544 Lowe's Companies, Inc. Consolidated Balance Sheets (Unaudited) In Millions, Except Par Value Data Nov. 3, Oct. 28, Feb. 3, 2006 2005 2006 Assets Current assets: Cash and cash equivalents $657 $1,445 $423 Short-term investments 464 864 453 Merchandise inventory - net 7,219 6,429 6,635 Deferred income taxes - net 157 104 155 Other current assets 140 200 122 Total current assets 8,637 9,042 7,788 Property, less accumulated depreciation 18,188 15,410 16,354 Long-term investments 121 296 294 Other assets 219 205 203 Total assets $27,165 $24,953 $24,639 Liabilities and shareholders' equity Current liabilities: Current maturities of long-term debt $89 $632 $32 Accounts payable 3,416 3,201 2,832 Accrued salaries and wages 373 369 424 Self-insurance liabilities 608 551 571 Deferred revenue 846 748 709 Other current liabilities 1,374 1,109 1,264 Total current liabilities 6,706 6,610 5,832 Long-term debt, excluding current maturities 4,337 3,749 3,499 Deferred income taxes 683 745 735 Other long-term liabilities 353 290 277 Total liabilities 12,079 11,394 10,343 Shareholders' equity: Preferred stock - $5 par value, none issued - - - Common stock - $.50 par value; Shares issued and outstanding November 3, 2006 1,520 October 28, 2005 1,560 February 3, 2006 1,568 760 780 784 Capital in excess of par value - 1,235 1,320 Retained earnings 14,323 11,544 12,191 Accumulated other comprehensive income 3 - 1 Total shareholders' equity 15,086 13,559 14,296 Total liabilities and shareholders' equity $27,165 $24,953 $24,639 Lowe's Companies, Inc. Consolidated Statements of Cash Flows (Unaudited) In Millions Nine Months Ended November 3, 2006 October 28, 2005 Cash flows from operating activities: Net earnings $2,492 $2,072 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 907 771 Deferred income taxes (54) 24 Loss on disposition/writedown of fixed and other assets 35 23 Share-based payment expense 56 57 Changes in operating assets and liabilities: Merchandise inventory - net (584) (579) Other operating assets (18) (116) Accounts payable 584 506 Other operating liabilities 225 602 Net cash provided by operating activities 3,643 3,360 Cash flows from investing activities: Purchases of short-term investments (248) (1,581) Proceeds from sale/maturity of short- term investments 490 1,083 Purchases of long-term investments (225) (249) Proceeds from sale/maturity of long- term investments 141 10 Increase in other long-term assets (8) (34) Fixed assets acquired (2,724) (2,277) Proceeds from the sale of fixed and other long-term assets 30 44 Net cash used in investing activities (2,544) (3,004) Cash flows from financing activities: Proceeds from issuance of long-term debt 991 987 Repayment of long-term debt (24) (23) Proceeds from issuance of common stock under employee stock purchase plan 36 32 Proceeds from issuance of common stock from stock options exercised 64 183 Cash dividend payments (200) (125) Repurchase of common stock (1,737) (495) Excess tax benefits of share-based payments 5 - Net cash (used in) provided by financing activities (865) 559 Net increase in cash and cash equivalents 234 915 Cash and cash equivalents, beginning of period 423 530 Cash and cash equivalents, end of period $657 $1,445