This excerpt taken from the HD 10-K filed Mar 29, 2006.
As of January 29, 2006, the Company had $900 million of Short-Term Debt outstanding under its commercial paper program. In the fourth quarter of fiscal 2005, the Company increased the maximum capacity for borrowing under its commercial paper program to $2.5 billion as well as increased the related back-up credit facility with a consortium of banks to $2.0 billion. Since the initial borrowing on January 17, 2006, the maximum amount outstanding under the commercial paper program was $900 million and the weighted average interest rate was 4.3%. The credit facility, which expires in December 2010, contains various restrictions, none of which is expected to materially impact the Company's liquidity or capital resources.
In May 2005, the Company filed a shelf registration statement with the Securities and Exchange Commission for the future issuance of up to $5.0 billion of debt securities. In August 2005, the Company issued $1.0 billion of 45/8% Notes due August 15, 2010 ("45/8% Senior Notes") at a discount of $5 million. Interest on the 45/8% Senior Notes is payable semi-annually on February 15 and August 15 of each year. The net proceeds of $995 million were used to pay for a portion of the acquisition price of National Waterworks, Inc. The $5 million discount associated with the issuance is being amortized to interest expense over the term of the 45/8% Senior Notes using the effective interest rate method. Issuance costs of $7 million are being amortized to interest expense over the term of the 45/8% Senior Notes using the straight-line method.
In September 2004, the Company issued $1.0 billion of 33/4% Senior Notes due September 15, 2009 ("33/4% Senior Notes") at a discount of $5 million with interest payable semi-annually on March 15 and September 15 of each year. The net proceeds of $995 million were used in part for the repayment of the Company's outstanding 61/2% Senior Notes due September 2004 in the aggregate principal amount of $500 million. The remainder of the net proceeds was used for general corporate purposes. The $5 million discount associated with the issuance is being amortized to interest expense over the term of the 33/4% Senior Notes using the effective interest rate method. Issuance costs of $7 million are being amortized to interest expense over the term of the 33/4% Senior Notes using the straight-line method.
The Company also had $500 million of unsecured 53/8% Senior Notes outstanding as of January 29, 2006, collectively referred to with the 45/8% Senior Notes and the 33/4% Senior Notes as "Senior Notes." The Senior Notes may be redeemed by the Company at any time, in whole or in part, at a redemption price plus accrued interest up to the redemption date. The redemption price is equal to the greater of (1) 100% of the principal amount of the Senior Notes to be redeemed, or (2) the sum of the present values of the remaining scheduled payments of principal and interest to maturity. The Company is generally not limited under these indentures in its ability to incur additional indebtedness nor required to maintain financial ratios or specified levels of net worth or liquidity. However, the indentures governing the Senior Notes contain various restrictive covenants, none of which are expected to impact the Company's liquidity or capital resources. The Senior Notes are not subject to sinking fund requirements.
Interest Expense in the accompanying Consolidated Statements of Earnings is net of interest capitalized of $51 million, $40 million and $50 million in fiscal 2005, 2004 and 2003, respectively.
Maturities of Long-Term Debt are $513 million for fiscal 2006, $16 million for fiscal 2007, $300 million for fiscal 2008, $1.0 billion for fiscal 2009, $1.0 billion for fiscal 2010 and $328 million thereafter.
As of January 29, 2006, the market values of the publicly traded 45/8% Senior Notes, 33/4% Senior Notes and 53/8% Senior Notes were approximately $985 million, $976 million and $500 million, respectively. The estimated fair value of all other long-term borrowings, excluding capital lease obligations, was approximately $314 million compared to the carrying value of $312 million. These fair values were estimated using a discounted cash flow analysis based on the Company's incremental borrowing rate for similar liabilities.