Filed pursuant to Rule 424(b)2
File Number 333-55252
PROSPECTUS SUPPLEMENT
(To prospectus dated March 14, 2001)
$505,000,000
Senior Convertible Notes due 2021
----------------
The Offering:
We are offering the notes at an issue price of $861.03 per note (86.103%
of the principal amount at maturity). Interest on the notes at the rate of
.8610% per year on the principal amount at maturity is payable semiannually in
arrears on April 19 and October 19 of each year, beginning April 19, 2002 until
October 19, 2006. After that date, we will not pay cash interest on the notes
prior to maturity. Instead, on October 19, 2021, the maturity date of the
notes, a holder will receive $1,000 per note. The rate of accrual of original
issue discount represents a yield to maturity of 1% per year, computed on a
semiannual bond equivalent basis and calculated from October 19, 2006. The
notes will be senior unsecured obligations and will rank equally with our
existing and future senior unsecured indebtedness.
Convertibility of the Notes:
Holders may convert their notes into 17.2120 shares of our common stock,
subject to adjustment, only if (1) the sale price of our common stock reaches
specified thresholds, (2) the credit rating of the notes is below a specified
level, (3) the notes are called for redemption, or (4) specified corporate
transactions have occurred. The common stock currently trades on the New York
Stock Exchange under the symbol "LOW." On October 15, 2001, the last reported
sale price of the common stock on the NYSE was $34.50 per share.
Purchase of the Notes by Lowe's at the Option of the Holder:
Holders may require us to purchase all or a portion of their notes on
October 19, 2003 or October 19, 2006, at a price of $861.03 per note plus
accrued cash interest, if any, or on October 19, 2011, at a price of $905.06
per note. We may choose to pay the purchase price of such notes in cash or
common stock or a combination of cash and common stock. In addition, if a
change in control of Lowe's occurs on or before October 19, 2006, each holder
may require us to purchase for cash all or a portion of such holder's notes.
Redemption of the Notes at Our Option:
We may redeem for cash all or a portion of the notes at any time on or
after October 19, 2006, at a price equal to the sum of the issue price plus
accrued original issue discount and accrued cash interest, if any, on the
redemption date.
Investing in the notes involves risks, some of which are described in
"Risk Factors Relating to the Notes" section starting on page S-8 of this
prospectus supplement.
----------------
Per Note Total
-------- -----
Public offering price(1).......................... $861.03 $434,820,150
Underwriting discount............................. $19.37 $9,781,850
Proceeds, before expenses, to Lowe's.............. $841.66 $425,038,300
(1) Plus accrued interest from October 19, 2001, if settlement occurs
after that date.
The underwriters may also purchase up to an additional $75,700,000
aggregate principal amount at maturity of notes from Lowe's within 30 days from
the date of this prospectus supplement to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The notes will be ready for delivery in book-entry form only through The
Depository Trust Company on or about October 19, 2001.
----------------
Merrill Lynch & Co.
Banc of America Securities LLC
SunTrust Robinson Humphrey
U.S. Bancorp Piper Jaffray
Wachovia Securities
Fleet Securities, Inc.
----------------
The date of this prospectus supplement is October 16, 2001.
TABLE OF CONTENTS
Prospectus Supplement
Warning Regarding Forward-Looking Statements............................... S-3
Summary.................................................................... S-4
Risk Factors Relating to the Notes......................................... S-8
Use of Proceeds............................................................ S-10
Price Range of Common Stock and Dividend History........................... S-10
Capitalization............................................................. S-11
Selected Consolidated Financial Information................................ S-12
Description of Notes....................................................... S-13
Description of Our Capital Stock........................................... S-28
Certain United States Federal Income Tax Consequences...................... S-31
Underwriting............................................................... S-36
Legal Matters.............................................................. S-39
Experts.................................................................... S-39
Prospectus
About this Prospectus....................................................... 2
Where You Can Find More Information......................................... 2
Incorporation of Information Filed With the SEC............................. 3
Warning Regarding Forward-Looking Statements................................ 4
The Company................................................................. 5
Use of Proceeds............................................................. 5
Ratio of Earnings to Fixed Charges.......................................... 5
Description of Our Debt Securities.......................................... 6
Description of Our Preferred Stock.......................................... 17
Description of Our Common Stock............................................. 22
Description of Our Warrants................................................. 24
Description of Stock Purchase Contracts and Stock Purchase Units............ 30
Plan of Distribution of the Offered Securities.............................. 30
Legal Matters............................................................... 31
Experts..................................................................... 31
----------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information in this prospectus supplement, the accompanying prospectus and
the documents incorporated by reference is accurate only as of their respective
dates. Our business, financial condition, results of operations and prospects
may have changed since those dates.
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained in this
prospectus supplement and the accompanying prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by us or the underwriters. This prospectus supplement and the
accompanying prospectus do not constitute an offer to sell or the solicitation
of an offer to buy any securities in any circumstances in which such offer or
solicitation is unlawful. Neither the delivery of this prospectus supplement
and the accompanying prospectus nor any sale made hereunder or thereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of our company since the date hereof or that the
information contained herein or therein is correct as of any time subsequent to
the date hereof.
Certain persons participating in this offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the notes or our
common stock. Such transactions may include stabilization and the purchase of
notes to cover syndicate short positions and the imposition of penalty bids.
For a description of those activities, see "Underwriting."
S-2
WARNING REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement may include "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Although we believe that the expectations
reflected in such forward-looking statements are reasonable, we can give no
assurance that such expectations will prove to be correct. Some of the things
that could cause our actual results to differ substantially from our
expectations are:
. Our sales are dependent upon the general economic health of the country,
the level of repairs, remodeling and additions to existing homes,
commercial building activity, and the availability and cost of financing.
An economic downturn can impact sales because much of our inventory is
purchased for discretionary projects, which can be delayed.
. Our expansion strategy may be affected by environmental regulations,
local zoning issues and delays. As we expand into major metropolitan
areas, the availability and development of land, and more stringent land
use regulations than we have traditionally experienced, may result in
lengthening timelines for the opening of our stores.
. Sufficient labor to facilitate growth may not be available.
. Many of our products are commodities whose prices fluctuate erratically
within an economic cycle, a condition true of lumber and plywood.
. Our business is highly competitive, and as we expand to larger markets,
and to the Internet, we may face new forms of competition which do not
exist in some of the markets we have traditionally served.
. The ability to continue our everyday competitive pricing strategy and
provide the products that consumers want depends on our vendors providing
a reliable supply of inventory at competitive prices.
. Legal or regulatory developments may have an adverse effect on our
business.
. On a short-term basis, weather may affect sales of product groups like
lawn and garden, lumber, and building materials.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
You should carefully read this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference in their entirety. They
contain information that you should consider when making your investment
decision.
S-3
SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere or incorporated by reference in this prospectus
supplement and the accompanying prospectus. Because this is a summary, it may
not contain all the information that may be important to you. You should
carefully read this prospectus supplement and the accompanying prospectus, as
well as the information incorporated by reference, before making an investment
decision.
References in this prospectus supplement to "Lowe's," "the company," "we"
and "our" refer to Lowe's Companies, Inc., and its consolidated subsidiaries,
unless otherwise specified. References to our common stock mean shares of our
common stock, $0.50 par value, and associated preferred share purchase rights
under our Shareholder Rights Plan described under "Description of Our Capital
Stock." Unless otherwise specified, information in this prospectus supplement
assumes that the underwriters do not exercise their over-allotment option.
The Company
Lowe's Companies, Inc. is the world's second largest home improvement
retailer competing in a highly fragmented $400 billion industry. We serve more
than six million do-it-yourself and commercial business customers weekly
through more than 700 stores in 40 states. At August 3, 2001, our retail square
footage totaled approximately 74.5 million square feet. Headquartered in
Wilkesboro, NC, our 55-year-old company employs more than 100,000 people. We
anticipate opening 115 stores, which includes relocating approximately 13
older, smaller format stores, under Lowe's 2001 expansion plan.
Lowe's is incorporated in North Carolina and has been a publicly held
company since October 10, 1961. Our stock is listed on the New York Stock
Exchange with shares trading under the ticker symbol "LOW."
The Offering
Notes Offered........... $505,000,000 aggregate principal amount at maturity
($580,700,000 aggregate principal amount at maturity
if the underwriters exercise their over-allotment
option in full) of Senior Convertible Notes due
October 19, 2021. Each note will be issued at a price
of $861.03 per note and will have a principal amount
at maturity of $1,000.
Maturity................ October 19, 2021.
Cash Interest........... .8610% per year on the principal amount at maturity,
payable semiannually in arrears in cash on April 19
and October 19 of each year, beginning April 19,
2002, through October 19, 2006. This cash interest
will be taxable to holders as original issue discount
for United States federal income tax purposes and
accordingly, will be taxed to a holder as it accrues
regardless of the holder's method of tax accounting.
However, a holder will not recognize any income upon
the actual payment of such cash interest. See
"Certain United States Federal Income Tax
Consequences."
Yield to Maturity of 1% per year, computed on a semiannual bond equivalent
Notes................... basis and calculated from October 19, 2001.
Original Issue We are offering our notes at an issue price
Discount................ significantly below the principal amount at maturity
of the notes. As a result, the notes will be treated
as issued with original issue discount, which will
accrue daily at a rate of 1% per year beginning on
October 19, 2006, calculated on a semiannual bond
equivalent basis using a 360-day year comprised of
twelve 30-day months.
S-4
For United States federal income tax purposes,
original issue discount will accrue at a constant
rate of 1% per year, calculated on a semiannual bond
equivalent basis, throughout the term of the notes
from their issue date and U.S. holders will be
required to include original issue discount in their
gross income as it accrues regardless of their method
of tax accounting. See "Certain United States Federal
Income Tax Consequences."
Conversion Rights....... For each note surrendered for conversion, if the
conditions for conversion are satisfied, a holder
will receive 17.2120 shares of our common stock. The
conversion rate may be adjusted for certain reasons,
but will not be adjusted for accrued original issue
discount, cash interest or interest payable upon the
occurrence of a tax event. Upon conversion, a holder
will not receive any cash payment representing
accrued original issue discount or any accrued cash
interest. Instead, accrued original issue discount or
accrued cash interest will be deemed paid by the
shares of common stock received by the holder on
conversion.
Holders may surrender notes for conversion into our
shares of common stock in any fiscal quarter
commencing after February 1, 2002, if, as of the last
day of the preceding fiscal quarter, the closing sale
price of our common stock for at least 20 trading
days in a period of 30 consecutive trading days
ending on the last trading day of such preceding
fiscal quarter is more than a specified percentage,
beginning at 120% and declining .1282% per quarter
thereafter until it reaches 110% for the quarter
beginning July 31, 2021, of the accreted conversion
price per share of common stock on the last day of
such preceding fiscal quarter. The accreted
conversion price per share as of any day will equal
the issue price of a note plus accrued original issue
discount or cash interest to that day, divided by
17.2120, subject to any adjustments to the conversion
rate through that day.
Holders may also surrender a note for conversion
during any period in which the credit rating assigned
to the notes is Baa3 or lower by Moody's Investors
Service ("Moody's"), BBB or lower by Standard &
Poor's Credit Market Services, a division of The
McGraw-Hill Companies ("Standard & Poor's") or BBB or
lower by Fitch, Inc. ("Fitch").
Notes or portions of notes in integral multiples of
$1,000 principal amount at maturity called for
redemption may be surrendered for conversion until
the close of business on the second business day
prior to the redemption date. In addition, if we make
a significant distribution to our stockholders or if
we are a party to certain consolidations, mergers or
binding share exchanges, notes may be surrendered for
conversion, as provided in "Description of Notes--
Conversion Rights." The ability to surrender notes
for conversion will expire at the close of business
on October 19, 2021.
Ranking................. The notes will be senior unsecured obligations and
will rank equal in right of payment to all of our
other unsecured and unsubordinated indebtedness. The
notes are effectively subordinated to our secured
indebtedness to the extent of the security. Also, the
notes are effectively subordinated to the
indebtedness and other liabilities, including trade
payables, of our subsidiaries.
S-5
At August 3, 2001, we had $194.9 million of secured
indebtedness outstanding, $2,775.1 million of
unsecured indebtedness outstanding and $465.6 million
of capital leases. At August 3, 2001, our
subsidiaries had $125.8 million of secured
unsubordinated indebtedness outstanding.
Sinking Fund............ None.
Redemption of Notes at
Our Option..............
We may redeem for cash all or a portion of the notes
at any time on or after October 19, 2006, at
redemption prices equal to the sum of the issue price
plus accrued original issue discount and accrued cash
interest, if any, on the applicable redemption date.
See "Description of Notes--Redemption of Notes at Our
Option."
Purchase of the Notes
by Lowe's at the Option
of the Holder........... Holders may require us to purchase all or a portion
of their notes on each of the following dates at the
following prices, plus accrued cash interest, if any,
to the purchase date:
. on October 19, 2003 at a price of $861.03 per
note;
. on October 19, 2006 at a price of $861.03 per
note; and
. on October 19, 2011 at a price of $905.06 per
note.
We may pay the purchase price in cash or shares of
our common stock or in a combination of cash and
shares of our common stock.
Change in Control....... Upon a change in control of Lowe's occurring on or
before October 19, 2006, the holders may require us
to purchase for cash all or a portion of their notes
at a price equal to the sum of the issue price plus
accrued original issue discount and accrued cash
interest, if any, to the date of purchase.
Optional Conversion to
Semiannual Coupon Notes
upon Tax Event..........
From and after the occurrence of a tax event, at our
option, interest in lieu of future accrued original
issue discount or cash interest will accrue on each
note from the option exercise date at 1% per year,
calculated on a semiannual bond equivalent basis, on
the restated principal amount and will be payable
semiannually. Any such interest in lieu of original
issue discount or cash interest will be computed in
the same manner and payable at the same time as the
cash interest and will accrue from the most recent
date to which cash interest, if payable, has been
paid or provided for or, if no cash interest is
payable or has been paid or provided for, the option
exercise date. In such event, the redemption price,
purchase price and change in control purchase price
will be adjusted, as described herein. However, there
will be no change in the holder's conversion rights.
See "Description of Notes--Optional Conversion to
Semiannual Coupon Notes upon Tax Event."
S-6
DTC Eligibility......... The notes will be issued in fully registered book-
entry form and will be represented by one or more
permanent global notes without coupons. Global notes
will be deposited with a custodian for and registered
in the name of a nominee of The Depository Trust
Company in New York, New York. Beneficial interests
in global notes will be shown on, and transfers
thereof will be effected only through, records
maintained by DTC and its direct and indirect
participants, and your interest in any global note
may not be exchanged for certificated notes, except
in limited circumstances described herein.
Trading................. We do not intend to list the notes on any national
securities exchange. The notes will be new securities
for which there is currently no public market. Our
common stock is traded on the New York Stock Exchange
under the symbol "LOW."
S-7
RISK FACTORS RELATING TO THE NOTES
You should carefully consider the following information with the other
information contained in or incorporated by reference into this prospectus
supplement and the accompanying prospectus before purchasing the notes.
We expect that the trading value of the notes will be significantly affected by
the price of our common stock and other factors.
The market price of the notes is expected to be significantly affected by
the market price of our common stock. This may result in greater volatility in
the trading value of the notes than would be expected for nonconvertible debt
securities we issue. In addition, the notes have a number of features,
including conditions to conversion, which, if not met, could result in a holder
receiving less than the value of the common stock into which a note is
otherwise convertible. These features could adversely affect the value and the
trading prices of the notes.
The covenants applicable to the notes do not require minimum financial results
or prevent Lowe's from incurring additional debt or paying extraordinary
dividends and may not afford protection to holders of notes against some
transactions, such as recapitalizations or incurrence of additional
indebtedness.
The holders of notes may require us to purchase the notes upon the
occurrence of certain change-in-control events described under "Description of
Notes--Change in Control Permits Purchase of Notes by Lowe's at the Option of
the Holder." The covenants applicable to the notes do not restrict us from
incurring indebtedness or paying extraordinary dividends. Further, the notes do
not afford a holder protection under maintenance or other covenants relating to
our consolidated financial position or results of operations. Our ability to
recapitalize or incur additional indebtedness could have the effect of
diminishing our ability to make payments on the notes when due. In addition,
certain transactions, including certain recapitalizations, would not constitute
a change in control with respect to the change in control purchase feature of
the notes, even though these transactions may increase the amount of our (or
our subsidiaries') outstanding indebtedness.
An active trading market for notes may not develop, which could reduce their
value.
The notes comprise a new issue of securities for us for which there is
currently no public market. We do not intend to list the notes on any national
securities exchange or automated quotation system. If the notes are traded,
they may trade at a discount from their initial offering price, depending on
prevailing interest rates, the market for similar securities, the price of our
common stock, our performance and other factors. We do not know whether an
active trading market will develop for the notes. To the extent that an active
trading market does not develop, the price at which you may be able to sell the
notes may be less than the price you pay for them.
You should consider the United States federal income tax consequences of owning
notes in the context of your own tax position.
Our tax counsel has concluded that the notes will be characterized as
indebtedness for United States federal income tax purposes. In addition, the
notes will be issued with original issue discount. You will be required to
include original issue discount in income at a constant rate of 1% per year,
calculated on a semiannual bond equivalent basis, over the term of the notes as
ordinary income, in advance of the receipt of the cash, or other property,
attributable thereto.
You will recognize gain or loss on the sale or other disposition of a note
in an amount equal to the difference between the amount realized on such a
transaction and your adjusted tax basis in the note. Any gain or loss so
recognized by you generally will be capital gain or loss. However, a conversion
or redemption of the notes in exchange for shares of our common stock generally
will not be a taxable event and thus, you will not
S-8
recognize any capital gain or loss on such a transaction. A summary of the
United States federal income tax consequences of ownership of the notes is
described in this prospectus under the heading "Certain United States Federal
Income Tax Consequences."
We may not have the funds necessary to finance a purchase of notes at the
option of the holder or upon a change in control of Lowe's.
On October 19, 2003, October 19, 2006 and October 19, 2011 or in the event
of a change in control of Lowe's occurring on or before October 19, 2006,
holders of notes have the right to require us to purchase their notes. Although
not anticipated, we may not have sufficient funds at those times to make any
required purchase of notes. In such event, holders would not be able to sell
their notes to Lowe's for cash. In addition, corporate events involving
fundamental changes to our capital structure, such as leveraged
recapitalizations that would increase the level of our indebtedness or that of
our subsidiaries, would not necessarily constitute a change in control for
these purposes. See "Description of Notes--Purchase of Notes at the Option of
the Holder" and "--Change in Control Permits Purchase of Notes by Lowe's at the
Option of the Holder."
S-9
USE OF PROCEEDS
We estimate that the net proceeds from this offering will be approximately
$425.0 million (approximately $488.8 million, if the underwriters exercise
their over-allotment option in full). We plan to use the net proceeds from the
sale of the securities to finance capital expenditures such as the purchase of
land, buildings and equipment for new and existing stores, distribution
facilities and for other general corporate purposes.
We may temporarily invest any proceeds that are not immediately applied to
the above purposes in U.S. government or agency obligations, commercial paper,
bank certificates of deposit, or repurchase agreements collateralized by U.S.
government or agency obligations. We may also deposit the proceeds with banks.
PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY
Our common stock is traded on the New York Stock Exchange under the symbol
"LOW."
Set forth below are the high and low sales prices for Lowe's common stock as
reported on the New York Stock Exchange composite transaction reporting system
and the dividends we paid on such shares for each quarterly period during
fiscal years 1999, 2000 and 2001. The information set forth below has been
adjusted to reflect a two-for-one split of Lowe's common stock effective June
29, 2001.
Dividends
High Low Per Share
------ ------ ---------
Fiscal 2001
3rd Quarter (through October 15, 2001)................ $39.30 $24.99 $0.0000
2nd Quarter........................................... 39.86 30.30 0.0200
1st Quarter........................................... 32.30 24.79 0.0175
Fiscal 2000
4th Quarter........................................... $27.75 $18.88 $0.0175
3rd Quarter........................................... 27.25 17.13 0.0175
2nd Quarter........................................... 26.35 20.19 0.0175
1st Quarter........................................... 33.63 20.38 0.0175
Fiscal 1999
4th Quarter........................................... $30.00 $21.66 $0.0175
3rd Quarter........................................... 27.97 21.50 0.0150
2nd Quarter........................................... 30.00 24.85 0.0150
1st Quarter........................................... 33.22 25.66 0.0150
Our payment of dividends in the future will be determined by our board of
directors and will depend on business conditions, our financial condition and
earnings and other factors.
S-10
CAPITALIZATION
The following table sets forth our capitalization at August 3, 2001. The as
adjusted column below gives effect to this offering and the application of
approximately $425.0 million of net proceeds from the sale of the notes. See
"Use of Proceeds."
August 3, 2001
-----------------------
Actual As Adjusted
---------- -----------
(dollars in thousands)
Cash and equivalents.................................. $ 629,293 $ 1,054,331
========== ===========
Short-term debt....................................... $ 100,000 $ 100,000
---------- -----------
Current installments of long-term debt................ 43,993 43,993
---------- -----------
Long-term debt:
Industrial Revenue Bonds, interest at 3.35%......... 2,628 2,628
Medium term notes
Series A, interest at 7.08% to 8.2% consists of 17
notes
with various due dates........................... 90,000 90,000
Series B, interest at 6.7% to 7.61% consists of 7
notes
with various due dates........................... 266,289 266,289
$300 million Debentures, interest at 6.88%, due
February 15, 2028.................................. 296,607 296,607
$400 million Debentures, interest at 6.5%, due March
15, 2029........................................... 395,029 395,029
$500 million Debentures, interest at 8.25%, due June
1, 2010............................................ 495,986 495,986
Senior Notes, interest at 6.38%, due December 15,
2005............................................... 99,545 99,545
$500 million Notes, interest at 7.5%, due December
15, 2005........................................... 497,151 497,151
Capital Leases, interest at 6.12% to 19.57%......... 449,116 449,116
Mortgage notes, interest at 7.35% to 9.25%.......... 78,957 78,957
Other notes......................................... 1,790 1,790
LYONs due February 16, 2021......................... 618,507 618,507
Senior Convertible Notes offered hereby............. -- 434,820
---------- -----------
Total long-term debt.............................. 3,291,605 3,726,425
---------- -----------
Total debt...................................... 3,435,598 3,870,418
---------- -----------
Shareholders' equity:
Preferred stock, $5 par value, 5,000,000 shares
authorized, no shares issued and outstanding....... -- --
Common stock, $.50 par value, 2,800,000,000 shares
authorized, 772,749,000 issued and outstanding
(1)(2)............................................. 386,374 386,374
Capital in excess of par value...................... 1,723,515 1,723,515
Unearned compensation-restricted stock awards....... (1,067) (1,067)
Accumulated other comprehensive income.............. 622 622
Retained earnings................................... 4,043,810 4,043,810
---------- -----------
Total shareholders' equity........................ 6,153,254 6,153,254
---------- -----------
Total capitalization............................ $9,588,852 $10,023,672
========== ===========
--------
(1) Does not include shares issuable upon exercise of outstanding options or
available for grant under our 1994, 1997 and 2001 incentive plans.
(2) Does not include shares of common stock reserved for issuance upon
conversion of the LYONs due February 16, 2021 or the convertible notes
offered in this offering.
S-11
SELECTED CONSOLIDATED FINANCIAL INFORMATION
We have derived the following results of operations and balance sheet data
for and as of the end of fiscal years 1996, 1997, 1998, 1999 and 2000 from our
audited consolidated financial statements. The selected financial data for the
26 weeks ended July 28, 2000 and August 3, 2001 have been derived from
unaudited consolidated financial statements of Lowe's. In the opinion of
Lowe's, the unaudited financial information contains all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the information for the periods presented. The results for the
26 weeks ended August 3, 2001 may not be indicative of the results to be
achieved for the entire fiscal year. All per share amounts have been adjusted
to reflect a two-for-one stock split of Lowe's common stock effective June 29,
2001. You should read the information set forth below in conjunction with our
consolidated financial statements and related notes and other financial
information incorporated by reference in this prespectus supplement and the
accompanying prospectus. See "Incorporation of Information Filed with the SEC"
in the accompanying prospectus.
For the Year Ended Six Months Ended
-------------------------------------------------------------- ------------------------
Jan. 31, Jan. 30, Jan. 29, Jan. 28, Feb. 2, Jul. 28, Aug. 3,
1997(1) 1998 1999 2000 2001 2000 2001
---------- ----------- ----------- ----------- ----------- ----------- -----------
(dollars in thousands, except per share amounts) (unaudited)
Results of Operations Data:
Net sales.................. $9,361,204 $11,108,378 $13,330,540 $15,905,595 $18,778,559 $ 9,731,366 $11,403,091
Gross margin............... 2,437,414 2,953,046 3,573,895 4,380,582 5,290,768 2,700,143 3,211,237
Operating income........... 543,487 670,246 868,307 1,147,969 1,402,265 790,763 963,875
Net earnings............... 314,730 383,030 500,374 672,795 809,871 466,748 554,363
Earnings per share--dilut-
ed........................ $ 0.44 $ 0.52 $ 0.67 $ 0.88 $ 1.05 $ 0.61 $ 0.71
Selected Operating Data:
Number of stores open at
end of
period.................... 429 477 520 576 650 604 700
Selling square footage at
end of period
(in thousands):........... 33,730 39,861 47,795 56,982 67,775 60,853 74,479
Same store sales
change(1)................. 7% 4% 6% 6% 1% 4% -0.5%
Balance Sheet Data (at pe-
riod end):
Total assets............... $4,999,566 $5,861,790 $7,086,882 $9,012,323 $11,375,754 $10,242,579 $12,867,392
Long-term debt, excluding
current
portion................... 875,754 1,191,406 1,364,278 1,726,579 2,697,669 2,217,006 3,291,605
Shareholders' equity....... $2,567,546 $2,978,004 $3,619,767 $4,695,471 $5,494,885 $5,151,936 $6,153,254
Other Data:
Ratio of earnings to fixed
charges(2)................ 5.79x 5.95x 5.86x 6.50x 6.31x 8.14x 6.93x
--------
(1) For fiscal year ended January 31, 1997, the same store sales percentage
does not include Eagle Hardware and Garden's sales which increased by 11%.
(2) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, "earnings" includes pretax earnings plus
fixed charges. "Fixed charges" includes interest expense, capitalized
interest and the portion of rental expense that is representative of the
interest factor in these rentals.
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DESCRIPTION OF NOTES
We will issue the notes under an amended and restated indenture, dated as of
December 1, 1995, between us and Bank One, N.A. (formerly known as the First
National Bank of Chicago), as trustee, as supplemented by a First Supplemental
Indenture, dated as of February 23, 1999, between us and the trustee and a
Second Supplemental Indenture to be dated as of October 19, 2001 (together, the
indenture). The notes constitute senior debt securities under the indenture.
The following description of the particular terms of the notes supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of the senior debt securities set forth in the
accompanying prospectus. The following description does not purport to be
complete and is subject to, and qualified by reference to, all of the
provisions of the indenture, which we urge you to read because they define your
rights as a notes holder. As used in this description of notes, the words "we,"
"us," "our" or "Lowe's" refer only to Lowe's and do not include any current or
future subsidiary of Lowe's.
General
The notes will be limited to $505,000,000 aggregate principal amount at
maturity ($580,700,000 aggregate principal amount at maturity if the
underwriters exercise their over-allotment option in full). The notes will
mature on October 19, 2021. The principal amount at maturity of each note will
be $1,000. The notes will be payable at the principal corporate trust office of
the paying agent, which initially will be an office or agency of the trustee,
or an office or agency maintained by us for such purpose, in the Borough of
Manhattan, The City of New York.
The notes will bear cash interest at the rate of .8610% per year on the
principal amount at maturity from the issue date, or from the most recent date
to which interest has been paid or provided for, until October 19, 2006. During
such period, cash interest will be payable semiannually in arrears on April 19,
and October 19 of each year, commencing on April 19, 2002, to holders of record
at the close of business on the April 4 or October 4 immediately preceding such
interest payment date. Each payment of cash interest on the notes will include
interest accrued through the day before the applicable interest payment date
(or purchase, redemption or, in certain circumstances, conversion date, as the
case may be). Any payment required to be made on any day that is not a business
day will be made on the next succeeding business day.
The notes are being offered at a substantial discount from their $1,000
principal amount at maturity. The notes will be issued at an issue price of
$861.03 per note. Beginning October 19, 2006, the notes will accrue original
issue discount while they remain outstanding at a rate of 1% per year. Original
issue discount is the difference between the issue price and the principal
amount (or stated redemption price for federal income tax purposes) at maturity
of a note. The calculation of the accrual of original issue discount will be on
a semiannual bond equivalent basis, using a 360-day year composed of twelve 30-
day months. For United States federal income tax purposes, the stated
redemption price at maturity of the notes will include the semiannual cash
interest payments payable through October 19, 2006 and original issue discount
will accrue at a constant rate of 1% per year, calculated on a semiannual bond
equivalent basis throughout the term of the notes from their issue date. Thus,
holders will be required to accrue the cash interest as original issue discount
regardless of their method of tax accounting but will not recognize any income
when such interest is actually paid. See "Certain United States Federal Income
Tax Consequences--U.S. Holders--Original Issue Discount."
Original issue discount or cash interest, as the case may be, will cease to
accrue on a note upon its maturity, conversion, purchase by us at the option of
a holder or redemption. We may not reissue a note that has matured or been
converted, purchased by us at your option, redeemed or otherwise cancelled,
except for registration of transfer, exchange or replacement of such note.
Notes may be presented for conversion at the office of the conversion agent
and for exchange or registration of transfer at the office of the registrar.
The conversion agent and the registrar shall initially be the trustee. No
service charge will be made for any registration of transfer or exchange of
notes. However, we may require the holder to pay any tax, assessment or other
governmental charge payable as a result of such transfer or exchange.
S-13
Ranking of the Notes
The notes will be senior unsecured obligations and will rank equal in right
of payment to all of our other senior unsecured and unsubordinated
indebtedness. The notes will be effectively subordinated to our secured
indebtedness to the extent of the security. Also, the notes will be effectively
subordinated to the indebtedness and other liabilities, including trade
payables, of our subsidiaries. At August 3, 2001, we had $194.9 million of
secured indebtedness outstanding, $2,775.1 million of unsecured indebtedness
outstanding and 465.6 million of capital leases. At August 3, 2001, our
subsidiaries had $125.8 million of secured unsubordinated indebtedness
outstanding.
Conversion Rights
A holder may convert a note, in multiples of $1,000 principal amount at
maturity, into common stock only if at least one of the conditions described
below is satisfied. In addition, a holder may convert a note only until the
close of business on the second business day prior to the redemption date if we
call a note for redemption. A note for which a holder has delivered a purchase
notice or a change in control purchase notice requiring us to purchase the note
may be surrendered for conversion only if such notice is withdrawn in
accordance with the indenture.
The initial conversion rate is 17.2120 shares of common stock per note,
subject to adjustment upon the occurrence of certain events described below. A
holder of a note otherwise entitled to a fractional share will receive cash
equal to the applicable portion of the then current sale price of our common
stock on the trading day immediately preceding the conversion date.
The ability to surrender notes for conversion will expire at the close of
business on October 19, 2021.
To convert a note into shares of common stock, a holder must:
. complete and manually sign a conversion notice, a form of which is on the
back of the note, and deliver the conversion notice to the conversion
agent;
. surrender the note to the conversion agent;
. if required by the conversion agent, furnish appropriate endorsements and
transfer documents; and
. if required, pay all transfer or similar taxes.
On conversion of a note, a holder will not receive any cash payment of
interest representing accrued original issue discount or, except as described
below, accrued cash interest. Delivery to the holder of the full number of
shares of common stock into which the note is convertible, together with any
cash payment of such holder's fractional shares, will be deemed:
. to satisfy our obligation to pay the principal amount at maturity of the
note; and
. to satisfy our obligation to pay accrued original issue discount or
accrued cash interest attributable to the period from the issue date
through the conversion date.
As a result, accrued original issue discount or accrued cash interest is
deemed paid in full rather than cancelled, extinguished or forfeited.
Notwithstanding the foregoing, accrued cash interest, if any, will be payable
upon any conversion of notes at the option of the holder made concurrently with
or after acceleration of the notes following an event of default described
under "--Events of Default and Acceleration" below. Holders of notes
surrendered for conversion during the period from the close of business on any
regular record date next preceding any interest payment date to the opening of
business of such interest payment date will receive the semiannual interest
payable on such notes on the corresponding interest payment date
notwithstanding the conversion and such notes (except notes called for
redemption) upon surrender must be accompanied by funds equal to the amount of
semiannual interest payable on the principal amount of notes so converted.
The conversion rate will not be adjusted for accrued original issue discount
or accrued cash interest. A certificate for the number of full shares of common
stock into which any note is converted, together with any cash payment for
fractional shares, will be delivered through the conversion agent as soon as
practicable
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following the conversion date. For a discussion of the tax treatment of a
holder receiving shares of our common stock upon surrendering notes for
conversion, see "Certain United States Federal Income Tax Consequences--U.S.
Holders--Sale, Exchange, Conversion or Redemption."
We will adjust the conversion rate for:
. dividends or distributions on our common stock payable in our common
stock or other capital stock of Lowe's;
. subdivisions, combinations or certain reclassifications of our common
stock;
. distributions to all holders of our common stock of certain rights to
purchase our common stock for a period expiring within 60 days at less
than the then current sale price; and
. distributions to the holders of our common stock of a portion of our
assets (including shares of capital stock of a subsidiary) or debt
securities issued by us or certain rights to purchase our securities
(excluding cash dividends or other cash distributions from current or
retained earnings unless the annualized amount thereof per share exceeds
5% of the sale price of our common stock on the day preceding the date of
declaration of such dividend or other distribution).
However, no adjustment to the conversion rate need be made if holders of the
notes may participate in the transaction without conversion or in certain
other cases.
In the event that we elect to make a distribution to all holders of shares
of our common stock pursuant to the third and fourth bullets above of the
provisions regarding adjustments to the conversion rate which, in the case of
the fourth bullet, has a per share value equal to more than 15% of the sale
price of our shares of common stock on the day preceding the declaration date
for such distribution, we will be required to give notice to the holders of
notes at least 20 days prior to the date for such distribution and, upon the
giving of such notice, the notes may be surrendered for conversion at any time
until the close of business on the business day prior to the date of
distribution or until we announce that such distribution will not take place.
In addition, the indenture provides that upon conversion of the notes, the
holders of such notes will receive, in addition to the shares of common stock
issuable upon such conversion, the rights related to such common stock
pursuant to our existing and any future shareholder rights plan, whether or
not such rights have separated from the common stock at the time of such
conversion. However, there shall not be any adjustment to the conversion
privilege or conversion rate as a result of:
. the issuance of the rights;
. the distribution of separate certificates representing the rights;
. the exercise or redemption of such rights in accordance with any rights
agreement; or
. the termination or invalidation of the rights.
The indenture permits us to increase the conversion rate from time to time.
Holders of the notes may, in certain circumstances, be deemed to have
received a distribution subject to United States federal income tax as a
dividend upon:
. a taxable distribution to holders of common stock which results in an
adjustment of the conversion rate;
. an increase in the conversion rate at our discretion; or
. failure to adjust the conversion rate in some instances.
See "Certain United States Federal Income Tax Consequences--U.S. Holders--
Constructive Dividend."
If we are a party to a consolidation, merger or binding share exchange or a
transfer of all or substantially all of our assets, the right to convert a
note into common stock may be changed into a right to convert it into the kind
and amount of securities, cash or other assets of Lowe's or another person
which the holder would have received if the holder had converted the holder's
note immediately prior to the transaction.
The conversion agent will, on our behalf, determine if the notes are
convertible and notify the trustee and us accordingly. If one or more of the
conditions to the conversion of the notes has been satisfied, we will
S-15
promptly notify the holders of the notes thereof and use our reasonable best
efforts to post this information on our website or otherwise publicly disclose
this information.
Conversion Based on Common Stock Price. Holders may surrender notes for
conversion into our shares of common stock in any fiscal quarter commencing
after February 1, 2002 if, as of the last day of the preceding fiscal quarter,
the sale price of our common stock for at least 20 trading days in a period of
30 consecutive trading days ending on the last trading day of such preceding
fiscal quarter is more than a specified percentage, beginning at 120% and
declining .1282% per quarter thereafter until it reaches 110% for the quarter
beginning July 31, 2021, of the accreted conversion price per share of common
stock on the last day of such preceding fiscal quarter.
The accreted conversion price per share as of any day will equal the issue
price of a note plus the accrued original issue discount or accrued cash
interest to that day, divided by the number of shares of common stock issuable
upon conversion of a note on that day. The sale price of our common stock on
any trading day means the closing per share sale price (or if no closing sale
price is reported, the average of the bid and ask prices or, if more than one
in either case, the average of the average bid and the average ask prices) on
such date on the principal national securities exchange on which the common
stock is listed or, if our common stock is not listed on a principal national
securities exchange, as reported by the Nasdaq System or otherwise as provided
in the indenture.
The table below shows the conversion trigger price per share of our common
stock in respect of each of the first 20 fiscal quarters following issuance of
the notes. These conversion trigger prices reflect the accreted conversion
price per share of common stock multiplied by the applicable percentage for the
respective fiscal quarter. Thereafter, the accreted conversion price per share
of common stock increases each fiscal quarter by the accreted original issue
discount for the quarter and the applicable percentage declines by .1282% per
quarter. The conversion trigger price for the fiscal quarter beginning July 31,
2021 is $63.77.
(3)
(1) (2) Conversion
Accreted Applicable Trigger Price
Fiscal Quarter* Conversion Price Percentage (1) X (2)
--------------- ---------------- ---------- -------------
2001
Quarter ended February 1, 2002...... $50.03 120.0000% $60.04
2002
Quarter ended May 3, 2002........... 50.03 119.8718% 59.97
Quarter ended August 2, 2002........ 50.03 119.7436% 59.91
Quarter ended November 1, 2002...... 50.03 119.6154% 59.84
Quarter ended January 31, 2003...... 50.03 119.4872% 59.78
2003
Quarter ended May 2, 2003........... 50.03 119.3590% 59.72
Quarter ended August 1, 2003........ 50.03 119.2308% 59.65
Quarter ended October 31, 2003...... 50.03 119.1026% 59.59
Quarter ended January 30, 2004...... 50.03 118.9744% 59.52
2004
Quarter ended April 30, 2004........ 50.03 118.8462% 59.46
Quarter ended July 30, 2004......... 50.03 118.7180% 59.39
Quarter ended October 29, 2004...... 50.03 118.5898% 59.33
Quarter ended January 28, 2005...... 50.03 118.4616% 59.27
2005
Quarter ended April 29, 2005........ 50.03 118.3334% 59.20
Quarter ended July 29, 2005......... 50.03 118.2052% 59.14
Quarter ended October 28, 2005...... 50.03 118.0770% 59.07
Quarter ended January 27, 2006...... 50.03 117.9488% 59.01
2006
Quarter ended April 28, 2006........ 50.03 117.8206% 58.95
Quarter ended July 28, 2006......... 50.03 117.6924% 58.88
Quarter ended October 27, 2006...... 50.04 117.5642% 58.83
--------
* This table assumes no events have occurred that would require an adjustment
to the conversion rate.
Lowe's has a fiscal year that ends on the Friday nearest January 31 and
generally comprises four fiscal quarters of 13 weeks ending on the last
Friday of April, July, October and January.
S-16
Conversion Based on Credit Rating. Holders may also surrender a note for
conversion during any period that the credit rating assigned to the notes is
Baa3 or lower by Moody's, BBB or lower by Standard & Poor's or BBB or lower by
Fitch.
Conversion Based on Redemption. A holder may surrender for conversion a note
called for redemption at any time prior to the close of business on the second
business day immediately preceding the redemption date, even if it is not
otherwise convertible at such time. A note for which a holder has delivered a
purchase notice or a change in control purchase notice, as described below,
requiring us to purchase such note may be surrendered for conversion only if
such notice is withdrawn in accordance with the indenture.
A "business day" is any weekday that is not a day on which banking
institutions in The City of New York are authorized or obligated to close. A
"trading day" is any day on which the NYSE is open for trading or, if the
applicable security is quoted on the Nasdaq National Market, a day on which
trades may be made on such market or, if the applicable security is not so
listed, admitted for trading or quoted, any business day.
Conversion Upon Occurrence of Certain Corporate Transactions. If we are
party to a consolidation, merger or binding share exchange or a transfer of all
or substantially all of our assets, a note may be surrendered for conversion at
any time from and after the date which is 15 days prior to the anticipated
effective date of the transaction until 15 days after the actual effective date
of such transaction, and at the effective date, the right to convert a note
into common stock will be changed into a right to convert it into the kind and
amount of securities, cash or other assets of Lowe's or another person which
the holder would have received if the holder had converted the holder's notes
immediately prior to the transaction. If such transaction also constitutes a
change in control of Lowe's, the holder will be able to require us to purchase
all or a portion of such holder's notes as described under "--Change in Control
Permits Purchase of Notes by Lowe's at the Option of the Holder."
The notes will also be convertible upon the occurrence of certain
distributions resulting in an adjustment to the conversion price as described
above.
Redemption of Notes at Our Option
No sinking fund is provided for the notes. Prior to October 19, 2006, we
cannot redeem the notes at our option. Beginning on October 19, 2006, we may
redeem the notes for cash, as a whole at any time or from time to time in part.
We will give not less than 30 days' or more than 60 days' notice of redemption
by mail to holders of notes.
S-17
If redeemed at our option, the notes will be redeemed at a price equal to
the sum of the issue price plus accrued original issue discount and accrued
cash interest, if any, on such notes as of the applicable redemption date. The
table below shows the redemption prices of a note on October 19, 2006, at each
October thereafter prior to maturity and at maturity on October 19, 2021. In
addition, the redemption price of a note that is redeemed between the dates
listed below would include an additional amount reflecting the additional
accrued original issue discount that has accrued on such note since the
immediately preceding date in the table below.
(1) (2)
Note Accrued (3) Redemption
Redemption Date Issue Price Original Issue Discount Price (1) + (2)
--------------- ----------- ----------------------- ---------------
October 19:
2006........................ $861.03 $ 0.00 $ 861.03
2007........................ 861.03 8.63 869.66
2008........................ 861.03 17.35 878.38
2009........................ 861.03 26.16 887.19
2010........................ 861.03 35.05 896.08
2011........................ 861.03 44.03 905.06
2012........................ 861.03 53.11 914.14
2013........................ 861.03 62.27 923.30
2014........................ 861.03 71.53 932.56
2015........................ 861.03 80.88 941.91
2016........................ 861.03 90.32 951.35
2017........................ 861.03 99.86 960.89
2018........................ 861.03 109.49 970.52
2019........................ 861.03 119.22 980.25
2020........................ 861.03 129.04 990.07
At stated maturity.......... 861.03 138.97 1,000.00
If we convert the notes to semiannual coupon notes following the occurrence
of a tax event, the notes will be redeemable at the restated principal amount
plus accrued and unpaid interest from the date of the conversion through the
redemption date. However, in no event may the notes be redeemed prior to
October 19, 2006. For more information on this optional conversion, see "--
Optional Conversion to Semiannual Coupon Notes upon Tax Event."
If less than all of the outstanding notes are to be redeemed, the trustee
will select the notes to be redeemed in principal amounts at maturity of $1,000
or integral multiples of $1,000. In this case, the trustee may select the notes
by lot, pro rata or by any other method the trustee considers fair and
appropriate. If a portion of a holder's notes is selected for partial
redemption and the holder converts a portion of the notes, the converted
portion will be deemed to be the portion selected for redemption.
Purchase of Notes at the Option of the Holder
On the purchase dates of October 19, 2003, October 19, 2006 and October 19,
2011, we may, at the option of the holder, be required to purchase, at the
purchase price set forth below plus accrued cash interest, if any, to the
purchase date, any outstanding note for which a written purchase notice has
been properly delivered by the holder and not withdrawn, subject to certain
additional conditions. Holders may submit their written purchase notice to the
paying agent at any time from the opening of business on the date that is 20
business days prior to such purchase date until the close of business on the
business day immediately preceding such purchase date.
S-18
The purchase price of a note will be:
. $861.03 per note on October 19, 2003;
. $861.03 per note on October 19, 2006; and
. $905.06 per note on October 19, 2011.
The above purchase prices reflect a price equal to the sum of the issue
price and accrued original issue discount, if any, on such notes as of the
applicable purchase date.
We may, at our option, elect to pay the purchase price in cash or shares of
common stock, or any combination thereof. For a discussion of the tax treatment
of a holder receiving cash, common stock or any combination thereof, see
"Certain United States Federal Income Tax Consequences--U.S. Holders--Sale,
Exchange, Conversion or Redemption."
If prior to a purchase date the notes have been converted to semiannual
coupon notes following the occurrence of a tax event, the purchase price will
be equal to the restated principal amount plus accrued and unpaid cash interest
from the date of the conversion to the purchase date. For more information on
this optional conversion, see "--Optional Conversion to Semiannual Coupon Notes
upon Tax Event."
We will be required to give notice on a date not less than 20 business days
prior to each purchase date to all holders at their addresses shown in the
register of the registrar, and to beneficial owners as required by applicable
law, stating among other things:
. the amount of the purchase price;
. whether we will pay the purchase price of the notes in cash or common
stock or any combination thereof, specifying the percentages of each;
. if we elect to pay in common stock, the method of calculating the market
price of the common stock; and
. the procedures that holders must follow to require us to purchase their
notes.
The purchase notice given by each holder electing to require us to purchase
notes shall state:
. the certificate numbers of the holder's notes to be delivered for
purchase;
. the portion of the principal amount at maturity of notes to be purchased,
which must be $1,000 or an integral multiple of $1,000;
. that the notes are to be purchased by us pursuant to the applicable
provisions of the notes; and
. in the event we elect, pursuant to the notice that we are required to
give, to pay the purchase price in common stock, in whole or in part, but
the purchase price is ultimately to be paid to the holder entirely in
cash because any of the conditions to payment of the purchase price or
portion of the purchase price in common stock is not satisfied prior to
the close of business on the purchase date, as described below, whether
the holder elects:
(1) to withdraw the purchase notice as to some or all of the notes to which
it relates, or
(2) to receive cash in respect of the entire purchase price for all notes
or portions of notes subject to such purchase notice.
If the purchase price for the notes subject to the purchase notice is
ultimately to be paid to a holder entirely in cash because we have not
satisfied one or more of the conditions to payment of the purchase price in
common stock prior to the close of business on the purchase date, a holder
shall be deemed to have elected to receive cash in respect of the entire
purchase price for all such notes unless such holder has properly notified us
S-19
of its election to withdraw the purchase notice. For a discussion of the tax
treatment of a holder receiving cash instead of common stock, see "Certain
United States Federal Income Tax Consequences--U.S. Holders--Sale, Exchange,
Conversion or Redemption."
Any purchase notice may be withdrawn by the holder by a written notice of
withdrawal delivered to the paying agent prior to the close of business on the
business day prior to the purchase date.
The notice of withdrawal shall state:
. the principal amount at maturity being withdrawn;
. the certificate numbers of the notes being withdrawn; and
. the principal amount at maturity, if any, of the notes that remains
subject to the purchase notice.
If we elect to pay the purchase price, in whole or in part, in shares of our
common stock, the number of such shares we deliver shall be equal to the
portion of the purchase price to be paid in common stock divided by the market
price of a share of common stock.
We will pay cash based on the market price for all fractional shares of
common stock in the event we elect to deliver common stock in payment, in whole
or in part, of the purchase price. See "Certain United States Federal Income
Tax Consequences--U.S. Holders--Sale, Exchange, Conversion or Redemption."
The market price of our common stock shall be an amount equal to the average
of the sale prices of our common stock for the five-trading-day period ending
on the third business day prior to the applicable purchase date, or, if such
business day is not a trading day, then on the last trading day prior to such
business day, appropriately adjusted to take into account any occurrence that
would result in an adjustment of the conversion rate with respect to the common
stock. See "--Conversion Rights" for a description of the manner in which the
sales price of our common stock is determined.
Because the market price of our common stock is determined prior to the
applicable purchase date, holders of notes bear the market risk with respect to
the value of the common stock to be received from the date such market price is
determined to such purchase date. We may pay the purchase price or any portion
of the purchase price in common stock only if the information necessary to
calculate the market price is published in a daily newspaper of national
circulation.
Upon determination of the actual number of shares of common stock in
accordance with the foregoing provisions, we will promptly issue a press
release and publish such information on our website.
Our right to purchase notes, in whole or in part, with common stock is
subject to our satisfying various conditions, including:
. listing the common stock on the principal United States securities
exchange on which our common stock is then listed or, if not so listed,
on Nasdaq;
. the registration of the common stock under the Securities Act and the
Exchange Act, if required; and
. any necessary qualification or registration under applicable state
securities law or the availability of an exemption from such
qualification and registration.
If such conditions are not satisfied with respect to a holder prior to the
close of business on the purchase date, we will pay the purchase price of the
notes of the holder entirely in cash. See "Certain United States Federal Income
Tax Consequences--U.S. Holders--Sale, Exchange, Conversion or Redemption." We
may not change the form or components or percentages of components of
consideration to be paid for the notes once we have given the notice that we
are required to give to holders of notes, except as described in the first
sentence of this paragraph.
S-20
In connection with any purchase offer, we will:
. comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender
offer rules under the Exchange Act which may then be applicable; and
. file Schedule TO or any other required schedule under the Exchange Act.
Payment of the purchase price for a note for which a purchase notice has
been delivered and not validly withdrawn is conditioned upon delivery of the
note, together with necessary endorsements, to the paying agent at any time
after delivery of the purchase notice. Payment of the purchase price for the
note will be made as soon as practicable following the later of the purchase
date or the time of delivery of the note.
If the paying agent holds money or securities sufficient to pay the purchase
price of the note on the business day following the purchase date in accordance
with the terms of the indenture, then, immediately after the purchase date, the
note will cease to be outstanding and cash interest or original issue discount
on such note will cease to accrue, whether or not the note is delivered to the
paying agent. Thereafter, all other rights of the holder shall terminate, other
than the right to receive the purchase price upon delivery of the note.
No notes may be purchased for cash at the option of holders if there has
occurred and is continuing an event of default with respect to the notes, other
than a default in the payment of the purchase price with respect to such notes.
Change in Control Permits Purchase of Notes by Lowe's at the Option of the
Holder
In the event of a change in control occurring on or prior to October 19,
2006, each holder will have the right, at the holder's option, subject to the
terms and conditions of the indenture, to require us to purchase for cash all
or any portion of the holder's notes. However, the principal amount at maturity
submitted for purchase by a holder must be $1,000 or an integral multiple of
$1,000.
We will be required to purchase the notes as of a date no later than 35
business days after the occurrence of such change in control at a cash price
equal to the sum of the issue price plus accrued original issue discount or
accrued cash interest on such note on such date of purchase.
If prior to such date of purchase upon a change in control the notes have
been converted to semiannual coupon notes following the occurrence of a tax
event, we will be required to purchase the notes at a cash price equal to the
restated principal amount plus accrued and unpaid interest from the date of the
conversion to such date of purchase.
Within 15 days after the occurrence of a change in control, we are obligated
to mail to the trustee and to all holders of notes at their addresses shown in
the register of the registrar and to beneficial owners as required by
applicable law a notice regarding the change in control, which notice shall
state, among other things:
. the events causing a change in control;
. the date of such change in control;
. the last date on which the purchase right may be exercised;
. the change in control purchase price;
. the change in control purchase date;
. the name and address of the paying agent and the conversion agent;
. the conversion rate and any adjustments to the conversion rate resulting
from such change in control;
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. that notes with respect to which a change in control purchase notice is
given by the holder may be converted only if the change in control
purchase notice has been withdrawn in accordance with the terms of the
indenture; and
. the procedures that holders must follow to exercise these rights.
To exercise this right, the holder must deliver a written notice to the
paying agent prior to the close of business on the business day prior to the
change in control purchase date. The required purchase notice upon a change in
control shall state:
. the certificate numbers of the notes to be delivered by the holder;
. the portion of the principal amount at maturity of notes to be purchased,
which portion must be $1,000 or an integral multiple of $1,000; and
. that we are to purchase such notes pursuant to the applicable provisions
of the notes.
Any such change in control purchase notice may be withdrawn by the holder by
a written notice of withdrawal delivered to the paying agent prior to the close
of business on the business day prior to the change in control purchase date.
The notice of withdrawal shall state:
. the principal amount at maturity being withdrawn;
. the certificate numbers of the notes being withdrawn; and
. the principal amount at maturity, if any, of the notes that remain
subject to a change in control purchase notice.
Payment of the change in control purchase price for a note for which a
change in control purchase notice has been delivered and not validly withdrawn
is conditioned upon delivery of the note, together with necessary endorsements,
to the paying agent at any time after the delivery of such change in control
purchase notice. Payment of the change in control purchase price for such note
will be made promptly following the later of the change in control purchase
date or the time of delivery of such note.
If the paying agent holds money sufficient to pay the change in control
purchase price of the note on the business day following the change in control
purchase date in accordance with the terms of the indenture, then, immediately
after the change in control purchase date, cash interest or original issue
discount on the note will cease to accrue, whether or not the note is delivered
to the paying agent. Thereafter, all other rights of the holder shall
terminate, other than the right to receive the change in control purchase price
upon delivery of the note.
Under the indenture, a "change in control" of Lowe's is deemed to have
occurred at such time as:
. any person, including its affiliates and associates, other than Lowe's,
its subsidiaries or their employee benefit plans, files a Schedule 13D or
Schedule TO (or any successor schedule, form or report under the Exchange
Act) disclosing that such person has become the beneficial owner of 50%
or more of the aggregate voting power of our common stock and other
capital stock with equivalent voting rights, or other capital stock into
which the common stock is reclassified or changed, with certain
exceptions; or
. there shall be consummated any consolidation or merger of Lowe's pursuant
to which the common stock would be converted into cash, securities or
other property, in each case other than a consolidation or merger of
Lowe's in which the holders of the common stock and other capital stock
with equivalent voting rights, immediately prior to the consolidation or
merger have, directly or indirectly, at least a majority of the total
voting power in the aggregate of all classes of capital stock of the
continuing or surviving corporation immediately after the consolidation
or merger.
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The indenture does not permit our board of directors to waive our obligation
to purchase notes at the option of holders in the event of a change in control.
In connection with any purchase offer in the event of a change in control,
we will:
. comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender
offer rules under the Exchange Act which may then be applicable; and
. file Schedule TO or any other required schedule under the Exchange Act.
The change in control purchase feature of the notes may, in certain
circumstances, make more difficult or discourage a takeover of Lowe's. The
change in control purchase feature, however, is not the result of our knowledge
of any specific effort:
. to accumulate shares of common stock;
. to obtain control of us by means of a merger, tender offer, solicitation
or otherwise; or
. part of a plan by management to adopt a series of anti-takeover
provisions.
Instead, the change in control purchase feature is a standard term contained
in other offerings of securities similar to the notes that have been marketed
by the underwriters. The terms of the change in control purchase feature
resulted from negotiations between the underwriters and us.
We could, in the future, enter into certain transactions, including certain
recapitalizations, that would not constitute a change in control with respect
to the change in control purchase feature of the notes but that would increase
the amount of our or our subsidiaries' outstanding indebtedness.
No notes may be purchased at the option of holders upon a change in control
if there has occurred and is continuing an event of default with respect to the
notes, other than a default in the payment of the change in control purchase
price with respect to the notes.
Events of Default and Acceleration
The following are events of default under the indenture:
. default in the payment of any principal amount (including accrued
original issue discount and, if the notes have been converted to
semiannual coupon notes following a tax event, the restated principal
amount) at maturity, redemption price, purchase price, or change in
control purchase price due with respect to the notes, when the same
become due and payable;
. default in payment of any interest under the notes, which default
continues for 30 days;
. our failure to comply with any of our other agreements in the notes or
the indenture upon our receipt of notice of such default from the trustee
or from holders of not less than 25% in aggregate principal amount at
maturity of the notes, and our failure to cure (or obtain a waiver of)
such default within 60 days after we receive such notice;
. default in the payment of principal when due or resulting in acceleration
of other indebtedness of ours for borrowed money where the aggregate
principal amount with respect to which the default or acceleration has
occurred exceeds $10 million, and such acceleration has not been
rescinded or annulled within a period of 10 days after written notice to
Lowe's by the trustee or to Lowe's and the trustee by the holders of at
least 25% in principal amount at maturity of the notes; or
. certain events of bankruptcy, insolvency or reorganization affecting
Lowe's.
If an event of default shall have happened and be continuing, either the
trustee or the holders of not less than 25% in aggregate principal amount at
maturity of the notes then outstanding may declare the issue price of
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the notes plus the original issue discount on the notes accrued through the
date of such declaration, and any accrued and unpaid cash interest (or if the
notes have been converted to semiannual coupon notes following a tax event, the
restated principal amount, plus accrued interest) through the date of such
declaration, to be immediately due and payable. In the case of certain events
of bankruptcy or insolvency, the issue price of the notes plus the original
issue discount accrued thereon, together with any accrued cash interest (or if
the notes have been converted to semiannual coupon notes following a tax event,
the restated principal amount, plus accrued interest) through the occurrence of
such event shall automatically become and be immediately due and payable.
Mergers and Sales of Assets
Without the consent of the holders of any outstanding debt securities, we
may consolidate with or merge into any person or convey, transfer or lease our
properties and assets substantially as an entity to another person, so long as:
. the resulting, surviving or transferee person is a corporation organized
and existing under the laws of the United States, any state thereof or
the District of Columbia and such corporation (if other than us) assumes
all our obligations under the notes and the indenture;
. after giving effect to the transaction no event of default, and no event
that, after notice or become an event of default, has occurred and is
continuing; and
. other conditions described in the indenture are met.
Upon the assumption of our obligations by such corporation in such
circumstances, subject to certain exceptions, we shall be discharged from all
obligations under the notes and the indenture. Although such transactions are
permitted under the indenture, certain of the foregoing transactions occurring
could constitute a change in control in Lowe's, permitting each holder to
require us to purchase the notes of such holder as described above.
Optional Conversion to Semiannual Coupon Notes upon Tax Event
From and after the date of the occurrence of a tax event, we shall have the
option to elect to have interest in lieu of future accrued original issue
discount or cash interest accrue at 1% per year on a principal amount per note
equal to the sum of the issue price and accrued original issue discount on such
note on the date of the tax event or the date on which we exercise such option,
whichever is later.
Such interest shall accrue from the option exercise date, and shall be
payable semiannually on the interest payment dates of April 19 and October 19
of each year to holders of record at the close of business on April 4 or
October 4 immediately preceding the interest payment date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Interest will accrue from the most recent date to which interest, if
applicable, has been paid or provided for or, if no interest is payable or has
been paid or provided for, from the option exercise date. In the event that we
exercise our option to pay interest in lieu of accrued original issue discount
or cash interest, the redemption price, purchase price and change in control
purchase price on the notes will be adjusted. However, there will be no change
in the holder's conversion rights.
A "tax event" means that we shall have received an opinion from independent
tax counsel experienced in such matters to the effect that, on or after the
date of this prospectus supplement, as a result of:
. any amendment to, or change (including any announced prospective change)
in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein; or
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. any amendment to, or change in, an interpretation or application of such
laws or regulations by any legislative body, court, governmental agency
or regulatory authority,
in each case which amendment or change is enacted, promulgated, issued or
announced or which interpretation is issued or announced or which action is
taken, on or after the date of this prospectus supplement there is more than an
insubstantial risk that accrued original issue discount payable on the notes
either:
. would not be deductible on a current accrual basis; or
. would not be deductible under any other method,
in either case in whole or in part, by us (by reason of deferral, disallowance,
or otherwise) for United States federal income tax purposes.
The Clinton administration previously proposed to change the tax law to
defer the deduction of original issue discount on convertible debt instruments
until the issuer pays the interest. Congress did not enact those proposed
changes. It is not certain what the views of the Bush administration are on
this issue and there can be no assurance that the same or a similar proposal
will not be proposed and enacted.
If a similar proposal were ever enacted and made applicable to the notes in
a manner that would limit our ability to either
. deduct the interest, including the accrued original issue discount,
payable on the notes on a current accrual basis; or
. deduct the interest, including accrued original issue discount, payable
on the notes under any other method for United States federal income tax
purposes,
such enactment would result in a tax event and the terms of the notes would be
subject to modification at our option as described above.
The modification of the terms of notes by us upon a tax event as described
above could possibly alter the timing of income recognition by holders of the
notes with respect to the semiannual payments of interest due on the notes
after the date on which we exercise our option to pay interest in lieu of
accrued original issue discount or accrued interest, if any, on the notes.
Modification
We and the trustee may modify or amend the indenture or the notes with the
consent of the holders of not less than a majority in aggregate principal
amount at maturity of the notes then outstanding. However, the consent of the
holders of each outstanding note would be required to:
. alter the manner of calculation or rate of accrual of original issue
discount or interest on any note or change the time of payment;
. make any note payable in money or securities other than that stated in
the note;
. change the stated maturity of any note;
. reduce the principal amount at maturity, restated principal amount, issue
price, accrued original issue discount, redemption price, purchase price
or change in control purchase price with respect to any note;
. make any change that adversely affects the rights of a holder to convert
any note;
. make any change that adversely affects the right to require us to
purchase a note;
. impair the right to institute suit for the enforcement of any payment
with respect to, or conversion of, the notes; and
. change the provisions in the indenture that relate to modifying or
amending the indenture.
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Without the consent of any holder of notes, we and the trustee may enter
into supplemental indentures for any of the following purposes:
. to evidence a successor to us and the assumption by that successor of our
obligations under the indenture and the notes;
. to add to our covenants for the benefit of the holders of the notes or to
surrender any right or power conferred upon us;
. to secure our obligations in respect of the notes;
. to cure any ambiguity or inconsistency in the indenture; or
. to make any change that does not adversely affect the rights of any
holder of the notes.
The holders of a majority in principal amount at maturity of the outstanding
notes may, on behalf of all the holders of all notes:
. waive compliance by us with restrictive provisions of the indenture, as
detailed in the indenture; and
. waive any past default under the indenture and its consequences, except a
default in the payment of the principal amount at maturity, issue price,
accrued and unpaid interest, accrued original issue discount, redemption
price, purchase price or change in control purchase price or obligation
to deliver common stock upon conversion with respect to any note or in
respect of any provision which under the indenture cannot be modified or
amended without the consent of the holder of each outstanding note
affected.
Discharge of the Indenture
We may satisfy and discharge our obligations under the indenture by
delivering to the trustee for cancellation all outstanding notes or by
depositing with the trustee, the paying agent or the conversion agent, if
applicable, after the notes have become due and payable, whether at stated
maturity or any redemption date, or any purchase date, or a change in control
purchase date, or upon conversion or otherwise, cash or shares of common stock
(as applicable under the terms of the indenture) sufficient to pay all of the
outstanding notes and paying all other sums payable under the indenture.
Defeasance
The notes will not be subject to any defeasance provisions otherwise
available under the indenture.
Calculations in Respect of Notes
We will be responsible for making all calculations called for under the
notes. These calculations include, but are not limited to, determination of the
market prices of our common stock. We will make all these calculations in good
faith and, absent manifest error, our calculations will be final and binding on
holders of notes. We will provide a schedule of our calculations to the
trustee, and the trustee is entitled to rely upon the accuracy of our
calculations without independent verification.
Limitations of Claims in Bankruptcy
If a bankruptcy proceeding is commenced in respect of Lowe's, the claim of a
holder of a note is, under Title 11 of the United States Code, limited to the
issue price of the note plus that portion of the original issue discount,
together with any cash interest, that has accrued from the date of issue to the
commencement of the proceeding.
Governing Law
The indenture and the notes will be governed by, and construed in accordance
with, the law of the State of New York.
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Book-Entry System
The notes will only be issued in the form of global securities held in book-
entry form. DTC or its nominee will be the sole registered holder of the notes
for all purposes under the indenture. Owners of beneficial interests in the
notes represented by the global securities will hold their interests pursuant
to the procedures and practices of DTC. As a result, beneficial interests in
any such securities will be shown on, and may only be transferred through,
records maintained by DTC and its direct and indirect participants and any such
interest may not be exchanged for certificated securities, except in limited
circumstances. Owners of beneficial interests must exercise any rights in
respect of their interests, including any right to convert or require purchase
of their interests in the notes, in accordance with the procedures and
practices of DTC. Beneficial owners will not be holders and will not be
entitled to any rights under the global securities or the indenture. Lowe's and
the trustee, and any of their respective agents, may treat DTC as the sole
holder and registered owner of the global securities.
Exchange of Global Securities
Notes represented by a global security will be exchangeable for certificated
securities with the same terms only if:
. DTC is unwilling or unable to continue as depositary or if DTC ceases to
be a clearing agency registered under the Exchange Act and a successor
depositary is not appointed by us within 90 days;
. we decide to discontinue use of the system of book-entry transfer through
DTC (or any successor depositary); or
. a default under the indenture occurs and is continuing.
DTC has advised us as follows: DTC is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
facilitates the settlement of transactions among its participants through
electronic computerized book-entry changes in participants' accounts,
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers, including the
underwriters, banks, trust companies, clearing corporations and other
organizations, some of whom and/or their representatives, own DTC. Access to
DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
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DESCRIPTION OF OUR CAPITAL STOCK
Common Stock
The following is a summary of some of the terms of our common stock. For a
more complete description of our common stock, you should review the applicable
North Carolina law, our Charter and Bylaws, and the Amended and Restated Rights
Agreement, dated December 2, 1999, between us and Equiserve Trust Company,
N.A., as rights agent.
Our Charter authorizes us to issue 2,800,000,000 shares of common stock. As
of August 31, 2001, we had 773,125,913 shares of common stock outstanding. Each
share of common stock is entitled to one vote on all matters submitted to a
vote of shareholders. Holders of common stock are entitled to receive dividends
when our Board of Directors declares them out of funds legally available
therefor. Dividends may be paid on the common stock only if all dividends on
any outstanding preferred stock have been paid or provided for.
The issued and outstanding shares of common stock are fully paid and
nonassessable. Holders of common stock have no preemptive or conversion rights,
and we may not make further calls or assessments on our common stock.
In the event of our voluntary or involuntary dissolution, liquidation or
winding up, holders of common stock are entitled to receive, pro rata, after
satisfaction in full of the prior rights of creditors and holders of preferred
stock, if any, all of our remaining assets available for distribution.
Directors are elected by a vote of the holders of common stock. Holders of
common stock are not entitled to cumulative voting rights.
EquiServe Trust Company, N.A. of Boston, Massachusetts, acts as the transfer
agent and registrar for the common stock.
Preferred Share Purchase Rights.
In 1998, under our Shareholder Rights Plan, we distributed as a dividend one
right for each outstanding share of common stock. Each right entitles the
holder to buy one one-thousandth of a share of Participating Cumulative
Preferred Stock, Series A, at an exercise price of $152.50, which we may adjust
at a later time. As a result of a two-for-one stock split of Lowe's common
stock effective June 29, 2001, the number of rights associated with each share
of common stock was reduced to 0.5.
The rights will become exercisable only if a person or group acquires or
announces a tender offer for 15% or more of our outstanding common stock. When
exercisable, we may issue a share of common stock in exchange for each right
other than those held by the person or group. If a person or group acquires 30%
or more of the outstanding common stock, each right will entitle the holder,
other than the acquiring person, upon payment of the exercise price, to acquire
preferred stock or, at our option, common stock, having a value equal to twice
the right's exercise price. If we are acquired in a merger or other business
combination or if 50% of our earnings power is sold, each right will entitle
the holder, other than the acquiring person, to purchase securities of the
surviving company having a market value equal to twice the exercise price of
the right.
The rights will expire on September 9, 2008, and may be redeemed by us at a
price of $.001 per right at any time before the tenth day after an announcement
that a 15% position has been acquired.
Until a person or group acquires or announces a tender offer for 15% or more
of the common stock:
. the rights will be evidenced by the common stock certificates and will be
transferred with and only with such common stock certificates, and
. the surrender for transfer of any certificate for common stock will also
constitute the transfer of the rights associated with the common stock
represented by such certificate.
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Rights may not be transferred, directly or indirectly:
. to any person or group that has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the rights, referred to
as an "acquiring person";
. to any person in connection with a transaction in which such person
becomes an acquiring person; or
. to any affiliate or associate of an acquiring person.
Any right that is the subject of a purported transfer to an acquiring person
will be null and void.
The rights may have some anti-takeover effects. The rights will cause
substantial dilution to a person or group that acquires more than 15% of the
outstanding shares of our common stock if some events thereafter occur without
the rights having been redeemed. However, the rights should not interfere with
any merger or other business combination approved by the Board of Directors and
the shareholders because the rights are redeemable in some circumstances.
Change of Control Provisions.
Some provisions of our Charter and of North Carolina law govern the rights
of holders of common stock with the intention of affecting any attempted change
of control of Lowe's.
Board of Directors.
Our Charter classifies the Board of Directors into three separate classes,
with the term of one-third of the directors expiring at each annual meeting.
Removal of a director requires the affirmative vote of 70% of outstanding
voting shares. These provisions make it more difficult for holders of our
common stock to gain control of the Board of Directors.
Fair Price Provisions.
Provisions of our Charter, which we will refer to as the "fair price
provisions," limit the ability of an interested shareholder to effect some
transactions involving us. An "interested shareholder" is one who beneficially
owns 20% or more of our outstanding voting shares.
Unless the fair price provisions are satisfied, an interested shareholder
may not engage in a business combination, which includes a merger,
consolidation, share exchange or similar transaction, involving us unless
approved by 70% of our outstanding voting shares. In general, the fair price
provisions require that an interested shareholder pay shareholders the same
amount of cash or the same amount and type of consideration paid by the
interested shareholder when it initially acquired our shares.
The fair price provisions are designed to discourage attempts to acquire
control of us in non-negotiated transactions utilizing two-tier pricing
tactics, which typically involve the accumulation of a substantial block of the
target corporation's stock followed by a merger or other reorganization of the
acquired company on terms determined by the purchaser. Due to the difficulties
of complying with the requirements of the fair price provisions, the fair price
provisions generally may discourage attempts to obtain control of us.
North Carolina Shareholder Protection Act.
The North Carolina Shareholder Protection Act requires the affirmative vote
of 95% of our voting shares to approve a business combination with any person
that beneficially owns 25% of the voting shares of the corporation unless the
"fair price" provisions of the Act are satisfied. The statute's intended effect
is similar to the fair price provisions of our Charter.
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Preferred Stock
Our Charter authorizes us to issue 5,000,000 shares of preferred stock, par
value $5.00 per share. We may amend our Charter from time to time to increase
the number of authorized shares of preferred stock. Any amendment requires the
approval of the holders of a majority of the outstanding shares of common stock
and the approval of the holders of a majority of the outstanding shares of all
series of preferred stock voting together as a single class without regard to
series. As of the date of this prospectus supplement, we had no shares of
preferred stock outstanding.
We will pay dividends and make distributions in the event of our
liquidation, dissolution or winding up first to holders of our preferred stock
and then to holders of our common stock. The Board of Directors' ability to
issue preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting powers of holders of common stock and, under some
circumstances, may discourage an attempt by others to gain control of us.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
General
This is a summary of certain United States federal income tax consequences
relevant to initial holders of notes and our common stock issuable upon
conversion or repurchase by us of the notes that purchase notes at their issue
price (as described below) in this offering. This summary is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (possibly with retroactive effect) or possible differing
interpretations. The discussion below deals only with notes and common stock
held as capital assets and does not purport to deal with persons in special tax
situations, such as financial institutions, insurance companies, dealers in
securities or currencies, tax-exempt entities, persons holding notes or common
stock in a tax deferred or tax-advantaged account, persons who are former
citizens or long-term residents of the United States subject to taxation as
expatriates or persons holding notes or common stock as a hedge against
currency risks, as a position in a "straddle" or as part of a "hedging,"
"constructive sale" or "conversion" transaction for tax purposes. Furthermore,
in general, this discussion does not address the tax consequences applicable to
holders that are taxed as partnerships or other pass-through entities for
United States federal income tax purposes. We do not address all of the tax
consequences that may be relevant to a U.S. Holder (as defined below). In
particular, we do not address:
. the United States federal income tax consequences to shareholders in, or
partners or beneficiaries of, an entity that is a holder of notes or
common stock;
. the United States federal estate (except as described below), gift or
alternative minimum tax consequences of the purchase, ownership or
disposition of notes or common stock;
. the consequences to persons who hold the notes or common stock whose
functional currency is not the United States dollar;
. any state, local or foreign tax consequences of the purchase, ownership
or disposition of notes or ownership or disposition of the common stock
issuable upon conversion or repurchase of the notes.
Accordingly, you should consult your own tax advisor regarding the tax
consequences of purchasing, owning and disposing of the notes and the common
stock in light of your own tax circumstances.
A U.S. Holder is a beneficial owner of the notes who or which is:
. a citizen or individual resident of the United States, as defined in
Section 7701(b) of the Internal Revenue Code of 1986, as amended (which
we refer to as the Code);
. a corporation, including any entity treated as a corporation for United
States federal income tax purposes, created or organized in or under the
laws of the United States, any state thereof or the District of
Columbia;
. an estate if its income is subject to United States federal income
taxation regardless of its source; or
. a trust if (1) a United States court can exercise primary supervision
over its administration and (2) one or more United States persons have
the authority to control all of its substantial decisions.
Notwithstanding the preceding sentence, certain trusts in existence on August
20, 1996, and treated as U.S. Holders prior to such date, may also be treated
as U.S. Holders. A Non-U.S. Holder is a holder of notes other than a U.S.
Holder.
If a partnership (including for this purpose any entity treated as a
partnership for United States federal income tax purposes) is a beneficial
owner of notes or common stock into which notes have been converted (or
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with which notes were repurchased), the treatment of a partner in the
partnership will generally depend upon the status of the partner and upon the
activities of the partnership. If you are a partnership that holds notes or
common stock or a partner in such a partnership, we urge you to consult your
own tax advisors about the United States federal and other tax consequences to
you of the purchase, ownership and disposition of the notes and the common
stock.
No statutory or judicial authority directly addresses the treatment of the
notes or instruments similar to the notes for United States federal income tax
purposes. No rulings have been sought or are expected to be sought from the
Internal Revenue Service (which we refer to as the IRS) with respect to any of
the United States federal income tax consequences discussed below, and no
assurance can be given that the IRS will agree with the tax characterizations
and the tax consequences described below.
We urge prospective investors to consult their own tax advisors with respect
to the tax consequences to them of the purchase, ownership and disposition of
the notes and the common stock in light of their own particular circumstances,
including the tax consequences under United States federal, state, local or
foreign and other tax laws and the possible effects of changes in United States
federal or other tax laws.
Classification of the Notes
It is the opinion of counsel to Lowe's, Hunton & Williams, that the notes
will be treated as indebtedness for United States federal income tax purposes.
Tax Event
The modification of the terms of the notes by us upon a Tax Event as
described in "Description of Notes--Optional Conversion to Semiannual Coupon
Notes Upon Tax Event," could possibly alter the timing of income recognition by
the holders with respect to the semiannual payments of interest due after the
option exercise date. In particular, under applicable Treasury regulations,
following such a modification you may be permitted to report such payments as
interest income as they are paid or accrue in accordance with your regular
method of tax accounting.
U.S. Holders
The following discussion applies to you if you are a U.S. Holder of notes
for tax purposes.
Original Issue Discount. We are issuing the notes at a substantial discount
from their principal amount at maturity. For United States federal income tax
purposes, the difference between the issue price and the stated redemption
price at maturity of each note constitutes original issue discount ("OID"). The
issue price is the initial offering price to investors at which a substantial
amount of the notes is sold (excluding sales to bond houses, brokers, or
similar persons or organizations acting in the capacity of underwriters,
placement agents, or wholesalers). The stated redemption price at maturity of a
note will be the sum of all payments on the note other than payments of
"qualified stated interest." Qualified stated interest is stated interest that
is unconditionally payable in cash or property (other than debt instruments of
the issuer) at least annually throughout the term of the instrument at a single
fixed rate that appropriately takes into account the length of the interval
between payments. The stated cash interest payable on the notes through October
19, 2006 will not constitute qualified stated interest since it is not payable
throughout their term and thus will be included along with principal in the
stated redemption price at maturity of the notes. As a result, this cash
interest will be taxable to you as OID under the method described below and
regardless of your method of tax accounting. However, you will not be required
to recognize any income upon the receipt of such cash interest.
You will be required to include OID in income periodically on an economic
accrual basis over the term of the notes at a constant rate equal to 1% per
year, calculated on a semiannual bond equivalent basis, before receipt of the
cash or other payment attributable to such income and regardless of your method
of tax
S-32
accounting. Specifically, the OID you must include in gross income as it
accrues is the sum of the daily portions of OID with respect to the note for
each day during the taxable year or portion of a taxable year on which you hold
the note. The daily portion is determined by allocating to each day of an
accrual period a pro rata portion of an amount equal to the adjusted issue
price of the note at the beginning of the accrual period multiplied by the
yield to maturity of the note. The accrual period of a note may be of any
length and may vary in length over the term of the note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the final day of an accrual period or on
the first day of an accrual period. The adjusted issue price of the note at the
start of any accrual period is the issue price of the note increased by the
accrued OID for all prior accrual periods, less any cash payments on the note
(other than payments of qualified stated interest).
Each payment made under a note (except for payments of qualified stated
interest) will be treated first as a payment of OID to the extent of OID that
has accrued as of the date of payment and has not been allocated to prior
payments and second as a payment of principal.
The OID regulations provide special rules for determining the yield and
maturity of debt instruments that provide the holder or issuer with an
unconditional option or options that, if exercised, require payments to be made
on the debt instrument under an alternative payment schedule or schedules
(e.g., an option to extend or an option to call a debt instrument at a fixed
premium). Under these rules, we will be presumed to exercise our option to
redeem the notes if such exercise would minimize the yield to maturity of the
notes. Similarly, you will be presumed to exercise your option to require us to
repurchase your notes if such exercise would maximize the yield to maturity of
the notes. The discussion set forth above is based on the assumption that
neither party will be presumed to exercise their respective options and that
the notes will remain outstanding until their stated maturity date.
Sale, Exchange, Conversion or Redemption. A conversion of a note into common
stock and the use by us of common stock on a purchase date to repurchase a note
(in case you require us to repurchase) will generally not be a taxable event,
except with respect to cash received in lieu of a fractional share. Your basis
in the common stock received will be the same as your adjusted tax basis in the
note at the time of conversion less any basis allocable to a fractional share.
Your adjusted tax basis in a note generally will be your original purchase
price for the note, increased by any interest income previously accrued on the
note as OID and decreased by the amount of any cash payment received by you
(other than payments of qualified stated interest). The holding period for the
common stock received on conversion or repurchase will include the holding
period of the converted or repurchased note, assuming each is held as a capital
asset, except that the holding period for common stock attributable to accrued
OID may likely begin no earlier than the date the OID accrued and may begin as
late as on the day following the date of conversion or repurchase.
If you elect to exercise your option to tender a note to us on a purchase
date and we satisfy the purchase price in a combination of common stock and
cash (other than cash received in lieu of a fractional share) you will
recognize gain (but not loss) to the extent such gain does not exceed such
cash. Such gain will generally be a capital gain, and will be a long-term
capital gain if the tendered note is held for more than one year.
If you elect to exercise your option to tender a note to us on a purchase
date or a change in control purchase date and we deliver solely cash in
satisfaction of the purchase price, you will recognize gain or loss, measured
by the difference between the amount of cash transferred by us to you and your
adjusted tax basis in the tendered note. Such gain or loss recognized by the
holder will generally be capital gain or loss, and will be long-term capital
gain or loss if the tendered note is held for more than one year.
Your basis in the common stock received from us in exchange for the note
will be the same as your adjusted tax basis in the note less any basis
allocable to a fractional share. However, this basis will be decreased by the
amount of cash, other than cash received in lieu of a fractional share, if any,
received in exchange and increased by the amount of any gain recognized by you
on the exchange, other than gain with respect to a fractional share. The
holding period for common stock received in the exchange will include the
S-33
holding period for the note tendered to us in exchange assuming each is held as
a capital asset. However, the holding period for common stock attributable to
accrued OID may likely begin no earlier than the date the OID accrued and may
begin as late as on the day following the purchase date.
Cash received in lieu of a fractional share upon a tender of a note to us on
a purchase date or on conversion should be treated as a payment in exchange for
the fractional share. Accordingly, the receipt of cash in lieu of a fractional
share should generally result in capital gain or loss, if any, measured by the
difference between the cash received for the fractional share and your basis in
the fractional share.
Except as described above with respect to notes, gain or loss upon a sale or
exchange of a note or of common stock received upon a conversion or a
repurchase of a note will generally be capital gain or loss, which capital gain
or loss will be long-term if the note or common stock is held for more than one
year.
In the case of individuals, long-term capital gains are generally taxed at a
maximum rate of 20%. The deductibility of capital losses is subject to
limitation.
Your obligation to include in gross income the daily portions of OID with
respect to a note will terminate prospectively on the date of conversion or
repurchase of the note for common stock or cash or any combination thereof.
Dividends. If you receive common stock, distributions on the common stock
that are paid out of our current or accumulated earnings and profits generally
will constitute dividends taxable as ordinary income. If a distribution exceeds
our current and accumulated earnings and profits, the excess will be treated as
a tax-free return of your investment, up to your basis in the common stock. Any
remaining excess will be treated as capital gain. If you are a U.S.
corporation, you may be able to claim a deduction equal to a portion of any
dividends received.
Constructive Dividend. If at any time we make a distribution of cash or
property to our shareholders that would be taxable to the shareholders as a
dividend for United States federal income tax purposes and, in accordance with
the anti-dilution provisions of the notes, the conversion rate of the notes is
increased, such increase may be deemed to be the payment of a taxable dividend
to holders of the notes although they would not actually receive any cash or
other property.
For example, an increase in the conversion rate in the event of a
distribution of our debt obligations or a portion of our assets or an increase
in the conversion rate at our discretion will generally result in deemed
dividend treatment to holders of the notes, but generally an increase in the
event of stock dividends or the distribution of rights to subscribe for common
shares will not. See "Description of Notes--Conversion Rights."
Backup Withholding and Information Reporting. Information reporting will
apply to payments of interest (including accruals of OID) or dividends, if any,
made by us on, or the proceeds of the sale or other disposition of, the notes
or shares of common stock with respect to certain non-corporate U.S. Holders,
and backup withholding at a rate of up to 30.5% may apply unless the recipient
of such payment supplies a correct taxpayer identification number and other
required information or otherwise establishes an exemption from backup
withholding. Backup withholding will also apply if we are notified by the IRS
or a broker that it is required. Any amount withheld under the backup
withholding rules will be allowable as a credit against your United States
federal income tax, provided that the required information is provided to the
IRS.
Non-U.S. Holders
The following discussion applies to you if you are a Non-U.S. Holder of
notes.
Original Issue Discount and Disposition. In general and subject to the
discussion below under "--Backup Withholding and Information Reporting," you
will not be subject to United States federal income or withholding tax with
respect to interest or OID accrued on notes if:
. you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our shares;
S-34
. you are not a controlled foreign corporation that is related to us;
. you are not a bank receiving interest described in Section 881(c)(3)(A)
of the Code; and
. you certify your nonresident status by providing a Form W-8BEN or
appropriate substitute form to us or our agent (provided that if you
hold the note through a financial institution or other agent acting on
your behalf, you will be required to provide appropriate documentation
to the agent and your agent will then be required to provide
certification to us or our paying agent, either directly or through
other intermediaries).
In addition, in general, and subject to the discussion below under "--
Backup Witholding and Information Reporting," you will not be subject to United
States federal income or withholding tax on gain realized upon your disposition
of notes or shares of common stock if:
. you are not an individual who is present in the United States for 183
days or more in the year of the sale, exchange or disposition of the
notes or common stock; and
. gain, if any, from a sale, exchange or disposition of the notes or
common stock is not effectively connected (or deemed effectively
connected by virtue of Section 897 of the Code, in the unlikely event we
became a United States real property holding corporation, or USRPHC, as
described below) with the conduct by you of a U.S. trade or business,
and where a tax treaty applies, is not attributable to a U.S. permanent
establishment. A corporation is generally a USRPHC if more than 50% of
its fair market value consists of U.S. real property interests. We
believe that we are not a USRPHC for United States federal income tax
purposes. Although we consider it unlikely based on our current business
plans and operations, we may become a USRPHC in the future.
Dividends paid to you on common stock received in exchange for the notes
will generally be subject to a withholding tax at a 30% rate (or such lower
rate provided by an applicable income tax treaty if you establish that you
qualify to receive the benefits of such treaty) unless they are effectively
connected with the conduct by you of a U.S. trade or business (and where a tax
treaty applies, are attributable to a U.S. permanent establishment) and you
provide us with a Form W-8ECI.
U.S. trade or business income will generally be subject to regular United
States federal income tax in the same manner as if it were realized by a U.S.
Holder. Moreover, if you are a non-U S. corporation your U.S. trade or business
income may be subject to an additional branch profits tax at a rate of 30% (or
such lower rate provided by an applicable income tax treaty if you establish
that you qualify to receive the benefits of such treaty).
United States Federal Estate Tax. A note held by an individual who at the
time of death is not a citizen or resident of the United States as defined for
U.S. estate tax purposes will not be includable in the decedent's gross estate
for United States federal estate tax purposes, provided that such holder or
beneficial owner did not at the time of death actually or constructively own
10% or more of the combined voting power of all of our classes of stock
entitled to vote, and provided that, at the time of death, payments with
respect to such note (including OID) would not have been effectively connected
with the conduct by such holder of a trade or business within the United
States. Our common stock generally will be included in the taxable estate of an
individual who at the time of death is not a citizen or resident of the United
States as defined for U.S. estate tax purposes. The United States federal
estate tax liability of the estate of such an individual with respect to our
common stock may be affected by a tax treaty between the United States and
their country of residence.
Backup Withholding and Information Reporting. If the notes, or shares of
common stock into which notes have been converted, are held by you through a
non-U.S., or non-U.S. related, broker or financial institution, information
reporting and backup withholding generally would not be required. Information
reporting, and possibly backup withholding, may apply if the notes or shares of
common stock are held by you through a U.S., or U.S. related, broker or
financial institution and you fail to certify your nonresident status.
S-35
UNDERWRITING
Subject to the terms and conditions set forth in the purchase agreement
dated the date of this prospectus supplement between Lowe's and the
underwriters, we have agreed to sell to the underwriters, and each of the
underwriters severally has agreed to purchase from us, the principal amount at
maturity of the notes set forth opposite its name below.
Principal Amount
Underwriter at Maturity
----------- ----------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................... $404,000,000
Banc of America Securities LLC............................. 22,725,000
First Union Securities, Inc. .............................. 22,725,000
SunTrust Capital Markets, Inc.............................. 22,725,000
U.S. Bancorp Piper Jaffray, Inc............................ 22,725,000
Fleet Securities, Inc...................................... 10,100,000
------------
Total................................................. $505,000,000
============
In the purchase agreement, the underwriters have agreed, subject to the
terms and conditions set forth in the purchase agreement, to purchase all of
the notes being sold under the terms of the purchase agreement if any of the
notes are purchased.
We have agreed to indemnify the underwriters against specific liabilities,
including liabilities under the Securities Act, or to contribute to payments
the underwriters may be required to make in respect of those liabilities.
The notes are being offered by the underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the underwriters and other conditions. The
underwriters reserve the right to withdraw, cancel or modify their offer and to
reject orders in whole or in part.
The underwriters have advised us that they propose initially to offer the
notes to the public at the public offering price set forth on the cover page of
this prospectus supplement, and to dealers at that price less a concession not
in excess of $11.62 per note (1.162% of the principal amount at maturity).
After the initial public offering, the public offering price may change.
The following table shows the per note and total public offering price, the
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. The information is presented assuming either no exercise
or full exercise by the underwriters of the over-allotment option.
Per Without
Note Option With Option
------- ------------ -----------
Public offering price..................... $861.03 $434,820,150 $500,000,121
Underwriting discount..................... $19.37 $9,781,850 $11,248,159
Proceeds, before expenses, to Lowe's...... $841.66 $425,038,300 $488,751,962
The expenses of this offering, exclusive of the underwriting discount, are
estimated at $375,000. The underwriters have agreed to reimburse some of our
offering expenses.
S-36
No Sales of Similar Securities
We and our Chairman, Executive Vice Presidents and Chief Financial Officer
have agreed that for a period of 90 days after the date of this prospectus
supplement we will not, without the prior written consent of Merrill Lynch on
behalf of the underwriters, either directly or indirectly:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, lend or otherwise dispose of or
transfer any shares of our common stock or securities convertible into
or exchangeable or exercisable for or repayable with our common stock,
or file a registration statement under the Securities Act relating to
sales by us or by the above-referenced persons of any shares of our
common stock; or
. enter into any swap or other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of our common stock whether any such swap or
transaction is to be settled by delivery of our common stock or other
securities, in cash or otherwise.
The restrictions described in the previous paragraph do not apply to (i) our
ability to sell the notes to the underwriters pursuant to the purchase
agreement; (ii) the issuance by Lowe's of shares of common stock upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date of this prospectus supplement; (iii) any securities or options issued
or options granted pursuant to any employee benefit plans; (iv) any common
stock issued pursuant to any non-employee director stock plan or dividend
reinvestment plan; and (v) an aggregate of 4,000,000 shares of common stock.
New Issue of Notes
The notes offered hereby are a new issue of securities for us with no
established trading market. We have been advised by the underwriters that the
underwriters intend to make a market in the notes, but the underwriters are not
obligated to do so and may discontinue market making at any time and without
notice. No assurance can be given as to the liquidity of the trading market for
the notes.
Over-Allotment Option
We have granted an option to the underwriters, exercisable for 30 days after
the date of this prospectus supplement, to purchase up to an additional
$75,700,000 aggregate principal amount at maturity of notes at the initial
public offering price set forth on the cover page of this prospectus supplement
plus accrued cash interest, less the Discount. The underwriters may exercise
this option solely to cover over-allotments, if any, made on the sale of the
notes offered hereby.
Price Stabilization and Short Positions
In connection with this offering, the underwriters may engage in particular
types of transactions that stabilize the price of our notes and our common
stock. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of our notes or our common stock.
If the underwriters create a short position in our notes in connection with
this offering, i.e., if they sell more notes than are set forth on the cover
page of this prospectus supplement, the underwriters may reduce that short
position by purchasing our notes in the open market. The underwriters may also
elect to reduce any short position by exercising all or part of the over-
allotment option described above.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
S-37
Neither we nor the underwriters make any representations or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of our notes or our common stock. In addition, neither we
nor the underwriters make any representation that the underwriters will engage
in such transactions or that such transactions, once commenced, will not be
discontinued without notice.
Other Relationships
Some of the underwriters and their affiliates have engaged in, and may in
the future engage in, investment banking, commercial banking and other
commercial dealings with us in the ordinary course of business. They have
received customary fees and commissions for these transactions.
First Union Securities, Inc., one of the underwriters, is an indirect,
wholly-owned subsidiary of Wachovia Corporation. Wachovia Corporation conducts
its investment banking, institutional, and capital markets businesses through
its various bank, broker-dealer and nonbank subsidiaries (including First Union
Securities, Inc.) under the trade name of Wachovia Securities. Any references
to Wachovia Securities in this prospectus supplement, however, do not include
Wachovia Securities, Inc., member NASD/SIPC and a separate broker-dealer
subsidiary of Wachovia Corporation and an affiliate of First Union Securities,
Inc., which may or may not be participating as a selling dealer in the
distribution of the securities offered by this prospectus supplement.
S-38
LEGAL MATTERS
Certain legal matters in connection with the notes will be passed upon for
us by Hunton & Williams, Richmond, Virginia, and for the underwriters by
Shearman & Sterling, New York, New York.
EXPERTS
The financial statements incorporated by reference in this prospectus
supplement from Lowe's Annual Report on Form 10-K for the fiscal year ended
February 2, 2001 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended May 4, 2001 and April 28, 2000, and August 3, 2001 and July 28, 2000,
which is incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review of
such information. However, as stated in their reports included in Lowe's
Quarterly Reports on Form 10-Q for the quarters ended May 4, 2001 and August 3,
2001 and incorporated by reference herein, they did not audit and they do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. Deloitte & Touche
LLP are not subject to the liability provisions of Section 11 of the Securities
Act of 1933 for their reports on the unaudited interim financial information
because those reports are not "reports" or a "part" of the registration
statement prepared or certified by an accountant within the meaning of Sections
7 and 11 of the Act.
Ernst & Young LLP, independent auditors, have audited Eagle Hardware &
Garden, Inc.'s consolidated financial statements for the fiscal year ended
January 31, 1999, as described in our Annual Report on Form 10-K/A for the year
ended February 2, 2001, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Eagle
Hardware & Garden, Inc.'s financial statements are incorporated by reference in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
S-39
PROSPECTUS
Lowe's
Lowe's Companies, Inc.
$1,500,000,000
Debt Securities
Preferred Stock
Depositary Shares
Common Stock
Warrants
Stock Purchase Contracts
Stock Purchase Units
----------------
We will provide specific terms of these securities, and the manner in which
they are being offered, in supplements to this prospectus. You should read this
prospectus and any supplement carefully before you invest. We cannot sell any
of these securities unless this prospectus is accompanied by a prospectus
supplement.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
----------------
The information in this prospectus is not complete and may change. We cannot
sell these securities until the registration statement filed with the SEC is
effective. This prospectus is not an offer to sell these securities, and it is
not soliciting an offer to buy these securities, in any state where the offer
or sale is not permitted.
----------------
This prospectus is dated March 14, 2001
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under the shelf process, we may sell any combination of the securities
described in this prospectus in one or more offerings up to a total dollar
amount of $1,500,000,000.
This prospectus provides you with a general description of the securities
that we may offer. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in the prospectus. The registration statement that we filed with the
SEC includes exhibits that provide more detail on the matters discussed in this
prospectus. You should read this prospectus and the related exhibits filed with
the SEC and any prospectus supplement together with additional information
described under the heading "WHERE YOU CAN FIND MORE INFORMATION."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file with the
SEC at the SEC's following public reference facilities:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. Please call 1-800-SEC-0330 for further
information on the operations of the public reference facilities. Our SEC
filings are also available at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
This prospectus constitutes part of a registration statement on Form S-3
filed by Lowe's under the Securities Act of 1933. As allowed by SEC rules, this
prospectus does not contain all the information you can find in the
registration statement or the exhibits to the registration statement.
2
INCORPORATION OF INFORMATION FILED WITH THE SEC
The SEC allows us to "incorporate by reference" in this prospectus the
information we file with the SEC, which means:
. incorporated documents are considered part of this prospectus;
. we can disclose important information to you by referring you to those
documents; and
. our filings with the SEC will automatically update and supersede the
information in this prospectus and any information that was previously
incorporated.
The following documents filed by Lowe's with the SEC (file No. 1-7898) are
incorporated herein by reference and made a part hereof: (i) Lowe's Annual
Report on Form 10-K for the fiscal year ended January 28, 2000; (ii) Lowe's
Quarterly Reports on Form 10-Q for the quarters ended April 28, 2000, July 28,
2000 and October 27, 2000; (iii) Lowe's Current Reports on Form 8-K filed on
June 8, 2000 and December 20, 2000; February 12, 2001 and February 23, 2001;
and (iv) the description of Lowe's common stock and preferred stock purchase
rights contained in Lowe's registration statements on Form 8-A filed under the
Securities Exchange Act of 1934, as amended, including any amendment or report
filed for the purpose of updating such description.
You can obtain any of the filings incorporated by reference in this document
through us, or from the SEC through the SEC's web site or at the addresses
listed above. Documents incorporated by reference are available from us without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this prospectus. You
can obtain documents incorporated by reference in this prospectus by requesting
them in writing or by telephone from us at the following address:
T. Carson Anderson, IV
Lowe's Companies, Inc.
1605 Curtis Bridge Road
Wilkesboro, North Carolina 28697
Telephone: (336) 658-4385 or (888) 34LOWES
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of the initial filing of the registration
statement and prior to the time we sell all of the securities offered by this
prospectus:
. reports filed under Section 13(a) and (c) of the Exchange Act;
. definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent stockholders' meeting; and
. any reports filed under Section 15(d) of the Exchange Act.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of the prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that is incorporated by reference herein modifies or supersedes such
earlier statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of the
prospectus.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. We are not
making any offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of those documents.
3
WARNING REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus may include "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although we believe that the expectations reflected in
such forward-looking statements are reasonable, we can give no assurance that
such expectations will prove to be correct. Some of the things that could cause
our actual results to differ substantially from our expectations are:
. Our sales are dependent upon the general economic health of the country,
the level of repairs, remodeling and additions to existing homes,
commercial building activity, and the availability and cost of financing.
An economic downturn can impact sales because much of our inventory is
purchased for discretionary projects, which can be delayed.
. Our expansion strategy may be affected by environmental regulations,
local zoning issues and delays. As we expand into major metropolitan
areas, the availability and development of land, and more stringent land
use regulations than we have traditionally experienced, may result in
lengthening timelines for the opening of our stores.
. Many of our products are commodities whose prices fluctuate erratically
within an economic cycle, a condition true of lumber and plywood.
. Our business is highly competitive, and as we expand to larger markets,
and to the Internet, we may face new forms of competition which do not
exist in some of the markets we have traditionally served.
. The ability to continue our everyday competitive pricing strategy and
provide the products that consumers want depends on our vendors
providing a reliable supply of inventory at competitive prices.
. On a short-term basis, weather may affect sales of product groups like
lawn and garden, lumber, and building materials.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
You should carefully read this prospectus and the documents incorporated by
reference in their entirety. They contain information that you should consider
when making your investment decision.
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized any other person to
provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. You should assume that
the information appearing in this prospectus, as well as information that we
previously filed with the SEC and incorporated by reference, is accurate as of
the date on the front cover of this prospectus only. Our business, financial
condition, results of operations and prospects may have changed since that
date.
4
THE COMPANY
Lowe's Companies, Inc. is the world's second largest home improvement
retailer competing in a highly fragmented $400 billion industry. We serve more
than four million do-it-yourself and commercial business customers weekly
through more than 650 stores in 40 states. At the end of the third quarter
2000, our retail square footage totaled approximately 64 million square feet.
Headquartered in Wilkesboro, North Carolina, our 55-year-old company employs
over 100,000 people. We anticipate opening 115 to 125 stores, which includes
relocating 10 to 15 older, smaller format stores, under our 2001 expansion
plan.
Lowe's gives back to the communities it serves through programs and
volunteer involvement. Lowe's contributes regularly to nonprofit organizations
in towns and cities throughout Lowe's territory. Through the "Lowe's Heroes"
programs and Lowe's Home Safety Council, Lowe's provides civic groups help with
public safety projects and shares important home safety and fire prevention
information with neighborhoods across the country.
Lowe's is incorporated in North Carolina and has been a publicly held
company since October 10, 1961. Our stock is listed on the New York Stock
Exchange, the Pacific Stock Exchange and the London Stock Exchange with shares
trading under the ticker symbol LOW.
USE OF PROCEEDS
Unless we state otherwise in the applicable prospectus supplement, we will
use the net proceeds from the sale of the securities:
. to finance the purchase of land, buildings and equipment for new and
existing stores,
. to repay indebtedness,
. to repurchase our outstanding securities, and
. for other general corporate purposes.
We may temporarily invest any proceeds that are not immediately applied to
the above purposes in U.S. government or agency obligations, commercial paper,
bank certificates of deposit, or repurchase agreements collateralized by U.S.
government or agency obligations. We may also deposit the proceeds with banks.
RATIO OF EARNINGS TO FIXED CHARGES
Lowe's historical ratio of earnings to fixed charges is shown in the table
below. "Earnings" consists of income before income taxes and fixed charges.
"Fixed charges" consists of interest on indebtedness (including capitalized
interest) and a share of rental expense deemed to be representative of
interest.
Nine Months Ended Fiscal Years Ended On
----------------- ---------------------------------------
10/27/00 10/29/99 1/28/00 1/29/99 1/30/98 1/31/97 1/31/96
-------- -------- ------- ------- ------- ------- -------
Ratio of earnings to
fixed charges.......... 7.44 6.77 6.50 5.86 5.95 5.79 5.25
5
DESCRIPTION OF OUR DEBT SECURITIES
The following description sets forth general terms and provisions of the
debt securities that we may offer with this prospectus. We will provide
additional terms of the debt securities in a prospectus supplement.
As required by federal law for all publicly offered notes and debentures,
the debt securities that we offer with this prospectus are governed by
documents called "indentures." We will issue senior debt securities under an
Amended and Restated Indenture, dated as of December 1, 1995, between Lowe's
and Bank One, N.A., (formerly known as The First National Bank of Chicago), as
trustee. We refer to this indenture as the "Senior Indenture." We will issue
our subordinated debt securities under the Indenture between Lowe's and The
Bank of New York, as trustee. We refer to this indenture as the "Subordinated
Indenture." As trustees, Bank One and The Bank of New York serve two roles.
First, the trustees can enforce your rights against us should we default on the
debt securities. Second, the trustees assist in administering our obligations
under the debt securities, such as payments of interest.
Below, we describe the indentures and summarize some of their provisions.
However, we have not described every aspect of the debt securities. You should
refer to the actual indentures for a complete description of their provisions
and the definitions of terms used in them. In this prospectus, we provide only
the definitions for some of the more important terms in the indentures. In
addition, we also include references in parentheses to some sections of the
indentures. Whenever we refer to particular sections or defined terms of the
indentures in this prospectus or in the prospectus supplement, we are
incorporating by reference those sections or defined terms into this prospectus
or the prospectus supplement. Unless we state otherwise, the section numbers
refer to the applicable sections for both indentures.
The indentures are exhibits to the registration statement. See "WHERE YOU
CAN FIND MORE INFORMATION" for information on how to obtain a copy of the
indentures for your review.
General Terms of Our Debt Securities.
The indentures do not limit the aggregate principal amount of debt
securities that we may issue and provide that we may issue debt securities from
time to time in one or more series. (Section 301). In addition, neither the
indentures nor the debt securities will limit or otherwise restrict the amount
of senior indebtedness that we or our subsidiaries may incur. "Senior
Indebtedness" is defined below in the subsection "Subordination of Our
Subordinated Debt Securities."
Under the Senior Indenture, we have outstanding:
. $500 million of 7 1/2% Senior Notes due December 15, 2005,
. $500 million of 8 1/4% Senior Notes due June 1, 2010,
. $100 million of Senior Notes due December 15, 2005,
. $268 million of Medium Term Notes, Series B, at rates ranging from 6.70%
to 7.61% with final maturities ranging from September 1, 2007 to May 15,
2037,
. $300 million of 6 7/8% Debentures due February 15, 2028, and
. $400 million of 6 1/2% Debentures due March 15, 2029.
We have outstanding under a separate senior indenture an additional $121
million of Medium Term Notes, Series A, at rates ranging from 7.08% to 8.20%
and with final maturities from February 12, 2001 to January 11, 2023.
The senior debt securities will be our unsecured obligations and will rank
on a parity with all of our other unsecured and unsubordinated indebtedness.
The senior debt securities will be subordinated to our secured indebtedness and
that of our subsidiaries and to any unsecured, unsubordinated indebtedness of
our
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subsidiaries. In other words, if we should default on our debt, we will not pay
on the senior debt securities until we have fully paid off our secured
indebtedness and that of our subsidiaries and any unsecured, unsubordinated
indebtedness of our subsidiaries. At December 29, 2000, we had $201.6 million
of secured indebtedness outstanding and $2,319.5 million of unsecured
indebtedness outstanding. At December 29, 2000, our subsidiaries had $126.3
million of secured unsubordinated indebtedness outstanding.
The subordinated debt securities will be our unsecured obligations and will
be subordinated in right of payment to all senior indebtedness.
The particular terms of each issue of debt securities, as well as any
modifications or additions to the general terms of the indenture applicable to
the issue of debt securities, will be described in the prospectus supplement.
This description will contain all or some of the following as applicable:
. the title of the debt security;
. the aggregate principal amount and denominations;
. the maturity or maturities;
. the price that we will receive from the sale of the debt securities;
. the interest rate or rates, or their method of calculation, to be
established for the debt securities, which rate or rates may vary from
time to time;
. the date or dates on which principal of the debt securities is payable;
. the date or dates from which interest on the debt securities will accrue
and the payment and record date or dates for payments of interest or the
methods by which any such dates will be determined;
. the place or places where principal of, premium, if any, and interest, if
any, on the debt securities is payable;
. the terms of any sinking fund and analogous provisions with respect to
the debt securities;
. the respective redemption and repayment rights, if any, of Lowe's and of
the holders of the debt securities and the related redemption and
repayment prices and any limitations on the redemption or repayment
rights;
. any provisions relating to the conversion or exchange of the debt
securities;
. any addition to or change in the affirmative or negative covenants, if
any, to be imposed upon us relating to any of the debt securities;
. any trustee or fiscal or authenticating or payment agent, issuing and
paying agent, transfer agent or registrar or any other person or entity
to act in connection with the debt securities for or on behalf of the
holders thereof or the Company or an affiliate;
. whether the debt securities are to be issuable initially in temporary
global form and whether any such debt securities are to be issuable in
permanent global form and, if so, whether beneficial owners of interests
in any such permanent global security may exchange the interests for debt
securities of like tenor of any authorized form and denomination and the
circumstances under which any such exchanges may occur;
. the listing of the debt securities on any securities exchange or
inclusion in any other market or quotation or trading system;
. any other specific terms, conditions and provisions of the debt
securities; and
. the conversion price and other terms of any debt securities that a holder
may convert into our common stock before our redemption, repayment or
repurchase of those convertible debt securities.
7
Unless the prospectus supplement provides differently, the trustees will pay
the principal of and any premium and interest on the debt securities and will
register the transfer of any debt securities at their offices. However, at our
option, we may distribute interest payments by mailing a check to the address
of each holder of debt securities that appears on the register for the debt
securities. (Sections 305 and 1002).
Unless the prospectus supplement provides differently, we will issue the
debt securities in fully registered form without coupons and in denominations
of $1,000 or any integral multiple of $1,000. There will be no service charge
for any registration of transfer or exchange of the debt securities, although
we may require that purchasers of the debt securities pay any tax or other
governmental charge associated with the registration. (Sections 302 and 305).
We may issue debt securities as Original Issue Discount Securities, as
defined in the indentures, to be sold at a substantial discount below their
principal amount. The prospectus supplement will describe any special federal
income tax and other considerations applicable to these securities.
Covenants Applicable to Our Senior Debt Securities.
Unless stated otherwise in the applicable prospectus supplement, senior debt
securities will have the benefit of the following covenants, and subordinated
debt securities will not. We have defined several capitalized terms used in
this section in the subsection below entitled "Definitions of Key Terms in the
Senior Indenture." Capitalized terms not defined there are defined in the
Senior Indenture.
Restrictions on Debt.
The Senior Indenture provides that as long as we have any senior debt
securities outstanding:
. we will not, and we will not permit any of our subsidiaries to, incur,
issue, assume or guarantee any Debt secured by
--a Mortgage on any Principal Property of Lowe's or any subsidiary; or
--any shares of Capital Stock or Debt of any subsidiary,
unless all outstanding senior debt securities will be secured equally and
ratably with the secured Debt, so long as the secured Debt is secured;
and
. we will not permit any of our subsidiaries to incur, issue, assume or
guarantee any unsecured Debt or to issue any preferred stock, unless the
aggregate amount of all the secured Debt together with the aggregate
preferential amount to which the preferred stock would be entitled on any
involuntary distribution of assets and all Attributable Debt of Lowe's
and our subsidiaries in respect of sale and leaseback transactions would
not exceed 10% of our Consolidated Net Tangible Assets.
This restriction does not apply to the following Debts, which we exclude in
computing Debt for the purpose of the restriction:
. Debt secured by Mortgages on any property acquired, constructed or
improved by Lowe's or any subsidiary after December 1, 1995, which
Mortgages are created or assumed contemporaneously with, or within 30
months after, the acquisition, or completion of the construction or
improvement, or within six months thereafter under a firm commitment for
financing arranged with a lender or investor within the 30-month period,
to secure or provide for the payment of all or any part of the purchase
price of the property or the cost of the construction or improvement
incurred after December 1, 1995 or Mortgages on any property existing at
the time of its acquisition if any such Mortgage does not apply to any
property previously owned by us or any subsidiary other than, in the case
of any such construction or improvement, any previously unimproved real
property on which the property so constructed, or the improvement, is
located;
. Debt of any corporation existing at the time the corporation is merged
with or into Lowe's or a subsidiary;
8
. Debt of any corporation existing at the time the corporation becomes a
subsidiary;
. Debt of a subsidiary or of a subsidiary's subsidiary;
. Debt, such as industrial reserve bonds, secured by Mortgages securing
obligations issued by a state, territory or possession of the United
States, or any political subdivision of any of the foregoing, or the
District of Columbia to finance the acquisition of or construction on
property, and on which the interest is not, in the opinion of counsel,
includable in gross income of the holder; and
. the extensions, renewals or replacements of any Debt referred to in the
above clauses.
This restriction does not apply to any issuance of preferred stock by a
subsidiary to Lowe's or another subsidiary, provided that the preferred stock
is thereafter not transferable to any Person other than Lowe's or a subsidiary.
(Senior Indenture, Section 1008).
Restrictions on Sales and Leasebacks.
The Senior Indenture provides that we will not, and we will not permit any
subsidiary to, after December 1, 1995, enter into any transaction involving the
sale and subsequent leasing back of Lowe's or any of its subsidiaries of any
Principal Property, unless, after giving effect to the sale and leaseback
transaction, the aggregate amount of all Attributable Debt with respect to all
such transactions plus all Debt to which Section 1008 of the Senior Indenture
is applicable, would not exceed 10% of Consolidated Net Tangible Assets. This
restriction will not apply to, and there will be excluded in computing
Attributable Debt for the purpose of the restriction, Attributable Debt with
respect to any sale and leaseback transaction if:
. the lease in the transaction is for a period (including renewal rights)
not exceeding three years;
. Lowe's or a subsidiary, within 180 days after the transaction, applies an
amount not less than the greater of the net proceeds of the sale of the
Principal Property leased under the arrangement or the fair market value
of the Principal Property leased at the time of entering into the
arrangement (as determined by the Board of Directors) to, with some
restrictions, the retirement of our Funded Debt ranking on a parity with
or senior to the Senior Debt Securities or the retirement of Funded Debt
of a subsidiary;
. the transaction is entered into before, at the time of, or within 30
months after the later of the acquisition of the Principal Property or
the completion of its construction;
. the lease in the transaction secures or relates to obligations issued by
a state, territory or possession or the United States, or any political
subdivision thereof, or the District of Columbia, to finance the
acquisition of or construction on property, and on which the interest is
not, in the opinion of counsel, includable in the gross income of the
holder; or
. the transaction is entered into between Lowe's and a subsidiary or
between subsidiaries.
(Senior Indenture, Section 1009).
Definitions of Key Terms in the Senior Indenture.
The Senior Indenture defines the following terms used in this subsection:
"Attributable Debt" means, as to any particular lease under which any Person
is at the time liable, at any date as of which the amount thereof is to be
determined, the total net amount of rent required to be paid by the Person
under the lease during the remaining term thereof (excluding any subsequent
renewal or other extension options held by the lessee), discounted from the
respective due dates thereof to the date at the rate of 10% per annum
compounded annually. The net amount of rent required to be paid under any such
lease for any such period will be the amount of the rent payable by the lessee
with respect to the period, after excluding amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water rates
and similar charges and contingent rents (such as those based on sales). In the
case of any lease that is terminable by the lessee upon the payment of a
penalty, the net amount will also include the amount of the penalty, but no
9
rent will be considered as required to be paid under the lease after the first
date upon which it may be so terminated.
"Capital Stock", as applied to the stock of any corporation, means the
capital stock of every class whether now or hereafter authorized, regardless of
whether the capital stock will be limited to a fixed sum or percentage with
respect to the rights of the holders thereof to participate in dividends and in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the corporation.
"Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) after deducting
(i) all current liabilities and (ii) all goodwill, trade names, trademarks,
patents, unamortized debt discount and expense and other like intangibles, all
as shown on the most recent balance sheet of Lowe's and our consolidated
subsidiaries and computed under generally accepted accounting principles.
"Debt" means loans, notes, bonds, indentures or other similar evidences of
indebtedness for money borrowed.
"Funded Debt" means all indebtedness for money borrowed having a maturity of
more than 12 months from the date as of which the amount thereof is to be
determined or having a maturity of less than 12 months but by its terms being
renewable or extendible beyond 12 months from the date at the option of the
borrower.
"Preferred stock" means any class of our stock that has a preference over
common stock in respect of dividends or of amounts payable in the event of our
voluntary or involuntary liquidation, dissolution or winding up and that is not
mandatorily redeemable or repayable, or redeemable or repayable at the option
of the Holder, otherwise than in shares of common stock or preferred stock of
another class or series or with the proceeds of the sale of common stock or
preferred stock.
"Principal Property" means any building, structure or other facility,
together with the land upon which it is erected and fixtures comprising a part
thereof, used primarily for selling home improvement products or the
manufacturing, warehousing or distributing of the products, owned or leased by
us or any of our subsidiaries. (Senior Indenture, Section 101).
Subordination of Our Subordinated Debt Securities.
Our obligations to make any payment on account of the principal of and
premium, if any, and interest on the subordinated debt securities will be
subordinate and junior in right of payment, to the extent described in the
Subordinated Indenture, to all of our senior indebtedness. (Subordinated
Indenture, Article 14).
If we default in the payment of any principal of or any premium or interest
on any senior indebtedness when it becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration of acceleration or
otherwise, then, unless and until we have cured the default, or it is waived or
ceases to exist, we will not make or agree to make any direct or indirect
payment, in cash, property, securities, by set-off or otherwise, for principal
of or any premium or interest on the subordinated debt securities, or in
respect of any redemption, retirement, purchase or other acquisition of any of
the subordinated debt securities. (Subordinated Indenture, Section 1401).
"Senior Indebtedness" is defined in the Subordinated Indenture as:
. all of our indebtedness for money borrowed or constituting reimbursement
obligations with respect to letters of credit and interest or currency
swap agreements, including indebtedness secured by a mortgage,
conditional sales contract or other lien that is:
-- given to secure all or a part of the purchase price of the property
subject to the mortgage, conditional sales contract or other lien
thereto, whether given to the vendor of the property or to another, or
-- existing on property at the time of acquisition thereof;
10
. all of our indebtedness evidenced by notes, debentures, bonds or other
securities that we sold for money;
. lease obligations, including but not limited to capitalized lease
obligations;
. all indebtedness of others of the kinds described in either of the
preceding first or second clauses and all lease obligations and
obligations of others of the kind described in the preceding third clause
assumed by or guaranteed in any manner by us or in effect guaranteed by
us through an agreement to purchase, contingent or otherwise; and
. all, whether initial or seriatim, renewals, deferrals, increases,
extensions or refundings of and modifications to indebtedness of the
kinds described in any of the preceding first, second or fourth clauses
and all renewals or extensions of leases of the kinds described in either
of the preceding third or fourth clauses; unless, in the case of any
particular indebtedness, lease, renewal, extension or refunding, the
instrument or lease creating or evidencing the same or the assumption or
guarantee of the same expressly provides that the indebtedness, lease,
renewal, extension, deferral, increase, modification or refunding is not
superior in right of payment to the subordinated debt securities or is
expressly subordinated by its terms in right of payment to all of our
other indebtedness, including the subordinated debt securities.
We will first pay in full all senior indebtedness before making any payment
or distribution, whether in cash, securities or other property, to holders of
subordinated debt securities in the event of:
. any insolvency, bankruptcy, receivership, liquidation, reorganization,
readjustment, composition or other similar proceeding relating to us, our
creditors or our property;
. any proceeding for our voluntary or involuntary liquidation, dissolution
or other winding up, whether or not involving insolvency or bankruptcy
proceedings;
. any assignment by us for the benefit of creditors; or
. any other marshalling of our assets.
In that event, any payment or distribution on account of the principal of or
any premium or interest on the subordinated debt securities, whether in cash,
securities or other property, other than securities of ours or any other
corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in the
subordination provisions with respect to the subordinated debt securities, to
the payment of all senior indebtedness at the time outstanding, and to any
securities issued in respect thereof under any such plan of reorganization or
readjustment, which would otherwise, but for the subordination provisions, be
payable or deliverable in respect of the subordinated debt securities, will be
paid or delivered directly to the holders of senior indebtedness under the
priorities then existing among the holders until all senior indebtedness,
including any interest thereon accruing after the commencement of any such
proceedings has been paid in full.
In the event of a proceeding, after payment in full of all sums owing with
respect to senior indebtedness, the holders of subordinated debt securities,
together with the holders of any of our obligations ranking on a parity with
the subordinated debt securities, will be entitled to be paid from our
remaining assets the amounts at the time due and owing on account of unpaid
principal of and premium, if any, and interest on the subordinated debt
securities and the other obligations before any payment or other distribution,
whether in cash, property or otherwise, will be made on account of any of our
capital stock or obligations ranking junior to the subordinated debt securities
and the other obligations.
If any payment or distribution on account of the principal of or any premium
or interest on the subordinated debt securities of any character, whether in
cash, securities or other property, other than securities of ours or any other
corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in the
subordination provisions with respect to the subordinated debt securities, to
the payment of all senior indebtedness at the time outstanding and to any
securities issued in
11
respect thereof under any such plan of reorganization or readjustment, or any
security is received by the trustee or any holder of any subordinated debt
securities in contravention of any of the terms of the Subordinated Indenture
and before all the senior indebtedness is paid in full, the payment or
distribution or security will be received in trust for the benefit of, and will
be paid over or delivered and transferred to, the holders of the senior
indebtedness at the time outstanding under the priorities then existing among
the holders for application to the payment of all senior indebtedness remaining
unpaid to the extent necessary to pay all the senior indebtedness in full.
(Subordinated Indenture, Section 1401).
By reason of this subordination, in the event of our insolvency, holders of
senior indebtedness may receive more, ratably, and any holders of the
subordinated debt securities having a claim under the subordinated debt
securities may receive less, ratably, than our other creditors. The
subordination will not prevent the occurrence of an event of default of the
subordinated debt securities. "Events of default" are described below in the
subsection "Events of Default."
The Effect of Our Corporate Structure on Our Payment of the Debt Securities.
The debt securities are the obligations of Lowe's exclusively. Because our
operations are currently conducted through subsidiaries, the cash flow and the
consequent ability to service our debt, including the debt securities, are
dependent, in part, upon the earnings of our subsidiaries and the distribution
of those earnings to us or upon loans or other payments of funds by those
subsidiaries to us. Our subsidiaries are separate and distinct legal entities.
They have no obligation, contingent or otherwise, to pay any amounts due on the
debt securities or to make any funds available for our payment of any amounts
due on the debt securities, whether by dividends, loans or other payments. In
addition, our subsidiaries' payments of dividends and making of loans and
advances to us may be subject to statutory or contractual restrictions, are
contingent upon the earnings of those subsidiaries and various business
considerations.
Although the Senior Indenture limits the incurrence of the indebtedness, as
described above in the subsection "Covenants Applicable to Our Senior Debt
Securities," the debt securities will be effectively subordinated to all
indebtedness and other liabilities, including current liabilities and
commitments under leases, if any, of our subsidiaries. Any right of ours to
receive assets of any of our subsidiaries upon liquidation or reorganization of
the subsidiary (and the consequent right of the holders of the debt securities
to participate in those assets) will be effectively subordinated to the claims
of that subsidiary's creditors (including trade creditors), except to the
extent that we are recognized as a creditor of the subsidiary, in which case
our claims would still be subordinated to any security interests in the
subsidiary's assets and any of the subsidiary's indebtedness senior to that
which we hold.
No Restriction on Sale or Issuance of Stock of Subsidiaries.
The indentures contain no covenant that we will not sell, transfer or
otherwise dispose of any shares of, or securities convertible into, or options,
warrants or rights to subscribe for or purchase shares of, voting stock of any
of our subsidiaries. They also do not prohibit any subsidiary from issuing any
shares of, securities convertible into, or options, warrants or rights to
subscribe for or purchase shares of, the subsidiary's voting stock.
Consolidation, Merger and Sale of Assets.
Without the consent of the holders of any of the outstanding debt
securities, we may consolidate or merge with or into, or convey, transfer or
lease our properties and assets substantially as an entirety, to any
corporation organized under the laws of any domestic jurisdiction, as long as:
. the successor corporation assumes our obligations on the debt securities
and under the indentures;
. after giving effect to the transaction no event of default, and no event
that, after notice or become an event of default, has occurred and is
continuing; and
. other conditions described in the indentures are met. (Section 801).
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Events of Default.
The following are "events of default" with respect to debt securities of any
series:
. default for 30 days in payment when due of any interest on any debt
security of the series or any additional amount payable with respect to
debt securities of the series as specified in the applicable prospectus
supplement;
. default in payment when due of principal, premium, if any, or on
redemption or otherwise, or in the making of a mandatory sinking fund
payment of any debt securities of the series;
. default for 60 days after notice from the applicable trustees or from the
holders of 25% in aggregate principal amount of the debt securities of
the series then outstanding, in the performance of any other agreement in
the debt securities of the series, in the indentures or in any
supplemental indenture or board resolution referred to in the notice
under which the debt securities of the series may have been issued;
. default in the payment of principal when due or resulting in acceleration
of other indebtedness of ours for borrowed money where the aggregate
principal amount with respect to which the default or acceleration has
occurred exceeds $10 million and the acceleration is not rescinded or
annulled within ten days after written notice of the default to us or to
us and the trustee by the holders of 25% in aggregate principal amount of
the debt securities of the series then outstanding, as long as the event
of default will be cured or waived if the default that resulted in the
acceleration of the other indebtedness is cured or waived or the
indebtedness is discharged; and
. events of bankruptcy, insolvency or reorganization of Lowe's more fully
described in the indentures.
(Section 501).
The prospectus supplement will describe any additional events of default
that may be added to the indenture for a particular series of debt securities
(Section 301). No event of default with respect to a particular series of debt
securities issued under the indentures necessarily constitutes an event of
default with respect to any other series of debt securities issued under the
indentures.
The indentures provide that the trustee for any series of debt securities
will, within ninety days after the occurrence of a default with respect to debt
securities of the series, give to the holders of those debt securities notice
of all uncured defaults known to it, provided that:
. except in the case of default in payment on the debt securities of the
series, the trustee may withhold the notice if and so long as it in good
faith determines that withholding the notice is in the interest of the
holders of the debt securities of that series, and
. no notice of a default made in the performance of any covenant or a
breach of any warranty contained in the indentures will be given until at
least 60 days after the occurrence thereof.
"Default" means any event that is, or, after notice or passage of time or both,
would be, an event of default. (Section 602).
If an event of default with respect to debt securities of any series at the
time outstanding occurs and is continuing, either the trustee or the holders of
at least 25% in aggregate principal amount of the outstanding debt securities
of the series may declare the principal amount (or, if the debt securities of
the series are Original Issue Discount Securities, the portion of the principal
amount as may be specified in the terms of the series) of all the debt
securities of the series to be due and payable immediately. At any time after
making a declaration of acceleration with respect to debt securities of any
series, but before obtaining a judgment or decree based on acceleration, the
holders of a majority in aggregate principal amount of outstanding debt
securities of the series may, in some circumstances, rescind and annul the
acceleration. (Section 502).
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The indentures provide that, except for the duty of the trustees in the case
of an event of default to act with the required standard of care, the trustees
will be under no obligation to exercise any of these rights or powers under the
indentures at the request or direction of any of the holders, unless the
holders have offered reasonable indemnity to the trustees. (Sections 601 and
603). Except as limited by the provisions for the indemnification of the
trustees, the holders of a majority in aggregate principal amount of the
outstanding debt securities of each series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the trustees, or exercising any trust or power conferred on the trustees with
respect to the debt securities of the series. (Section 512).
We are required to furnish annually to the trustees a statement as to our
performance of some of our obligations under the indentures and as to any
default in our performance. (Section 1005).
Global Securities.
We may issue the debt securities of a series as one or more fully registered
global securities. We will deposit the global securities with, or on behalf of,
a depositary bank identified in the prospectus supplement relating to the
series. We will register the global securities in the name of the depositary
bank or its nominee. In such case, one or more global securities will be issued
in a denomination or aggregate denominations equal to the aggregate principal
amount of outstanding debt securities of the series represented by the global
security or securities. Until any global security is exchanged in whole or in
part for debt securities in definitive certificated form, the depositary bank
or its nominee may not transfer the global certificate except to each other,
another nominee or to their successors and except as described in the
applicable prospectus supplement. (Section 303).
The prospectus supplement will describe the specific terms of the depositary
arrangement with respect to a series of debt securities that a global security
will represent. We anticipate that the following provisions will apply to all
depositary arrangements.
Upon the issuance of any global security, and the deposit of the global
security with or on behalf of the depositary bank for the global security, the
depositary bank will credit, on its book-entry registration and transfer
system, the respective principal amounts of the debt securities represented by
the global security to the accounts of institutions, also referred to as
"participants," that have accounts with the depositary bank or its nominee. The
accounts to be credited will be designated by the underwriters or agents
engaging in the distribution or placement of the debt securities or by us, if
we offer and sell the debt securities directly. Ownership of beneficial
interests in the global security will be limited to participants or persons
that may hold interests through participants.
Ownership of beneficial interests by participants in the global security
will be shown by book-keeping entries on, and the transfer of that ownership
interest will be effected only through book-keeping entries to, records
maintained by the depositary bank or its nominee for the global security.
Ownership of beneficial interests in the global security by persons that hold
through participants will be shown by book-keeping entries on, and the transfer
of that ownership interest among or through the participants will be effected
only through book-keeping entries to, records maintained by the participants.
The laws of some jurisdictions require that some of the purchasers of
securities take physical delivery of the securities in definitive certificated
form rather than book-entry form. Such laws may impair the ability to own,
transfer or pledge beneficial interests in any global security.
So long as the depositary bank for a global security or its nominee is the
registered owner of the global security, the depositary bank or the nominee, as
the case may be, will be considered the sole owner or holder of the debt
securities represented by the global security for all purposes under the
indenture. Except as described below or otherwise specified in the applicable
prospectus supplement, owners of beneficial interests in a global security:
. will not be entitled to have debt securities of the series represented by
the global security registered in their names,
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. will not receive or be entitled to receive physical delivery of debt
securities of the series in definitive certificated form, and
. will not be considered the holders thereof for any purposes under the
indenture.
Accordingly, each person owning a beneficial interest in the global security
must rely on the procedures of the depositary bank and, if the person is not a
participant, on the procedures of the participant through which the person
directly or indirectly owns its interest, to exercise any rights of a holder
under the indenture. The indenture provides that the depositary bank may grant
proxies and otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action that
a holder is entitled to give or take under the indenture. (Section 104).
We understand that under existing industry practices, if we request any
action of holders or any owner of a beneficial interest in the global security
desires to give any notice or take any action that a holder is entitled to give
or take under the indenture, the depositary bank for the global security would
authorize the participants holding the relevant beneficial interest to give
notice or take action, and the participants would authorize beneficial owners
owning through the participants to give notice or take action or would
otherwise act upon the instructions of beneficial owners owning through them.
Principal and any premium and interest payments on debt securities
represented by a global security registered in the name of a depositary bank or
its nominee will be made to the depositary bank or its nominee, as the case may
be, as the registered owner of the global security. None of us, the trustee or
any paying agent for the debt securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in any global security or for maintaining,
supervising or reviewing any records relating to the beneficial ownership
interests. (Section 308).
We expect that the depositary bank for any series of debt securities
represented by a global security, upon receipt of any payment of principal,
premium or interest, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the global security as shown on the records of the
depositary bank. We also expect that payments by participants to owners of
beneficial interests in the global security or securities held through the
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers
registered in "street name," and will be the responsibility of the
participants.
If the depositary bank for any series of debt securities represented by a
global security is at any time unwilling or unable to continue as depositary
bank and we do not appoint a successor depositary bank within 90 days, we will
issue the debt securities in definitive certificated form in exchange for the
global security. In addition, we may at any time and in our sole discretion
determine not to have the debt securities of a series represented by one or
more global securities and, in the event, will issue debt securities of the
series in definitive certificated form in exchange for the global security
representing the series of debt securities. (Section 305).
Further, at our discretion, an owner of a beneficial interest in a global
security representing debt securities of a series may, on terms acceptable to
us and the depositary bank for the global security, receive debt securities of
the series in definitive certificated form. Debt securities of the series
issued in definitive certificated form will, except as described in the
applicable prospectus supplement, be issued in denominations of $1,000 and
integral multiples thereof and will be issued in registered form. (Section
305).
Modification and Waiver of the Indentures.
We and the applicable Trustee may modify or amend the indentures with the
consent of the holders of a majority in principal amount of the debt securities
of all affected series. However, we must have the consent of the holders of all
of the affected outstanding debt securities to:
. change the stated maturity date of the principal of, or any installment
of principal of, or premium, if any, or interest, if any, on, any debt
security;
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. reduce the principal, premium, interest or amount payable on redemption
of any debt security;
. change the method of calculation of any premium, interest or amount
payable on redemption of any debt security;
. reduce the amount of principal of a debt security payable on acceleration
of the maturity of the debt security;
. change the place or currency of payment of principal of, or premium or
interest on, any debt security;
. impair a holder's conversion rights;
. impair a holder's right to institute suit for the enforcement of any
payment on or with respect to any debt security; or
. reduce the percentage in principal amount of the debt security, the
consent of whose holders is required for modification or amendment of the
indentures or for waiver of compliance with some of the provisions of the
indentures or for waiver of some of the defaults.
(Sections 901 and 902).
The holders of a majority in principal amount of the debt securities of all
affected series may, on behalf of the holders of all the debt securities,
waive:
. our compliance with some of the restrictive provisions of the indentures,
and
. any past default under the indentures with respect to the debt
securities.
They may not waive:
. a default in the payment of the principal of, or premium or interest on,
any debt security, or
. a provision that, under the indentures, requires the consent of the
holders of all of the affected outstanding debt securities for
modification or amendment.
(Section 513).
Regarding the Trustees.
Bank One, N.A. (formerly known as The First National Bank of Chicago) is the
trustee under the Senior Indenture. Notice to the senior trustee should be
directed to:
Corporate Trust Office
1 Bank One Plaza
Suite IL1-0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Administration.
The Bank of New York is the trustee under the Subordinated Indenture. Notice
to the subordinated trustee should be directed to:
Corporate Trust Office
101 Barclay Street
New York, New York 10007.
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DESCRIPTION OF OUR PREFERRED STOCK
General.
The following is a summary of some of the important terms of our preferred
stock. You should review the applicable North Carolina law and our Restated
and Amended Charter and Bylaws for a more complete description of our
preferred stock.
Our Charter authorizes us to issue 5,000,000 shares of preferred stock. We
may amend our Charter from time to time to increase the number of authorized
shares of preferred stock. Any amendment requires the approval of the holders
of a majority of the outstanding shares of common stock and the approval of
the holders of a majority of the outstanding shares of all series of preferred
stock voting together as a single class without regard to series. As of the
date of this prospectus, we had no shares of preferred stock outstanding.
The Board of Directors is authorized to designate with respect to each new
series of preferred stock:
. the number of shares in each series;
. the dividend rates and dates of payment;
. voluntary and involuntary liquidation preferences;
. redemption prices;
. whether dividends will be cumulative and, if cumulative, the date or
dates from which they will be cumulative;
. the sinking fund provisions, if any, for redemption or purchase of
shares;
. the rights, if any, and the terms and conditions on which shares can be
converted into or exchanged for, or the rights to purchase, shares of any
other class or series; and
. the voting rights, if any.
We will pay dividends and make distributions in the event of our
liquidation, dissolution or winding up first to holders of our preferred stock
and then to holders of our common stock. The Board of Directors' ability to
issue preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things,
adversely affect the voting powers of holders of common stock and, under some
circumstances, may discourage an attempt by others to gain control of us.
The prospectus supplement relating to each series of the preferred stock
will describe the following terms:
. title and stated value of the series;
. the number of shares in the series;
. the dividend payment dates and the dividend rate or method of
determination or calculation of the terms applicable to the series;
. applicable redemption provisions, if any;
. sinking fund or purchase fund provisions, if any;
. the fixed liquidation price and fixed liquidation premium, if any,
applicable to the series;
. the rate or basis of exchange or conversion into other securities or
method of determination thereof applicable to the series, if any;
. the conversion rights, if any;
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. applicable voting rights; and
. any other applicable terms.
Redemption.
A series of preferred stock may be redeemable, in whole or in part, at our
option. In addition, the series' redemption may be mandatory under a sinking
fund. In each case, the prospectus supplement will describe the terms, times
and redemption policies of the series.
The prospectus supplement relating to a series of preferred stock that is
mandatorily redeemable will specify the number of shares of the series of
preferred stock that we will redeem in each year commencing after a specified
date, at a specified redemption price per share, together with an amount equal
to any accrued and unpaid dividends to the date of redemption.
If we redeem fewer than all the outstanding shares of any series of
preferred stock, whether by mandatory or optional redemption, the selection of
the shares to be redeemed will be determined by lot or pro rata as may be
determined by the Board of Directors or its duly authorized committee, or by
any other method the Board of Directors or its committee determines to be
equitable. From and after the date of redemption, unless we default in
providing for the payment of the redemption price, dividends will cease to
accrue on the shares of preferred stock called for redemption and all rights of
the holders will cease, except their right to receive the redemption price.
Conversion Rights; No Preemptive Rights.
The prospectus supplement for any series of preferred stock will state the
terms, if any, on which shares of that series are convertible into shares of
common stock or another series of our preferred stock. The preferred stock will
have no preemptive rights.
Dividend Rights.
The holders of the preferred stock of each series will be entitled to
receive, if and when declared payable by the Board of Directors, out of assets
available therefor, dividends at, but not exceeding, the dividend rate for the
series, which may be fixed or variable, payable at such intervals and on the
dates as described in the Board of Directors' resolution creating the series.
If the intervals and dividend payment dates will vary from time to time for the
series, the resolution will describe the method by which the intervals and the
dates will be determined. Dividends on preferred stock will be paid before any
dividends, other than a dividend payable in common stock, may be paid upon or
set apart for any shares of capital stock ranking junior to the preferred stock
in respect of dividends or liquidation rights, which is referred to in this
prospectus as "stock ranking junior to the preferred stock".
Voting Rights.
Except as indicated below or in the prospectus supplement relating to a
particular series of preferred stock, or except as expressly required by the
laws of the State of North Carolina or other applicable law, the holders of the
preferred stock will not be entitled to vote. Except as indicated in the
prospectus supplement relating to a particular series of preferred stock, each
share will be entitled to one vote on matters on which holders of the series of
the preferred stock are entitled to vote.
However, as more fully described below in the subsection entitled
"Depositary Shares," if we elect to issue depositary shares representing a
fraction of a share of preferred stock, each depositary share will, in effect,
be entitled to a fraction of a vote, rather than a full vote. Because each full
share of any series of preferred stock will be entitled to one vote, the voting
power of the series, on matters on which holders of the series and holders of
other series of preferred stock are entitled to vote as a single class, will
depend on the
18
number of shares in the series, not the aggregate liquidation preference or
initial offering price of the shares of the series of preferred stock.
In addition to the foregoing voting rights, under the North Carolina
Business Corporation Act as now in effect, the holders of preferred stock will
have the voting rights described in the above subsection entitled "General"
with respect to amendments to our Charter that would increase the number of
authorized shares of our preferred stock.
Liquidation Rights.
In the event of our liquidation, dissolution or winding up, the holders of
preferred stock will be entitled to receive, for each share thereof, the fixed
liquidation or stated value for the respective series together in all cases
with all dividends accrued or in arrears on the preferred stock, before any
distribution of the assets will be made to the holders of any stock ranking
junior to the preferred stock, such as our common stock. If the assets
distributable among the holders of preferred stock would be insufficient to
permit the payment of the full preferential amounts fixed for all series, then
the distribution will be made among the holders of each series ratably in
proportion to the full preferential amounts to which they are each entitled.
Depositary Shares.
General.
We may, at our option, elect to offer fractional, rather than full, shares
of preferred stock. In the event we exercise the option, we will issue to the
public receipts for depositary shares. Each receipt will represent a fraction
of a share of a particular series of preferred stock as described below and in
the applicable prospectus supplement.
The shares of any series of preferred stock represented by depositary shares
will be deposited under a deposit agreement between us and a bank or trust
company that we select having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000. The deposit
agreement may provide that each owner of a depositary share will be entitled,
in proportion to the applicable fraction of a share of preferred stock
represented by the depositary share, to all the rights and preferences of the
preferred stock represented thereby, including dividend, voting, redemption and
liquidation rights.
The depositary shares will be evidenced by depositary receipts issued under
the deposit agreement. Depositary receipts will be distributed to those persons
purchasing the fractional shares of preferred stock. If depositary shares are
issued, copies of the forms of deposit agreement and depositary receipt will be
incorporated by reference in the registration statement of which this
prospectus is a part, and the following summary is qualified in its entirety by
reference to those documents.
Pending the preparation of definitive engraved depositary receipts, the
depositary bank may, upon our written order, issue temporary depositary
receipts substantially identical to, and entitling the holders thereof to all
the rights pertaining to, the definitive depositary receipts but not in
definitive form. Definitive depositary receipts will be prepared thereafter
without unreasonable delay, and temporary depositary receipts will be
exchangeable for definitive depositary receipts at our expense.
Withdrawal of Preferred Stock.
Upon surrender of the depositary receipts to the depositary bank, the owner
of the depositary shares is entitled to delivery of the number of whole shares
of preferred stock represented by the depositary shares. If the depositary
receipts delivered by the holder evidence a number of depositary shares in
excess of the number of depositary shares representing the number of whole
shares of preferred stock to be withdrawn, the depositary bank will deliver to
the holder at the same time a new depositary receipt evidencing the excess
number of
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depositary shares. The depositary bank will not distribute fractional shares of
preferred stock or cash instead of the fractional shares. Consequently, a
holder of a depositary receipt representing a fractional share of preferred
stock would be able to liquidate his position only by sale to a third party in
a public trading market transaction or otherwise, unless the depositary shares
are redeemed by us or converted by the holder.
Dividends and Other Distributions.
The depositary bank will distribute all cash dividends or other cash
distributions that it receives on the preferred stock to the record holders of
depositary shares relating to the preferred stock in proportion to the number
of the depositary shares owned by the holders.
In the event of a distribution other than in cash, the depositary bank will
distribute property that it receives to the record holders of depositary shares
entitled to the property. However, if the depositary bank determines that it is
not feasible to make the distribution, the depositary bank may, with our
approval, sell the property and distribute the net proceeds from the sale to
the holders.
Redemption of Depositary Shares.
If a series of preferred stock represented by depositary shares is
redeemable, the depositary shares will be redeemed from the proceeds that the
depositary bank receives resulting from the redemption, in whole or in part, of
the series of preferred stock that the depositary bank holds. The redemption
price per depositary share will be equal to the applicable fraction of the
redemption price per share payable with respect to the series of preferred
stock. Whenever we redeem shares of preferred stock held by the depositary
bank, the depositary bank will redeem as of the same redemption date the number
of depositary shares representing the shares of redeemed preferred stock. If
fewer than all of the depositary shares are to be redeemed, the depositary
shares to be redeemed will be selected by lot or pro rata as the depositary
bank may determine.
Voting the Preferred Stock.
Upon receipt of notice of any meeting at which the holders of preferred
stock are entitled to vote, the depositary bank will mail the information
contained in the notice of meeting to the record holders of the depositary
shares relating to the preferred stock. Each record holder of the depositary
shares on the record date, which will be the same date as the record date for
the preferred stock, will be entitled to instruct the depositary bank as to the
exercise of the voting rights pertaining to the amount of preferred stock
represented by the holder's depositary shares. The depositary bank will
endeavor, insofar as practicable, to vote the amount of preferred stock
represented by the depositary shares under the instructions, and we will agree
to take all action that the depositary bank deems necessary to enable the
depositary bank to do so. The depositary bank may abstain from voting shares of
preferred stock to the extent it does not receive specific instructions from
the holders of depositary shares representing the preferred stock.
Amendment and Termination of the Depositary Agreement.
At any time, we may agree with the depositary bank to amend the form of
depositary receipt evidencing the depositary shares and any provision of the
deposit agreement. However, any amendment that materially and adversely alters
the rights of the holders of depositary shares will not be effective unless the
holders of at least a majority of the depositary shares then outstanding has
approved the amendment. We or the depositary bank may terminate the deposit
agreement only if:
. all outstanding depositary shares have been redeemed, or
. there has been a final distribution on the preferred stock in connection
with our liquidation, dissolution or winding up, and the distribution has
been distributed to the holders of depositary receipts.
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Charges of Depositary Bank.
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. We will pay charges
of the depositary bank in connection with the initial deposit of the preferred
stock and any redemption of the preferred stock. Holders of depositary
receipts will pay other transfer and other taxes and governmental charges and
the other charges, including any fee for the withdrawal of shares of preferred
stock upon surrender of depositary receipts, as are expressly provided in the
deposit agreement for their accounts.
Miscellaneous.
The depositary bank will forward to holders of depositary receipts all
required reports and communications from us that are delivered to the
depositary bank.
Neither we nor the depositary bank will be liable if we are prevented or
delayed by law or any circumstance beyond our control in performing the
obligations under the deposit agreement. Those obligations will be limited to
performance in good faith of the duties thereunder, and we will not be
obligated to prosecute or defend any legal proceeding in respect of any
depositary shares or preferred stock unless satisfactory indemnity is
furnished. We and the depositary bank may rely upon written advice of counsel
or accountants, or upon information provided by persons presenting preferred
stock for deposit, holders of depositary receipts or other persons believed to
be competent and on documents believed to be genuine.
Resignation and Removal of Depositary Bank.
The depositary bank may resign at any time by delivering to us notice of
its election to do so. We may remove the depositary bank at any time. Any
resignation or removal will take effect upon the appointment of a successor
depositary bank and its acceptance of the appointment. The successor
depositary bank must be appointed within 60 days after delivery of the notice
of resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
Miscellaneous.
The preferred stock, when issued in exchange for full consideration, will
be fully paid and nonassessable.
21
DESCRIPTION OF OUR COMMON STOCK
General.
The following is a summary of some of the terms of our common stock. For a
more complete description of our common stock, you should review the applicable
North Carolina law, our Charter and Bylaws, and the Amended and Restated Rights
Agreement, dated December 2, 1999, between us and Equiserve Trust Company,
N.A., as rights agent.
Our Charter authorizes us to issue 1,400,000,000 shares of common stock. As
of December 29, 2000, we had approximately 383,412,356 shares of common stock
outstanding. Each share of common stock is entitled to one vote on all matters
submitted to a vote of shareholders. Holders of common stock are entitled to
receive dividends when our Board of Directors declares them out of funds
legally available therefor. Dividends may be paid on the common stock only if
all dividends on any outstanding preferred stock have been paid or provided
for.
The issued and outstanding shares of common stock are fully paid and
nonassessable. Holders of common stock have no preemptive or conversion rights,
and we may not make further calls or assessments on our common stock.
In the event of our voluntary or involuntary dissolution, liquidation or
winding up, holders of common stock are entitled to receive, pro rata, after
satisfaction in full of the prior rights of creditors and holders of preferred
stock, if any, all of our remaining assets available for distribution.
Directors are elected by a vote of the holders of common stock. Holders of
common stock are not entitled to cumulative voting rights.
Equiserve Trust Company, N.A. of Boston, Massachusetts, acts as the transfer
agent and registrar for the common stock.
Preferred Share Purchase Rights.
In 1998, under our Shareholder Rights Plan, we distributed as a dividend one
right for each outstanding share of common stock. Each right entitles the
holder to buy one one-thousandth of a share of Participating Cumulative
Preferred Stock, Series A, at an exercise price of $152.50, which we may adjust
at a later time.
The rights will become exercisable only if a person or group acquires or
announces a tender offer for 15% or more of our outstanding common stock. When
exercisable, we may issue a share of common stock in exchange for each right
other than those held by the person or group. If a person or group acquires 30%
or more of the outstanding common stock, each right will entitle the holder,
other than the acquiring person, upon payment of the exercise price, to acquire
preferred stock or, at our option, common stock, having a value equal to twice
the right's exercise price. If we are acquired in a merger or other business
combination or if 50% of our earnings power is sold, each right will entitle
the holder, other than the acquiring person, to purchase securities of the
surviving company having a market value equal to twice the exercise price of
the right.
The rights will expire on September 9, 2008, and may be redeemed by us at a
price of $.001 per right at any time before the tenth day after an announcement
that a 15% position has been acquired.
Until a person or group acquires or announces a tender offer for 15% or more
of the common stock:
. the rights will be evidenced by the common stock certificates and will be
transferred with and only with such common stock certificates, and
. the surrender for transfer of any certificate for common stock will also
constitute the transfer of the rights associated with the common stock
represented by such certificate.
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Rights may not be transferred, directly or indirectly:
. to any person or group that has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the rights, referred to
as an "acquiring person;"
. to any person in connection with a transaction in which such person
becomes an acquiring person; or
. to any affiliate or associate of an acquiring person.
Any right that is the subject of a purported transfer to an acquiring person
will be null and void.
The rights may have some anti-takeover effects. The rights will cause
substantial dilution to a person or group that acquires more than 15% of the
outstanding shares of our common stock if some events thereafter occur without
the rights having been redeemed. However, the rights should not interfere with
any merger or other business combination approved by the Board of Directors and
the shareholders because the rights are redeemable in some circumstances.
Change of Control Provisions.
Some provisions of our Charter and of North Carolina law govern the rights
of holders of common stock with the intention of affecting any attempted change
of control of Lowe's.
Board of Directors.
Our Charter classifies the Board of Directors into three separate classes,
with the term of one-third of the directors expiring at each annual meeting.
Removal of a director requires the affirmative vote of 70% of outstanding
voting shares. These provisions make it more difficult for holders of our
common stock to gain control of the Board of Directors.
Fair Price Provisions.
Provisions of our Charter, which we will refer to as the "fair price
provisions," limit the ability of an interested shareholder to effect some
transactions involving us. An "interested shareholder" is one who beneficially
owns 20% or more of our outstanding voting shares.
Unless the fair price provisions are satisfied, an interested shareholder
may not engage in a business combination, which includes a merger,
consolidation, share exchange or similar transaction, involving us unless
approved by 70% of our outstanding voting shares. In general, the fair price
provisions require that an interested shareholder pay shareholders the same
amount of cash or the same amount and type of consideration paid by the
interested shareholder when it initially acquired our shares.
The fair price provisions are designed to discourage attempts to acquire
control of us in non-negotiated transactions utilizing two-tier pricing
tactics, which typically involve the accumulation of a substantial block of the
target corporation's stock followed by a merger or other reorganization of the
acquired company on terms determined by the purchaser. Due to the difficulties
of complying with the requirements of the fair price provisions, the fair price
provisions generally may discourage attempts to obtain control of us.
North Carolina Shareholder Protection Act.
The North Carolina Shareholder Protection Act requires the affirmative vote
of 95% of our voting shares to approve a business combination with any person
that beneficially owns 25% of the voting shares of the corporation unless the
"fair price" provisions of the Act are satisfied. The statute's intended effect
is similar to the fair price provisions of our Charter.
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DESCRIPTION OF OUR WARRANTS
We may issue warrants for the purchase of debt securities, preferred stock
or common stock. We may issue the warrants independently or together with any
other offered securities, and they may be attached to or separate from the
other securities. We will issue each series of warrants under a separate
warrant agreement between us and a warrant agent. The warrant agent will act
solely as our agent in connection with the warrants of a series and will not
assume any obligation or relationship of agency or trust for or with any
holders or beneficial owners of warrants.
If we issue warrants, copies of the forms of the warrant agreement and the
certificate evidencing the warrants will be incorporated by reference in the
registration statement of which this prospectus is a part. You should refer to
those documents for a more complete description of the warrants.
The applicable prospectus supplement may describe the following terms of the
warrants:
. the title of the warrants;
. the aggregate number of the warrants;
. the price or prices at which the warrants will be issued;
. the designation, aggregate principal amount and terms of the securities
purchasable upon exercise of the warrants;
. the designation and terms of the offered securities with which the
warrants are issued and the number of the warrants issued with each
security;
. if applicable, the date on and after which the warrants and the related
securities may be separately transferable;
. the price at which the securities purchasable upon exercise of the
warrants may be purchased;
. the date on which the right to exercise the warrants will commence and
the date on which the right will expire;
. the minimum or maximum amount of the warrants that may be exercised at
any one time;
. information with respect to book-entry procedures, if any;
. a discussion of material federal income tax considerations; and
. any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
Description of Currency Warrants.
We may issue (either separately or together with other offered securities)
currency warrants (the "offered currency warrants"). We may issue the offered
currency warrants:
. in the form of currency put warrants, entitling the owners thereof to
receive from us the cash settlement value in U.S. dollars of the right to
purchase a designated amount of U.S. dollars for a designated amount of a
specified foreign currency (a "base currency"),
. in the form of currency call warrants, entitling the owners thereof to
receive from us the cash settlement value in U.S. dollars of the right to
sell a designated amount of U.S. dollars for a designated amount of a
base currency, or
. in another form as may be specified in the applicable prospectus
supplement.
A currency warrant will not require or entitle the owners to sell, deliver,
purchase or take delivery of any base currency. The currency warrants will be
issued under warrant agreements (each a "currency warrant
24
agreement") to be entered into between us and a bank or trust company, as
warrant agent (the "currency warrant agent"), identified in the prospectus
supplement.
Because this section is a summary, it does not describe every aspect of the
currency warrants and currency warrant agreement. We urge you to read the
currency warrant agreement because it, and not this description, defines your
rights as a holder of currency warrants. If we issue warrants, copies of the
forms of the warrant agreement and the certificate evidencing the warrants will
be incorporated by reference in the registration statement of which this
prospectus is a part. You should refer to those documents for a more complete
description of the warrants.
General.
You should read the prospectus supplement for the terms of the offered
currency warrants, including the following:
. The title and aggregate number of the currency warrants.
. The material risk factors relating to the currency warrants.
. Whether the currency warrants will be currency put warrants, currency
call warrants, both puts and calls or otherwise.
. The formula for determining the cash settlement value, if applicable, of
each currency warrant.
. The procedures and conditions relating to the exercise of the currency
warrants.
. The date on which the right to exercise the currency warrants will
commence and the date (the "currency warrant expiration date") on which
this right will expire.
. The circumstances, in addition to their automatic exercise upon the
currency warrant expiration date, that will cause the currency warrants
to be deemed to be automatically exercised.
. Any minimum number of the currency warrants that must be exercised at any
one time, other than upon automatic exercise.
. Whether the currency warrants are to be issued with any other offered
securities and, if so, the amount and terms of these other securities.
. Any other terms of the currency warrants.
The prospectus supplement will also contain a discussion of the federal
income tax considerations relevant to the offering.
If currency warrants are to be offered either in the form of currency put
warrants or currency call warrants, an owner will receive a cash payment upon
exercise only if the currency warrants have a cash settlement value in excess
of zero at that time. The spot exchange rate of the applicable base currency,
as compared to the U.S. dollar, will determine whether the currency warrants
have a cash settlement value on any given day prior to their expiration. The
currency warrants are expected to be "out-of-the-money" (i.e., the cash
settlement value will be zero) when initially sold and will be "in-the-money"
(i.e., their cash settlement value will exceed zero) if, in the case of
currency put warrants, the base currency depreciates against the U.S. dollar to
the extent that one U.S. dollar is worth more than the price determined for the
base currency in the prospectus supplement (the "strike price") or, in the case
of currency call warrants, the base currency appreciates against the U.S.
dollar to the extent one U.S. dollar is worth less than the strike price.
"Cash settlement value" on an exercise date (as this term will be defined in
the prospectus supplement) is an amount that is the greater of:
. zero, and
. the amount computed, in the case of currency put warrants, by subtracting
from a constant or, in the case of currency call warrants, by subtracting
the constant from, an amount equal to the constant multiplied by a
fraction, the numerator of which is the strike price and the denominator
of which is the
25
spot exchange rate of the base currency for U.S. dollars on the exercise
date (the "spot rate"), as the spot rate is determined pursuant to the
currency warrant agreement.
Information concerning the historical exchange rates for the base currency will
be included in the prospectus supplement.
There will be a time lag between the time that an owner of currency warrants
gives instructions to exercise the currency warrants and the time that the spot
rate relating to the exercise is determined, as described in the prospectus
supplement.
Currency warrants will be our unsecured contractual obligations and will
rank on a parity with our other unsecured contractual obligations and with our
unsecured and unsubordinated debt.
Book-Entry Procedures and Settlement.
Unless otherwise provided in the prospectus supplement, each issue of
currency warrants will be issued in book-entry form and represented by a single
global currency warrant certificate, registered in the name of a depositary or
its nominee. Owners will generally not be entitled to receive definitive
certificates representing currency warrants. An owner's ownership of a currency
warrant will be recorded on or through the records of the bank, broker or other
financial institution that maintains the owner's account. In turn, the total
number of currency warrants held by an individual bank, broker or other
financial institution for its clients will be maintained on the records of the
depositary. Transfer of ownership of any currency warrant will be effected only
through the selling owner's brokerage firm. Neither the currency warrant agent
nor we will have any responsibility or liability for any aspect of the records
relating to beneficial ownership interests of global currency warrant
certificates or for maintaining, supervising or reviewing records relating to
the beneficial ownership interests.
The cash settlement value on exercise of a currency warrant will be paid by
the currency warrant agent to the appropriate depositary participant. Each
participant will be responsible for disbursing the payments to the beneficial
owners of the currency warrants that it represents and to each bank, broker or
other financial institution for which it acts as agent. Each bank, broker or
other financial institution will be responsible for disbursing funds to the
beneficial owners of the currency warrants that it represents.
If the depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by us within 90 days, we
will issue currency warrants in definitive form, in exchange for the global
currency warrant. In addition, we may at any time determine not to have the
currency warrants represented by a global currency warrant and, in that event,
will issue currency warrants in definitive form, in exchange for the global
currency warrant. In either instance, an owner of a beneficial interest in the
global currency warrant will be entitled to have a number of currency warrants
equivalent to the beneficial interest registered in its name and will be
entitled to physical delivery of the currency warrants in definitive form.
Exercise of Currency Warrants.
Unless otherwise provided in the prospectus supplement, each currency
warrant will entitle the owner to the cash settlement value of the currency
warrant on the applicable exercise date. If not exercised prior to a specified
time on the fifth business day preceding the currency warrant expiration date,
currency warrants will be automatically exercised on the currency warrant
expiration date.
Listing.
Each issue of currency warrants will be listed on a national securities
exchange, subject only to official notice of issuance, as a pre-condition to
the sale of any currency warrants, unless otherwise provided in the prospectus
supplement. In the event that the currency warrants are delisted from, or
permanently suspended
26
from trading on, the exchange, currency warrants not previously exercised will
be automatically exercised on the date the delisting or permanent trading
suspension becomes effective. The applicable currency warrant agreement will
contain a covenant by us not to seek delisting of the currency warrants from,
or permanent suspension of their trading on, the applicable exchange.
Modifications.
A currency warrant agreement and the terms of the currency warrants issued
thereunder may be amended by the currency warrant agent and us, without the
consent of the registered holders or beneficial owners, for the purpose of
curing any ambiguity, or of curing, correcting or supplementing any defective
or inconsistent provision contained therein, or in any other manner that we may
deem necessary or desirable and that will not materially and adversely affect
the interests of the beneficial owners.
The currency warrant agent and we also may modify or amend a currency
warrant agreement and the terms of the currency warrants issued thereunder with
the consent of the beneficial owners of not less than a majority in number of
the then outstanding unexercised currency warrants affected thereby, provided
that no modification or amendment that decreases the strike price in the case
of a currency put warrant, increases the strike price in the case of a currency
call warrant, shortens the period of time during which the currency warrants
may be exercised or otherwise materially and adversely affects the exercise
rights of the beneficial owners of the currency warrants or reduces the number
of outstanding currency warrants the consent of whose beneficial owners is
required for modification or amendment of the currency warrant agreement or the
terms of the currency warrants, may be made without the consent of each
beneficial owner affected thereby.
Enforceability of Rights by Holders; Governing Law.
The currency warrant agent will act solely as our agent in connection with
the issuance and exercise of currency warrants and will not assume any
obligation or relationship of agency or trust for or with any owner of a
beneficial interest in currency warrants or with the registered holder thereof.
The currency warrant agent will have no duty or responsibility in case of any
default by us in the performance of our obligations under the currency warrant
agreement or a currency warrant certificate, including any duty or
responsibility to initiate any proceedings at law or otherwise or to make any
demand upon us. Beneficial owners may, without the consent of the currency
warrant agent, enforce by appropriate legal action, on their own behalf, their
right to exercise, and to receive payment for, their currency warrants. Except
as may otherwise be provided in the prospectus supplement, each issue of
currency warrants and the applicable currency warrant agreement will be
governed by the laws of the State of New York.
Description of Indexed, Commodity and Other Warrants.
We may issue (either separately or together with other offered securities)
shelf warrants (the "offered shelf warrants"). Subject to compliance with
applicable law, the offered shelf warrants may be issued for the purchase or
sale of debt securities of, or guaranteed by, the United States, units of a
stock index or stock basket or a commodity or a unit of a commodity index
(collectively, "exercise items"). Shelf warrants will be settled either through
physical delivery or through payment of a cash settlement value as set forth in
the prospectus supplement. The shelf warrants will be issued under warrant
agreements (each a "shelf warrant agreement") to be entered into between us and
a bank or trust company, as warrant agent (the "shelf warrant agent"),
identified in the prospectus supplement.
Because this section is a summary, it does not describe every aspect of the
shelf warrants and shelf warrant agreement. We urge you to read the shelf
warrant agreement because it, and not this description, defines your rights as
a holder of shelf warrants. If we issue warrants, copies of the forms of the
warrant agreement and the certificate evidencing the warrants will be
incorporated by reference in the registration statement of which this
prospectus is a part. You should refer to those documents for a more complete
description of the warrants.
27
General.
You should read the prospectus supplement for the terms of the offered shelf
warrants, including the following:
. The title and aggregate number of the shelf warrants.
. The material risk factors relating to the shelf warrants.
. The exercise items that the shelf warrants represent the right to buy or
sell.
. The procedures and conditions relating to the exercise of the shelf
warrants.
. The date on which the right to exercise the shelf warrants will commence
and the date on which this right will expire.
. The national securities exchange on which the shelf warrants will be
listed, if any.
. Any other material terms of the shelf warrants.
The prospectus supplement will also set forth information concerning any
other securities offered thereby and will contain a discussion of the federal
income tax considerations relevant to the offering.
If the shelf warrants relate to the purchase or sale of debt securities of,
or guaranteed by, the United States, it is currently expected that the shelf
warrants will be listed on a national securities exchange. The prospectus
supplement relating to the shelf warrants will describe the amount and
designation of the debt securities covered by each shelf warrant, whether the
shelf warrants provide for cash settlement or delivery of the shelf warrants
upon exercise and the national securities exchange, if any, on which the shelf
warrants will be listed.
If the shelf warrants relate to the purchase or sale of a unit of a stock
index or a stock basket, the shelf warrants will provide for payment of an
amount in cash determined by reference to increases or decreases in the stock
index or stock basket. It is currently expected that these shelf warrants will
be listed on a national securities exchange. The prospectus supplement relating
to the shelf warrants will describe the terms of the shelf warrants, the stock
index or stock basket covered by the shelf warrants and the market to which the
stock index or stock basket relates and the national securities exchange, if
any, on which the shelf warrants will be listed.
If the shelf warrants relate to the purchase or sale of a commodity or a
unit of a commodity index, the shelf warrants will provide for cash settlement
or delivery of the particular commodity or commodities. It is currently
expected that these shelf warrants will be listed on a national securities
exchange. The prospectus supplement relating to the shelf warrants will
describe the terms of the shelf warrants, the commodity or commodity index
covered by the shelf warrants and the market, if any, to which the commodity or
commodity index relates and the national securities exchange, if any, on which
the shelf warrants will be listed.
Shelf warrant certificates:
. may be exchanged for new shelf warrant certificates of different
denominations,
. if in registered form, may be presented for registration of transfer, and
. may be exercised, at the corporate trust office of the shelf warrant
agent or any other office indicated in the prospectus supplement.
Shelf warrants may be issued in the form of a single global shelf warrant
certificate registered in the name of the nominee of the depositary of the
shelf warrants, or may initially be issued in the form of definitive
certificates that may be exchanged, on a fixed date, or on a date or dates
selected by us, for an interest in a global shelf warrant certificate, as set
forth in the applicable prospectus supplement. Prior to the exercise of their
shelf warrants, holders thereof will not have any rights under the warrants:
28
. to purchase or sell any debt securities of, or guaranteed by, the United
States or to receive any settlement value therefor,
. to purchase or sell any commodities or to receive any settlement
therefor, or
. to receive any settlement value in respect to any unit of a commodity
index or stock index or stock basket.
Exercise of Shelf Warrants.
Each offered shelf warrant will entitle the holder to purchase or sell such
amount of debt securities of, or guaranteed by, the United States at the
exercise price, or receive the settlement value in respect of a stock index,
stock basket, commodity or commodity index, as shall in each case be set forth
in, or calculable from, the prospectus supplement relating to the shelf
warrants or as otherwise set forth in the prospectus supplement. Shelf warrants
may be exercised at any time on the dates set forth in the prospectus
supplement relating to the shelf warrants or as may be otherwise set forth in
the prospectus supplement. Unless otherwise provided in the applicable
prospectus supplement, after the close of business on the applicable expiration
date (as that date may be extended by us), unexercised shelf warrants will be
void.
Unless otherwise provided in the prospectus supplement, offered shelf
warrants may be exercised by delivery of a properly completed shelf warrant
certificate to the shelf warrant agent and, if required and if the shelf
warrant does not provide for cash settlement, payment of the amount required to
purchase the exercise items purchasable upon exercise. Shelf warrants will be
deemed to have been exercised upon receipt of the shelf warrant certificate and
any payment, if applicable, at the corporate trust office of the shelf warrant
agent or any other office indicated in the prospectus supplement and we will,
as soon as practicable thereafter, buy or sell the debt securities of, or
guaranteed by, the United States or pay the settlement value therefor. If fewer
than all of the shelf warrants represented by the shelf warrant certificate are
exercised, a new shelf warrant certificate will be issued for the remaining
shelf warrants. The holder of an offered shelf warrant will be required to pay
any tax or other governmental charge that may be imposed.
Modifications.
A shelf warrant agreement and the terms of the shelf warrants issued
thereunder may be amended by the shelf warrant agent and us, without the
consent of the holders or the owners, for the purpose of curing any ambiguity,
or of curing, correcting or supplementing any defective or inconsistent
provision contained therein, for the purpose of appointing a successor
depositary, for the purpose of issuing shelf warrants in definitive form, or in
any other manner that we may deem necessary or desirable and that will not
materially and adversely affect the interests of the owners.
The shelf warrant agent and we also may modify or amend a shelf warrant
agreement and the terms of the shelf warrants issued thereunder with the
consent of the owners of not less than a majority in number of the then
outstanding unexercised shelf warrants affected thereby, provided that no
modification or amendment that decreases the exercise price in the case of put
warrants, increases the exercise price in the case of call warrants, shortens
the period of time during which the shelf warrants may be exercised or
otherwise materially and adversely affects the exercise rights of the holders
of the shelf warrants or reduces the number of outstanding shelf warrants the
consent of whose owners is required for modification or amendment of the shelf
warrant agreement or the terms of the shelf warrants, may be made without the
consent of each owner affected thereby.
Risk Factors Relating to the Shelf Warrants.
The shelf warrants may entail significant risks, including, without
limitation, the possibility of significant fluctuations in the market for the
applicable exercise item, potential illiquidity in the secondary market and the
risk that they will expire worthless. These risks will vary depending on the
particular terms of the shelf warrants and will be more fully described in the
prospectus supplement.
29
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue Stock Purchase Contracts, representing contracts obligating
holders to purchase from us, and us to sell to the holders, a specified number
of shares of either class or both classes of Common Stock at a future date or
dates. The price per share of Common Stock and number of shares of Common Stock
may be fixed at the time the Stock Purchase Contracts are issued or may be
determined by reference to a specific formula set forth in the Stock Purchase
Contracts. The Stock Purchase Contracts may be issued separately or as a part
of Stock Purchase Units, consisting of a Stock Purchase Contract and Debt
Securities or debt obligations of third parties, including U.S. Treasury
securities, securing the holders' obligations to purchase the Common Stock
under the Stock Purchase Contracts. The Stock Purchase Contracts may require us
to make periodic payments to the holders of the Stock Purchase Units or vice-
versa. These payments may be unsecured or prefunded on some basis. The Stock
Purchase Contracts may require holders to secure their obligations thereunder
in a specified manner.
The prospectus supplement will describe the terms of any Stock Purchase
Contracts or Stock Purchase Units.
PLAN OF DISTRIBUTION OF THE OFFERED SECURITIES
The offered securities may be sold for public offering to underwriters or
dealers, which may be a group of underwriters represented by one or more
managing underwriters, or through the firms or other firms acting alone or
through dealers. We may also sell the offered securities directly or through
agents to investors. The prospectus supplement will contain the names of any
agents, dealers or underwriters involved in the sale of the offered securities
described in this prospectus, the applicable agent's commission, dealer's
purchase price or underwriter's discount and our net proceeds.
The prospectus supplement will describe any underwriting compensation that
we pay to underwriters or agents in connection with the offering of offered
securities and any discounts, concessions or commissions that the underwriters
allow to participating dealers. Underwriters, dealers and agents participating
in the distribution of the offered securities may be deemed to be
"underwriters" within the meaning of the Securities Act. In addition, any
discounts and commissions that the underwriters receive and any profit that
they realize on resale of the offered securities may be deemed to be
underwriting discounts and commissions under the Securities Act.
If any underwriters are utilized in the sale of the offered securities, we
will execute an underwriting agreement with the underwriters at the time an
agreement for the sale is reached. The underwriting agreement will provide that
the obligations of the underwriters are subject to conditions precedent and
that the underwriters with respect to a sale of offered securities will be
obligated to purchase all of the offered securities if any are purchased. In
connection with the sale of offered securities, the underwriters may be deemed
to have received compensation from us in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of offered
securities for whom they may act as agent.
The underwriters may sell offered securities to or through dealers, and the
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent. Under the underwriting agreements, underwriters,
dealers and agents who participate in the distribution of the offered
securities, may be entitled to indemnification by us against some civil
liabilities, including liabilities under the Securities Act or contribution
with respect to payments that the underwriters, dealers or agents may be
required to make. The underwriters of an underwritten offering of offered
securities will be listed in the prospectus supplement relating to an offering
and, if an underwriting syndicate is used, the managing underwriter or
underwriters will be listed on the cover of the prospectus supplement.
30
If indicated in an applicable prospectus supplement, we will authorize
dealers acting as our agents to solicit offers from some institutions to
purchase our offered securities at the public offering price given in the
prospectus supplement under "Delayed Delivery Contracts" providing for payment
and delivery on the date or dates stated in such prospectus supplement. Each
contract will be for an amount not less than, and the aggregate principal
amount of offered securities sold under the contracts will not be less nor more
than, the respective amounts stated in the prospectus supplement. Institutions
with whom contracts, when authorized, may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and other institutions, but will in all
cases be subject to our approval. Contracts will not be subject to any
conditions except that:
. the purchase by an institution of the offered securities covered by its
contracts will not at the time of delivery be prohibited under the laws
of any jurisdiction in the United States to which such institution is
subject, and
. if the offered securities are being sold to underwriters, we will have
sold to the underwriters the total principal amount of the offered
securities less the principal amount covered by contracts.
Agents and underwriters will have no responsibility in respect of the delivery
or performance of the contracts.
Some of the underwriters and their affiliates may be customers of, engage in
transactions with and perform services for us and our subsidiaries and the
trustees in the ordinary course of business.
The offered securities may or may not be listed on a national securities
exchange or a foreign securities exchange. No assurances can be given that
there will be a market for the offered securities.
LEGAL MATTERS
The validity of the offered securities will be passed upon for us by Hunton
& Williams, Richmond, Virginia.
EXPERTS
The financial statements incorporated in this prospectus by reference from
Lowe's Annual Report on Form 10-K for the fiscal year ended January 28, 2000
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended April 28, 2000 and April 30, 1999, July 28, 2000 and July 30, 1999, and
October 27, 2000 and October 29, 1999 which is incorporated by reference,
Deloitte & Touche LLP have applied limited procedures in accordance with
professional standards for a review of such information. However, as stated in
their reports included in the Company's Quarterly Reports on Form 10-Q for the
quarters ended April 28, 2000, July 28, 2000 and October 27, 2000 and
incorporated by reference, they did not audit and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. Deloitte & Touche LLP are
not subject to the liability provisions of Section 11 of the Securities Act of
1933 for their reports on the unaudited interim financial information because
those reports are not "reports" or a "part" of the registration statement
prepared or certified by an accountant within the meaning of Sections 7 and 11
of the Act.
31
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$505,000,000
Lowe's
Senior Convertible Notes due 2021
------------------------
PROSPECTUS SUPPLEMENT
------------------------
Merrill Lynch & Co.
Banc of America Securities LLC
SunTrust Robinson Humphrey
U.S. Bancorp Piper Jaffray
Wachovia Securities
Fleet Securities, Inc.
October 16, 2001
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