Lowe's 2005 Annual Report Download - page 38

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฀ L O W E ’ S ฀ ฀2 0 0 5 ฀ ฀A N N U A L ฀ ฀R E P O RT
Note฀3฀ INVESTMENTS
The฀Company’s฀investment฀securities฀are฀classified฀as฀available-for-sale.฀The฀
amortized฀costs,฀gross฀unrealized฀holding฀gains฀and฀losses฀and฀fair฀values฀of฀
the฀investments฀at฀February฀3,฀2006,฀and฀January฀28,฀2005,฀were฀as฀follows:
฀ February฀3,฀2006
฀ ฀ ฀ ฀ ฀ ฀ Gross฀ Gross฀
Type฀ ฀ ฀ ฀ Amortized฀ Unrealized฀ Unrealized฀ Fair฀
(In฀millions)฀ ฀ Cost฀ Gains฀ Losses฀ Value
Municipal฀obligations฀ $฀ 295฀ $฀ –฀ $฀ (1)฀ $฀294
Money฀market฀preferred฀stock฀ ฀ 157฀ ฀ –฀ ฀ –฀ 157
Corporate฀notes฀ ฀ 2฀ ฀ –฀ ฀ –฀ 2
฀ Classified฀as฀short-term฀ ฀ 454฀ ฀ –฀ ฀ (1)฀ 453
Municipal฀obligations฀ ฀ 223฀ ฀ –฀ ฀ (1)฀ 222
Corporate฀notes฀ ฀ 32฀ ฀ –฀ ฀ –฀ 32
Mutual฀funds฀ ฀ 23฀ ฀ 2฀ ฀ –฀ 25
Asset-backed฀obligations฀ ฀ 14฀ ฀ –฀ ฀ –฀ 14
Certificates฀of฀deposit฀ ฀ 1฀ ฀ –฀ ฀ –฀ 1
฀ Classified฀as฀long-term฀ ฀ 293฀ ฀ 2฀ ฀ (1)฀ 294
Total฀ ฀ ฀ ฀ $฀ 747฀ $฀ 2฀ $฀ (2)฀ $ ฀ 747
฀ January฀28,฀2005
฀ ฀ ฀ ฀ ฀ ฀ Gross฀ Gross฀
Type฀ ฀ ฀ ฀ Amortized฀ Unrealized฀ Unrealized฀ Fair฀
(In฀millions)฀ ฀ Cost฀ Gains฀ Losses฀ Value
Municipal฀obligations฀ $฀ 162฀ $฀ –฀ $฀ –฀ $฀162
Money฀market฀preferred฀stock฀ ฀ 121฀ ฀ –฀ ฀ –฀ 121
฀ Classified฀as฀short-term฀ ฀ 283฀ ฀ –฀ ฀ –฀ 283
Municipal฀obligations฀ ฀ 97฀ ฀ –฀ ฀ (1)฀ 96
Corporate฀notes฀ ฀ 19฀ ฀ –฀ ฀ –฀ 19
Asset-backed฀obligations฀ ฀ 16฀ ฀ –฀ ฀ –฀ 16
Mutual฀funds฀ ฀ 14฀ ฀ 1฀ ฀ –฀ 15
฀ Classified฀as฀long-term฀ ฀ 146฀ ฀ 1฀ ฀ (1)฀ 146
Total฀ ฀ ฀ ฀ $฀ 429฀ $฀ 1฀ $฀ (1)฀ $ ฀ 429
฀ The฀proceeds฀from฀sales฀of฀available-for-sale฀securities฀were฀$587฀million,฀
$117฀million฀and฀$204฀million฀for฀2005,฀2004฀and฀2003,฀respectively.฀Gross฀
realized฀gains฀and฀losses฀on฀the฀sale฀of฀available-for-sale฀securities฀were฀not฀
significant฀for฀any฀of฀the฀periods฀presented.฀The฀municipal฀obligations฀classified฀
as฀long-term฀at฀February฀3,฀2006,฀will฀mature฀in฀one฀to฀20฀years,฀based฀on฀
stated฀maturity฀dates.฀Corporate฀notes฀classified฀as฀long-term฀at฀February฀3,฀
2006,฀will฀mature฀in฀one฀to฀three฀years,฀based฀on฀stated฀maturity฀dates.฀
Asset-backed฀obligations฀classified฀as฀long-term฀at฀February฀3,฀2006,฀will฀
mature฀in฀three฀to฀six฀years,฀based฀on฀stated฀maturity฀dates.
฀ In฀the฀third฀quarter฀of฀2005,฀the฀Company฀determined฀that฀certain฀cash฀
balances฀pledged฀as฀collateral฀principally฀for฀the฀Company’s฀casualty฀insurance฀
program฀were฀restricted฀and฀thus฀should฀not฀have฀been฀included฀in฀cash฀and฀
cash฀equivalents฀in฀prior฀periods.฀The฀Company฀has฀corrected฀the฀classification฀
of฀such฀restricted฀balances฀by฀including฀them฀in฀short-term฀investments,฀and฀
has฀restated฀prior฀periods฀to฀reflect฀this฀change.฀The฀effect฀of฀this฀restatement฀
was฀a฀reduction฀in฀cash฀and฀cash฀equivalents฀and฀an฀increase฀in฀short-term฀
investments฀of฀$112฀million฀at฀January฀28,฀2005.฀The฀impact฀on฀cash฀flows฀
from฀investing฀activities฀was฀a฀decrease฀of฀$65฀million฀in฀2004฀and฀a฀decrease฀
of฀$10฀million฀in฀2003.฀In฀addition,฀this฀restatement฀resulted฀in฀a฀$37฀million฀
decrease฀in฀beginning฀cash฀and฀cash฀equivalents฀on฀the฀statement฀of฀cash฀
flows฀for฀the฀year฀ended฀January฀30,฀2004.
฀ Short-term฀and฀long-term฀investments฀include฀restricted฀balances฀pledged฀as฀
collateral฀for฀a฀letter฀of฀credit฀for฀the฀Company’s฀extended฀warranty฀program฀and฀
for฀a฀portion฀of฀the฀Company’s฀casualty฀insurance฀program฀liabilities.฀Restricted฀
balances฀included฀in฀short-term฀investments฀were฀$152฀million฀at฀February฀3,฀
2006฀and฀$112฀million฀at฀January฀28,฀2005.฀At฀February฀3,฀2006,฀restricted฀
balances฀included฀in฀long-term฀investments฀were฀$74฀million.฀There฀were฀no฀
restricted฀balances฀included฀in฀long-term฀investments฀at฀January฀28,฀2005.
Note฀4฀PROPERTY฀AND฀฀ ACCUMULATED฀DEPRECIATION
Property฀is฀summarized฀by฀major฀class฀in฀the฀following฀table:
฀ ฀ ฀ ฀ ฀ ฀ Estimated฀
฀ ฀ ฀ ฀ ฀ ฀ Depreciable฀ February฀3,฀ January฀28,฀
(In฀millions)฀ ฀ ฀ Lives฀(In฀Years)฀ 2006฀ 2005
Cost:
Land฀ ฀ ฀ ฀ ฀ N/A฀ $฀ 4,894฀ $฀ 4,197
Buildings฀ ฀ ฀ 10–40฀ ฀ 8,195฀ ฀ 7,007
Equipment฀ ฀ ฀ 3–15฀ ฀ 6,468฀ ฀ 5,405
Leasehold฀improvements*฀ ฀ 3–40฀ ฀ 1,862฀ ฀ 1,401
Total฀cost฀ ฀ ฀ ฀ ฀ 21,419฀ ฀ 18,010
Accumulated฀depreciation฀฀
฀ and฀amortization฀ ฀ ฀ ฀ (5,065)฀ ฀ (4,099)
Net฀property฀ ฀ ฀ $฀ 16,354฀ $฀ 13,911
*฀Leasehold฀improvements฀are฀depreciated฀over฀the฀shorter฀of฀their฀estimated฀useful฀lives฀or฀the฀term฀of฀the฀
related฀lease,฀which฀is฀defined฀to฀include฀the฀non-cancelable฀lease฀term฀and฀any฀option฀renewal฀period฀
where฀failure฀to฀exercise฀such฀option฀would฀result฀in฀an฀economic฀penalty฀in฀such฀amount฀that฀renewal฀
appears,฀at฀the฀inception฀of฀the฀lease,฀to฀be฀reasonably฀assured.฀During฀the฀term฀of฀a฀lease,฀if฀a฀substantial฀
additional฀investment฀is฀made฀in฀a฀leased฀location,฀the฀Company฀reevaluates฀its฀definition฀of฀lease฀term.
฀ Included฀in฀net฀property฀are฀assets฀under฀capital฀lease฀of฀$534฀million,฀less฀
accumulated฀depreciation฀of฀$248฀million,฀at฀February฀3,฀2006,฀and฀$538฀mil-
lion,฀less฀accumulated฀depreciation฀of฀$227฀million,฀at฀January฀28,฀2005.
Note฀5฀IMPAIRMENT฀AND฀฀ STORE฀CLOSING฀COSTS
The฀Company฀periodically฀reviews฀the฀carrying฀value฀of฀long-lived฀assets฀for฀
potential฀impairment.฀The฀charge฀for฀impairment฀is฀included฀in฀SG&A฀expense.฀
Impairment฀charges฀recorded฀were฀$16฀million,฀$31฀million฀and฀$14฀million฀in฀
2005,฀2004฀and฀2003,฀respectively.
฀ The฀net฀carrying฀value฀for฀relocated฀stores,฀closed฀stores฀and฀other฀excess฀
property฀are฀included฀in฀other฀assets฀(non-current)฀and฀totaled฀$63฀million฀and฀
$56฀million฀at฀February฀3,฀2006,฀and฀January฀28,฀2005,฀respectively.
฀ When฀leased฀locations฀are฀closed,฀a฀liability฀is฀recognized฀for฀the฀fair฀
value฀of฀future฀contractual฀obligations,฀including฀property฀taxes,฀utilities,฀and฀
common฀area฀maintenance,฀net฀of฀anticipated฀sublease฀income.฀The฀charge฀
for฀store฀closing฀costs฀is฀included฀in฀SG&A฀expense.฀The฀store฀closing฀liabil-
ity,฀which฀is฀included฀in฀other฀current฀liabilities฀in฀the฀consolidated฀balance฀
sheets,฀was฀$23฀million฀and฀$24฀million฀at฀February฀3,฀2006,฀and฀January฀28,฀
2005,฀respectively.