Costco 2004 Annual Report Download - page 44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data) (Continued)
Note 3—Debt (Continued)
the Company entered into interest rate swap agreements converting the interest to a floating rate indexed to LI-
BOR. As of August 29, 2004, 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 approximately $32,004, through a private placement. Interest is payable annually and
principal is due on October 23, 2007.
In July 2001, the Company’s wholly-owned Japanese subsidiary issued 1.187% promissory notes in the ag-
gregate amount of approximately $27,432, through a private placement. Interest is payable semi-annually and
principal is due on July 9, 2008.
In November 2002, the Company’s wholly-owned Japanese subsidiary issued promissory notes bearing
interest at 0.88% in the aggregate amount of approximately $27,432, through a private placement. Interest is
payable semi-annually and principal is due on November 7, 2009.
In April 2003, the Company’s wholly-owned Japanese subsidiary issued promissory notes bearing interest at
0.92% in the aggregate amount of approximately $36,576, through a private placement. Interest is payable semi-
annually and principal is due on April 26, 2010.
The Company guarantees all of the promissory notes issued by its wholly-owned Japanese subsidiary.
On August 19, 1997, the Company completed the sale of $900,000 principal amount at maturity Zero Cou-
pon Subordinated Notes (the “Notes”) due August 19, 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 19,340,158 shares of Costco Common Stock shares at an initial conversion price of $22.00.
Holders of the Notes may require the Company to purchase the Notes (at the discounted issue price plus accrued
interest to date of purchase) on August 19, 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 on or after August 19, 2002. As
of August 29, 2004, $48,352 in principal amount of the Zero Coupon Notes had been converted by note holders
to shares of Costco Common Stock.
In February 1996, the Company filed with the Securities and Exchange Commission a shelf registration
statement for $500,000 of senior debt securities. On October 23, 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.
At August 29, 2004, the fair value of the 7
1
⁄ 8 % Senior Notes, and the 5
1
⁄ 2 % Senior Notes, based on market
quotes, was approximately $311,250 and $316,950, respectively. The Senior Notes are not redeemable prior to
maturity. The fair value of the 3
1
⁄ 2 % Zero Coupon Subordinated Notes at August 29, 2004, based on market
quotes, was approximately $822,607. The fair value of other long-term debt approximates carrying value.
Maturities of long-term debt during the next five fiscal years and thereafter are as follows:
2005 ............................................................ $ 305,594
2006 ............................................................ 879
2007 ............................................................ 322,305
2008 ............................................................ 61,467
2009 ............................................................ 450
Thereafter ....................................................... 608,645
Total ....................................................... $1,299,340
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