Lowe's 1998 Annual Report Download - page 26

Impairment/Store Closing Costs – Losses related to impairment of long-lived assets and for long-lived assets to be disposed
of are recognized when expected future cash flows are less than the assets’ carrying value. At the time management commits
to close or relocate a store location, the Company evaluates the carrying value of the assets in relation to its expected future
cash flows. If the carrying value of the assets is greater than the expected future cash flows, a provision is provided for the
impairment of the assets. When a leased location becomes impaired, a provision is provided for the present value of future
lease obligations, net of anticipated sublease income. Provisions for impairment and store closing costs are included in
selling, general and administrative expenses.
The estimated realizable value of closed store real estate is included in other assets and amounted to $62.3 and $45.4
million at January 29, 1999 and January 30, 1998, respectively.
Advertising – Costs associated with advertising are charged to operations as incurred. Advertising expenses were $110.1,
$125.6 and $99.8 million for 1998, 1997 and 1996, respectively.
Recent Accounting Pronouncements – Statement of Financial Accounting Standards No. 133, “Accounting for Derivative
Instruments and Hedging Activities” (SFAS 133) was issued in June 1998. SFAS 133 is effective for the Company in the year
beginning January 29, 2000. SFAS 133 requires that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. Management is currently evaluating the impact of the adoption of
SFAS 133 and its effect on the Company’s financial statements.
Note 2, Investments:
The amortized cost, gross unrealized holding gains and losses and fair values of investment securities, all of which are
classified as available-for-sale securities, at January 29, 1999 and January 30, 1998 are as follows:
January 29, 1999 January 30, 1998
(In Thousands) Amortized Gross Unrealized Fair Amortized Gross Unrealized Fair
Type Cost Gains Losses Value Cost Gains Losses Value
Municipal Obligations $20,211 $132 — $20,343 $14,557 — — $14,557
Adjustable Rate Preferred Stock — — — — 1,614 — $ (16) 1,598
Classified as Short-Term
20,211 132 —20,343 16,171 — (16) 16,155
Municipal Obligations –
Classified as Long-Term 28,207
554 $ (45) 28,716 34,904 $291 (34) 35,161
Total $48,418 $686 $ (45) $49,059 $51,075 $291 $ (50) $51,316
The proceeds from sales of available-for-sale securities were $37.5, $14.3 and $15.1 million for 1998, 1997 and 1996,
respectively. Gross realized gains on the sale of available-for-sale securities were $47, $89 and $80 thousand for 1998,
1997 and 1996, respectively. Gross realized losses on the sale of available-for-sale securities were $30, $26 and $535
thousand for 1998, 1997 and 1996, respectively. Municipal obligations classified as long-term at January 29, 1999 will
mature in 1 to 5 years.
Note 3, Property and Accumulated Depreciation:
Property is summarized below by major class: January 29, 1999 January 30, 1998
(In Thousands)
Cost:
Land $ 946,203 $ 711,930
Buildings 1,841,658 1,533,954
Store, Distribution and Office Equipment 1,638,264 1,393,718
Leasehold Improvements 182,636 155,392
Total Cost 4,608,761 3,794,994
Accumulated Depreciation and Amortization (971,844) (789,795)
Net Property $3,636,917 $3,005,199
The estimated depreciable lives, in years, of the Company’s property are: buildings, 20 to 40; store, distribution and
office equipment, 3 to 10; leasehold improvements, generally the life of the related lease.
Net property includes $464.0 and $438.4 million in assets under capital leases at January 29, 1999 and January 30,
1998, respectively.
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