Lowe's 2006 Annual Report Download - page 40

36
Lowe’s 2006 Annual Report
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. e
charge for store closing costs is included in SG&A expense. e store closing
liability, which is included in other current liabilities in the consolidated
balance sheets, was $19 million and $23 million at February 2, 2007, and
February 3, 2006, respectively.
Note 5 SHORTTERM BORROWINGS AND
LINES OF CREDIT
e Company has a $1 billion senior credit facility which became eective
in July 2004 and expires in July 2009. is facility is available to support
the Company’s 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. e senior credit
facility contains certain restrictive covenants, which include maintenance
of a debt leverage ratio as dened by the facility. e Company was in com-
pliance with these covenants at February 2, 2007 and February 3, 2006.
Fieen banking institutions are participating in the $1 billion senior credit
facility. As of February 2, 2007, the Company had $23 million of short-term
borrowings outstanding under the senior credit facility but no outstand-
ing borrowings under the commercial paper program. e interest rate
on short-term borrowings was 5.4%. As of February 3, 2006, there were
no outstanding borrowings under the senior credit facility or under the
commercial paper program.
Five banks have extended lines of credit aggregating $486 million for
the purpose of issuing documentary letters of credit and standby letters
of credit. ese lines do not have termination dates and are reviewed
periodically. Commitment fees ranging from .225% to .50% per annum
are paid on the letters of credit amounts outstanding. Outstanding letters
of credit totaled $346 million as of February 2, 2007, and $316 million as
of February 3, 2006.
Note 6 LONGTERM DEBT
Fiscal Year
(In millions) of Final February 2, February 3,
Debt Category Interest Rates Maturity 2007 2006
Secured debt:1
Mortgage notes 6.57 to 8.25% 2028 $ 30 $ 38
Unsecured debt:
Debentures 6.50 to 6.88% 2029 693 693
Notes 8.25% 2010 498 498
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 5.80% 2036 1,980 988
Convertible notes 0.86 to 2.50% 2021 518 596
Capital leases
and other 2030 400 424
Total long-term debt 4,413 3,531
Less current maturities 88 32
Long-term debt, excluding
current maturities $ 4,325 $ 3,499
1 Real properties with an aggregate book value of $122 million were pledged as collateral at
February 2, 2007, for secured debt.
2 Approximately 37% of these medium-term notes may be put at the option of the holder on
either the tenth or twentieth anniversary of the issue at par value. e medium-term notes
were issued in 1997. None of these notes are currently putable.
Debt maturities, exclusive of unamortized original issue discounts,
capital leases and other, for the next ve years and thereaer are as follows:
2007, $61 million; 2008, $7 million; 2009, $1 million; 2010, $501 million;
2011, $1 million; thereaer, $3.6 billion.
e Company’s debentures, notes, medium-term notes, senior notes,
and convertible notes contain certain restrictive covenants. e Company
was in compliance with all covenants in these agreements at February 2,
2007 and February 3, 2006.
Senior Notes
In October 2005, the Company issued $1 billion of unsecured senior notes,
comprised of two $500 million tranches maturing in October 2015 and
October 2035, respectively. e rst $500 million tranche of 5.0% Senior
Notes was sold at a discount of $4 million. e second $500 million tranche
of 5.5% Senior Notes was sold at a discount of $8 million. Interest on the
Senior Notes is payable semi-annually in arrears in April and October of
each year until maturity. e discount associated with the issuance is
included in long-term debt and 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.
e net proceeds of approximately $988 million were used for the repay-
ment of $600 million in outstanding notes due December 2005, for general
corporate purposes, including capital expenditures and working capital
needs, and to nance repurchases of common stock.
In October 2006, the Company issued $1 billion of unsecured
senior notes, comprised of two tranches: $550 million of 5.4% Senior
Notes maturing in October 2016 and $450 million of 5.8% Senior Notes
maturing in October 2036. e 5.4% Senior Notes and the 5.8% Senior
Notes were each issued at a discount of approximately $4.4 million.
Interest on the Senior Notes is payable semi-annually in arrears in April
and October of each year until maturity, beginning in April 2007. e
discount associated with the issuance is included in long-term debt
and is being amortized over the respective terms of the Senior Notes.
Issuance costs were approximately $1.6 million and are being amortized
over the respective terms of the Senior Notes. e net proceeds of approxi-
mately $991 million were used for general corporate purposes, including
capital expenditures and working capital needs, and to nance repur-
chases of common stock.
e Senior Notes issued in 2005 and 2006 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. e 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 redemption on a semi-annual basis at a specied rate. e
indenture governing the Senior Notes does not limit the aggregate prin-
cipal amount of debt securities that the Company may issue, nor is the
Company required to maintain nancial ratios or specied levels of net
worth or liquidity. However, the indenture contains various restrictive
covenants, none of which is expected to impact the Company’s liquidity
or capital resources.
Convertible Notes
e Company has $578.8 million aggregate principal of senior convert-
ible notes issued in October 2001 at an issue price of $861.03 per note.
Cash interest payments on the notes ceased in October 2006. In October
2021 when the notes mature, a holder will receive $1,000 per note, repre-
senting a yield to maturity of approximately 1%. Holders of the notes had
the right to require the Company to purchase all or a portion of their
notes in October 2003 and October 2006, at a price of $861.03 per note
plus accrued cash interest, if any, and will have the right in October 2011
to require the Company to purchase all or a portion of their notes at a
price of $905.06 per note. e Company may choose to pay the purchase
price of the notes in cash or common stock or a combination of cash and
common stock. Holders of an insignicant number of notes exercised
their right to require the Company to repurchase their notes during
2003 and 2006, all of which were purchased in cash. e Company may
redeem for cash all or a portion of the notes at any time, at a price equal
to the sum of the issue price plus accrued original issue discount on the
redemption date.