As filed with the Securities and Exchange Commission on November 16, 2001
Registration No. 333-60434
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE
AMENDMENT NO. 3
TO FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-----------------------
LOWE'S COMPANIES, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0578072
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1605 Curtis Bridge Road
Wilkesboro, North Carolina 28697
(336) 658-5445
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Stephen A. Hellrung
Senior Vice President, General Counsel and Secretary
Lowe's Companies, Inc.
1605 Curtis Bridge Road
Wilkesboro, North Carolina 28697
(336) 658-5445
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copy to:
Lathan M. Ewers, Jr.
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
(804) 788-8269
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement in light of market
conditions and other factors.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434 under
the Securities Act, please check the following box: [_]
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
===============================================================================
The information in this prospectus is not complete and may be changed. The
selling securityholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission 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 jurisdiction where the offer or sale is not
permitted.
Subject to Completion, Dated November 16, 2001
PROSPECTUS
$1,005,000,000
LOWE'S COMPANIES, INC.
Liquid Yield Option(TM) Notes due 2021
(Zero Coupon - Senior)
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The Offering:
We issued the LYONs in a private placement on February 16, 2001 with an
issue price of $608.41 per LYON. Selling securityholders will use this
prospectus to resell their LYONs and the shares of common stock issuable upon
conversion and/or redemption of their LYONs at fixed, varying or negotiated
prices as described in the "Plan of Distribution" section beginning on page 40
of this prospectus. The LYONs are zero-coupon debt securities. On February 16,
2021, the maturity date of the LYONs, a holder will receive the principal amount
at maturity of the LYONs, which will be $1,000 per LYON. The issue price of each
LYON represents a yield to maturity of 2.5% per year, calculated from February
16, 2001. The LYONs are unsecured and unsubordinated and rank equal in right of
payment to all of our existing and future unsecured and unsubordinated
indebtedness.
Convertibility of the LYONs:
Holders may convert their LYONs at any time on or prior to the maturity
date, unless the LYONs have been redeemed or purchased previously, into 16.4480
shares of our common stock. The conversion rate may be adjusted for certain
reasons, but will not be adjusted for accrued original issue discount. Our
common stock trades on the New York Stock Exchange under the ticker symbol
"LOW." The last reported sale price of our common stock on the New York Stock
Exchange was $41.71 per share on November 15, 2001.
Purchase of the LYONs by Lowe's at the Option of the Holder:
Holders may require us to purchase all or a portion of their LYONs on
February 16, 2004, at a price of $655.49 per LYON or on February 16, 2011, at a
price of $780.01 per LYON. We may choose to pay the purchase price of such LYONs
in cash, shares of common stock or a combination of cash and common stock. In
addition, upon a change in control of Lowe's occurring on or before February 16,
2004, holders may require us to purchase all or a portion of their LYONs for
cash.
Redemption of the LYONs at the Option of Lowe's:
We may redeem all or a portion of the LYONs for cash at any time on or
after February 16, 2004, at a price equal to the sum of the issue price and
accrued original issue discount of such LYONs on the redemption date.
The LYONs issued in the initial private placement are eligible for
trading in the PORTAL system. LYONs sold using this prospectus, however, will no
longer be eligible for trading in the PORTAL system. We do not intend to list
the LYONs on any other national securities exchange or automated quotation
system.
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Investing in the LYONs involves risks that are described in the "Risk
Factors Relating to the LYONs" section beginning on page 5 of this prospectus.
--------------------------------------------------------------------------------
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.
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The date of this prospectus is ________ __, 2001
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(TM) Trademark of Merrill Lynch & Co., Inc.
TABLE OF CONTENTS
Page
----
SUMMARY................................................................... 1
RISK FACTORS RELATING TO THE LYONS........................................ 5
WARNING REGARDING FORWARD-LOOKING STATEMENTS.............................. 7
SELECTED CONSOLIDATED FINANCIAL INFORMATION............................... 8
USE OF PROCEEDS........................................................... 9
PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY.......................... 9
DESCRIPTION OF LYONs...................................................... 10
DESCRIPTION OF CAPITAL STOCK.............................................. 25
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES..................... 28
SELLING SECURITYHOLDERS................................................... 34
PLAN OF DISTRIBUTION...................................................... 40
WHERE YOU CAN FIND MORE INFORMATION....................................... 42
INCORPORATION OF INFORMATION FILED WITH THE SEC........................... 43
LEGAL MATTERS............................................................. 44
EXPERTS................................................................... 44
SUMMARY
The following summary of material terms of the LYONs appearing elsewhere in
this prospectus is qualified in its entirety by the more detailed information
included elsewhere or incorporated by reference in this prospectus. You should
read the entire prospectus, as well as the information incorporated by
reference, before making an investment decision. When used in this prospectus,
the terms "Lowe's," "we," "our" and "us" refer to Lowe's Companies Inc. and its
consolidated subsidiaries, unless otherwise specified. All information in this
prospectus reflects a two-for-one split of Lowe's Common Stock effective June
29, 2001.
Lowe's Companies, Inc.
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 five 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, North Carolina, our 55-year-old company employs over 100,000 people.
We anticipate opening 115 stores, which includes relocating 13 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, with shares trading under the ticker symbol "LOW."
The Offering
LYONs............................... Selling securityholders may sell up to
$1,005,000,000 aggregate principal
amount at maturity of LYONs due February
16, 2021. We will not pay any interest
on the LYONs prior to maturity. Each
LYON was issued at a price of $608.41
per LYON and will have a principal
amount at maturity of $1,000.
Maturity of the LYONs............... February 16, 2021.
Yield to Maturity of LYONs.......... 2.5% per year, computed on a semiannual
bond equivalent basis and calculated
from February 16, 2001.
Original Issue Discount............. We offered our LYONs at an issue price
significantly below the principal amount
at maturity of the LYONs. This original
issue discount will accrue daily at a
rate of 2.5% per year from February 16,
2001, calculated on a semiannual bond
equivalent basis at the yield to
maturity of the LYONs, using a 360-day
year comprised of twelve 30-day months.
You should be aware that, although we
will not pay interest on the LYONs, U.S.
holders must include original issue
discount, as it accrues, in their gross
income for United States federal income
tax purposes. See "Certain United States
Federal Income Tax Consequences."
Conversion Rights................... Holders may convert the LYONs at any
time on or before the maturity date,
unless the LYONs have been redeemed or
purchased previously. For each LYON
converted, we will deliver 16.4480
shares of common stock (including rights
associated with our shareholder rights
plan). The conversion rate may be
adjusted for certain reasons, but will
not be adjusted for accrued original
issue discount. Upon conversion, the
holder will not receive any cash payment
representing accrued original issue
discount; accrued original issue
discount will be deemed paid by the
shares of common stock received by the
holder of LYONs on conversion.
Ranking............................. The LYONs are unsecured obligations and
rank equal in right of payment to all of
our other unsecured and unsubordinated
indebtedness. The LYONs are effectively
subordinated to our secured indebtedness
to the extent of the security. Also, the
LYONs are effectively subordinated to
the indebtedness and other liabilities
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.
2
Sinking Fund........................ None.
Redemption of LYONs at Our Option... We may redeem for cash all or a portion
of the LYONs at any time on or after
February 16, 2004, at redemption prices
equal to the sum of the issue price and
accrued original issue discount for the
LYONs on the applicable redemption date.
See "Description of LYONs--Redemption of
LYONs at Our Option."
Purchase of the LYONs by Lowe's at
the Option of the Holder............ Holders may require us to purchase all
or a portion of their LYONs on each of
the following dates at the following
prices, which are equal to the sum of
the issue price and accrued original
issue discount for the LYONs on such
dates:
. on February 16, 2004 at a price of
$655.49 per LYON; and
. on February 16, 2011 at a price of
$780.01 per LYON.
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. See "Description of LYONs-
Purchase of LYONs at the Option of the
Holder."
Change in Control................... Upon a change in control of Lowe's
occurring on or before February 16,
2004, the holders may require us to
purchase for cash all or a portion of
their LYONs at a price equal to the sum
of the issue price and accrued original
issue discount for the LYONs on the date
of purchase. Although not anticipated,
we may not have sufficient cash to
redeem the LYONs upon a change of
control.
3
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 will accrue on each LYON from
the option exercise date at 2.5% per
year on the restated principal amount
and will be payable semiannually. 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 LYONs--
Optional Conversion to Semiannual Coupon
Notes upon Tax Event."
DTC Eligibility..................... The LYONs were issued in fully
registered book-entry form and are
represented by permanent global LYONs
without coupons. DTC or its nominee is
the sole registered holder of the global
LYONs. Beneficial interests in global
LYONs are 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 LYON may not be
exchanged for certificated LYONs, except
in limited circumstances described
herein.
Use of Proceeds..................... We will not receive any of the proceeds
from the sale by any selling
securityholder of the LYONs or the
common stock issuable upon conversion
and/or redemption of the LYONs. See "Use
of Proceeds."
Trading............................. We do not intend to list the LYONs on
any national securities exchange. The
LYONs issued in the initial private
placement are eligible for trading in
the PORTAL system. LYONs sold using this
prospectus, however, will no longer be
eligible for trading in the PORTAL
system. Our common stock is traded on
the New York Stock Exchange, under the
symbol "LOW."
4
RISK FACTORS RELATING TO THE LYONS
You should carefully consider the following information with the other
information contained in or incorporated by reference into this prospectus
before purchasing the LYONs.
The covenants applicable to the LYONs 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 LYONs against some
transactions, such as recapitalizations or incurrence of additional
indebtedness.
The holders of LYONs may require us to purchase the LYONs upon the
occurrence of certain change-in-control events described under "Description of
LYONs -- Change in Control Permits Purchase of LYONs by Lowe's at the Option of
the Holder" on page 17. The covenants applicable to the LYONs do not restrict us
from incurring indebtedness or paying extraordinary dividends. Further, the
LYONs 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 LYONs 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 LYONs, even though these transactions may increase the amount of our (or our
subsidiaries') outstanding indebtedness.
An active trading market for LYONs may not develop, which could reduce their
value.
The LYONs comprise a new issue of securities for us for which there is
currently no public market. The LYONs issued in the initial private placement
are eligible for trading in the PORTAL system. LYONs sold using this prospectus,
however, will no longer be eligible for trading in the PORTAL system. We do not
intend to list the LYONs on any other national securities exchange or automated
quotation system. If the LYONs 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
LYONs. To the extent that an active trading market does not develop, the price
at which you may be able to sell the LYONs, if at all, may be less than the
price you pay for them.
You should consider the United States Federal Income Tax Consequences of owning
LYONs in the context of your own tax position.
Our tax counsel has concluded that the LYONs are characterized as
indebtedness for United States federal income tax purposes. In addition, the
LYONs were issued with original issue discount. You will be required to include
original issue discount in income over the term of the LYONs 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 LYON
in an amount equal to the difference between the amount realized on such a
transaction, and your adjusted tax basis in the LYON. Any gain or loss so
recognized by you generally will be capital gain or loss. However, it is
possible that holders may be precluded by certain rules regarding
recapitalizations from recognizing any capital loss with respect to a conversion
or redemption of the LYONs in exchange for shares of our common stock. Holders
of LYONs should consult their tax advisors regarding the deductibility of any
such capital loss. A summary of the federal income tax consequences of ownership
of the LYONs is described in this prospectus under the heading "Certain United
States Federal Income Tax Consequences" beginning on page 28.
5
We may not have the funds necessary to finance a purchase of LYONs at the option
of the holder or upon a change in control of Lowe's.
On February 16, 2004 and February 16, 2011 or in the event of a change in
control of Lowe's occurring on or before February 16, 2004, holders of LYONs
have the right to require us to purchase their LYONs. Although not anticipated,
we may not have sufficient funds at those times to make any required purchase of
LYONs. In such event, holders would not be able to sell their LYONs 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 LYONs --
Purchase of LYONs at the Option of the Holder" on page 14 and "-- Change in
Control Permits Purchase of LYONs by Lowe's at the Option of the Holder" on page
17.
6
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.
7
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 offering memorandum. See "Incorporation of Information Filed
with the SEC" on page 43.
For the Year Ended Six Months Ended
--------------------------------------------------------------------- -----------------------
Jan. 31, Jan. 30, Jan. 29, Jan. 28, Feb. 2, July 28, August 3,
1997(1) 1998 1999 2000 2001 2000 2001
------- ------ ------ ------ ---- ------ -----
(unaudited)
(dollars in thousands except per share amounts and ratios)
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--diluted...... 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.......... 7% 4% 6% 6% 1% 4% -0.5%
Balance Sheet Data (at period 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 debts, 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.
8
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the LYONs or
shares of common stock by the selling securityholders. See "Selling
Securityholders" for a list of those entities receiving proceeds from sales of
LYONs.
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
the 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
4th Quarter (through November 15, 2001)......................... $42.63 $33.70 $0.0000
3rd Quarter .................................................... 39.30 24.99 0.0200
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 $21.53 $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.
9
DESCRIPTION OF LYONs
The following is a description of the material features of the LYONs. We
issued the LYONs under an indenture, dated as of February 16, 2001, between us
and The Bank of New York, as trustee. The following summary 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 LYONs holder. As used in this description of LYONs, 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 LYONs are limited to $1,005,000,000 aggregate principal amount at
maturity. The LYONs will mature on February 16, 2021. The principal amount at
maturity of each LYON will be $1,000. The LYONs 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 LYONs were offered at a substantial discount from their $1,000
principal amount at maturity. The LYONs were issued at an issue price of $608.41
per LYON. We will not make periodic payments of interest on the LYONs. However,
the LYONs will accrue original issue discount while they remain outstanding.
Original issue discount is the difference between the issue price and the stated
principal amount at maturity of a LYON. Original issue discount will accrue at a
rate of 2.5% per year, beginning on the date of original issuance of the LYONs.
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.
Original issue discount will cease to accrue on a LYON upon its maturity,
conversion, purchase by us at the option of a holder or redemption. We may not
reissue a LYON 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 LYON.
LYONs 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 LYONs.
However, we may require the holder to pay any tax, assessment or other
governmental charge payable as a result of such transfer or exchange.
Ranking of the LYONs
The LYONs are unsecured obligations and rank equal in right of payment to
all of our other unsecured and unsubordinated indebtedness. The LYONs are
effectively subordinated to our secured indebtedness to the extent of the
security. Also, the LYONs are effectively subordinated to the indebtedness and
other liabilities 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 LYON, in multiples of $1,000 principal amount at
maturity, into common stock at any time before the close of business on February
16, 2021. However, a holder may convert a
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LYON only until the close of business on the redemption date if we call a LYON
for redemption. A LYON for which a holder has delivered a purchase notice or a
change in control purchase notice requiring us to purchase the LYONs may be
surrendered for conversion only if such notice is withdrawn in accordance with
the indenture.
The conversion rate is 16.4480 shares of common stock per LYON, subject to
adjustment upon the occurrence of certain events described below. A holder of a
LYON 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.
To convert a LYON 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 LYON, and deliver the conversion notice to the
conversion agent;
. surrender the LYON 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 LYON, a holder will not receive any cash payment of
interest representing accrued original issue discount. Delivery to the holder of
the full number of shares of common stock into which the LYON 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 LYON; and
. to satisfy our obligation to pay accrued original issue discount
attributable to the period from the issue date through the conversion
date.
As a result, accrued original issue discount is deemed paid in full rather than
cancelled, extinguished or forfeited.
If semiannual interest is payable to holders of LYONs due to the occurrence
of a Tax Event and such LYONs are converted after a record date and prior to the
next interest payment date for the LYONs, holders of such LYONs on the record
date will receive the semi-annual interest payable on such LYONs on the
corresponding interest payment date notwithstanding the conversion and such
LYONs upon surrender must be accompanied by funds equal to the amount of
semiannual interest payable on the principal amount of LYONs so converted,
unless such LYONs have been called for redemption, in which case no such payment
shall be required.
The conversion rate will not be adjusted for accrued original issue
discount. A certificate for the number of full shares of common stock into which
any LYON is converted, together with any cash payment for fractional shares,
will be delivered through the conversion agent as soon as practicable following
the conversion date. For a discussion of the tax treatment of a holder receiving
shares of our common stock upon surrendering LYONs 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:
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. 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 LYONs may participate in the transaction without conversion or in certain
other cases.
In addition, the indenture provides that upon conversion of the LYONs, the
holders of such LYONs 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 LYONs may, in certain circumstances, be deemed to have
received a distribution subject to 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 LYON
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
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which the holder would have received if the holder had converted the holder's
LYON immediately prior to the transaction.
Redemption of LYONs at Our Option
No sinking fund is provided for the LYONs. Prior to February 16, 2004, we
cannot redeem the LYONs at our option. Beginning on February 16, 2004, we may
redeem the LYONs 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 LYONs.
If redeemed at our option, the LYONs will be redeemed at a price equal to
the sum of the issue price and accrued original issue discount on such LYONs as
of the applicable redemption date. The table below shows the redemption prices
of a LYON on February 16, 2004, at each February thereafter prior to maturity
and at maturity on February 16, 2021. In addition, the redemption price of a
LYON 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 LYON since the immediately preceding date in the table below.
(1) (2) (3)
LYON Accrued Redemption
Redemption Date Issue Price Original Issue Discount Price (1) + (2)
--------------- ----------- ----------------------- ---------------
February 16:
2004 ....................................................... $608.41 $ 47.08 $ 655.49
2005 ....................................................... 608.41 63.57 671.98
2006 ....................................................... 608.41 80.48 688.89
2007 ....................................................... 608.41 97.81 706.22
2008 ....................................................... 608.41 115.57 723.98
2009 ....................................................... 608.41 133.78 742.19
2010 ....................................................... 608.41 152.46 760.87
2011 ....................................................... 608.41 171.60 780.01
2012 ....................................................... 608.41 191.22 799.63
2013 ....................................................... 608.41 211.33 819.74
2014 ....................................................... 608.41 231.96 840.37
2015 ....................................................... 608.41 253.10 861.51
2016 ....................................................... 608.41 274.77 883.18
2017 ....................................................... 608.41 296.99 905.40
2018 ....................................................... 608.41 319.76 928.17
2019 ....................................................... 608.41 343.11 951.52
2020 ....................................................... 608.41 367.05 975.46
At stated maturity ......................................... 608.41 391.59 1,000.00
If we convert the LYONs 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 LYONs be redeemed prior to
February 16, 2004. For more information on this optional conversion, see "--
Optional Conversion to Semiannual Coupon Notes upon Tax Event."
If less than all of the outstanding LYONs are to be redeemed, the trustee
will select the LYONs 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 LYONs
by lot, pro rata or by any other method the trustee considers fair and
appropriate. If a portion of a holder's LYONs is selected for partial redemption
and the holder converts a portion of the LYONs, the converted portion will be
deemed to be the portion selected for redemption.
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Purchase of LYONs at the Option of the Holder
On the purchase dates of February 16, 2004 and February 16, 2011, we may,
at the option of the holder, be required to purchase any outstanding LYON 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 LYONs for purchase 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.
The purchase price of a LYON will be:
. $655.49 per LYON on February 16, 2004; and
. $780.01 per LYON on February 16, 2011.
The above purchase prices reflect a price equal to the sum of the issue
price and accrued original issue discount on such LYONs 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 LYONs 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 a unpaid 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, stating among other things:
. the amount of the purchase price;
. whether we will pay the purchase price of LYONs 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 LYONs.
The purchase notice given by each holder electing to require us to purchase
LYONs shall state:
. the certificate numbers of the holder's LYONs to be delivered for
purchase;
. the portion of the principal amount at maturity of LYONs to be
purchased, which must be $1,000 or an integral multiple of $1,000;
. that the LYONs are to be purchased by us pursuant to the applicable
provisions of the LYONs; and
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. 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 LYONs
to which it relates, or
(2) to receive cash in respect of the entire purchase price for all
LYONs or portions of LYONs subject to such purchase notice.
If the purchase price for the LYONs 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 LYONs unless such holder has properly notified us 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 LYONs being withdrawn; and
. the principal amount at maturity, if any, of the LYONs 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.
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 LYONs 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
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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 LYONs, 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
LYONs 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 LYONs once we have given the notice that we are
required to give to holders of LYONs, except as described in the first sentence
of this paragraph.
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 LYON for which a purchase notice has
been delivered and not validly withdrawn is conditioned upon delivery of the
LYON, together with necessary endorsements, to the paying agent at any time
after delivery of the purchase notice. Payment of the purchase price for the
LYON will be made as soon as practicable following the later of the purchase
date or the time of delivery of the LYON.
If the paying agent holds money or securities sufficient to pay the
purchase price of the LYON on the business day following the purchase date in
accordance with the terms of the indenture, then, immediately after the purchase
date, the LYON will cease to be outstanding and accrued original issue discount
on such LYON will cease to accrue, whether or not the LYON 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 LYON.
No LYONs 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 LYONs, other
than a default in the payment of the purchase price with respect to such LYONs.
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Change in Control Permits Purchase of LYONs by Lowe's at the Option of the
Holder
In the event of a change in control occurring on or prior to February 16,
2004, 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 LYONs. 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 LYONs 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 and accrued original issue discount on such
LYON on such date of purchase. Although not anticipated, we may not have
sufficient cash to redeem the LYONs upon a change of control.
If prior to such date of purchase upon a change in control the LYONs 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 LYONs 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;
. that LYONs 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 LYONs to be delivered by the holder;
. the portion of the principal amount at maturity of LYONs to be
purchased, which portion must be $1,000 or an integral multiple of
$1,000; and
17
. that we are to purchase such LYONs pursuant to the applicable
provisions of the LYONs.
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 principal amount at maturity, if any, of the LYONs that remain
subject to a change in control purchase notice; and
. the certificate numbers of the LYONs being withdrawn.
Payment of the change in control purchase price for a LYON for which a
change in control purchase notice has been delivered and not validly withdrawn
is conditioned upon delivery of the LYON, 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 LYON
will be made promptly following the later of the change in control purchase date
or the time of delivery of such LYON.
If the paying agent holds money sufficient to pay the change in control
purchase price of the LYON 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, accrued original issue discount on
the LYON will cease to accrue, whether or not the LYON 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 LYON.
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.
The indenture does not permit our board of directors to waive our
obligation to purchase LYONs 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:
18
. 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 LYONs 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 LYONs offerings that have been marketed by Merrill Lynch,
Pierce, Fenner & Smith Incorporated. The terms of the change in control purchase
feature resulted from negotiations between Merrill Lynch, Pierce, Fenner & Smith
Incorporated 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 LYONs but that would increase the
amount of our or our subsidiaries' outstanding indebtedness.
No LYONs 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
LYONs, other than a default in the payment of the change in control purchase
price with respect to the LYONs.
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 LYONs 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 LYONs;
. default in payment of any interest which becomes payable after the
LYONs have been converted to semiannual coupon notes following the
occurrence of a Tax Event, which default continues for 30 days;
. our failure to comply with any of our other agreements in the LYONs 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 LYONs, 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
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or to Lowe's and the trustee
by the holders of at least 25% in principal amount at maturity of the
LYONs; or
. certain events of bankruptcy, insolvency or reorganization affecting
Lowe's.
We shall deliver an Officer's Certificate to the trustee within 120 days
after the end of our fiscal year, stating whether or not to the best knowledge
of the signers thereof we are in default under the indenture.
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 LYONs then outstanding may declare the issue price of the LYONs
plus the original issue discount on the LYONs accrued through the date of such
declaration, and any accrued and unpaid 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 LYONs plus the original issue
discount accrued thereon 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 LYONs 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 LYONs 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 LYONs 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 accrue at 2.5% per year on a principal amount per LYON equal to the sum
of the issue price and accrued original issue discount on such LYON 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 date that we exercise our option to pay
interest in lieu of accrued original issue discount, and shall be payable
semiannually on the interest payment dates of February 16 and August 16 of each
year to holders of record at the close of business on the February 1 or August 1
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 has been paid or, if no
interest has been paid, from the date we exercise our option to pay interest.
20
In the event that we exercise our option to pay interest in lieu of accrued
original issue discount, the redemption price, purchase price and change in
control purchase price on the LYONs 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, 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
. 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 there is more than an
insubstantial risk that accrued original issue discount payable on the LYONs
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.
If a similar proposal were ever enacted and made applicable to the
LYONs in a manner that would limit our ability to either:
. deduct the interest, including the accrued original issue
discount, payable on the LYONs on a current accrual basis; or
. deduct the interest, including accrued original issue discount,
payable on the LYONs under any other method for United States
federal income tax purposes,
such enactment would result in a Tax Event and the terms of the LYONs would be
subject to modification at our option as described above.
The modification of the terms of LYONs by us upon a Tax Event as
described above could possibly alter the timing of income recognition by holders
of the LYONs with respect to the semiannual payments of interest due on the
LYONs after the date on which we exercise our option to pay interest in lieu of
accrued original issue discount on the LYONs.
Modification
We and the trustee may modify or amend the indenture or the LYONs with
the consent of the holders of not less than a majority in aggregate principal
amount at maturity of the LYONs then outstanding. However, the consent of the
holders of each outstanding LYON would be required to:
. alter the manner of calculation or rate of accrual of original
issue discount or interest on any LYON or change the time of
payment;
21
. make any LYON payable in money or securities other than that
stated in the LYON;
. change the stated maturity of any LYON;
. reduce the principal amount at maturity, accrued original issue
discount, redemption price, purchase price or change in control
purchase price with respect to any LYON;
. make any change that adversely affects the rights of a holder to
convert any LYON;
. make any change that adversely affects the right to require us to
purchase a LYON;
. impair the right to institute suit for the enforcement of any
payment with respect to, or conversion of, the LYONs; and
. change the provisions in the indenture that relate to modifying or
amending the indenture.
Without the consent of any holder of LYONs, 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 LYONs;
. to add to our covenants for the benefit of the holders of the
LYONs or to surrender any right or power conferred upon us;
. to secure our obligations in respect of the LYONs;
. to make any changes or modifications to the indenture necessary in
connection with the registration of the LYONs under the Securities
Act and the qualifications of the LYONs under the Trust Indenture
Act as contemplated by the indenture;
. 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 LYONs.
The holders of a majority principal amount at maturity of the
outstanding LYONs may, on behalf of all the holders of all LYONs:
. 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 LYON or in respect of
any provision which under the indenture cannot be modified or
amended without the consent of the holder of each outstanding LYON
affected.
22
Discharge of the Indenture
We may satisfy and discharge our obligations under the indenture by
delivering to the trustee for cancellation all outstanding LYONs or by
depositing with the trustee, the paying agent or the conversion agent, if
applicable, after the LYONs 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 LYONs and paying all other sums payable under the indenture.
Calculations in Respect of LYONs
We are responsible for making all calculations called for under the
LYONs. These calculations include, but are not limited to, determination of the
market prices of our common stock. We make all these calculations in good faith
and, absent manifest error, our calculations are final and binding on holders of
LYONs. We 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 LYON is, under Title 11 of the United States Code, limited to
the issue price of the LYON plus that portion of the original issue discount
that has accrued from the date of issue to the commencement of the proceeding.
In addition, the holders of LYONs will be effectively subordinated in right of
payment to our secured indebtedness to the extent of the security and
effectively subordinated to the indebtedness and other obligations of our
subsidiaries.
Governing Law
The indenture and the LYONs are governed by, and construed in
accordance with, the law of the State of New York without application to
principles of law, thereof.
Book-Entry System
The LYONs were issued only in the form of global securities held in
book-entry form. DTC or its nominee is the sole registered holder of the LYONs
for all purposes under the indenture. Owners of beneficial interests in the
LYONs represented by the global securities hold their interests pursuant to the
procedures and practices of DTC. As a result, beneficial interests in these
securities are 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
LYONs, in accordance with the procedures and practices of DTC. Beneficial owners
are not holders and are not 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
LYONs represented by a global security are exchangeable for
certificated securities with the same terms only if:
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. 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 Merrill Lynch,
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.
24
DESCRIPTION OF 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.
25
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.
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.
26
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.
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 offering memorandum, 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 holders of LYONs and our common stock issuable upon
conversion or repurchase by us of the LYONs. 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 LYONs 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 LYONs 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 LYONs 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
LYONs 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 LYONs or common stock;
. the consequences to persons who hold the LYONs 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 LYONs or ownership or disposition of
the common stock issuable upon conversion or repurchase of the
LYONs.
Accordingly, you should consult your own tax advisor regarding the tax
consequences of purchasing, owning and disposing of the LYONs and the common
stock in light of your own tax circumstances.
For purposes of this section, a U.S. Holder is a beneficial owner of
the LYONs 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.
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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 LYONs 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 LYONs or common stock into which LYONs have been converted (or with which
LYONs 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 LYONs or common stock or a
partner in such a partnership, we urge you to consult your own tax advisors
regarding the United States federal and other tax consequences to you of the
purchase, ownership and disposition of the LYONs and the common stock.
No statutory or judicial authority directly addresses the treatment of
the LYONs or instruments similar to the LYONs 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 holders to consult their own tax advisors with respect to the
tax consequences to them of the ownership and disposition of the LYONs and the
common stock in light of their own particular circumstances, including the tax
consequences under United States federal, state, local, foreign and other tax
laws and the possible effects of changes in United States federal or other tax
laws.
Classification of the LYONs
It is the opinion of counsel to Lowe's, Hunton & Williams, that the
LYONs will be treated as indebtedness for United States federal income tax
purposes.
Tax Event
The modification of the terms of the LYONs by us upon a Tax Event as
described in "Description of LYONs--Optional Conversion to Semiannual Coupon
Notes upon Tax Event," could possibly alter the timing of income recognition by
the holders of LYONs 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
LYONs for tax purposes.
Original Issue Discount. We issued the LYONs 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 principal amount
at maturity of each LYON constitutes original issue discount ("OID"). You will
be required to include OID in income periodically over the term of the LYONs
before receipt of the cash or other payment attributable to such income. As
described below, you must take OID into income using an economic accrual method
that reflects semiannual compounding.
The OID you must include in gross income as it accrues is the sum of
the daily portions of OID with respect to the LYON for each day during the
taxable year or portion of a taxable year on which you
29
hold the LYON. 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 LYON at the beginning of the accrual period multiplied by the yield to
maturity of the LYON. The accrual period of a LYON may be of any length and may
vary in length over the term of the LYON, 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 issue price is the initial offering price to investors at
which a substantial amount of the LYONs were sold (excluding sales to bond
houses, brokers, or similar persons or organizations acting in the capacity of
underwriters, placement agents, or wholesalers). The adjusted issue price of the
LYON at the start of any accrual period is the issue price of the LYON increased
by the accrued original issue discount for each prior accrual period.
Under these rules, you will be required to include in gross income
increasingly greater amounts of OID in each successive accrual period. Any
amount included in income as OID will increase your basis in the LYON.
Market Discount. If you acquire a LYON for an amount that is less than
the original issue price of such LYON plus any accrued OID, the amount of the
difference will be treated as market discount for United States federal income
tax purposes, unless such difference is less than a specified de minimis amount.
Under the market discount rules, you will be required to treat any principal
payment in respect of, or any gain recognized on the sale, exchange (other than
pursuant to a conversion into common stock as to which the market discount
carries over, as described below), retirement or other disposition of a LYON as
ordinary income to the extent of the lesser of (1) the amount of such principal
payment or recognized gain or (2) the accrued, but not previously taxed, market
discount at the time of such payment or disposition. In addition, you may be
required to defer, until the maturity of the LYON or its earlier disposition in
a taxable transaction, the deduction of all or a portion of the interest expense
on any indebtedness incurred or maintained to purchase or carry such LYON. In
the event of a conversion of a LYON into common stock, any accrued but
unrecognized market discount will carry over to the common stock and, upon the
disposition of the common stock, any gain will be treated as interest income to
the extent of the amount of accrued market discount as of the date of
conversion.
Any market discount generally will be considered to accrue ratably
during the period from the date of acquisition to the maturity date of the LYON,
unless you irrevocably elect to accrue such market discount on the basis of a
constant interest rate. In addition, you may elect to include market discount in
income currently as it accrues. If you make such a current inclusion election,
the rule described above regarding deferral of interest deductions will not
apply. Once made, a current inclusion election applies to all market discount
obligations acquired by you on or after the first day of the first taxable year
to which such election applies and may be revoked only with the consent of the
IRS.
Any amount included in income as market discount will increase your
basis in the LYON. You should consult your own tax advisor regarding the
application of the market discount rules to the LYONs.
Sale, Exchange, Conversion or Redemption. A conversion of a LYON into
common stock and the use by us of common stock on a purchase date to repurchase
a LYON (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 basis in the LYON at
the time of conversion less any basis allocable to a fractional share. The
holding period for the common stock received on conversion or repurchase will
include the holding period of the converted or repurchased LYON, assuming each
is held as a capital asset, except that the holding period for common stock
attributable to accrued OID likely may 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.
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If you elect to exercise your option to tender a LYON 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 capital gain, and will be a long-term capital gain if the tendered
LYON is held for more than one year.
If you elect to exercise your option to tender a LYON to us on a purchase
date or a change in control purchase date and we deliver solely cash in
satisfaction of the purchase price or change in control purchase price, you will
recognize gain or loss, measured by the difference between the amount of cash
transferred by us to you and your basis in the tendered LYON. Such gain or loss
will generally be capital gain or loss, and will be long-term capital gain or
loss if the tendered LYON is held for more than one year.
Your basis in the common stock received from us in exchange for a LYON
will be the same as your basis in the LYON 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 the
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 holding period for
the LYON tendered to us in exchange, assuming each is held as a capital asset.
However, the holding period for common stock attributable to accrued OID likely
may begin no earlier than the date the OID accrued and may begin as late as on
the day following the exchange date.
Cash received in lieu of a fractional share upon a tender of a LYON 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 LYONs, gain or loss upon a sale
or exchange of a LYON or of common stock received upon a conversion or a
repurchase of a LYON will generally be capital gain or loss, which capital gain
or loss will be long-term if the LYON 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 LYON will terminate prospectively on the date of conversion or
repurchase of the LYON for common stock or cash or any combination thereof.
Dividends. If you receive common stock in exchange for a LYON,
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 LYONs, the conversion rate of the
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LYONs is increased, such increase may be deemed to be the payment of a taxable
dividend to holders of the LYONs 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 LYONs, 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 LYONs--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 LYONs or
shares of common stock with respect to certain non-corporate U.S. Holders, and
backup withholding at a rate of up to 31% 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
LYONs.
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 LYONs if:
. you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our shares entitled to vote;
. you are not a controlled foreign corporation that is related to us
through stock ownership;
. 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 an IRS Form W-8BEN
or appropriate substitute form to us or our agent (provided that if
you hold the LYONs 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 Withholding and Information Reporting," you will not be subject to United
States federal income or withholding tax on gain realized upon your disposition
of LYONs or shares of common stock if:
. if an individual, you are not, present in the United States for 183
days or more in the year of the sale, exchange or disposition of the
LYONs or common stock, or you do not have a "tax home" (as defined in
Code Section 911(d)(3)) in the United States; and
. gain, if any, from a sale, exchange or disposition of the LYONs 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,
32
or USRPHC, as described below) with the conduct by you of a U.S.
trade or business. 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.
Income that is effectively connected with a U.S. trade or business 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) of your effectively connected earnings and profits for
the taxable year, subject to certain adjustments.
Dividends paid to you on common stock received in exchange for the LYONs
will generally be subject to U.S. 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 you provide us
with an IRS Form W-8ECI.
United States Federal Estate Tax. A LYON 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
LYON (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 his or her country of residence.
Backup Withholding and Information Reporting. If the LYONs, or shares of
common stock into which LYONs 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 LYONs or shares of
common stock are held by you through a U.S., or U.S. related, broker or
financial institution or certain other U.S. related entities and you fail to
certify your nonresident status.
33
SELLING SECURITYHOLDERS
The LYONs were originally issued by us and sold by Merrill Lynch,
Pierce, Fenner & Smith Incorporated in a transaction exempt from the
registration requirements of the Securities Act to persons reasonably believed
by Merrill Lynch to be "qualified institutional buyers" (as defined by Rule 144A
under the Securities Act). The selling securityholders (which term includes
their transferees, pledgees, donees or successors) may from time to time offer
and sell pursuant to this prospectus any and all of the LYONs and the shares of
common stock issuable upon conversion and/or redemption of the LYONs.
Set forth below are the names of each selling securityholder, the
principal amount of LYONs that may be offered by such selling securityholder
pursuant to this prospectus and the number of shares of common stock into which
such LYONs are convertible. Unless set forth below, none of the selling
securityholders has had a material relationship with us or any of our
predecessors or affiliates within the past three years.
The following table sets forth certain information received by us on or
prior to November 16, 2001. However, any or all of the LYONs or common stock
listed below may be offered for sale pursuant to this prospectus by the selling
securityholders from time to time. Accordingly, no estimate can be given as to
the amounts of LYONs or common stock that will be held by the selling
securityholders upon consummation of any such sales.
------------------------------------------------------------------------------------------------------------------------------
Aggregate Principal
Amount of LYONs at Common Stock Common Stock
Maturity that May be Percentage of Owned Prior to Registered
Name/(2)/(3)/ Sold/(4)/ LYONs Outstanding Conversion Hereby/(1)/
------------------------------------------------------------------------------------------------------------------------------
AAM/Zazore International Income Fund L.P. 2,000,000 0.20% 0 32,896
------------------------------------------------------------------------------------------------------------------------------
AIM Capital Management Mid-Cap Opportunities Fund 4,000,000 0.40% 0 65,792
------------------------------------------------------------------------------------------------------------------------------
AIM Capital Management Large Cap Opportunity Fund 2,000,000 0.20% 0 32,896
------------------------------------------------------------------------------------------------------------------------------
Allstate Insurance Company 2,050,000 0.20% 0 33,718
------------------------------------------------------------------------------------------------------------------------------
Allstate Life Insurance Company 5,405,000 0.54% 0 88,901
------------------------------------------------------------------------------------------------------------------------------
Aloha Airlines Non-Pilots Pension Trust 285,000 0.03% 0 4,687
------------------------------------------------------------------------------------------------------------------------------
Aloha Airlines Pilots Retirement Trust 165,000 0.02% 0 2,713
------------------------------------------------------------------------------------------------------------------------------
Amaranth Securities LLC 2,125,000 0.21% 0 34,952
------------------------------------------------------------------------------------------------------------------------------
Amerisure Companies/Michigan Mutual Insurance Company 400,000 0.04% 0 6,579
------------------------------------------------------------------------------------------------------------------------------
Arpeggio Fund LP 4,500,000 0.45% 0 74,016
------------------------------------------------------------------------------------------------------------------------------
Associated Electric & Gas Insurance Services Limited 1,100,000 0.11% 0 18,092
------------------------------------------------------------------------------------------------------------------------------
Banc of America Securities LLC 850,000 0.08% 0 13,980
------------------------------------------------------------------------------------------------------------------------------
Bankers Trust Co. Trustee for Daimler Chrysler
Corp Emp#1 Pension Plan 4,785,000 0.48% 0 78,703
------------------------------------------------------------------------------------------------------------------------------
Bay County PERS 195,000 0.02% 0 3,207
------------------------------------------------------------------------------------------------------------------------------
BBT Fund L.P. 27,500,000 2.74% 0 452,320
------------------------------------------------------------------------------------------------------------------------------
Bear Stearns & Co., Inc. 10,333,000 1.03% 0 169,957
------------------------------------------------------------------------------------------------------------------------------
Black Diamond Offshore Ltd. 1,748,000 0.17% 0 28,751
------------------------------------------------------------------------------------------------------------------------------
34
-------------------------------------------------------------------------------------------------------------------------------
Aggregate Principal
Amount of LYONs at Percentage of Common Stock Common Stock
Maturity that May be LYONs Owned Prior to Registered
Name/(2)/(3)/ Sold/(4)/ Outstanding Conversion Hereby/(1)/
-------------------------------------------------------------------------------------------------------------------------------
Blue Cross/Blue Shield of Florida 1,500,000 0.15% 0 24,672
-------------------------------------------------------------------------------------------------------------------------------
C&H Sugar Company, Inc. 425,000 0.04% 0 6,990
-------------------------------------------------------------------------------------------------------------------------------
CA State Automobile Assn. Inte-Insurance 1,000,000 0.10% 0 16,448
-------------------------------------------------------------------------------------------------------------------------------
CALAMOS(R)Convertible Growth and Income Fund -
CALAMOS(R)Investment Trust 7,500,000 0.75% 0 123,360
-------------------------------------------------------------------------------------------------------------------------------
California Public Employees' Retirement System 9,000,000 0.90% 3,114,560 148,032
-------------------------------------------------------------------------------------------------------------------------------
Canyon MAC 18 LTD (RMF) 2,000,000 0.20% 0 32,896
-------------------------------------------------------------------------------------------------------------------------------
Canyon Value Realization Fund (Cayman) LTD 10,000,000 1.00% 0 164,480
-------------------------------------------------------------------------------------------------------------------------------
Canyon Capital Arbitrage MasterHedge Fund, LTD 5,000,000 0.50% 0 82,240
-------------------------------------------------------------------------------------------------------------------------------
Canyon Value Realization Fund LP. 5,000,000 0.50% 0 82,240
-------------------------------------------------------------------------------------------------------------------------------
Cater Allen International Limited 11,500,000 1.14% 0 189,152
-------------------------------------------------------------------------------------------------------------------------------
Christian Science Trustees -- Gifts and Endowments 170,000 0.02% 0 2,796
-------------------------------------------------------------------------------------------------------------------------------
Chrysler Corporation Master Retirement Trust 5,105,000 0.51% 0 83,967
-------------------------------------------------------------------------------------------------------------------------------
CIBC World Markets 7,000,000 0.70% 0 115,136
-------------------------------------------------------------------------------------------------------------------------------
City of Birmingham Retirement & Relief System 1,000,000 0.10% 0 16,448
-------------------------------------------------------------------------------------------------------------------------------
CitySam Fund-Ltd. 11,600,000 1.15% 0 190,796
-------------------------------------------------------------------------------------------------------------------------------
Clarica Life Insurance Co. - U.S. 800,000 0.08% 0 13,158
-------------------------------------------------------------------------------------------------------------------------------
Commonwealth Professional Assurance Company, c/o
Income Research &
Management 540,000 0.05% 0 8,881
-------------------------------------------------------------------------------------------------------------------------------
Conseco Annuity Assurance Company 2,500,000 0.25% 0 41,120
-------------------------------------------------------------------------------------------------------------------------------
Conseco Fund Group - Conseco Convertible
Securities Fund 250,000 0.02% 0 4,112
-------------------------------------------------------------------------------------------------------------------------------
Credit Industriel D'Alsace et De Lorraine 9,400,000 0.94% 0 154,611
-------------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston Corporation 6,200,000 0.62% 0 101,977
-------------------------------------------------------------------------------------------------------------------------------
Delta Airlines Master Trust 1,350,000 0.13% 0 22,204
-------------------------------------------------------------------------------------------------------------------------------
Delta Pilots D & S Trust 750,000 0.07% 0 12,336
-------------------------------------------------------------------------------------------------------------------------------
Deutsche Banc Alex Brown Inc. 25,512,000 2.54% 0 419,621
-------------------------------------------------------------------------------------------------------------------------------
Double Black Diamond Offshore 7,869,000 0.78% 0 129,429
-------------------------------------------------------------------------------------------------------------------------------
Drury University 140,000 0.01% 0 2,302
-------------------------------------------------------------------------------------------------------------------------------
Dylan (IMA) Limited 5,000,000 0.50% 0 82,240
-------------------------------------------------------------------------------------------------------------------------------
EQAT/Alliance Growth Investors 1,565,000 0.16% 0 25,741
-------------------------------------------------------------------------------------------------------------------------------
Equitable Life Assurance Separate Account --
Balanced 90,000 0.01% 0 1,480
-------------------------------------------------------------------------------------------------------------------------------
Equitable Life Assurance Separate Account --
Convertibles 1,425,000 0.14% 0 23,438
-------------------------------------------------------------------------------------------------------------------------------
Excellus Health Plan; Formerly Blue Cross/Blue
Shield of Rochester, c/o Income Research and
Management 1,000,000 1.00% 0 16,448
-------------------------------------------------------------------------------------------------------------------------------
Federated Equity Funds 17,000,000 1.69% 0 279,616
-------------------------------------------------------------------------------------------------------------------------------
Fidelity Devonshire Trust: Fidelity
Equity-Income Fund 16,850,000 1.68% 0 277,148
-------------------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Trust: Fidelity Puritan Fund 9,610,000 0.96% 0 158,065
-------------------------------------------------------------------------------------------------------------------------------
35
-------------------------------------------------------------------------------------------------------------------------------
Aggregate Principal
Amount of LYONs at Percentage of Common Stock Common Stock
Maturity that May be LYONs Owned Prior to Registered
Name/(2)/(3)/ Sold/(4)/ Outstanding Conversion Hereby/(1)/
-------------------------------------------------------------------------------------------------------------------------------
Forest Alternative Strategies II 150,000 0.01% 150,000 2,467
-------------------------------------------------------------------------------------------------------------------------------
Forest Fulcrum Fund L.L.P. 1,950,000 0.19% 1,950,000 32,073
-------------------------------------------------------------------------------------------------------------------------------
Forest Global Convertible Fund Series A-5 9,130,000 0.91% 9,128,000 150,170
-------------------------------------------------------------------------------------------------------------------------------
Franklin and Marshall College 275,000 0.03% 0 4,523
-------------------------------------------------------------------------------------------------------------------------------
Gaia Offshore Master Fund Ltd. 20,000,000 1.99% 0 328,960
-------------------------------------------------------------------------------------------------------------------------------
GLG Market Neutral Fund 16,000,000 1.59% 0 263,168
-------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs and Company 485,000 0.05% 0 7,977
-------------------------------------------------------------------------------------------------------------------------------
Hawaiian Airlines Employees Pension Plan - IAM 135,000 0.01% 0 2,220
-------------------------------------------------------------------------------------------------------------------------------
Hawaiian Airlines Pension Plan for Salaried Employees 25,000 0.00% 0 411
-------------------------------------------------------------------------------------------------------------------------------
Hawaiian Airlines Pilots Retirement Plan 260,000 0.03% 0 4,276
-------------------------------------------------------------------------------------------------------------------------------
HSBCTTee Zola Managed Trust 900,000 0.09% 0 14,803
-------------------------------------------------------------------------------------------------------------------------------
IMF Convertible Fund 2,400,000 0.24% 0 39,475
-------------------------------------------------------------------------------------------------------------------------------
Investcorp Sam Fund Limited 10,000,000 1.00% 0 164,480
-------------------------------------------------------------------------------------------------------------------------------
KBC Financial Products USA 2,275,000 0.23% 0 37,419
-------------------------------------------------------------------------------------------------------------------------------
Lakeshore International Ltd. 5,000,000 0.50% 0 82,240
-------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Inc. 350,000 0.03% 0 5,756
-------------------------------------------------------------------------------------------------------------------------------
Liberty View Fund LLC 500,000 0.05% 0 8,224
-------------------------------------------------------------------------------------------------------------------------------
Liberty View Funds L.P. 4,500,000 0.45% 0 74,016
-------------------------------------------------------------------------------------------------------------------------------
LLT Limited 440,000 0.04% 0 7,237
-------------------------------------------------------------------------------------------------------------------------------
Lord Abbett Bond Debenture Fund 10,000,000 1.00% 0 164,480
-------------------------------------------------------------------------------------------------------------------------------
Lutheran Brotherhood 4,500,000 0.45% 14,160 74,016
-------------------------------------------------------------------------------------------------------------------------------
Lydian Overseas Partners Master Fund 24,525,000 2.44% 0 403,387
-------------------------------------------------------------------------------------------------------------------------------
Lyxor Master Fund 600,000 0.06% 0 9,868
-------------------------------------------------------------------------------------------------------------------------------
Lyxor Master Fund, c/o Forest Investment Mngt. L.L.C. 2,100,000 0.21% 2,100,000 34,540
-------------------------------------------------------------------------------------------------------------------------------
McMahan Securities Co. L.P. 1,150,000 0.11% 0 18,915
-------------------------------------------------------------------------------------------------------------------------------
Med America
Insurance,
c/o Income Research and Management 3,535,000 0.35% 0 58,143
-------------------------------------------------------------------------------------------------------------------------------
Med American New York
Insurance,
c/o Income Research and Management 1,315,000 0.13% 0 21,629
-------------------------------------------------------------------------------------------------------------------------------
Memphis Light, Gas and Water Retirement Fund 935,000 0.09% 0 15,378
-------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch, Pierce, Fenner and Smith Inc. 14,123,000 1.41% 0 232,295
-------------------------------------------------------------------------------------------------------------------------------
Motion Picture Industry Health Plan - Active
Member Fund 255,000 0.03% 0 4,194
-------------------------------------------------------------------------------------------------------------------------------
Motion Picture Industry Health Plan - Retiree
Member Fund 125,000 0.01% 0 2,056
-------------------------------------------------------------------------------------------------------------------------------
Nicholas Applegate Convertible Fund 87,000 0.01% 0 1,430
-------------------------------------------------------------------------------------------------------------------------------
36
--------------------------------------------------------------------------------------------------------------------------------
Aggregate Principal
Amount of LYONs at Percentage of Common Stock Common Stock
Name/(2)//(3)/ Maturity that May be LYONs Owned Prior to Registered
Sold/(4)/ Outstanding Conversion Hereby/(1)/
--------------------------------------------------------------------------------------------------------------------------------
Northern Income Equity Fund 4,000,000 0.40% 0 65,792
--------------------------------------------------------------------------------------------------------------------------------
OCM Convertible Trust 2,440,000 0.24% 0 40,133
--------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Convertible Securities Fund 10,000,000 1.00% 0 164,480
--------------------------------------------------------------------------------------------------------------------------------
Paloma Securities LLC 17,125,000 1.70% 8,200 281,672
--------------------------------------------------------------------------------------------------------------------------------
Partner Reinsurance Company Ltd 590,000 0.06% 0 9,704
--------------------------------------------------------------------------------------------------------------------------------
Penn Treaty Network America Insurance Company 360,000 0.04% 0 5,921
--------------------------------------------------------------------------------------------------------------------------------
Physicians Life 314,000 0.03% 0 5,164
--------------------------------------------------------------------------------------------------------------------------------
PIMCO Convertible Fund 1,000,000 0.10% 0 16,448
--------------------------------------------------------------------------------------------------------------------------------
Principal Investors Fund, Inc. on behalf of its
Partners Large Cap Blend Fund 280,000 0.03% 0 4,605
--------------------------------------------------------------------------------------------------------------------------------
Principal Investors Fund, Inc. on behalf of its
Principal Partners Large Cap Blend Fund, Inc. 125,000 0.01% 0 2,056
--------------------------------------------------------------------------------------------------------------------------------
Quattro Fund, Ltd. 1,500,000 0.15% 0 24,672
--------------------------------------------------------------------------------------------------------------------------------
Queen's Health Plan 100,000 0.01% 0 1,644
--------------------------------------------------------------------------------------------------------------------------------
RBC Capital Services Inc. c/o Forest Investment
Mngt. L.L.C. 50,000 0.00% 47,000 822
--------------------------------------------------------------------------------------------------------------------------------
Rhapsody Fund, LP 13,300,000 1.32% 0 218,758
--------------------------------------------------------------------------------------------------------------------------------
Royal Bank of Canada 6,300,000 0.63% 188,711 103,622
--------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Asset Management, Inc. 7,750,000 0.77% 0 127,472
--------------------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney Inc. 174,000 0.02% 0 2,861
--------------------------------------------------------------------------------------------------------------------------------
San Diego County Employees Retirement Association 1,000,000 0.10% 0 16,448
--------------------------------------------------------------------------------------------------------------------------------
SCI Endowment Care Common Trust Fund - National
Fiduciary Services 340,000 0.03% 0 5,592
--------------------------------------------------------------------------------------------------------------------------------
SCI Endowment Care Common Trust Fund - Suntrust 150,000 0.01% 0 2,467
--------------------------------------------------------------------------------------------------------------------------------
S.G. Cowen Securities Corp. 5,000,000 0.50% 0 82,240
--------------------------------------------------------------------------------------------------------------------------------
Southern Farm Bureau Life Insurance 870,000 0.09% 0 14,309
--------------------------------------------------------------------------------------------------------------------------------
Starvest Managed Portfolio 125,000 0.01% 0 2,056
--------------------------------------------------------------------------------------------------------------------------------
State Employees' Retirement Fund of the State of
Delaware 1,605,000 0.16% 0 26,399
--------------------------------------------------------------------------------------------------------------------------------
State of Connecticut Combined Investment Funds 2,680,000 0.27% 0 44,080
--------------------------------------------------------------------------------------------------------------------------------
State of Florida, Division of Treasury 3,380,000 0.34% 0 55,594
--------------------------------------------------------------------------------------------------------------------------------
State of Florida, Office of the Treasurer 3,500,000 0.35% 0 57,568
--------------------------------------------------------------------------------------------------------------------------------
State of Mississippi Health Care Trust Fund 905,000 0.09% 0 14,885
--------------------------------------------------------------------------------------------------------------------------------
State of Oregon/SAIF Corporation 9,575,000 0.95% 0 157,489
--------------------------------------------------------------------------------------------------------------------------------
State Street Bank Custodian for GE Pension Trust 2,180,000 0.22% 0 35,856
--------------------------------------------------------------------------------------------------------------------------------
Sylvan IMA Ltd., c/o Forest Mngt. L.L.C. 810,000 0.08% 810,000 13,322
--------------------------------------------------------------------------------------------------------------------------------
37
--------------------------------------------------------------------------------------------------------------------------------
Aggregate Principal
Amount of LYONs at Percentage of Common Stock Common Stock
Name/(2)//(3)/ Maturity that May be LYONs Owned Prior to Registered
Sold/(4)/ Outstanding Conversion Hereby/(1)/
--------------------------------------------------------------------------------------------------------------------------------
The Frist Foundation 255,000 0.03% 0 4,194
--------------------------------------------------------------------------------------------------------------------------------
Tokai Asia Limited 34,000,000 3.38% 0 559,232
--------------------------------------------------------------------------------------------------------------------------------
Tufts Associated Health Plans, c/o Income
Research & Management 650,000 0.06% 0 10,691
--------------------------------------------------------------------------------------------------------------------------------
UBS Warburg L.L.C. 3,300,000 0.33% 0 54,278
--------------------------------------------------------------------------------------------------------------------------------
Union Carbide Retirement Account 2,500,000 0.25% 0 41,120
--------------------------------------------------------------------------------------------------------------------------------
University of Massachusetts, c/o Income Research
& Management 130,000 0.01% 0 2,138
--------------------------------------------------------------------------------------------------------------------------------
Vanguard Convertible Securities Fund, Inc. 5,285,000 0.53% 0 86,927
--------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund: Equity-Income
Portfolio 7,800,000 0.78% 0 128,294
--------------------------------------------------------------------------------------------------------------------------------
Victory Capital Management as Agent for EB
Convertible Securities Fund 580,000 0.06% 0 9,539
--------------------------------------------------------------------------------------------------------------------------------
Victory Capital Management as Agent for Key Trust
Convertible Securities Fund 100,000 0.01% 0 1,644
--------------------------------------------------------------------------------------------------------------------------------
Victory Capital Management as Agent for the
Charitable Convertible Securities Fund 535,000 0.05% 0 8,799
--------------------------------------------------------------------------------------------------------------------------------
Victory Capital Management as Agent for the
Charitable Income Fund 85,000 0.01% 0 1,398
--------------------------------------------------------------------------------------------------------------------------------
Victory Capital Management as Agent for the Field
Foundation of Illinois 25,000 0.00% 0 411
--------------------------------------------------------------------------------------------------------------------------------
Victory Capital Management as Agent for the
GenCorp Foundation 20,000 0.00% 0 328
--------------------------------------------------------------------------------------------------------------------------------
Victory Capital Management as Agent for the Key
Trust Fixed Income Fund 130,000 0.01% 0 2,138
--------------------------------------------------------------------------------------------------------------------------------
Victory Capital Management as Agent for the
Parker Key/Convertible 135,000 0.01% 0 2,220
--------------------------------------------------------------------------------------------------------------------------------
Victory Capital Management as Agent for the Union
Security Life Insurance Co 20,000 0.00% 0 328
--------------------------------------------------------------------------------------------------------------------------------
Victory Capital Management as Agent for the
Victory Convertible Securities Fund 385,000 0.04% 0 6,332
--------------------------------------------------------------------------------------------------------------------------------
Victory Capital Management as Investment Manager
for Health Foundation of Greater Cincinnati 80,000 0.01% 0 1,315
--------------------------------------------------------------------------------------------------------------------------------
Victory Capital Management as Investment Manager
for Potlatch 375,000 0.04% 0 6,168
--------------------------------------------------------------------------------------------------------------------------------
White River Securities LLC 10,334,000 1.03% 0 169,973
--------------------------------------------------------------------------------------------------------------------------------
Wilmington Trust Co as Owner & TTEE for the
Forestal Funding Master Trust 5,000,000 0.50% 0 82,240
--------------------------------------------------------------------------------------------------------------------------------
Worldwide Transactions Ltd. 383,000 0.04% 0 6,299
--------------------------------------------------------------------------------------------------------------------------------
Zurich Institutional Benchmarks Master Fund LTD 500,000 0.05% 0 8,224
--------------------------------------------------------------------------------------------------------------------------------
Zurich Master Hedge Fund c/o Forest Investment
Mngt. L.L.C. 370,000 0.04% 370,000 6,085
--------------------------------------------------------------------------------------------------------------------------------
38
(1) Assumes conversion of all of the holder's LYONs at a conversion rate of
16.4480 shares of common stock per $1,000 principal amount at maturity
of the LYONs. However, this conversion rate will be subject to
adjustment as described under "Description of LYONs -- Conversion
Rights." As a result, the amount of common stock issuable upon
conversion of the LYONs may increase or decrease in the future.
(2) Information about other selling securityholders will be set forth in
post-effective amendments, if required.
(3) Assumes that any other holders of LYONs, or any future transferees,
pledgees, donees or successors of or from any such other holders of
LYONs, do not beneficially own any common stock other than the common
stock issuable upon conversion of the LYONs at the initial conversion
rate.
(4) Total principal amount of selling securityholders listed may be more
than $1,005,000,000 because certain of the selling securityholders have
transferred LYONs pursuant to rule 144A or otherwise reduced their
position prior to selling pursuant to this registration statement
without notifying Lowe's of their reduced position. The maximum
principal amount at maturity of LYONs that may be sold under this
registration statement will not exceed $1,005,000,000.
The preceding table has been prepared based upon information furnished
to us by the selling securityholders named in the table. From time to time,
additional information concerning ownership of the LYONs and common stock may
rest with certain holders thereof not named in the preceding table, with whom we
believe we have no affiliation. Information about the selling securityholders
may change from over time. Any changed information will be set forth in
post-effective amendments.
39
PLAN OF DISTRIBUTION
The LYONs and the common stock are being registered to permit public
secondary trading of these securities by the holders thereof from time to time
after the date of this prospectus. We have agreed, among other things, to bear
all expenses (other than underwriting discounts and selling commissions) in
connection with the registration and sale of the LYONs and the common stock
covered by this prospectus.
We will not receive any of the proceeds from the offering of LYONs or
the common stock by the selling securityholders. We have been advised by the
selling securityholders that the selling securityholders may sell all or a
portion of the LYONS and common stock beneficially owned by them and offered
hereby from time to time on any exchange on which the securities are listed on
terms to be determined at the times of such sales. The selling securityholders
may also make private sales directly or through a broker or brokers.
Alternatively, any of the selling securityholders may from time to time offer
the LYONs or the common stock beneficially owned by them through underwriters,
dealers or agents, who may receive compensation in the form of underwriting
discounts, commissions or concessions from the selling securityholders and the
purchasers of the LYONs and the common stock for whom they may act as agent. The
aggregate proceeds to the selling securityholders from the sale of the LYONs or
common stock offering by them hereby will be the purchase price of such LYONs or
common stock less discounts and commissions, if any.
The LYONs and common stock may be sold from time to time in one or more
transactions at fixed offering prices, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. These prices will
be determined by the holders of such securities or by agreement between these
holders and underwriters or dealers who may receive fees or commissions in
connection therewith.
These transactions may include block transactions or crosses. Crosses
are transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the LYONs and the underlying common stock
or otherwise, the selling securityholders may enter into options or other
transactions with broker-dealers. These broker-dealers may in turn engage in
short sales of the LYONs and the underlying common stock in the course of
hedging their positions. The selling securityholders may also sell the LYONs and
underlying common stock short and deliver LYONs and the underlying common stock
to close out short positions, or loan or pledge LYONs and the underlying common
stock to broker-dealers that in turn may sell the LYONs and the underlying
common stock.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the LYONs and the underlying common
stock by the selling securityholders. Selling securityholders may elect to not
sell any or all of the LYONs and the underlying common stock offered by them
pursuant to this prospectus. In addition, we cannot assure you that any such
selling securityholder will not transfer, devise or gift the LYONs and the
underlying common stock by other means not described in this prospectus. In
addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule
144 or Rule 144A rather than pursuant to this prospectus.
Our outstanding common stock is listed for trading on the New York
Stock Exchange.
The selling securityholders and any broker and any broker-dealers,
agents or underwriters that participate with the selling securityholders in the
distribution of the LYONs or the common stock may be
40
deemed to be "underwriters" within the meaning of the Securities Act, in which
event any commission received by such broker-dealers, agents or underwriters and
any profit on the resale of the LYONs or the common stock purchased by them may
be deemed to be underwriting commissions or discounts under the Securities Act.
The LYONs were issued and sold on February 16, 2001 in transactions
exempt from the registration requirements of the Securities Act to persons
reasonably believed by Merrill Lynch to be "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act). We have agreed to indemnify
Merrill Lynch and each selling securityholder, and each selling securityholder
had agreed to indemnify us, Merrill Lynch and each other selling shareholder
against certain liabilities arising under the Securities Act.
The selling securityholders and any other persons participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of the LYONs and the underlying common stock by the selling
securityholders and any other such person. In addition, Regulation M of the
Exchange Act may restrict the ability of any person engaged in the distribution
of the LYONs and the underlying common stock to engage in market-making
activities with respect to the particular LYONs and the underlying common stock
being distributed for a period of up to five business days prior to the
commencement of such distribution. This may affect the marketability of the
LYONs and the underlying common stock and the ability of any person or entity to
engage in market-making activities with respect to the LYONs and the underlying
common stock.
We will use our reasonable efforts to keep the registration statement
of which this prospectus is a part effective until the earlier of (i) the sale
pursuant to the registration statement of all the securities registered
thereunder or (ii) the expiration of the holding period applicable to such
securities held by persons that are not our affiliates under Rule 144(k) under
the Securities Act or any successor provision, subject to certain permitted
exceptions in which case we may prohibit offers and sales of LYONs and common
stock pursuant to the registration statement to which this prospectus relates.
Under the securities laws of certain states, the LYONs may be sold in
such states only through registered or licensed brokers or dealers. In addition,
in certain states the LYONs may not be sold unless the LYONs have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.
41
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC under the Securities Exchange Act of 1934. 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 Chicago Regional Office
450 Fifth Street, N.W. Citicorp Center
Room 1024 500 West Madison Street
Washington, D.C. 20549 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.
42
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 February 2, 2001, filed on April
13, 2001 and amended on July 12, 2001, (ii) Lowe's Quarterly Reports on Form
10-Q filed on June 15, 2001 and September 14, 2001; (iii) Lowe's Current Reports
on Form 8-K filed on February 12, 2001, February 23, 2001, March 9, 2001 and
October 25, 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:
Marshall A. Croom
Lowe's Companies, Inc.
1605 Curtis Bridge Road
Wilkesboro, North Carolina 28697
Telephone: (336) 658-4000 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 until the termination of the offering of the
securities offered by this prospectus:
. reports filed under Section 13(a) and (c) of the Exchange Act;
. 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.
43
LEGAL MATTERS
The validity of the LYONs and the shares of common stock issuable upon
conversion of the LYONs has been 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 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 report included in
Lowe's Quarterly Report 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.
44
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expenses payable in connection with the distribution of the securities
being registered (estimated except for the registration fee), all of which will
be borne by us, are as follows:
SEC Registration Fee $ 169,652
Accounting Fees 15,000
Trustee Fees 10,000
Printing, Engraving and Postage Expenses 15,000
Legal Fees and Expenses 50,000
Miscellaneous Expenses 15,348
---------
Total $ 275,000
Item l5. Indemnification of Directors and Officers.
Article IV of the Company's Bylaws provides that the Company will indemnify
any person as an officer or director of the Company or as an officer, director,
trustee or partner of another corporation, trust, partnership or employee
benefit plan at the request of the Company, against any liability incurred in
connection with any proceeding arising out of the service. To the extent that
such person is successful on the merits or otherwise in defense of any such
proceeding, the Company will indemnify him against expenses actually and
reasonably incurred in such defense. No indemnification is available if, at the
time of the activities that are the subject of the proceeding, the person knew
or believed that the activities were clearly in conflict with the best interests
of the Company. Further, Section 55-8-51 of the North Carolina Business
Corporation Act provides that a corporation may not indemnify a director in
connection with a proceeding by or in the right of the corporation in which the
director was adjudged liable to the corporation or in connection with any other
proceeding charging improper personal benefit to him, whether or not involving
action in his official capacity, in which he is adjudged liable on the basis
that personal benefit was improperly received by him.
The Company maintains an insurance policy for the benefit of directors and
officers insuring them against claims that are made against them by reason of
any wrongful act (as defined) committed in their capacity as directors or
officers.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit Number Description of Exhibit
-------------- ----------------------
4.1* Indenture between Lowe's Companies, Inc. and The Bank of
New York, dated as of February 16, 2001.
4.2 Form of Liquid Yield Option Note(TM) due 2021 (Zero
Coupon -- Senior) (included in Exhibit 4.1).
4.3* Registration Rights Agreement, dated as of February 16,
2001, by and between Lowe's Companies, Inc. and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
II-1
Exhibit Number Description of Exhibit
-------------- ----------------------
5.1* Opinion of Hunton & Williams.
8.1* Opinion of Hunton & Williams as to certain U.S. federal
income tax considerations.
12.1* Computation of Ratio of Earnings to Fixed Charges.
15.1* Letter of Deloitte & Touche LLP re Unaudited Interim
Financial Information.
23.1* Consent of Deloitte & Touche LLP.
23.2 Consent of Hunton & Williams (included in Exhibit 5.1).
23.3* Consent of Ernst & Young LLP.
24.1* Power of Attorney
25.1* Form of T-1 Statement of Eligibility of the Trustee under
the Indenture.
____________
*Previously filed.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to the information in the
registration statement; provided, however, that the undertakings set
forth in subparagraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the Registrant pursuant to Sections
II-2
13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement, shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
the indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of the
issue.
That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering thereof.
To file an application for the purpose of determining the eligibility
of a trustee to act under subsection (a) of Section 310 of the Trust Indenture
Act of 1939 in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Trust Indenture Act of 1939.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Wilkes, State of North Carolina, on November 16,
2001.
LOWE'S COMPANIES, INC.
(Registrant)
By: /s/ Stephen A. Hellrung
----------------------------------
Stephen A. Hellrung, Senior Vice
President, General Counsel and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 16, 2001.
Signature Title
--------- -----
/s/ Robert L. Tillman* Chairman of the Board of Directors, President,
------------------------------------
Robert L. Tillman Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Robert A. Niblock* Senior Vice President and Chief Financial
-------------------------------
Robert A. Niblock Officer (Principal Financial Officer)
/s/ Kenneth W. Black, Jr.* Senior Vice President and Chief Accounting Officer
-----------------------------------
Kenneth W. Black, Jr. (Principal Accounting Officer)
/s/ Leonard L. Berry, Ph.D.* Director
-------------------------------------
Leonard L. Berry, Ph.D.
/s/ Peter C. Browning* Director
-------------------------------------
Peter C. Browning
II-4
/s/ Paul Fulton* Director
-------------------------------------
Paul Fulton
/s/ Dawn Hudson* Director
-------------------------------------
Dawn Hudson
/s/ Robert A. Ingram* Director
-------------------------------------
Robert A. Ingram
/s/ Kenneth D. Lewis* Director
-------------------------------------
Kenneth D. Lewis
/s/ Richard K. Lochridge* Director
-------------------------------------
Richard K. Lochridge
/s/ Claudine B. Malone* Director
-------------------------------------
Claudine B. Malone
/s/ Thomas D. O'Malley* Director
-------------------------------------
Thomas D. O'Malley
/s/ Robert G. Schwartz* Director
-------------------------------------
Robert G. Schwartz
*By: /s/ Stephen A. Hellrung
----------------------------------
Stephen A. Hellrung
Attorney-in-Fact
II-5
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit
-------------- ----------------------
4.1* Indenture between Lowe's Companies, Inc. and The Bank of
New York, dated as of February 16, 2001.
4.2 Form of Liquid Yield Option Note(TM) due 2021 (Zero Coupon
-- Senior) (included in Exhibit 4.1).
4.3* Registration Rights Agreement, dated as of February 16,
2001, by and between Lowe's Companies, Inc. and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
5.1* Opinion of Hunton & Williams.
8.1* Opinion of Hunton & Williams as to certain U.S. federal
income tax considerations.
12.1* Computation of Ratio of Earnings to Fixed Charges.
15.1* Letter of Deloitte & Touche LLP re Unaudited Interim
Financial Information.
23.1* Consent of Deloitte & Touche LLP.
23.2 Consent of Hunton & Williams (included in Exhibit 5.1).
23.3* Consent of Ernst & Young LLP.
24.1* Power of Attorney
25.1* Form of T-1 Statement of Eligibility of the Trustee under
the Indenture.
_______________________
*Previously filed.
II-6