Lowe's Cos. Inc. (LOW)

Long-term Debt and Solvency Analysis

Difficulty level: Basic

Solvency ratios also known as long-term debt ratios measure a company's ability to meet long-term obligations.

Lowe's Cos. Inc., debt and solvency ratios

	Jan 31, 2014	Feb 1, 2013	Feb 3, 2012	Jan 28, 2011	Jan 29, 2010	Jan 30, 2009
Debt to equity	0.89	0.66	0.46	0.36	0.27	0.34
Debt to capital	0.47	0.40	0.32	0.27	0.21	0.25
Interest coverage	8.75	8.35	8.67	10.49	10.42	12.17

Source: Based on data from Lowe's Cos. Inc. Annual Reports

Ratio	Description	The company
Debt-to-equity ratio	A solvency ratio calculated as total debt divided by total shareholders' equity.	Lowe's Cos. Inc.'s debt-to-equity ratio deteriorated from 2012 to 2013 and from 2013 to 2014.
Debt-to-capital ratio	A solvency ratio calculated as total debt divided by total debt plus shareholders' equity.	Lowe's Cos. Inc.'s debt-to-capital ratio deteriorated from 2012 to 2013 and from 2013 to 2014.
Interest coverage ratio	A solvency ratio calculated as EBIT divided by interest payments.	Lowe's Cos. Inc.'s interest coverage ratio deteriorated from 2012 to 2013 but then improved from 2013 to 2014 exceeding 2012 level.

Lowe's Cos. Inc., debt to equity calculation, comparison to benchmarks

	Jan 31, 2014	Feb 1, 2013	Feb 3, 2012	Jan 28, 2011	Jan 29, 2010	Jan 30, 2009
Selected Financial Data (USD $ in millions)
Short-term borrowings	386	–	–	–	–	987
Current maturities of long-term debt	49	47	592	36	552	34
Long-term debt, excluding current maturities	10,086	9,030	7,035	6,537	4,528	5,039
Total debt	10,521	9,077	7,627	6,573	5,080	6,060
Shareholders' equity	11,853	13,857	16,533	18,112	19,069	18,055
Ratio
Debt to equity¹	0.89	0.66	0.46	0.36	0.27	0.34
Benchmarks
Debt to Equity, Competitors
Home Depot Inc.	1.18	0.61	0.60	0.52	0.50	0.64
Debt to Equity, Sector
Home Improvement Retailers	–	0.63	0.53	0.44	0.38	–
Debt to Equity, Industry
Consumer Services	–	0.62	0.58	0.54	0.48	–

Source: Based on data from Lowe's Cos. Inc. Annual Reports

2014 Calculations

¹ Debt to equity = Total debt ÷ Shareholders' equity
= 10,521 ÷ 11,853 = 0.89

Ratio	Description	The company
Debt-to-equity ratio	A solvency ratio calculated as total debt divided by total shareholders' equity.	Lowe's Cos. Inc.'s debt-to-equity ratio deteriorated from 2012 to 2013 and from 2013 to 2014.

Lowe's Cos. Inc., debt to capital calculation, comparison to benchmarks

	Jan 31, 2014	Feb 1, 2013	Feb 3, 2012	Jan 28, 2011	Jan 29, 2010	Jan 30, 2009
Selected Financial Data (USD $ in millions)
Short-term borrowings	386	–	–	–	–	987
Current maturities of long-term debt	49	47	592	36	552	34
Long-term debt, excluding current maturities	10,086	9,030	7,035	6,537	4,528	5,039
Total debt	10,521	9,077	7,627	6,573	5,080	6,060
Shareholders' equity	11,853	13,857	16,533	18,112	19,069	18,055
Total capital	22,374	22,934	24,160	24,685	24,149	24,115
Ratio
Debt to capital¹	0.47	0.40	0.32	0.27	0.21	0.25
Benchmarks
Debt to Capital, Competitors
Home Depot Inc.	0.54	0.38	0.38	0.34	0.33	0.39
Debt to Capital, Sector
Home Improvement Retailers	–	0.39	0.35	0.31	0.28	–
Debt to Capital, Industry
Consumer Services	–	0.38	0.37	0.35	0.32	–

Source: Based on data from Lowe's Cos. Inc. Annual Reports

2014 Calculations

¹ Debt to capital = Total debt ÷ Total capital
= 10,521 ÷ 22,374 = 0.47

Ratio	Description	The company
Debt-to-capital ratio	A solvency ratio calculated as total debt divided by total debt plus shareholders' equity.	Lowe's Cos. Inc.'s debt-to-capital ratio deteriorated from 2012 to 2013 and from 2013 to 2014.

Lowe's Cos. Inc., interest coverage calculation, comparison to benchmarks

	Jan 31, 2014	Feb 1, 2013	Feb 3, 2012	Jan 28, 2011	Jan 29, 2010	Jan 30, 2009
Selected Financial Data (USD $ in millions)
Net earnings	2,286	1,959	1,839	2,010	1,783	2,195
Add: Income tax expense	1,387	1,178	1,067	1,218	1,042	1,311
Add: Interest expense, net of amount capitalized	474	427	379	340	300	314
Earnings before interest and tax (EBIT)	4,147	3,564	3,285	3,568	3,125	3,820
Ratio
Interest coverage¹	8.75	8.35	8.67	10.49	10.42	12.17
Benchmarks
Interest Coverage, Competitors
Home Depot Inc.	12.91	12.43	11.01	10.95	6.89	6.75
Interest Coverage, Sector
Home Improvement Retailers	–	10.78	10.11	10.77	7.97	–
Interest Coverage, Industry
Consumer Services	–	10.35	9.47	9.55	8.70	–

Source: Based on data from Lowe's Cos. Inc. Annual Reports

2014 Calculations

¹ Interest coverage = EBIT ÷ Interest expense
= 4,147 ÷ 474 = 8.75

Ratio	Description	The company
Interest coverage ratio	A solvency ratio calculated as EBIT divided by interest payments.	Lowe's Cos. Inc.'s interest coverage ratio deteriorated from 2012 to 2013 but then improved from 2013 to 2014 exceeding 2012 level.