Costco 1999 Annual Report Download - page 15

Liquidity and Capital Resources
(dollars in thousands)
Expansion Plans
Costco’s primary requirement for capital is the financing of the land, building and equipment costs for
new warehouses plus the costs of initial warehouse operations and working capital requirements, as well as
additional capital for international expansion through investments in foreign subsidiaries and joint
ventures.
While there can be no assurance that current expectations will be realized, and plans are subject to
change upon further review, it is management’s current intention to spend an aggregate of approximately
$800,000 to $950,000 during fiscal 2000 in the United States and Canada for real estate, construction,
remodeling and equipment for warehouse clubs and related operations; and approximately $100,000 to
$150,000 for international expansion, including the United Kingdom, Asia, Mexico and other potential
ventures. These expenditures will be financed with a combination of cash provided from operations, the
use of cash and cash equivalents and short-term investments (which totaled $697,274 at August 29, 1999),
short-term borrowings under revolving credit facilities and other financing sources as required.
Expansion plans for the United States and Canada during fiscal 2000 are to open approximately 20 to
25 new warehouse clubs, including four to six relocations of existing warehouses to larger and better-
located warehouses. The Company expects to continue expansion of its international operations and plans
to open two to three additional units in the United Kingdom through its 60%-owned subsidiary and an
additional unit in Taiwan through its 55%-owned subsidiary during the next year. Other international
markets are being assessed.
Costco and its Mexico-based joint venture partner, Controladora Comercial Mexicana, each own a
50% interest in Price Club Mexico. As of August 29, 1999, Price Club Mexico operated 16 warehouses in
Mexico and plans to open two or three new warehouse clubs during fiscal 2000, including one that opened
in September 1999.
Bank Credit Facilities and Commercial Paper Programs (all amounts stated in US dollars)
The Company has in place a $425,000 commercial paper program supported by a $425,000 bank credit
facility with a group of nine banks, of which $175,000 expires on January 24, 2000, and $250,000 expires on
January 30, 2001. At August 29, 1999, no amounts were outstanding under the loan facility or the
commercial paper program.
In addition, a wholly-owned Canadian subsidiary has a $134,000 commercial paper program supported
by a $94,000 bank credit facility with three Canadian banks, of which $57,000 expires in March 2000, and
$37,000 expires in March 2001. At August 29, 1999, no amounts were outstanding under the bank credit
facility or the Canadian commercial paper program.
The Company has agreed to limit the combined amount outstanding under the U.S. and Canadian
commercial paper programs to the $519,000 combined amounts of the respective supporting bank credit
facilities.
Letters of Credit
The Company has separate letter of credit facilities (for commercial and standby letters of credit),
totaling approximately $294,200. The outstanding commitments under these facilities at August 29, 1999
totaled approximately $176,500, including approximately $45,300 in standby letters of credit.
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