Lowe's 2001 Annual Report Download - page 35

Lo we’s Co mpanies, Inc.
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Debt maturities, exclusive o f capital leases, fo r the next five fis-
cal years are as fo llo ws ( in millio ns) : 2002, $40.3; 2003, $8.8;
2004, $55.7; 2005, $609.0; 2006, $7.7.
The Co mpany’s debentures, senio r no tes, medium term no tes
and c o nvertible no tes co ntain certain financial co venants, includ-
ing the maintenance of specific financial ratio s, amo ng o thers. The
Co mpany was in co mpliance with all co venants in these agree-
ments at February 1, 2002 and February 2, 2001.
In Octo ber 2001, the Co mpany issued $580.7 millio n ag gregate
principal o f senio r co nvertible no tes at an issue price o f $861.03
per no te. Interest o n the no tes, at the rate o f 0.8610% per year o n
the principal amount at maturity, is payable semiannually in
arrears until Octo ber 2006. After that date, the Co mpany will no t
pay c ash interest o n the no tes prio r to maturity. Instead, in
Octo ber 2021 when the no tes mature, a ho lder will receive $1,000
per no te, representing a yield to maturity of 1% . Ho lders may co n-
vert their notes into 17.212 shares o f the Co mpany’s co mmo n
sto ck, subject to adjustment, o nly if: the sale price o f the
Co mpany’s co mmo n sto ck reaches specified thresho lds, the credit
rating o f the no tes is belo w a specified level, the no tes are called
fo r redemptio n, o r specified co rpo rate transactio ns have o ccurred.
Ho lders may require the Co mpany to purchase all o r a po rtio n of
their no te in Octo ber 2003 o r Octo ber 2006, at a price of $861.03
per no te plus accrued cash interest, if any, o r in Octo ber 2011, at
a price o f $905.06 per no te. The Co mpany may cho o se to pay the
purchase price o f the no tes in cash o r co mmon sto c k o r a co mbi-
natio n of cash and co mmo n sto ck. In additio n, if a change in co n-
tro l of the Co mpany o ccurs o n o r befo re Octo ber 2006, each ho ld-
er may require the Co mpany to purchase fo r c ash all o r a po rtio n
of such ho lder’s notes. The Co mpany may redeem fo r cash all o r a
po rtio n o f the no tes at any time beg inning Octo ber 2006, at a
price equal to the sum o f the issue price plus accrued o riginal issue
disco unt and accrued cash interest, if any, o n the redemption date.
The co nditio ns that permit co nversio n were no t satisfied at
February 1, 2002.
In February 2001, the Co mpany issued $1.005 billio n aggregate
principal o f co nvertible no tes at an issue price of $608.41 per no te.
Interest will no t be paid o n the no tes prio r to maturity in February
2021, at which time the ho lders will receive $1,000 per no te, rep-
resenting a yield to maturity of 2.5% . Ho lders may co nvert their
no tes at any time o n o r befo re the maturity date, unless the no tes
have been previously purchased o r redeemed, into 16.448 shares
of the Co mpany’s co mmo n sto ck per no te. Ho lders o f the no tes may
require the Co mpany to purc hase all o r a po rtio n of their no tes in
February 2004 at a price of $655.49 per no te o r in February 2011
at a price o f $780. 01 per no te. On either of these dates, the
Co mpany may cho o se to pay the purc hase price o f the no tes in
cash o r co mmo n sto ck, o r a co mbinatio n of cash and co mmo n
sto ck. In additio n, if a c hange in co ntro l o f the Co mpany o ccurs
o n o r befo re February 2004, each ho lder may require the Co mpany
to purchase, fo r cash, all o r a po rtio n of the ho lder’s no tes.
1Re al pro pe rtie s ple dge d as co llate ral fo r se cure d de bt had ne t bo o k val-
ue s at February 1, 2002 , as fo llows: mo rtgage no te s – $134 . 5 millio n and
o the r no te s – $26 . 6 millio n.
2Appro ximate ly 37% o f the se Me dium Te rm No te s may be put at the
o ptio n o f the ho lde r o n e ithe r the te nth o r twe ntie th annive rsary date o f the
issue at par value. No ne of the se no te s are curre ntly putable.
NOTE 8 > FI NANCI AL I NSTRUMENTS
Cash and cash equivalents, acco unts receivable, sho rt- term bo r-
ro wings, trade acco unts payable, and accrued liabilities are reflect-
ed in the financial statements at co st which appro ximates fair
value. Sho rt and lo ng- term investments, classified as available-fo r-
sale securities, are reflected in the financial statements at fair
value. Estimated fair values fo r lo ng- term debt have been deter-
mined using available market info rmatio n and appro priate valua-
tio n metho do lo gies. However, co nsiderable judgment is required in
interpreting market data to develo p the estimates of fair value.
Acco rdingly, the estimates presented herein are no t necessarily
indicative of the amo unts that the Co mpany co uld realize in a cur-
rent market exchange. The use o f different market assumptio ns
and/ o r estimatio n metho do logies may have a material effect o n
the estimated fair value amo unts. The fair value o f the Co mpany’s
lo ng- term debt excluding capital leases is as fo llo ws:
February 1, 2002 February 2 , 2001
––– ––– – ––– – ––– – ––– ––– – ––– – ––– –––– ––– – ––– – ––– –––– ––– – ––– – – ––– –––– ––– – ––– – ––– –––– ––– – ––– – ––– –––– ––– – ––– – ––– ––– –
Carrying Fair Carrying Fair
( In Tho usands) Amo unt Value Amo unt Value
Liabilities:
Lo ng-Term De bt
( Excluding Capital Leases) $3, 326,514 $3,813,861 $2,271, 284 $2,271,729
Interest rates that are currently available to the Co mpany fo r
issuance o f debt with similar terms and remaining maturities are
used to estimate fair value fo r debt issues that are no t quo ted o n
an exc hange.