Lowe's 2014 Annual Report Download - page 33

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash flows from operating activities continued to provide the primary source of our liquidity. The increase in net cash
provided by operating activities for 2014 versus 2013 was primarily driven by changes in working capital and an increase in net
earnings. The decrease in net cash used in investing activities for 2014 versus 2013 was primarily driven by the acquisition of
Orchard in the prior year and a reduction in capital expenditures, partially offset by an increase in net contributions to equity
method investments in the current year. The increase in net cash used in financing activities for 2014 versus 2013 was driven
primarily by repayments of short-term borrowings.
Sources of Liquidity
In addition to our cash flows from operations, liquidity is provided by our short-term borrowing facilities. On August 29, 2014,
we entered into a new five year unsecured revolving credit agreement (the 2014 Credit Facility) to replace the 2011 Second
Amended and Restated Credit Agreement dated October 2011. The 2014 Credit Facility provides for borrowings up to $1.75
billion and expires in August 2019. Subject to obtaining commitments from the lenders and satisfying other conditions
specified in the 2014 Credit Facility, we may increase the aggregate availability under the facility by an additional $500
million. The 2014 Credit Facility supports our commercial paper program and has a $500 million letter of credit sublimit.
Letters of credit issued pursuant to the 2014 Credit Facility reduce the amount available for borrowing under its terms.
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 2014 Credit Facility. Thirteen banking institutions are participating in the 2014 Credit Facility. The 2014
Credit Facility contains certain restrictive covenants, which include maintenance of an adjusted debt leverage ratio as defined
by the credit agreement. We were in compliance with those covenants at January 30, 2015. In addition, there were no
outstanding borrowings or letters of credit under the 2014 Credit Facility and no outstanding borrowings under the commercial
paper program at January 30, 2015. For additional information about the 2014 Credit Facility, see the summary of certain
terms thereof that is included in the Current Report on Form 8-K we filed on September 2, 2014 with the Securities and
Exchange Commission.
We expect to continue to have access to the capital markets on both short-term and long-term bases when needed for liquidity
purposes by issuing commercial paper or new long-term debt. The availability and the borrowing costs of these funds could be
adversely affected, however, by a downgrade of our debt ratings or a deterioration of certain financial ratios. The table below
reflects our debt ratings by Standard & Poor’s (S&P) and Moody’s as of March 31, 2015, which we are disclosing to enhance
understanding of our sources of liquidity and the effect of our ratings on our cost of funds. Although we currently do not
expect a downgrade in our debt ratings, our commercial paper and senior debt ratings may be subject to revision or withdrawal
at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating.
Debt Ratings S&P Moody’s
Commercial Paper A-2 P-2
Senior Debt A- A3
Outlook Stable Stable
We believe that net cash provided by operating and financing activities will be adequate not only for our operating
requirements, but also for investments in information technology, investments in our existing stores, expansion plans and
acquisitions, if any, and to return cash to shareholders through both dividends and share repurchases over the next 12
months. There 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. In addition, we do not have a significant amount of
cash held in foreign affiliates that is unavailable to fund domestic operations.
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