Lowe's 2002 Annual Report Download - page 25

relocations of older stores. This planned expansion is expected to
increase sales floor square footage by approximately 15% – 16%.
Approximately 1% of the 2003 projects will be build-to-suit leas-
es, 19% will be ground leased properties and 80% will be owned.
At January 31, 2003, the Company operated nine regional distri-
bution centers. During 2003, the Company expects to begin con-
struction on an additional regional distribution center located in
Poinciana, Fla., and is expected to be operational in the third quar-
ter of 2004. The Company also expects to open approximately
three to five additional flatbed network facilities in 2003 for the
handling of lumber, building materials and long-length items.
The Company believes that funds from operations will be ade-
quate to finance the 2003 expansion plan and other operating
requirements. However, general economic downturns, fluctua-
tions in the prices of products and unanticipated impact arising
from competition could have an effect on funds generated from
operations and our future expansion plans. In addition, the avail-
ability of funds through the issuance of commercial paper and new
debt could be adversely affected due to a debt rating downgrade or
a deterioration of certain financial ratios. The $100 million revolv-
ing credit and security agreement requires a minimum investment
grade rating in order to receive funding. There are no provisions in
any agreements that would require early cash settlement of exist-
ing debt or leases as a result of a downgrade in the Company’s debt
rating or a decrease in the Company’s stock price. Holders of the
Company’s $580.7 million Senior Convertible notes may convert
their notes into the Company’s common stock if the minimum
investment grade rating is not maintained. The Company’s current
debt ratings are as follows:
Current Debt Ratings S&P Moody’s Fitch
Commercial A1 P2 F1
Senior Debt A A3 A
Outlook Stable Positive Stable
Market risk.
The Company’s major market risk exposure is the potential loss
arising from the impact of changing interest rates on long-term
debt. The Company’s policy is to monitor the interest rate risks
associated with this debt, and the Company believes any signifi-
cant risks could be offset by variable rate instruments available
through the Company’s lines of credit. The following tables sum-
marize the Company’s market risks associated with long-term
debt, excluding capitalized leases. The tables present principal
cash outflows and related interest rates by year of maturity, exclud-
ing unamortized original issue discounts as of January 31, 2003
and February 1, 2002. The fair values included in the following
tables were determined using quoted market rates or interest rates
that are currently available to the Company on debt with similar
terms and remaining maturities.
Long-Term Debt Maturities by Fiscal Year
January 31, 2003
Average Average
Fixed Interest Variable Interest
(Dollars in Millions) Rate Rate Rate Rate
2003 $ 8 7.64% $ – –
2004 55 7.98 – –
2005 609 7.32 – –
2006 8 7.70 – –
2007 61 6.89 – –
Thereafter 3,042 4.49% – –
Total $3,783 $ –
Fair Value $3,747 $ –
Long-Term Debt Maturities by Fiscal Year
February 1, 2002
Average Average
Fixed Interest Variable Interest
(Dollars in Millions) Rate Rate Rate Rate
2002 $ 40 7.65% $ 0.1 1.55%
2003 9 7.66 0.1 1.55
2004 55 7.98 0.1 1.55
2005 609 7.32 0.1 1.55
2006 8 7.70 – NA
Thereafter 3,103 4.54% 2.1 1.65%
Total $3,824 $ 2.5
Fair Value $3,811 $ 2.5