Lowe's 2005 Annual Report Download - page 39

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Note฀6฀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฀direct฀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฀February฀3,฀2006฀and฀January฀28,฀2005.฀
Fifteen฀banking฀institutions฀are฀participating฀in฀the฀$1฀billion฀senior฀credit฀facility฀
and,฀as฀of฀February฀3,฀2006฀and฀January฀28,฀2005,฀there฀were฀no฀outstanding฀
borrowings฀under฀the฀facility฀or฀under฀the฀commercial฀paper฀program.
฀ Four฀banks฀have฀extended฀lines฀of฀credit฀aggregating฀$420฀million฀for฀the฀
purpose฀of฀issuing฀documentary฀letters฀of฀credit฀and฀standby฀letters฀of฀credit.฀
These฀lines฀do฀not฀have฀termination฀dates฀and฀are฀reviewed฀periodically.฀Com-
mitment฀fees฀ranging฀from฀.25%฀to฀.50%฀per฀annum฀are฀paid฀on฀the฀letters฀of฀
credit฀amounts฀outstanding.฀Outstanding฀letters฀of฀credit฀totaled฀$316฀million฀
as฀of฀February฀3,฀2006,฀and฀$304฀million฀as฀of฀January฀28,฀2005.
฀ There฀were฀no฀short-term฀borrowings฀outstanding฀at฀February฀3,฀2006,฀
or฀January฀28,฀2005.
Note฀7LONG-TERM฀DEBT
฀ ฀ ฀ ฀ ฀ ฀ Fiscal฀฀
฀ ฀ ฀ ฀ ฀ ฀ Year฀
(In฀millions)฀ ฀ ฀ of฀Final฀ February฀3,฀ January฀28,฀
Debt฀Category฀ Interest฀Rates฀ Maturity฀ 2006฀ 2005
Secured฀debt:1
Mortgage฀notes฀ 6.82฀to฀8.25%฀ 2028฀ $฀ 38฀ $฀ 37
Unsecured฀debt:
Debentures฀฀ 6.50฀to฀6.88%฀ 2029฀ ฀ 693฀ ฀ 693
Notes฀฀ ฀ ฀ 8.25%฀ 2010฀ ฀ 498฀ ฀ 997
Medium-term฀notes฀–฀฀
฀ series฀A฀ ฀ 7.35฀to฀8.20%฀ 2023฀ ฀ 27฀ ฀ 27
Medium-term฀notes฀–฀฀
฀ series฀B2฀฀ 6.70฀to฀7.61%฀ 2037฀ ฀ 267฀ ฀ 267
Senior฀notes฀ 5.00฀to฀5.50%฀ 2035฀ ฀ 988฀ ฀ 100
Convertible฀notes฀ 0.86฀to฀2.50%฀ 2021฀ ฀ 596฀ ฀ 1,146
Capital฀leases฀฀
฀ and฀other฀ ฀ 2030฀ ฀ 424฀ ฀ 423
Total฀long-term฀debt฀ ฀ ฀ ฀ 3,531฀ ฀ 3,690
Less฀current฀maturities฀ ฀ ฀ ฀ 32฀ ฀ 630
Long-term฀debt,฀excluding฀฀
฀ current฀maturities฀ ฀ ฀ $฀ 3,499฀ $฀ 3,060
1฀Real฀properties฀with฀an฀aggregate฀book฀value฀of฀$101฀million฀were฀pledged฀as฀collateral฀at฀February฀3,฀
2006,฀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฀unamortized฀original฀issue฀discounts,฀capital฀
leases฀and฀other,฀for฀the฀next฀five฀years฀and฀thereafter฀are฀as฀follows:฀2006,฀
$7฀million;฀2007,฀$61฀million;฀2008,฀$6฀million;฀2009,฀$1฀million;฀2010,฀
$501฀million;฀thereafter,฀$2.7฀billion.
฀ The฀Company’s฀debentures,฀senior฀notes,฀medium-term฀notes฀and฀
convertible฀notes฀contain฀certain฀restrictive฀covenants.฀The฀Company฀was฀in฀
compliance฀with฀all฀covenants฀in฀these฀agreements฀at฀February฀3,฀2006฀and฀
January฀28,฀2005.
฀ In฀October฀2005,฀the฀Company฀issued฀$1฀billion฀of฀unsecured฀senior฀notes,฀
comprised฀of฀two฀$500฀million฀traunches฀maturing฀in฀October฀2015฀and฀Octo-
ber฀2035,฀respectively฀(Senior฀Notes).฀The฀first฀$500฀million฀traunche฀of฀5.0%฀
Senior฀Notes฀was฀sold฀at฀a฀discount฀of฀$4฀million.฀The฀second฀$500฀million฀
traunche฀of฀5.5%฀Senior฀Notes฀was฀sold฀a฀discount฀of฀$8฀million.฀Interest฀on฀
the฀notes฀is฀payable฀semi-annually฀in฀arrears฀in฀April฀and฀October.฀The฀discount฀
associated฀with฀the฀issuance฀is฀being฀amortized฀over฀the฀respective฀terms฀of฀
the฀senior฀notes.฀Issuance฀costs฀were฀approximately฀$1฀million฀and฀are฀being฀
amortized฀over฀the฀respective฀terms฀of฀the฀Senior฀Notes.฀The฀net฀proceeds฀of฀
$987฀million฀were฀used฀in฀part฀for฀the฀repayment฀of฀$600฀million฀in฀outstanding฀
notes฀due฀December฀2005.฀The฀remaining฀proceeds฀will฀be฀used฀for฀general฀
corporate฀purposes฀and฀to฀finance฀repurchases฀of฀common฀stock.
฀ The฀Senior฀Notes฀may฀be฀redeemed฀by฀the฀Company฀at฀any฀time,฀in฀whole฀
or฀in฀part,฀at฀a฀redemption฀price฀plus฀accrued฀interest฀to฀the฀date฀of฀redemption.฀
The฀redemption฀price฀is฀equal฀to฀the฀greater฀of฀(1)฀100%฀of฀the฀principal฀amount฀
of฀the฀Senior฀Notes฀to฀be฀redeemed,฀or฀(2)฀the฀sum฀of฀the฀present฀values฀of฀the฀
remaining฀scheduled฀payments฀of฀principal฀and฀interest฀thereon,฀discounted฀
to฀the฀date฀of฀the฀redemption฀on฀a฀semi-annual฀basis฀at฀a฀specified฀rate.฀The฀
indenture฀does฀not฀limit฀the฀aggregate฀principal฀amount฀of฀debt฀securities฀that฀
the฀Company฀may฀issue,฀nor฀is฀the฀Company฀required฀to฀maintain฀financial฀ratios฀
or฀specified฀levels฀of฀net฀worth฀or฀liquidity.฀However,฀the฀indenture฀governing฀the฀
Senior฀Notes฀contains฀various฀restrictive฀covenants,฀none฀of฀which฀is฀expected฀
to฀impact฀the฀Company’s฀liquidity฀or฀capital฀resources.
฀ The฀Company฀has฀$580.5฀million฀aggregate฀principal฀of฀senior฀convertible฀
notes฀issued฀in฀October฀2001฀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฀semi-annually฀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฀require฀the฀
Company฀to฀purchase฀all฀or฀a฀portion฀of฀their฀notes฀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฀com-
mon฀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.
฀ Holders฀of฀the฀senior฀convertible฀notes฀may฀convert฀their฀notes฀into฀17.212฀
shares฀of฀the฀Company’s฀common฀stock฀only฀if:฀the฀sale฀price฀of฀the฀Company’s฀
common฀stock฀reaches฀specified฀thresholds,฀or฀the฀credit฀rating฀of฀the฀notes฀฀
is฀below฀a฀specified฀level,฀or฀the฀notes฀are฀called฀for฀redemption,฀or฀specified฀
corporate฀transactions฀representing฀a฀change฀in฀control฀have฀occurred.฀The฀
conversion฀ratio฀of฀17.212฀shares฀per฀note฀is฀only฀adjusted฀based฀on฀normal฀
antidilution฀provisions฀designed฀to฀protect฀the฀value฀of฀the฀conversion฀option.
฀ During฀the฀third฀quarter฀of฀2005,฀the฀Company’s฀closing฀share฀prices฀
reached฀the฀specified฀threshold฀such฀that฀the฀senior฀convertible฀notes฀became฀
convertible฀at฀the฀option฀of฀each฀holder฀into฀shares฀of฀common฀stock฀during฀
the฀fourth฀quarter฀of฀2005.฀Holders฀of฀an฀insignificant฀number฀of฀notes฀exer-
cised฀their฀right฀to฀convert฀their฀notes฀into฀shares฀of฀the฀Company’s฀common฀
stock฀during฀2005.฀During฀the฀fourth฀quarter฀of฀2005,฀the฀Company’s฀closing฀
share฀prices฀again฀reached฀the฀specified฀threshold฀such฀that฀the฀senior฀con-
vertible฀notes฀would฀become฀convertible฀at฀the฀option฀of฀each฀holder฀into฀shares฀
of฀common฀stock฀in฀the฀first฀quarter฀of฀2006.