Lowe's 2003 Annual Report Download - page 36

34 LOWE’S COMPANIES, INC.
Five banks have extended lines of credit aggregating $330 mil-
lion for the purpose of issuing documentary letters of credit and
standby letters of credit. These lines do not have termination dates
but are reviewed periodically. Commitment fees ranging from
.25% to .50% per annum are paid on the amounts of standby let-
ters of credit. Outstanding letters of credit totaled $161 million as
of January 30, 2004 and $122 million as of January 31, 2003.
At January 31, 2003, the interest rate on short-term borrowings
was 1.4%. There were no short-term borrowings outstanding at
January 30, 2004.
Note 7
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Long-term debt.
Fiscal Year
(In Millions) of Final January 30, January 31,
Debt Category Interest Rates Maturity 2004 2003
Secured Debt:1
Mortgage Notes 7.00% to 9.25% 2028 $ 45 $ 55
Unsecured Debt:
Debentures 6.50% to 6.88% 2029 692 692
Notes 7.50% to 8.25% 2010 996 995
Medium-Term Notes
Series A 7.35% to 8.20% 2023 74 74
Medium-Term Notes2
Series B 6.70% to 7.61% 2037 267 266
Senior Notes 6.38% 2005 100 100
Convertible Notes 0.9% to 2.5% 2021 1,136 1,119
Capital Leases 6.58% to 19.57% 2029 445 464
Total Long-Term Debt 3,755 3,765
Less Current Maturities 77 29
Long-Term Debt, Excluding
Current Maturities $ 3,678 $ 3,736
1Real properties with an aggregate book value of $86 million were pledged as
collateral at January 30, 2004 for secured debt.
2Approximately 37% of these Medium-Term Notes may be put at the option of the
holder on either the tenth or twentieth anniversary date of the issue at par value. None
of these notes are currently putable.
Debt maturities, exclusive of capital leases, for the next five fis-
cal years and thereafter are as follows: 2004, $54 million; 2005, $608
million; 2006, $8 million; 2007, $61 million; 2008, $6 million;
thereafter, $3,036 million.
The Company’s debentures, senior notes, medium-term notes
and convertible notes contain certain restrictive covenants, includ-
ing maintenance of a specific financial ratio. The Company was in
compliance with all covenants in these agreements at January 30,
2004 and January 31, 2003.
In October 2001, the Company issued $580.7 million aggregate
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 prin-
cipal 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 adjust-
ment, only if: the sale price of the Company’s common stock reaches
specified thresholds, the credit rating of the notes is below a specified
level, the notes are called for redemption, or specified corporate trans-
actions have occurred. Holders may require the Company to purchase
all or a portion of their note in 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 30, 2004.
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, repre-
senting 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. Holders of an insignificant num-
ber of notes exercised their right to require the Company to purchase
their notes in February 2004, all of which were purchased in cash.
Note 8
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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 30, 2004 January 31, 2003
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Carrying Fair Carrying Fair
(In Millions) Amount Value Amount Value
Liabilities:
Long-Term Debt
(Excluding Capital Leases) $ 3,310 $ 3,985 $ 3,302 $ 3,747