Lowe's 2002 Annual Report Download - page 36

34 / 35 LO WE’S CO MPANIES, INC. ANNUAL REPORT 2002
Debt maturities, exclusive of capital leases, for the next five fis-
cal years are as follows: 2003, $8.2 million; 2004, $55.6 million;
2005, $608.9 million; 2006, $7.7 million; 2007, $60.9 million.
The Company’s debentures, senior notes, medium term notes
and convertible notes contain certain financial covenants, includ-
ing the maintenance of specific financial ratios, among others. The
Company was in compliance with all covenants in these agree-
ments at January 31, 2003 and February 1, 2002.
In October 2001, the Company issued $580.7 million aggre-
gate principal of senior convertible notes at an issue price of
$861.03 per note. Interest on the notes, at the rate of 0.8610% per
year on the principal amount at maturity, is payable semiannually
in arrears until October 2006. After that date, the Company will
not pay cash interest on the notes prior to maturity. Instead, in
October 2021 when the notes mature, a holder will receive $1,000
per note, representing a yield to maturity of approximately 1%.
Holders may convert their notes into 17.212 shares of the
Company’s common stock, subject to adjustment, only if: the sale
price of the Company’s common stock reaches specified thresh-
olds, the credit rating of the notes is below a specified level, the
notes are called for redemption, or specified corporate transactions
have occurred. Holders may require the Company to purchase all
or a portion of their note in October 2003 or October 2006, at a
price of $861.03 per note plus accrued cash interest, if any, or in
October 2011, at a price of $905.06 per note. The Company may
choose to pay the purchase price of the notes in cash or common
stock or a combination of cash and common stock. In addition, if
a change in control of the Company occurs on or before October
2006, each holder may require the Company to purchase for cash
all or a portion of such holder’s notes. The Company may redeem
for cash all or a portion of the notes at any time beginning October
2006, at a price equal to the sum of the issue price plus accrued
original issue discount and accrued cash interest, if any, on the
redemption date. The conditions that permit conversion were not
satisfied at January 31, 2003.
In February 2001, the Company issued $1.005 billion aggregate
principal of convertible notes at an issue price of $608.41 per note.
Interest will not be paid on the notes prior to maturity in February
2021, at which time the holders will receive $1,000 per note, rep-
resenting a yield to maturity of 2.5%. Holders may convert their
notes at any time on or before the maturity date, unless the notes
have been previously purchased or redeemed, into 16.448 shares of
the Company’s common stock per note. Holders of the notes may
require the Company to purchase all or a portion of their notes in
February 2004 at a price of $655.49 per note or in February 2011
at a price of $780.01 per note. On either of these dates, the
Company may choose to pay the purchase price of the notes in cash
or common stock, or a combination of cash and common stock. In
addition, if a change in control of the Company occurs on or before
February 2004, each holder may require the Company to purchase,
for cash, all or a portion of the holder’s notes.
Note 7: Financial instruments.
Cash and cash equivalents, accounts receivable, short-term bor-
rowings, trade accounts payable and accrued liabilities are reflect-
ed in the financial statements at cost which approximates fair
value. Short and long-term investments, classified as available-for-
sale securities, are reflected in the financial statements at fair value.
Estimated fair values for long-term debt have been determined
using available market information and appropriate valuation
methodologies. However, considerable judgment is 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 cur-
rent market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the
estimated fair value amounts. The fair value of the Company’s
long-term debt excluding capital leases is as follows:
January 31, 2003 February 1, 2002
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Carrying Fair Carrying Fair
(In Millions) Amount Value Amount Value
Liabilities:
Long-Term Debt
(Excluding Capital Leases) $ 3,302 $ 3,747 $ 3,327 $ 3,814
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.