Lowe's 2000 Annual Report Download - page 34

Lowe’s Companies, Inc.
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Leases
The Company leases certain store facilities
under agreements with original terms generally of twenty years.
Some agreements provide for contingent rental based on sales
performance in excess of specified minimums. In fiscal years
2000, 1999 and 1998, contingent rentals have been nominal. The
leases usually contain provisions for four renewal options of five
years each. Certain equipment is also leased by the Company
under agreements ranging from two to five years. These agree-
ments typically contain renewal options providing for a renegoti-
ation of the lease, at the Company’s option, based on the fair
market value at that time.
The future minimum rental payments required under capital
and operating leases having initial or remaining noncancelable
lease terms in excess of one year are summarized as follows:
(In Thousands) Operating Leases Capital Leases
Fiscal Year Real Estate Equipment Real Estate Equipment Total
2 001 $ 160,794 $ 940 $ 55,744 $ 590 $ 218,068
2002 165,370 429 55,744 590 222,133
2003 160,034 41 55,744 537 216,356
2004 154,454 4 55,927 326 210,711
2005 150,195 – 55,942 181 206,318
Later Years 1,640,574 – 594,861 42 2,235,477
Total Minimum
Lease
Payments $2,431,421 $1,414 $873,962 $2,266 $3,309,063
Total Minimum
Capital Lease
Payments $ 876,228
Less Amount
Representing Interest 407,502
Present Value of Minimum
Lease Payments 468,726
Less Current Maturities 16,041
Present Value of Minimum
Lease Payments,
Less Current Maturities $ 452,685
Rental expenses under operating leases for real estate and
equipment were $161.9, $144.0and $113.3million in 2000, 1999
and 1998, respectively.
Employee Retirement Plans
The Company’s contribution to its Employee
Stock Ownership Plan (ESOP) is determined by the Board of
Directors. The ESOP generally covers all Lowe’s employees after
completion of one year of employment and 1,000 hours of serv-
ice during that year. Contributions are allocated to participants
based on their eligible compensation relative to total eligible com-
pensation. Contributions may be made in cash or shares of the
Company’s common stock and are usually made in the following
year. ESOP expense for 2000, 1999 and 1998 was $72.1, $84.7
and $84.4million, respectively. At February 2, 2001 the ESOP
held approximately 6.9% of the outstanding common stock of
the Company.
The Board of Directors determines contributions to the
Company’s Employee Savings and Investment Plan (ESIP), a
qualified 401(k) plan, each year based upon a matching formula
applied to employee contributions. All employees are eligible to
participate in the ESIP on the first day of the month following
completion of one year of employment. Company contributions
to the ESIP for 2000, 1999 and 1998 were $13.6, $11.5and $10.6
million, respectively. The Company’s common stock is an invest-
ment option for participants in the ESIP. Shares held in the ESIP
are voted by the trustee as directed by an administrative commit-
tee of the ESIP.
Income
Taxes
2000 1999 1998
Statutory Rate Reconciliation
Statutory Federal Income Tax Rate 35.0% 35.0% 35.0%
State Income Taxes—Net of Federal
Tax Benefit 2.7 2.8 2.2
Other, Net (0.9) (1.1) (0.8)
Effective Tax Rate 36.8% 36.7% 36.4%
(In Thousands) Components of Income Tax Provision
Current
Federal $398,335 $333,257 $251,848
State 49,950 43,626 26,918
Total Current 448,285 376,883 278,766
Deferred
Federal 19,298 11,303 7,305
State 3,986 2,136 921
Total Deferred 23,284 13,439 8,226
Total Income Tax Provision $471,569 $390,322 $286,992
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