Ladies and gentlemen, please take your seats. The meeting is about to begin. Before we begin, please note that the use of cameras or sound recording devices, except those used by Lowe's to provide a record of the proceedings, is prohibited. In addition, throughout this presentation, you will hear forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Management's expectations and opinions reflected in those statements are subject to risks, and the company can give no assurance that they will prove to be correct. Those risks are described in the company's annual meeting press release and in its filings with the Securities and Exchange Commission. Also, during this presentation, management will be using certain non-GAAP financial measures. You can find a reconciliation to the most directly comparable GAAP financial measures and other information about them posted on Lowe's Investor Relations website under Investor Packet.
Now please welcome Lowe's Chairman, President, and CEO, Mr. Robert Niblock.
Thank you. Good morning, and obviously, welcome to Lowe's 2014 Annual Meeting of Shareholders. We're glad you could join us here, and on behalf of Lowe's, I want to thank you for your continued support and commitment. To begin this meeting, I am pleased to announce that your board of directors approved a 27.8% increase in Lowe's quarterly dividend this morning, increasing it from $0.18 per share to $0.23 per share. It is scheduled to be paid on August 26th of this year. That's when the new dividend takes effect. This increase is a result of hard work and dedication from employees across the entire organization and obviously led by our executive management team, which I would like to thank and recognize now. Please hold your applause to the end until all of them have been recognized.
With me on the platform is our Chief Financial Officer, Bob Hull, and our Chief Legal Officer, Gaither Keener. In the front row here is Maureen Ausura , our Chief Human Resources Officer, Marshall Croom, our Chief Risk Officer, Rick Damron, our Chief Operating Officer, Mike Jones, our Chief Customer Officer, Brent Kirby, our Sales and Service Fulfillment Executive, Dennis Knowles, our U.S. Stores Executive, Tom Lamb, our Chief Marketing Officer, Mike Mabry, Strategy and Experience Design Executive, Richard Maltsbarger, Business Development Executive, Mike McDermott, Chief Merchandising Officer, Brian Peace, Corporate Administration Executive, Paul Ramsay, Acting Chief Information Officer, and Doug Robinson, Head of International Operations and Development. Thank you again. Now I'd like to introduce your board of directors who are standing for election at today's meeting. Again, please hold your applause until all of them have been recognized.
In the front row on this side is Mr. Raul Alvarez, Mr. Dave Bernauer, Dr. Leon Berry, Ms. Angela Braly, Mr. Rick Dreiling, Ms. Dawn Hudson, Mr. Bob Johnson, Mr. Marshall Larsen, Mr. Dick Lochridge, and Mr. Eric Wiseman. In addition, I would like to recognize Mr. Peter Browning, who is retiring from Lowe's board today, and thank him for his 16 years of loyal and devoted service. Peter, we'll miss you. We'll miss your passion, your advice, and your counsel over those 16 years. Thank you for your many years of dedicated service. Let's give all of them a round of applause. Now I'd like to introduce Mr. Bill Sullivan from the accounting firm of Deloitte & Touche. Bill is in the room, and he will be available to answer your questions that you may have after the meeting.
Ms. Hannah Kim is our Vice President for Lowe's, and she's been appointed the Inspector of Election for this meeting and will report the voting results in a few minutes. Also, we've got a financial services agent from Broadridge who will assist with the tabulation of proxies and ballots. Sid, thanks for being here. As your proxy cards indicated, Mr. Keener and Mr. Hull have been duly appointed as proxies for this meeting. At this time, I officially call the meeting to order. Mr. Keener, please report on the mailing of the notice for this meeting, the presence of a quorum, and other business we will consider today.
Thank you, Robert. Notice of the Annual Meeting of Shareholders of Lowe's Companies, Inc. has been provided to shareholders of record as of March 28th, 2014. The notice and company proxy statement were mailed to shareholders beginning on April 14th, 2014. As of March 28th, 2014, there were 1,018,776,409 shares of common stock outstanding, of which 87.92% are represented today, either in person or by proxy. Therefore, we have a quorum. As provided in the notice of the Annual Meeting of Shareholders, the purpose of this meeting is to address six items of business. First
First, elect 11 directors to terms of one year. Second, to approve the Lowe's Companies, Inc. 2006 Long-Term Incentive Plan as amended and reinstated, effective March 21, 2014. Third, approve on an advisory basis the compensation paid to the company's executive officers in fiscal 2013. Fourth, ratify the appointment of Deloitte & Touche as the company's independent registered public accounting firm for fiscal year 2014. Fifth, consider and vote upon the shareholder proposal. Sixth, transact such other business as may promptly come before the annual meeting or any adjournment or postponement thereof. With regards to the fifth item of business, to consider and vote upon the shareholder proposal regarding a report on the impact of sustainability policy. Mr. David Almasi, you will now have three minutes, sir, to present your proposal.
Thank you. As mentioned, David Almasi with the National Center for Public Policy Research, and I'm here to recommend a vote for Proposal 5 because of transparency. All we're asking for is transparency. Lowe's Companies Incorporated is a member of the Retail Industry Leaders Association. RILA wants its membership to engage in a five-point sustainability plan. We think from our company's website's stated extensive sustainability goals and the new site that was just put up in the last couple of days, that it may be seeking to comply with RILA's wishes. We don't know for sure if the company is hitting all of RILA's points and if they are successful in this endeavor. That's why we have our proposal.
We ask for a simple report, updated annually and devoid of any trade secrets, that tells the employees, managers, vendors, customers, and shareholders where our company found the science to create its sustainability policies and an estimation and justification of the cost and benefits of maintaining the Lowe's sustainability program. Our proposal does not attack or outlaw the company from having a RILA-style sustainability program or any other variation of that. We understand that sustainability can be a profitable endeavor. It merely suggests that a program adhere to a free market tenant and that our company's leadership share this plan and its effects with those of us who have a stake in the company. Thank you.
Thank you, Mr. Almasi. After careful consideration of the proposal and as more fully set forth in Lowe's proxy statement, the board recommended voting against this proposal. Robert, this completes our shareholder proposal. I'll return the meeting to you. Thank you, Gaither. I now declare the polls open for voting. The proxies have already delivered their ballots to the Inspector of Election. If you've already delivered a proxy, it is not necessary to vote in person unless you wish to change your vote. Anyone who desires to vote in person should raise their hand at this time so either Hannah or Steve from Broadridge can provide you with a ballot. Okay, I do not see any hands raised, since all votes have now been cast, I declare the polls to be closed. Hannah, are you prepared to deliver your report?
I am. Based upon the vote of the shareholders, let me note that the nominees to the board of directors are elected, with all 11 nominees receiving a majority of the vote. Lowe's Companies, Inc. 2006 Long-Term Incentive Plan has been approved, receiving 96% of the vote. The company's executive compensation plan has been approved with 97% of the vote. Deloitte & Touche is ratified as the company's independent public accountant, receiving 99% of the vote. Proposal Number 5 regarding the report on impact of sustainability policy has failed, receiving less than 2% of the vote. Please note that the final numbers will be filed with the SEC within four business days. Thank you, Robert.
Thank you, Hannah, for that report. I will now provide insight into our progress and our performance in 2013. By every financial measure, 2013 was a success. Our sales topped a company record $53 billion, we delivered comparable sales of nearly 5%, our highest annual comp sales increase in almost a decade. We leveraged our sales growth to increase net earnings by 16.7%, with a 26.6% increase in earnings per share and a 220 basis point increase in return on invested capital to 11.5%. Our stock price also hit an all-time high at $51.95 per share and finished the fiscal year at $46.29, a 20% increase over 2012. lowes.com exceeded the $1 billion mark in annual sales as customer traffic to digital spaces continues to rise in the home improvement industry.
Our Project Specialist Interiors program, which enables us to sell projects in people's homes at the rate of almost 700 per week, helped us exceed $1 billion in installed sales. Lowe's Canada delivered double-digit comps in local currency for the last three quarters of 2013 as well as the first quarter of 2014. The strategic decisions and investments that we made at the start of the decade are beginning to pay off, enabling shareholders to enjoy benefits like today's dividend increase. Solid financial performance enables the pace of our transformational change to accelerate in order to create the omni-channel environment consumers expect and the customer experiences that set us apart. Value improvement, the process by which we enhance our product line designs is now fully operational. In 2013, we completed the first round of product line reviews and substantially all of the associated resets.
Our enhanced line review and product reset process is now woven into our everyday business, making us better positioned to meet customers' product needs and drive better inventory productivity. Product differentiation continues to drive excitement in our stores through better product display techniques, including end caps that allow us to showcase innovative products, significant values in private and national brands. By the end of 2013, elements of product differentiation had been executed in more than 1,400 stores with plans to complete the remaining stores in the first half of 2014. Our investment in incremental store labor in 2013 allowed us to better serve customers in our stores during peak weekday shopping hours. As we continue to refine the allocation of these hours by store and selling department and increase the amount of assistance we're able to offer in the aisles, this investment will continue to become more productive for us.
In 2013, we also completed the acquisition of Orchard Supply Hardware, expanding our reach into high-density prime locations in California, where it's difficult for large format retailers to gain a foothold. Orchard's smaller format neighborhood stores complement our strength in big box retail operations, their brand strength will serve us well as we look to increase penetration in this lucrative market. In April of this year, we culminated months of work with the announcement of our expanded partnership with porch.com, a website that connects homeowners with contractors to minimize challenge of finding trusted professionals to help homeowners complete their projects. This enables us to give customers the confidence they need to take on more projects and also make Lowe's a destination for pro customers who can use porch.com as a portal to grow their own business.
We reset the outdoor living area in the majority of our stores ahead of spring, creating a different look and feel for outdoor products with positive results and feedback from customers. 2013 was a year of progress on these initiatives and a source of momentum as we continue to invest in the business and improve the customer experience so we can move closer to the future where we meet customers whenever and wherever they choose to engage and become their preferred partner for home improvement projects. In the immediate future, economic forecasts suggest that we'll see moderate growth in home improvement industry. We're ready to capitalize on that opportunity. With job and income growth creating a more favorable environment for consumer spending and with credit conditions improving, we expect household finances to continue to strengthen, giving us confidence that we'll grow as well.
That confidence allows us to focus on three priorities in 2014: our sales and operations planning process, our product and service offering for the pro customer, and the customer experience design capabilities that we're building. The sales and ops planning process allows us to improve our seasonal planning, everything from the cadence of inventory allocation to staffing, to training, to marketing. These activities have always taken place, but never as early or as coordinated as they are now. This enhanced planning process enables us to more thoroughly consider input from all functions, and the end result is a better resource allocation and a more consistent message and experience across all of our selling channels. The market for the pro customer, which is growing faster than the overall consumer market, represents an opportunity for us in 2014.
While pro customers shop across the entire store, their sales penetration is highest within building and maintenance categories. To make that experience better, we've grouped these categories together under a separate general merchandising manager to ensure we have the products and brands that pro customers demand. In 2014, we'll be relaunching lowesforpros.com, a website to help pros order their materials online. By investing in these areas, we're positioning ourself to better capitalize on the opportunity the pro customer presents. Finally, we will enhance customer experiences by building our customer experience design capabilities in 2014. By focusing on occasion-based customer experiences, we are working to provide relevant solutions presented in inspiring ways across all of our selling channels. These experiences must meet three criteria for us to invest in them. They must be desirable for our target customer.
They must be feasible to execute, and they must be viable, meaning that they have to be something that we can deliver in a profitable and sustainable way. With our focus on these three priorities in 2014, sales and ops planning, the pro customer, and building customer experience design capabilities, we can improve our profitability while investing in key customer experiences that drive growth. Growth and profit are not the only measures of our value and worth. Giving back to the communities we serve remains a top priority as well. We play an important role in providing and improving on some of the most fundamental needs that people have, their homes and their communities. We do that with our partners at Habitat for Humanity, where for more than a decade, we've been working to bring affordable housing solutions and hope to families across the country.
We also do that with our partners at the American Red Cross to serve communities devastated by disaster. With the help of customers, we surpassed the $25 million mark in donations since our partnership with the Red Cross began, becoming just one of a few companies to have reached that milestone. In 2003, we were recognized for our service. The National Association of Broadcasters Leadership Foundation presented us with its Service to America Corporate Leadership Award. The Environmental Protection Agency honored our efforts in promoting energy and water conservation and conferred on us our fifth SmartWay award for leading transportation practices. These efforts are a great source of pride for me and the 260,000 employees who make up this great company. We'll continue to focus on our responsibility to give back to the communities we serve.
I'll now turn it over to Bob Hull to discuss Lowe's financial results in a little more detail. Bob?
Thank you, Robert. Good morning, everyone. For 2013, total sales were $53.4 billion, an increase of 5.7% over 2012. The increase in sales was driven by a comparable sales increase of 4.8%, our strongest annual comp since 2005, as well as the Orchard Supply acquisition and new stores. Earnings before interest and taxes, or EBIT, increased 72 basis points over 2012 to 7.77% to sales. Net earnings increased 16.7% to $2.3 billion, and earnings per share increased 26.6% to $2.14. Here's a look at our recently reported first quarter results. Sales for the first quarter were $13.4 billion, which represents a 2.4% increase over last year's first quarter. Comp sales were positive 0.9%. EBIT increased 47 basis points to 7.96% to sales. The increase in EBIT was driven by gross margin expansion. Net earnings increased 15.6% to $624 million, and earnings per share increased 24.5% to $0.61.
For the year, we expect earnings per share of approximately $2.63, an increase of 22.9% over 2013. We ended 2013 with $10.5 billion in total debt, and our lease-adjusted debt-to-EBITDA ratio was 2.23 times. We expect to remain at or below 2.25 times during 2014. For 2013, we generated cash flow from operations of $4.1 billion, and free cash flow of almost $3.2 billion. We shared on our first quarter earnings call that we expect cash flow from operations for 2014 to be $4.1 billion, cash capital expenditures of $1.2 billion, resulting in free cash flow of approximately $2.9 billion. Our strong financial position allows us to return capital to shareholders through increased dividends and share repurchases. This morning, your board approved a 27.8% increase in the quarterly dividend. Over the past 10 years, our quarterly dividend has grown at a 28% compound annual growth rate.
In 2013, we repurchased approximately 87 million shares, which equates to a total repurchase amount of $3.7 billion. In January, your board approved an incremental $5 billion share repurchase authorization. In the first quarter of 2014, we repurchased 17.9 million shares for $850 million. This leaves us with approximately $5.4 billion remaining on our share repurchase authorization. For all of 2014, we expect to repurchase approximately $3.4 billion spread evenly across the four quarters. As we continue to capitalize on opportunities within an improving economy and further optimize our business model, we look forward to generating and returning additional value to our shareholders. Thank you for your interest in Lowe's, and I'll turn the program back over to Robert.
Thanks, Bob. I'll now open the meeting to shareholders with questions. If anyone has a question, if you'll please step to the microphone and state your name and the organization for which you are a proxy, if you're here on their behalf. I would also like to ask you to limit your question to no more than two minutes and hold any follow-up questions in order to give other shareholders an opportunity to be heard. The floor is now open for questions.
Hi, good morning. My name is Rebecca Edsoken. I'm a professional chef, and I'm an avid gardener, and I'm a beekeeper from California. I'm representing more than four million members of SumOfUs, which is a global movement that's fighting for a better economy. I'm here regarding your awesome sustainability policy, which says, I'm quoting here from the website, "Operating our business more sustainably means considering the environmental impacts of operations in Lowe's stores, offices, and supply chain." Here's the best part, "Considering the lifestyle impact of the products and services used and sold." In light of this admirable and inspiring commitment, I'm delivering a petition that's been signed by more than 730,000 people who are very concerned about the role that Lowe's has been playing in the death of honeybees.
As I'm sure you know, the phenomenon is fairly real and the economic implications are really huge. As you know, the Harvard scientists have just reconfirmed the evidence that the neonicotinoids, those are one of the main systemic pesticides in products like Ortho, the Bug B Gon, and the Bayer Advanced products that are sold at Lowe's are behind the bee eradication. The critical role that bees play in pollination and subsequently food production can't be overstated. The impact of these pesticides on the bee population threatens our food supply, and their continued sale poses a huge reputational risk to the Lowe's shareholders. Once again, I want to take a look at the sustainability policy and ask you to consider the life cycle impact of the products that you sell.
I commend Lowe's for adopting a real sustainability policy, and I urge you to take action as your competitors have to be a leader in sustainability. 700,000 people have signed this petition, which I'm now going to deliver, it's on a thumb drive, asking Lowe's to remove the neonicotinoids from its shelves. I do have a question about the $53 billion revenue. I was wondering if you know what % comes from the sale of pesticides and other neonicotinoid-laden products, and what's the margin on those products, and what does that represent in dollars?
Well, thank you for your statement as well as I'll address your question as well. Certainly, we're aware of the issue. With regard to the sustainability front and continuing to work in that regard, obviously we want to have the products that our customers desire, and we want to give them multiple options, including organic options. We want to also educate them on the safe applications of those pesticides. In that front, I would encourage you to continue to work with Michael Schnarr, who is our Director of Corporate Sustainability. You can provide the information that you have to him, and he'll be glad to work with you and continue the dialogue on that front. As it becomes specific to your question, the % of sales that we get from those products, the margins, those type of things, for competitive reasons, we don't break our business down that far.
What I would direct you to, if you go to page 57 of our annual report, it provides detail on the 12 major product categories that we're in and shows you some detail there as to the breakdown of how our business is across those 12 categories.
Thank you. I was wondering, the neonicotinoids have been banned in Europe. I figure if it's like the Germans don't even want to touch it, then it's probably pretty bad. I was just wondering, does Lowe's have some kind of alternative source to replacement products in light of the fact that The Home Depot has pretty good alternatives? What are you considering the risks that the Lowe's brand faces by failing to make a real switch?
Well, in all of our business decisions that we make, we certainly take the Lowe's brand into account there. We do hold our vendors accountable for following federal, state, local guidelines and making sure that all of their products are compliant in the markets that we do business in and sell. As I mentioned earlier, in many product categories, we do have other options available for consumers, such as organic options. At the end of the day, we believe it's up to the consumer for us to have a range of products available on our shelf. As I indicated, we will continue to work with them to try and educate and make sure that they understand the proper application of those chemicals, and we'll continue to work to provide an array of options, including organic, to meet customers' needs.
Thank you. May I present this?
Yeah. You can give it to Mr. Keener.
[Non-English content ] Mr. Niblock.
[Non-English content ]
My name is Hime, and I'm a shareholder from North Carolina.
Okay.
I wanted to thank you for everything that Lowe's does in its efforts for diversity and inclusion.
Okay.
[Non-English content ]
Thank you. I appreciate that. That's certainly a significant focus for us, and we continue to work on our efforts in that area. Thank you for that feedback.
Hi, David Almasi again with the National Center for Public Policy Research. We're a free market think tank and a company shareholder. In early April, the CEO of Mozilla was forced out of his job because he contributed to a 2008 referendum effort defining marriage in California as between one man and one woman. The idea that a well-qualified individual could be fired for participating in a civic discussion about marriage laws sent a shockwave across the country, especially within religious communities. Some companies guarantee employees that their jobs will not be affected by outside legal, personal, political activities. We were unable to find such a guarantee in the Lowe's Code of Business Conduct and Ethics that is required reading for all company employees. In fact, we found no reference whatsoever to any company policy regarding the civic participation of Lowe's employees.
Coca-Cola has a code of business conduct that says, quote, "Your job will not be affected by your personal political views or your choice in political contributions." Unquote. We believe that this is one possible model for a guarantee that each employee's civic rights will be respected. We realize that not every company policy is written on its website. I ask you now, does Lowe's have any guarantee of the right of its employees to, on their own time, participate legally in the political process without their jobs being affected? If not, is it something that you'd consider?
As you indicated, we do have a code of business conduct, and I think you said you were familiar with that. We do not have a separate policy that you've outlined. We consider basically what you've outlined, our employees' ability to participate in the political process on their own time is part of covered by free speech. I think they are allowed to do that. We do have employees across the organization that do get involved and participate in the political process, and we're fine with that. Because it is covered, we feel, by free speech, we don't think there's a need for another policy today.
Okay, you wouldn't consider amending your policy to have a specific protection?
Today, no. We don't have any plans today to specifically amend our policy to incorporate that. We think it's already adequately covered.
Okay, thank you.
Yep, thank you.
Hi, my name is Heather, and I am from Davidson, North Carolina. I'm a longtime shareholder, and I just wanted to take this opportunity to thank you and the company for your continued success and also to thank you for declaring the increase in the dividend today. Thank you.
Thank you, Heather. Appreciate that. Okay, well, certainly thank you for your questions and comments today. I would like to express my thanks again for your continued commitment and support of Lowe's and also for attending the meeting this year. Thanks also to our shareholders who submitted their proxies but were unable to attend the meeting in person. I hope that you'll be able to join us next year. This meeting is now adjourned. Thank you, and have a great day.