Paying users zone. Data is covered by hidden.

  • Get 1 month access to Lowe’s Cos. Inc. for $17.99, or

  • get full access to entire website for at least 3 months from $49.99.


We accept:

Visa Mastercard American Express Maestro Discover JCB PayPal Apple Pay Google Pay
Verified by Visa MasterCard SecureCode American Express SafeKey

Microsoft Excel LibreOffice Calc

Lowe’s Cos. Inc. (LOW)


Analysis of Goodwill and Intangible Assets

Difficulty: Advanced


Goodwill and Intangible Assets Accounting Policy

Goodwill

Goodwill is the excess of the purchase price over the fair value of identifiable assets acquired, less liabilities assumed, in a business combination. Lowe’s reviews goodwill for impairment at the reporting unit level, which is one level below the operating segment level. Goodwill is not amortized but is evaluated for impairment at least annually on the first day of the fourth quarter or whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable. The evaluation begins with a qualitative assessment to determine whether a quantitative impairment test is necessary. If, after assessing qualitative factors, Lowe’s determines it is more likely than not that the fair value of the reporting unit is less than the carrying amount, then the quantitative goodwill impairment test is performed.

The quantitative goodwill impairment test used to identify potential impairment compares the fair value of a reporting unit with its carrying amount, including goodwill. Fair value represents the price a market participant would be willing to pay in a potential sale of the reporting unit and is based on a combination of an income approach, based on discounted future cash flows, and a market approach, based on market multiples applied to free cash flow. If the fair value exceeds carrying value, then no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, in accordance with Accounting Standards Update 2017-04 which was early adopted by Lowe’s in fiscal 2018, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. Any impairment identified is included within SG&A expense in the consolidated statements of earnings. The income tax effect from any tax deductible goodwill on the carrying amount of the reporting unit, if applicable, is considered in determining the goodwill impairment loss.

A reporting unit is an operating segment or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. During fiscal 2018, goodwill was allocated to the following reporting units: U.S. Home Improvement, Canada-Retail, and Canada-Distribution.

Lowe’s annual goodwill impairment analysis performed during the fourth quarter of fiscal 2018 included a quantitative analysis of the Canada-Retail and Canada-Distribution reporting units. Lowe’s classified these fair value measurements as Level 3. Lowe’s performed a discounted cash flow analysis and market multiple analysis for the Canada-Retail and Canada-Distribution reporting units. These discounted cash flow models included management assumptions for expected sales growth, margin expansion, operational leverage, capital expenditures, and overall operational forecasts. The market multiple analysis included historical and projected performance, market capitalization, volatility, and multiples for industry peers. These analyses led to the conclusion that the fair value of these reporting units was less than their carrying values by an amount that exceeded the carrying value of goodwill, primarily driven by a softening outlook for the Canadian housing market. Accordingly, the full carrying value of $952 million relating to the Canadian reporting units’ goodwill was impaired during the fourth quarter of 2018.

During the third quarter of fiscal 2016, Lowe’s determined potential indicators of impairment within the Orchard reporting unit existed, and quantitatively evaluated the Orchard reporting unit for impairment. Lowe’s classified this fair value measurement as Level 3. Lowe’s performed a discounted cash flow analysis for the Orchard reporting unit. The discounted cash flow model included management assumptions for expected sales growth, expansion plans, capital expenditures, and overall operational forecasts. The analysis led to the conclusion that the goodwill allocated to the Orchard reporting unit had no implied value. Accordingly, the full carrying value of $46 million relating to Orchard goodwill was impaired during the third quarter of 2016.

Source: 10-K (filing date: 2019-04-02).


Analyst Adjustments: Removal of Goodwill

Lowe’s Cos. Inc., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016 Jan 30, 2015 Jan 31, 2014
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Shareholders’ Equity
Shareholders’ equity (as reported) hidden hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden hidden
Shareholders’ equity (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Net Earnings
Net earnings (as reported) hidden hidden hidden hidden hidden hidden
Add: Goodwill impairment hidden hidden hidden hidden hidden hidden
Net earnings (adjusted) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).


Lowe’s Cos. Inc., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Goodwill (Summary)

Lowe’s Cos. Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016 Jan 30, 2015 Jan 31, 2014
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden hidden hidden
Adjusted net profit margin hidden hidden hidden hidden hidden hidden
Total Asset Turnover
Reported total asset turnover hidden hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Lowe’s Cos. Inc.’s adjusted net profit margin improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Lowe’s Cos. Inc.’s adjusted total asset turnover improved from 2017 to 2018 and from 2018 to 2019.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Lowe’s Cos. Inc.’s adjusted financial leverage increased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Lowe’s Cos. Inc.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Lowe’s Cos. Inc.’s adjusted ROA improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.

Lowe’s Cos. Inc., Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016 Jan 30, 2015 Jan 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net earnings hidden hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Adjusted net earnings hidden hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).

2019 Calculations

1 Net profit margin = 100 × Net earnings ÷ Net sales
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Net sales
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Lowe’s Cos. Inc.’s adjusted net profit margin improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016 Jan 30, 2015 Jan 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net sales hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
Total asset turnover1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Net sales hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted total asset turnover2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).

2019 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Lowe’s Cos. Inc.’s adjusted total asset turnover improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016 Jan 30, 2015 Jan 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Total assets hidden hidden hidden hidden hidden hidden
Shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Adjusted total assets hidden hidden hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).

2019 Calculations

1 Financial leverage = Total assets ÷ Shareholders’ equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Lowe’s Cos. Inc.’s adjusted financial leverage increased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016 Jan 30, 2015 Jan 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net earnings hidden hidden hidden hidden hidden hidden
Shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Adjusted net earnings hidden hidden hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).

2019 Calculations

1 ROE = 100 × Net earnings ÷ Shareholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net earnings ÷ Adjusted shareholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Lowe’s Cos. Inc.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Feb 1, 2019 Feb 2, 2018 Feb 3, 2017 Jan 29, 2016 Jan 30, 2015 Jan 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net earnings hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Adjusted net earnings hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).

2019 Calculations

1 ROA = 100 × Net earnings ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net earnings ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Lowe’s Cos. Inc.’s adjusted ROA improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.