Presentation on theme: "Emily Yetzer ACG2021-004. Executive Summary Lowe’s has had a great 2005 year. They have had a 19 percent sales growth and a 27 percent net earnings growth."— Presentation transcript:
Emily Yetzer ACG
Executive Summary Lowe’s has had a great 2005 year. They have had a 19 percent sales growth and a 27 percent net earnings growth. As one of the top home improvement chains Lowe’s continues to be prosperous in the industry due to their constant attention to the needs of their customers and their investments into their expansion. Due to Lowe’s strong drive and performance, in 2005, Lowe's earned several notable industry distinctions, including: Ranked 42 on the FORTUNE® 500 Named 2003, 2004 and 2005 ENERGY STAR® Retail Partner of the Year Operates more than 1,234 stores in 49 states
Introduction Robert A. Niblock, Chief Executive Officer Lowe’s home office is located at 1000 Lowe’s Boulevard, Mooresville, NC Lowe’s ending date of the latest fiscal year is February 03, 2006 Lowe’s carries a variety of products to assist in the home improvement process such as lumber, flooring, paint, plumbing, tools, lighting, landscaping products, cabinets, electrical and much more.
Independent Auditors Deloitte & Touche LLP 1100 Carillon Building 227 West Trade Street Charlotte, NC Lowe’s was audited in accordance to the standards of the Public Company Accounting Oversight Board and found that Lowe’s records were accurately and fairly translated. The auditors conclude that Lowe’s has maintained effective internal control over financial reporting as of February 3, 2006.
Lowe’s stock price listed in the NYSE is $28.37 per share Twelve month trading range of the company’s stock Dividend per share, annually $0.22 This information was found on September 27, 2006 In my opinion Lowe’s is a good investment. The company continues to grow and improve and is a stable investment. Stock Market Information High34.85 Low day-September 27, year-2006
Industry Situation and Company Plans The U.S. has hit a record high of homeownership, all who would like to personalize their homes. Lowe’s is here to help. Lowe's, who has been a leader in the home improvement industry for the past 60 years and has recently implemented a new program, for those who need help or do not have the time for “do-it-yourself” projects, the program is called “do-it- for-me”. By offering this new program Lowe’s has estimated the program to draw a $150 billion dollar revenue. Not only is Lowe's growing internally but continues to grow externally as well by opening 150 new stores this year with a continued expansion plan of 155 stores opening in 2006.
Lowe’s has continued to have significant increases in income over the past three years. Due to these consistent increases one can only believe that the future of this company will be very promising. (In millions) Years ended on February 3, 2006January 28, 2005January 30, 2004 Net Sales$43,243$36,464$30,838 Gross Margin14,80012,2569,569 Total Expenses10,2948,7206,625 Earnings from Continuing Operations 2,7712,1761,829 Net Earnings$2,771$2,176$1,844 Lowe’s gross profit, income from operations, and net income for the last three years. Multi-Step Income Statement
Lowe’s Assets, Liabilities and Stockholders’ Equity for the past two years. The biggest change on the balance sheet is the increase in stockholders’ equity from the fiscal 2005 to 2006 year. Stockholders’ equity represents the capital received from investors in exchange for stock and also includes retained earnings. Therefore the change in stockholder’s equity is a result of the stockholders’ investments. Balance Sheet (in millions)February 3, 2006January 30, 2005 Total Assets (=) $24,682$21,138 Total Liabilities (+) 10,3439,603 Total Stockholders Equity14,33911,535
Cash flow refers to the amount of cash being received and spent by a business during a defined period of time. Lowe’s cash flow from operations is significantly larger than the net income for the past two years. Lowe’s has a deficit in investing activities because of the “fixed assets acquired” account which is an asset which possesses a physical form and is intended to be used in the business on a long term basis in order to earn income or to produce outputs growing through investing activities. So the deficit from 2004 to 2005 shows that Lowe's is investing money to make money. Lowe’s primary source of financing is through long-term loans. Overall cash has decreased over the past three years. (In millions) Net cash provided by operating activities $3,842$3,073$3,034 Net cash used in investing activities (3,674)(2,362)(2,487) Net cash used in financing activities (275)(1,047)(17) Net (decrease) increase in cash and cash equivalents (107)(336)530 Cash and cash equivalents, beginning of the year Cash and cash equivalents end of the year $423$530$866 Statement of Cash Flow
Significant Accounting Policies Revenue Recognition The company recognized revenues, net of sales tax when sales transactions occur and customers take possession of the merchandise. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of sales in the period that the related sales are recorded. Cash Cash and cash equivalents include cash on hand, demand deposits and short- term investments with original maturities of 3 month or less when purchased. Short-Term Investments Investments, exclusive of cash equivalents, with a stated maturity date of one year or less from the balance sheet date or that are expected to be used in current operations, are classified as short-term investments. Inventories Management does not believe the Company’s merchandise inventories are subject to significant risk in the near term but does have the ability to adjust based on anticipated sales trends. Property and Equipment Property is recorded at cost. Costs associated with major additions are capitalized and depreciated. Accounting Policies
Notes To Consolidated Financial Statements Note 1 Summary of Significant Accounting Policies Note 2 Discontinued Operation Note 3 Investments Note 4 Accumulated Depreciation Note 5 Impairment and Store Closing Costs Note 6 Short-Term Borrowings and Lines of Credit Note 7 Long Term Debt Note 8 Financial Instruments Note 9 Earnings Per Share Note 10 Shareholder’s Equity Note 11 Leases Note 12 Employee Retirement Plan Note 13 Income Taxes Note 14 Commitments and Contingencies Note 15 Other Information Accounting Policies
Working Capital: (in millions)February 3, 2006January 28, 2005 Current Assets (-)$7,831$6,903 Current Liabilities (=) $5,832$5,648 Total$1,999$1,255 (in millions)February 3, 2006January 28, 2005 Current Assets (/)$7,831$6,903 Current Liabilities (=) $5,832$5,648 Total Financial Analysis Liquidity Ratio Average Days’ Sales Uncollected: Current Ratio: Receivable Turnover: Inventory Turnover: Average Days’ Inventory on Hand: (in millions)February 3, 2006January 28, 2005 Net Sales (/)$43,243$36, 464 Average Accounts Receivable (=) (18+9)/29 Total times times (in millions)February 3, 2006January 28, 2005 Days in a Year (/)360 Receivable Turnover (=) Total0.112 days0.089 days (in millions)February 3, 2006January 28, 2005 Cost of Goods Sold (/) $28,443$24,208 Average Inventory (=) ($6,706+$5,911)/2$5,911 Total4.51 times4.1 times (in millions)February 3, 2006January 28, 2005 Days in Year (/)360 Inventory Turnover (=) Total79.8 days87.8 days
Profit Margin: Profit margin measures how much out of every dollar of sales a company actually keeps in earnings. Lowe’s has increased their earnings over the past two years showing that their income and sales are growing at a consistent rate.. Asset Turnover: Asset turnover measures how well assets are being used to produce revenue. Lowe’s asset turnover increases progressively with their sales, which means they use their assets productively. Return on Assets: Return on Assets shows how many dollars of profits the company can achieve for each dollar of assets they control. It seems that Lowe’s is excelling in converting their investments into profit. Return on Equity: Return on equity measures how much profit a company generates with the money shareholders’ have invested. Lowe’s return on equity shows that the investor are able to generate a good amount of money internally. Financial Analysis Profitability Ratio (in millions) Net Income (/)2,7712,176 Net Sales (=)43,24336,464 Total6.4%5.97% (in millions) Net Sales (/)43,24336,464 Average Total Assets (=) (24,602+21,138)/ 2 21,138 Total (in millions) Net Income (/)2,7712,176 Average Total Assets (=) (24,603+21,138)/ 2 21,138 Total12.1%10.3% (in millions) Net Income (/)2,7712,176 Average Stockholders Equity (=) (14,339+11,535)/ 2 11,535 Total21.4%18.9%
Debt to Equity: Debt to equity measures the company’s reliance on creditor financing as well as the business’s indebtedness compared to the amount invested by it’s owners. Lowe's debt to equity ratio shows that Lowe’s received less than half of its financing from its investors and more than half from its creditors. Financial Analysis Solvency Ratio Total Liabilities (/) 10,3439,603 Stockholder’s Equity (=) 14,33911,535 Total72.13%83.6%
Price/Earning per Share: Price/ Earning per share is used to measure how cheap or expensive share prices are. Lowe’s investors in 2006 paid $7.96 for every one dollar of earnings and in 2005 paid $11.50 for every one dollar of earnings. Dividend Yield: Dividend yield shows the investor the yield they can expect by purchasing a stock. Lowe's investors received 0.78% in 2006 and 0.46% in Financial Analysis Market Strength Ratio Market Price per Share (/) Earnings per Share (=) Total Dividends per Share (/) Market Price per Share (=) Total.78%.46%