Lowe's 2005 Annual Report Download - page 39
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Note6SHORT-TERMBORROWINGS
ANDLINESOFCREDIT
TheCompanyhasa$1billionseniorcreditfacilitywhichbecameeffectiveinJuly
2004andexpiresinJuly2009.ThisfacilityisavailabletosupporttheCompany’s
$1billioncommercialpaperprogramandfordirectborrowings.Borrowingsare
pricedbaseduponmarketconditionsatthetimeoffundinginaccordancewith
thetermsoftheseniorcreditfacility.Theseniorcreditfacilitycontainscertain
covenants,includingmaintenanceofaspecificfinancialratio.TheCompanywas
incompliancewiththesecovenantsatFebruary3,2006andJanuary28,2005.
Fifteenbankinginstitutionsareparticipatinginthe$1billionseniorcreditfacility
and,asofFebruary3,2006andJanuary28,2005,therewerenooutstanding
borrowingsunderthefacilityorunderthecommercialpaperprogram.
Fourbankshaveextendedlinesofcreditaggregating$420millionforthe
purposeofissuingdocumentarylettersofcreditandstandbylettersofcredit.
Theselinesdonothaveterminationdatesandarereviewedperiodically.Com-
mitmentfeesrangingfrom.25%to.50%perannumarepaidonthelettersof
creditamountsoutstanding.Outstandinglettersofcredittotaled$316million
asofFebruary3,2006,and$304millionasofJanuary28,2005.
Therewerenoshort-termborrowingsoutstandingatFebruary3,2006,
orJanuary28,2005.
Note7LONG-TERMDEBT
Fiscal
Year
(Inmillions) ofFinal February3, January28,
DebtCategory InterestRates Maturity 2006 2005
Secureddebt:1
Mortgagenotes 6.82to8.25% 2028 $ 38 $ 37
Unsecureddebt:
Debentures 6.50to6.88% 2029 693 693
Notes 8.25% 2010 498 997
Medium-termnotes–
seriesA 7.35to8.20% 2023 27 27
Medium-termnotes–
seriesB2 6.70to7.61% 2037 267 267
Seniornotes 5.00to5.50% 2035 988 100
Convertiblenotes 0.86to2.50% 2021 596 1,146
Capitalleases
andother 2030 424 423
Totallong-termdebt 3,531 3,690
Lesscurrentmaturities 32 630
Long-termdebt,excluding
currentmaturities $ 3,499 $ 3,060
1Realpropertieswithanaggregatebookvalueof$101millionwerepledgedascollateralatFebruary3,
2006,forsecureddebt.
2Approximately34%ofthesemedium-termnotesmaybeputattheoptionoftheholderoneitherthe
tenthortwentiethanniversarydateoftheissueatparvalue.Noneofthesenotesarecurrentlyputable.
Debtmaturities,exclusiveofunamortizedoriginalissuediscounts,capital
leasesandother,forthenextfiveyearsandthereafterareasfollows:2006,
$7million;2007,$61million;2008,$6million;2009,$1million;2010,
$501million;thereafter,$2.7billion.
TheCompany’sdebentures,seniornotes,medium-termnotesand
convertiblenotescontaincertainrestrictivecovenants.TheCompanywasin
compliancewithallcovenantsintheseagreementsatFebruary3,2006and
January28,2005.
InOctober2005,theCompanyissued$1billionofunsecuredseniornotes,
comprisedoftwo$500milliontraunchesmaturinginOctober2015andOcto-
ber2035,respectively(SeniorNotes).Thefirst$500milliontrauncheof5.0%
SeniorNoteswassoldatadiscountof$4million.Thesecond$500million
trauncheof5.5%SeniorNoteswassoldadiscountof$8million.Intereston
thenotesispayablesemi-annuallyinarrearsinAprilandOctober.Thediscount
associatedwiththeissuanceisbeingamortizedovertherespectivetermsof
theseniornotes.Issuancecostswereapproximately$1millionandarebeing
amortizedovertherespectivetermsoftheSeniorNotes.Thenetproceedsof
$987millionwereusedinpartfortherepaymentof$600millioninoutstanding
notesdueDecember2005.Theremainingproceedswillbeusedforgeneral
corporatepurposesandtofinancerepurchasesofcommonstock.
TheSeniorNotesmayberedeemedbytheCompanyatanytime,inwhole
orinpart,ataredemptionpriceplusaccruedinteresttothedateofredemption.
Theredemptionpriceisequaltothegreaterof(1)100%oftheprincipalamount
oftheSeniorNotestoberedeemed,or(2)thesumofthepresentvaluesofthe
remainingscheduledpaymentsofprincipalandinterestthereon,discounted
tothedateoftheredemptiononasemi-annualbasisataspecifiedrate.The
indenturedoesnotlimittheaggregateprincipalamountofdebtsecuritiesthat
theCompanymayissue,noristheCompanyrequiredtomaintainfinancialratios
orspecifiedlevelsofnetworthorliquidity.However,theindenturegoverningthe
SeniorNotescontainsvariousrestrictivecovenants,noneofwhichisexpected
toimpacttheCompany’sliquidityorcapitalresources.
TheCompanyhas$580.5millionaggregateprincipalofseniorconvertible
notesissuedinOctober2001atanissuepriceof$861.03pernote.Intereston
thenotes,attherateof0.8610%peryearontheprincipalamountatmaturity,
ispayablesemi-annuallyinarrearsuntilOctober2006.Afterthatdate,the
Companywillnotpaycashinterestonthenotespriortomaturity.Instead,in
October2021whenthenotesmature,aholderwillreceive$1,000pernote,
representingayieldtomaturityofapproximately1%.Holdersmayrequirethe
CompanytopurchasealloraportionoftheirnotesinOctober2006,ataprice
of$861.03pernoteplusaccruedcashinterest,ifany,orinOctober2011,at
apriceof$905.06pernote.TheCompanymaychoosetopaythepurchase
priceofthenotesincashorcommonstockoracombinationofcashandcom-
monstock.Inaddition,ifachangeincontroloftheCompanyoccursonorbefore
October2006,eachholdermayrequiretheCompanytopurchaseforcashall
oraportionofsuchholder’snotes.TheCompanymayredeemforcashallora
portionofthenotesatanytimebeginningOctober2006,atapriceequaltothe
sumoftheissuepriceplusaccruedoriginalissuediscountandaccruedcash
interest,ifany,ontheredemptiondate.
Holdersoftheseniorconvertiblenotesmayconverttheirnotesinto17.212
sharesoftheCompany’scommonstockonlyif:thesalepriceoftheCompany’s
commonstockreachesspecifiedthresholds,orthecreditratingofthenotes
isbelowaspecifiedlevel,orthenotesarecalledforredemption,orspecified
corporatetransactionsrepresentingachangeincontrolhaveoccurred.The
conversionratioof17.212sharespernoteisonlyadjustedbasedonnormal
antidilutionprovisionsdesignedtoprotectthevalueoftheconversionoption.
Duringthethirdquarterof2005,theCompany’sclosingshareprices
reachedthespecifiedthresholdsuchthattheseniorconvertiblenotesbecame
convertibleattheoptionofeachholderintosharesofcommonstockduring
thefourthquarterof2005.Holdersofaninsignificantnumberofnotesexer-
cisedtheirrighttoconverttheirnotesintosharesoftheCompany’scommon
stockduring2005.Duringthefourthquarterof2005,theCompany’sclosing
sharepricesagainreachedthespecifiedthresholdsuchthattheseniorcon-
vertiblenoteswouldbecomeconvertibleattheoptionofeachholderintoshares
ofcommonstockinthefirstquarterof2006.