Lowe's 2007 Annual Report Download - page 38

36 |LOWE’S 2007 ANNUAL REPORT
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 $167 million
at February 1,2008 and $248 million at February 2,2007. Restricted balances
included in long-term investments were $172 million at February 1, 2008 and
$32 million at February 2, 2007.
NOTE 3 PROPERTY AND ACCUMULATED
DEPRECIATION
Property is summarized by major class in the following table:
Estimated
Depreciable February 1, February 2,
(In millions) Lives, In Years 2008 2007
Cost:
Land N/A $ 5,566 $ 4,807
Buildings 7–40 10,036 8,481
Equipment 3–15 8,118 7,036
Leasehold improvements 3–40 3,063 2,484
Construction in progress N/A 2,053 2,296
Total cost 28,836 25,104
Accumulated depreciation (7,475) (6,133)
Property, less accumulated depreciation $21,361 $18,971
Included in net property are assets under capital lease of $523 million, less
accumulated depreciation of $294 million,at February 1, 2008,and $533 million,
less accumulated depreciation of $274 million, at February 2,2007.
NOTE 4 SHORT-TERM BORROWINGS AND
LINES OF CREDIT
In June 2007, the Company entered into an Amended and Restated Credit
Agreement (Amended Facility) to modify the senior credit facility by extend-
ing the maturity date to June 2012 and providing for borrowings of up to
$1.75 billion. The Amended Facility supports the Company’s commercial
paper and revolving credit programs. Borrowings made are unsecured and
are priced at a fixed rate based upon market conditions at the time of fund-
ing, in accordance with the terms of the Amended Facility.The Amended
Facility contains certain restrictive covenants, which include maintenance
of a debt leverage ratio as defined by the Amended Facility. The Company
was in compliance with those covenants at February 1, 2008. Seventeen
banking institutions are participating in the Amended Facility. As of Febru-
ary 1, 2008, there was $1.0 billion outstanding under the commercial paper
program.The weighted-average interest rate on the outstanding commer-
cial paper was 3.92%. As of February 2, 2007, there was $23 million of
short-term borrowings outstanding under the senior credit facility, but no
outstanding borrowings under the commercial paper program. The interest
rate on the short-term borrowing was 5.41%.
In October 2007, the Company established a Canadian dollar (C$)
denominated credit facility in the amount of C$50 million, which provides
revolving credit support for the Company’s Canadian operations. This uncom-
mitted facility provides the Company with the ability to make unsecured
borrowings, which are priced at a fixed rate based upon market conditions
at the time of funding in accordance with the terms of the credit facility.
As of February 1, 2008, there were no borrowings outstanding under the
credit facility.
In January 2008, the Company entered into a C$ denominated credit
agreement in the amount of C$200 million for the purpose of funding the
build out of retail stores in Canada and for working capital and other general
corporate purposes. Borrowings made are unsecured and are priced at a fixed
rate based upon market conditions at the time of funding in accordance with
the terms of the credit agreement. The credit agreement contains certain
restrictive covenants, which include maintenance of a debt leverage ratio
as defined by the credit agreement.The Company was in compliance with those
covenants at February 1, 2008. Three banking institutions are participating
in the credit agreement. As of February 1, 2008, there was C$60 million or
the equivalent of $60 million outstanding under the credit facility.The interest
rate on the short-term borrowing was 5.75%.
Five banks have extended lines of credit aggregating $789 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 periodi-
cally. Commitment fees ranging from .225% to .50% per annum are paid
on the standby letters of credit amounts outstanding. Outstanding letters of
credit totaled $299 million as of February 1, 2008, and $346 million as of
February 2, 2007.
NOTE 5 LONG-TERM DEBT
Fiscal Year
(In millions) of Final February 1, February 2,
Debt Category Interest Rates Maturity 2008 2007
Secured debt:1
Mortgage notes 6.00 to 8.25% 2028 $ 33 $ 30
Unsecured debt:
Debentures 6.50 to 6.88% 2029 694 693
Notes 8.25% 2010 499 498
Medium-term notes –
series A 7.35 to 8.20% 2023 20 27
Medium-term notes –
series B27.11 to 7.61% 2037 217 267
Senior notes 5.00 to 6.65% 2037 3,271 1,980
Convertible notes 0.86 to 2.50% 2021 511 518
Capital leases and other 2030 371 400
Total long-term debt 5,616 4,413
Less current maturities 40 88
Long-term debt,excluding current maturities $5,576 $4,325
1Real properties with an aggregate book value of $47 million were pledged as collateral at
February 1, 2008, for secured debt.
2Approximately 46% of these medium-term notes may be put at the option of the holder on the
twentieth anniversary of the issue at par value. The 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 five years and thereafter are as follows:
2008, $10 million; 2009, $10 million; 2010, $501 million; 2011, $1 million;
2012, $552 million; thereafter, $4.3 billion.
The Company’s debentures, notes, medium-term notes, senior notes and
convertible notes contain certain restrictive covenants. The Company was in
compliance with all covenants in these agreements at February 1, 2008.
Senior Notes
In September 2007, the Company issued $1.3 billion of unsecured senior
notes comprised of three tranches: $550 million of 5.60% senior notes
maturing in September 2012, $250 million of 6.10% senior notes maturing
in September 2017 and $500 million of 6.65% senior notes maturing in
September 2037. The 5.60%, 6.10% and 6.65% senior notes were issued
at discounts of approximately $2.7 million, $1.3 million and $6.3 million,
respectively. Interest on the senior notes is payable semiannually in arrears
in March and September of each year until maturity, beginning in March 2008.
The discount associated with the issuance is included in long-term debt and
is being amortized over the respective terms of the senior notes. The net
proceeds of approximately $1.3 billion were used for general corporate
purposes, including capital expenditures and working capital needs, and
for repurchases of shares of the Company’s common stock.