Lowe's 2004 Annual Report Download - page 39

Lowe’s 2004 Annual Report Page 37
expected future cash flows and the fair value of the asset is less than the
carrying value, a provision is made for the impairment of the asset
based on the excess of carrying value over fair value. The fair value of
the assets is generally based on appraisals and the Company’s histori-
cal experience. The provision for impairment is included in SG&A
expense. Impairment provisions recorded were $31 million, $14 mil-
lion and $22 million in fiscal 2004, 2003 and 2002, respectively.
Closed store real estate is included in other assets and amounted to
$56 million and $89 million at January 28, 2005, and January 30, 2004,
respectively.
When leased locations are closed, a liability is recognized for the fair
value of future contractual obligations, including property taxes, utili-
ties, and common area maintenance, net of anticipated sublease income.
The provision for store closing costs is included in SG&A expense.
The following table summarizes the store closing liability and the
respective changes in the obligation, which is included in other current
liabilities in the consolidated balance sheets.
(In Millions) Store Closing Liability
Balance at February 1, 2002 $ 17
Accrual for Store Closing Costs 9
Lease Payments, Net of Sublease Income (10)
Balance at January 31, 2003 $ 16
Accrual for Store Closing Costs 12
Lease Payments, Net of Sublease Income (9)
Balance at January 30, 2004 $ 19
Accrual for Store Closing Costs 16
Lease Payments, Net of Sublease Income (11)
Balance at January 28, 2005 $ 24
NOTE 8 Short-term borrowings
and lines of credit
The Company has a $1 billion senior credit facility which became
effective in July 2004 and expires in July 2009. This facility is available
to support the Company’s $1 billion commercial paper program and
for short-term borrowings. Borrowings are priced based upon market
conditions at the time of funding in accordance with the terms of the
senior credit facility. The senior credit facility contains certain
covenants, including maintenance of a specific financial ratio. The
Company was in compliance with these covenants at January 28, 2005.
Fifteen banking institutions are participating in the $1 billion senior
credit facility and, as of January 28, 2005, there were no outstanding
loans under the facility.
Five banks have extended lines of credit aggregating $513 million
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 letters of credit amounts outstanding.
Outstanding letters of credit totaled $304 million as of January 28,
2005, and $161 million as of January 30, 2004.
There were no short-term borrowings outstanding at January 28,
2005, or January 30, 2004.
NOTE 9 Long-term debt
Fiscal Year
Debt Category of Final January 28, January 30,
(In Millions) Interest Rates Maturity 2005 2004
Secured Debt:1
Mortgage Notes 6.82% to 8.25% 2028 $ 37 $ 45
Unsecured Debt:
Debentures 6.50% to 6.88% 2029 693 692
Notes 7.50% to 8.25% 2010 997 996
Medium-Term Notes
Series A 7.35% to 8.20% 2023 27 74
Medium-Term Notes
Series B26.70% to 7.61% 2037 267 267
Senior Notes 6.38% 2005 100 100
Convertible Notes 0.86% to 2.50% 2021 1,146 1,136
Capital Leases 2029 423 445
Total Long-Term Debt 3,690 3,755
Less Current Maturities 630 77
Long-Term Debt, Excluding
Current Maturities $ 3,060 $ 3,678
1Real properties with an aggregate book value of $86 million were pledged as collateral at
January 28, 2005, for secured debt.
2 Approximately 34% 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 fiscal
years and thereafter are as follows: 2005, $608 million; 2006, $7 mil-
lion; 2007, $61 million; 2008, $6 million; 2009, $1 million; thereafter,
$3,025 million.
The Company’s debentures, senior notes, medium-term notes and
convertible notes contain certain restrictive covenants, including
maintenance ofa specific financial ratio. The Company was in com-
pliance with all covenants in these agreements at January 28, 2005, and
January 30, 2004.
The Company has $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 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 por-
tion 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 pur-
chase 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 begin-
ning 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