Lowe's 2006 Annual Report Download - page 39

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Lowe’s 2006 Annual Report
interest and penalties, accounting in interim periods, disclosure, and
transition. e Interpretation is eective for scal years beginning aer
December 15, 2006. Management is continuing to evaluate the eect
that the adoption of FIN 48 will have on the Company’s consolidated
nancial statements.
In September 2006, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 157, “Fair Value Measurements.” e Statement
provides a single denition of fair value, together with a framework for
measuring it, and requires additional disclosure about the use of fair
value to measure assets and liabilities. SFAS No. 157 also emphasizes that
fair value is a market-based measurement, not an entity-specic measure-
ment, and sets out a fair value hierarchy with the highest priority being
quoted prices in active markets. Under the Statement, fair value measure-
ments are required to be disclosed by level within that hierarchy. e
Statement is eective for nancial statements issued for scal years begin-
ning aer November 15, 2007, and interim periods within those scal
years. e Company is currently evaluating the eect that the adoption of
SFAS No. 157 will have on its consolidated nancial statements.
In February 2007, the FASB issued SFAS No. 159, “e Fair Value
Option for Financial Assets and Liabilities.” e Statement provides enti-
ties an option to measure many nancial instruments and certain other
items at fair value, including available-for-sale and held-to-maturity
securities previously accounted for under SFAS No. 115, “Accounting for
Certain Investments in Debt and Equity Securities.” Under this Statement,
unrealized gains and losses on items for which the fair value option has been
elected will be reported in earnings at each subsequent reporting period.
e Statement is eective for scal years beginning aer November 15,
2007. e Company is currently evaluating the eect that the adoption
of SFAS No. 159 will have on its consolidated nancial statements.
Segment Information – e Company’s operating segments, repre-
senting the Company’s home improvement retail stores, are aggregated
within one reportable segment, based on the way the Company manages
its business. e Company’s home improvement retail stores exhibit
similar long-term economic characteristics, sell similar products and
services, use similar processes to sell those products and services, and
sell their products and services to similar classes of customers.
Reclassications – Certain prior period amounts have been reclassi-
ed to conform to current classications.
Note 2 INVESTMENTS
e Company’s investment securities are classied as available-for-sale.
e amortized costs, gross unrealized holding gains and losses and fair
values of the investments at February 2, 2007, and February 3, 2006, were
as follows:
February 2, 2007
Gross Gross
Type Amortized Unrealized Unrealized Fair
(In millions) Cost Gains Losses Value
Municipal obligations $ 258 $ – $ (1) $ 257
Money market preferred stock 148 – – 148
Corporate notes 26 – – 26
Certicates of deposit 1 – – 1
Classied as short-term 433 – (1) 432
Municipal obligations 127 – – 127
Mutual funds 35 3 – 38
Classied as long-term 162 3 – 165
Total $ 595 $ 3 $ (1) $ 597
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
Classied 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
Certicates of deposit 1 – – 1
Classied as long-term 293 2 (1) 294
Total $ 747 $ 2 $ (2) $ 747
e proceeds from sales of available-for-sale securities were $412 million,
$192 million and $165 million for 2006, 2005 and 2004, respectively. Gross
realized gains and losses on the sale of available-for-sale securities were
not signicant for any of the periods presented. e municipal obligations
classied as long-term at February 2, 2007, will mature in one to 30 years,
based on stated maturity dates.
Short-term and long-term investments include restricted balances
pledged as collateral for letters of credit for the Company’s extended warranty
program and for a portion of the Company’s casualty insurance and installed
sales program liabilities. Restricted balances included in short-term investments
were $248 million at February 2, 2007 and $152 million at February 3, 2006.
Restricted balances included in long-term investments were $32 million at
February 2, 2007 and $74 million at February 3, 2006.
Note 3 PROPERTY AND ACCUMULATED
DEPRECIATION
Property is summarized by major class in the following table:
Estimated
Depreciable February 2, February 3,
(In millions) Lives, In Years 2007 2006
Cost:
Land N/A $ 5,496 $ 4,894
Buildings 10–40 9,655 8,204
Equipment 3–15 7,477 6,468
Leasehold improvements 3–40 2,476 1,853
Total cost 25,104 21,419
Accumulated depreciation (6,133) (5,065)
Property, less accumulated depreciation $ 18,971 $ 16,354
Included in net property are assets under capital lease of $533 million,
less accumulated depreciation of $274 million, at February 2, 2007,
and $534 million, less accumulated depreciation of $248 million, at
February 3, 2006.
Note 4 IMPAIRMENT AND STORE CLOSING COSTS
e Company periodically reviews the carrying value of long-lived assets
for potential impairment. e charge for impairment is included in SG&A
expense. Impairment charges were $5 million, $16 million and $31 million
in 2006, 2005 and 2004, respectively.
e net carrying value for relocated stores, closed stores and other
excess property are included in other assets (non-current) and totaled
$113 million and $63 million at February 2, 2007, and February 3, 2006,
respectively.