Lowe's 2014 Annual Report Download - page 35

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CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following table summarizes our significant contractual obligations at January 30, 2015:
Payments Due by Period
Contractual Obligations
(
In millions
)
Tot al Less Than
1 Year 1-3
Yea rs 4-5
Yea rs After 5 Years
Long-term debt (principal amounts,
excludin
g
discount
)
$ 10,949
$ 508
$ 1,779
$ 451
$ 8,211
Long-term debt (interest payments) 7,477
491
881
802
5,303
Capitalized lease obligations 1 795
85
133
110
467
Operating leases 1 5,479
464
931
850
3,234
Purchase obligations 2 847
745
100
2
—
Total contractual obligations $ 25,547
$ 2,293
$ 3,824
$ 2,215 $ 17,215
Amount of Commitment Expiration by Period
Commercial Commitments
(
in millions
)
Tot al Less Than
1 Year 1-3
Yea rs 4-5
Yea rs After 5 Years
Letters of Credit 3 $ 66
$ 63
$ 3
$
—
$
—
1 Amounts do not include taxes, common area maintenance, insurance or contingent rent because these amounts have
historically been insignificant.
2 Represents commitments related to certain marketing and information technology programs, and purchases of merchandise
inventory.
3 Letters of credit are issued primarily for insurance and construction contracts.
At January 30, 2015, our reserve for uncertain tax positions (including penalties and interest) was $9 million, all of which was
classified as a current liability. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in
individual years beyond 12 months due to uncertainties in the timing of the effective settlement of tax positions.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of the consolidated financial statements and notes to consolidated financial statements presented in this Form
10-K requires us to make estimates that affect the reported amounts of assets, liabilities, sales and expenses, and related
disclosures of contingent assets and liabilities. We base these estimates on historical results and various other assumptions
believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and
liabilities that are not readily available from other sources. Actual results may differ from these estimates.
Our significant accounting policies are described in Note 1 to the consolidated financial statements. We believe that the
following accounting policies affect the most significant estimates and management judgments used in preparing the
consolidated financial statements.
Merchandise Inventory
Description
We record an obsolete inventory reserve for the anticipated loss associated with selling inventories below cost. This reserve is
based on our current knowledge with respect to inventory levels, sales trends and historical experience. During 2014, our
reserve decreased approximately $16 million to $52 million as of January 30, 2015, primarily due to a reduction in obsolete
inventory.
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