Lowe's 2004 Annual Report Download - page 26

Page 24 Lowe’s 2004 Annual Report
minimum investment grade rating is not maintained. There is no indi-
cation that we will not be able to maintain this minimum investment
grade rating. In addition, if a change in control of the company occurs
on or before October 2006, each holder of the Senior Convertible
Notes may require us to purchase for cash all or a portion of such
holder’s notes. We 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 inter-
est, if any, on the redemption date. Our debt ratings at January 28,
2005, were as follows:
Current Debt Ratings S&P Moody’s Fitch
Commercial Paper A1 P1 F1
Senior Debt A+ A2 A
Outlook Stable Positive Positive
Off-balance sheet arrangements and
other contractual obligations
Other than in connection with executing operating leases, we do not
have any off-balance-sheet financing. The following table summarizes
our significant contractual obligations and commercial commitments:
Payments Due by Period
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Contractual Obligations Less than 1-3 4-5 After 5
(In Millions) Total 1 year years years years
Long-Term Debt
(principal and
interest amounts,
net of discount) $ 5,605 $ 769 $ 295 $ 219 $ 4,322
Capital Lease
Obligations 688 60 118 117 393
Operating Leases 3,843 249 493 487 2,614
Purchase Obligations1450 377 56 8 9
Subtotal – Contractual
Obligations $10,586 $ 1,455 $ 962 $ 831 $ 7,338
Commercial Commitments
(In Millions) Amount of Commitment Expiration by Period
Letters of Credit2$ 304 $ 293 $ 11 $ – $ –
Total Contractual
Obligations
and Commercial
Commitments $10,890 $ 1,748 $ 973 $ 831 $ 7,338
1 Represents contracts for purchases of property and construction of buildings, as well as
commitments related to certain marketing and information technology programs.
2 Letters of credit are issued for insurance programs, the purchase of import merchandise
inventories and real estate and construction contracts.
Company outlook
During fiscal 2005, we expect to open 150 stores, resulting in total
square footage growth of approximately 13-14%. We expect total sales
to increase approximately 17% and comparable store sales to increase
approximately 5%. Operating margin, defined as gross margin less
SG&A and depreciation, is expected to increase approximately 20 basis
points. In addition, store opening costs are expected to be approxi-
mately $127 million. Diluted earnings per share of $3.25 to $3.34 are
expected for the fiscal year ending February 3, 2006. Fiscal 2005 will
include an extra week in the fourth quarter for a total of 53 weeks.
Quantitative and qualitative disclosures
about market risk
Our major market risk exposure is the potential loss arising from the
impact of changing interest rates on long-term debt. We currently
only have fixed-rate debt. Our policy is to monitor the interest rate
risks associated with this debt, and we believe any significant risks
could be offset by accessing variable rate instruments available
through our lines of credit. The following tables summarize our mar-
ket risks associated with long-term debt, excluding capital leases. The
tables present principal cash outflows and related interest rates by
year of maturity, excluding unamortized original issue discounts, as
of January 28, 2005, and January 30, 2004. The fair values included in
the following tables were determined using quoted market rates or
interest rates that are currently available to us on debt with similar
terms and remaining maturities.
Long-Term Debt Maturities by Fiscal Year
January 28, 2005
Average
Fixed Interest
(Dollars in Millions) Rate Rate
2005 $ 608 7.32%
2006 7 7.70
2007 61 6.89
2008 6 7.39
2009 1 7.52
Thereafter 3,025 4.49%
Total $ 3,708
Fair Value $ 3,974
Long-Term Debt Maturities by Fiscal Year
January 30, 2004
Average
Fixed Interest
(Dollars in Millions) Rate Rate
2004 $ 54 7.98%
2005 608 7.32
2006 8 7.70
2007 61 6.89
2008 6 7.39
Thereafter 3,036 4.49%
Total $ 3,773
Fair Value $ 3,985