Lowe's 2009 Annual Report Download - page 25

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Amounts outstanding under letters of credit reduce the amount
available for borrowing under the senior credit facility. Borrowings
made are unsecured and are priced at fixed rates 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 defined by the senior credit facility. We were in compliance with
those covenants at January 29, 2010. Nineteen banking institutions are
participating in the senior credit facility. As of January 29, 2010, there
were no outstanding borrowings or letters of credit outstanding under
the senior credit facility and no outstanding borrowings under the
commercial paper program.
We have a Canadian dollar (C$) denominated credit facility in
the amount of C$50 million that provides revolving credit support for
our Canadian operations. is uncommitted credit facility provides
us with the ability to make unsecured borrowings which are priced
at fixed rates based upon market conditions at the time of funding
in accordance with the terms of the credit facility. As of January 29,
2010, there were no borrowings outstanding under this credit facility.
Our debt ratings at January 29, 2010, were as follows:
Current Debt Ratings S&P Moody’s Fitch
Commercial Paper A1 P1 F1
Senior Debt A+ A1 A+
Outlook Negative Stable Negative
On March 25, 2010, Fitch affirmed our commercial paper rating
at F1, affirmed our senior debt rating at A+ and changed our outlook
from negative to stable.
We believe that net cash provided by operating and financing
activities will be adequate for our expansion plans and for our other
operating requirements over the next 12 months. e availability of
funds through the issuance of commercial paper or new debt or the
borrowing cost of these funds could be adversely affected due to a debt
rating downgrade, which we do not expect, or a deterioration of certain
financial ratios. ere are no provisions in any agreements that would
require early cash settlement of existing debt or leases as a result of a
downgrade in our debt rating or a decrease in our stock price.
Cash Requirements
Capital expenditures
Our 2010 capital budget is approximately $2.1 billion, inclusive of
approximately $400 million of lease commitments, resulting in a planned
net cash outflow of $1.7 billion. Approximately 62% of the planned
net cash outflow is for store expansion and approximately 21% is for
investment in our existing stores through resets and remerchandising.
Our store expansion plans for 2010 consist of 40 to 45 new stores
and are expected to increase sales floor square footage by approxi-
mately 2%. Approximately 93% of the 2010 projects will be owned, of
which 43% will be ground-leased. Other planned capital expenditures
include investing in our distribution and corporate infrastructure,
including enhancements in information technology.
During 2009, we entered into a joint venture agreement with
Australian retailer Woolworths Limited to develop a chain of home
improvement stores in Australia. We expect to contribute approxi-
mately $100 million per year over four years to the joint venture, of
which we are a one-third owner.
At January 29, 2010, we owned and operated 14 regional distribution
centers. At January 29, 2010, we also operated 15 flatbed distribution
centers for the handling of lumber, building materials and other
long-length items. We are confident that our current distribution
network has the capacity to ensure that our stores remain in stock
and that customer demand is met.
Debt and capital
e $500 million 8.25% Notes due June 1, 2010 will be repaid with
net cash provided by operating and financing activities.
Dividends declared during 2009 totaled $522 million. e decline
in cash dividend payments from $491 million in 2008 to $391 million
in 2009 was primarily due to a shift in the timing of dividend payments
for dividends declared in the fourth quarter of 2009. Dividends
declared in the fourth quarter of 2009 were paid in 2010 and totaled
$131 million.
Our share repurchase program is implemented through purchases
made from time to time either in the open market or through private
transactions. Shares purchased under the share repurchase program are
retired and returned to authorized and unissued status. Authorization
available for share repurchases under the program during 2009
expired as of January 29, 2010. However, on January 29, 2010, the Board
of Directors authorized an additional $5 billion in share repurchases
with no expiration. We expect to utilize the $5 billion authorization
over the next three years.
e ratio of debt to equity plus debt was 21.0% and 25.1% as of
January 29, 2010, and January 30, 2009, respectively.
OFFBALANCE SHEET ARRANGEMENTS
Other than in connection with executing operating leases, we do not have
any off-balance sheet financing that has, or is reasonably likely to have,
a material, current or future effect on our financial condition, cash flows,
results of operations, liquidity, capital expenditures or capital resources.