Costco 2006 Annual Report Download - page 58

In March 2002, the Company issued $300,000 of 5
1
⁄ 2 % Senior Notes due in March 2007. Interest is
payable semi-annually on March 15 and September 15. Simultaneous with the issuance of the 5
1
⁄ 2 %
Senior Notes, the Company entered into interest rate swap agreements converting the interest to a
floating rate indexed to LIBOR. As of September 3, 2006, the 5
1
⁄ 2 % Senior Notes are reported in the
current portion of long-term debt on the consolidated balance sheets. As of September 3, 2006, the
Company was in compliance with all restrictive covenants.
In October 2000, the Company’s wholly-owned Japanese subsidiary issued 2.070% promissory notes
in the aggregate amount of $29,810, through a private placement. Interest is payable annually and
principal is due in October 2007.
In July 2001, the Company’s wholly-owned Japanese subsidiary issued 1.187% promissory notes in
the aggregate amount of $25,551, through a private placement. Interest is payable semi-annually and
principal is due in July 2008.
In November 2002, the Company’s wholly-owned Japanese subsidiary issued promissory notes
bearing interest at 0.88% in the aggregate amount of $25,551, through a private placement. Interest is
payable semi-annually and principal is due in November 2009.
In April 2003, the Company’s wholly-owned Japanese subsidiary issued promissory notes bearing
interest at 0.92% in the aggregate amount of $34,069, through a private placement. Interest is payable
semi-annually and principal is due in April 2010.
The Company guarantees all of the promissory notes issued by its wholly-owned Japanese subsidiary.
In August 1997, the Company completed the sale of $900,000 principal amount at maturity Zero
Coupon Convertible Subordinated Notes (Notes) due in August 2017. The Notes were priced with a
yield to maturity of 3
1
⁄ 2 %, resulting in gross proceeds to the Company of $449,640. The current Notes
outstanding are convertible into a maximum of 2,925,057 shares of Costco Common Stock shares at
an initial conversion price of $22.71. Holders of the Notes may require the Company to purchase the
Notes (at the discounted issue price plus accrued interest to date of purchase) in August 2007, or
2012. The Company, at its option, may redeem the Notes (at the discounted issue price plus accrued
interest to date of redemption) any time in or after August 2002. As of September 3, 2006, $771,210 in
principal amount of the Zero Coupon Notes had been converted by note holders to shares of Costco
Common Stock, of which $286,456 and $436,402 in principal were converted in fiscal 2006 and 2005,
respectively.
In February 1996, the Company filed with the Securities and Exchange Commission a shelf registration
statement for $500,000 of senior debt securities. In October 2001, an additional $100,000 in debt
securities was registered, bringing the total amount of debt registered under the shelf registration to
$600,000. The $300,000 of 5
1
⁄ 2 % Senior Notes issued in March 2002 reduced the amount of
registered securities available for future issuance to $300,000. In April 2006, remaining amounts of the
shelf registration were cancelled.
At September 3, 2006, the fair value of the 5
1
⁄ 2 % Senior Notes, based on market quotes, was
approximately $300,000. The Senior Notes are not redeemable prior to maturity. The fair value of the
3
1
⁄ 2 % Zero Coupon Subordinated Notes at September 3, 2006, based on market quotes, was
approximately $139,415. The fair value of other long-term debt approximates carrying value.
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