Lowe's 1997 Annual Report Download - page 31

The Company was exposed to credit loss in the event of nonperformance by the counterparties to its interest rate
swap and cap agreements. The counterparties were able to fully satisfy their obligations under the agreements. The
counterparties consisted of a number of financial institutions whose credit ratings were AA or better at the time the agreements
were instituted. No collateral was held in relation to the agreements.
The following are financial instruments whose estimated fair value amounts are different from their carrying amounts.
Estimated fair values have been determined using available market information and appropriate valuation methodologies.
However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize
in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
January 30, 1998 January 31, 1997
Carrying Fair Carrying Fair
(In Thousands) Amount Value Amount Value
Liabilities:
Long-Term Debt $1,058,048 $1,146,434 $789,904 $818,508
Long-term debt – Interest rates that are currently available to the Company for issuance of debt with similar terms and
remaining maturities are used to estimate fair value for debt issues that are not quoted on an exchange.
Interest rate swap agreements – The fair value of interest rate swaps are the amounts at which they could be settled,
based on estimates obtained from dealers. There were no off-balance sheet financial instruments at January 30, 1998. At
January 31, 1997, the fair value of interest rate swap agreements was $84 thousand.
Note 7, Earnings Per Share:
In February 1997, Statement of Financial Accounting Standards No. 128, “Earnings per Share” (SFAS 128) was issued.
In accordance with SFAS 128, the Company has retroactively adopted the new standard in the quarter and year ended
January 30, 1998. SFAS 128 requires dual presentation of basic and diluted earnings per share (EPS) on the face of the
consolidated statement of earnings and a reconciliation of the components of the basic and diluted EPS calculations in the
notes to the financial statements. Basic EPS excludes dilution and is computed by dividing net earnings by the weighted-
average number of common shares outstanding for the period. Diluted EPS is similar to fully diluted EPS pursuant to
Accounting Principles Board (APB) Opinion No. 15. Following is the reconciliation of EPS for fiscal years 1997, 1996 and
1995.
(In Thousands, Except Per Share Data)
1997 1996 1995
Basic Earnings per Share:
Net Earnings $357,484 $292,150 $226,027
Weighted Average Shares Outstanding 174,277 167,599 160,377
Basic Earnings per Share $2.05 $1.74 $1.41
Diluted Earnings per Share:
Net Earnings $357,484 $292,150 $226,027
Interest (After Taxes) on Convertible Debt — 3,620 7,589
Net Earnings, as Adjusted $357,484 $295,770 $233,616
Weighted Average Shares Outstanding 174,277 167,599 160,377
Dilutive Effect of Stock Options 103 79 76
Dilutive Effect of Convertible Debt — 5,006 10,898
Weighted Average Shares, as Adjusted 174,380 172,684 171,351
Diluted Earnings per Share $2.05 $1.71 $1.36
Note 8, Shareholders’ Equity:
Authorized shares of common stock were 700 million at January 30, 1998 and January 31, 1997 and 1996.
The Company has 5 million authorized shares of preferred stock ($5 par), none of which have been issued. The preferred
stock may be issued by the Board of Directors (without action by shareholders) in one or more series, having such voting
rights, dividend and liquidation preferences and such conversion and other rights as may be designated by the Board of
Directors at the time of issuance of the preferred shares.
The Company has a shareholder rights plan which provides for a dividend distribution of one preferred share purchase
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