Costco 2006 Annual Report Download - page 32

credit facility and $2 million and $3 million, respectively, were used to support standby letters of credit. A
second $15 million bank revolving credit facility is in place, which expires in August 2007. At September 3,
2006 and August 28, 2005, no amounts were borrowed under the second credit facility and $2 million and
$1 million, respectively, were used to support standby letters of credit. Applicable interest rates on the
credit facility at September 3, 2006 and August 28, 2005, were 4.00% and 3.75%, respectively.
Our wholly-owned United Kingdom subsidiary has a $114 million bank revolving credit facility expiring
in February 2007, and a $67 million bank overdraft facility renewable on a yearly basis in March 2007.
We intend to renew both facilities. At September 3, 2006, $38 million was outstanding under the
revolving credit facility with an applicable interest rate of 5.32% and no amounts were outstanding
under the bank overdraft facility. At August 28, 2005, $40 million was outstanding under the revolving
credit facility, with an applicable interest rate of 5.30%, and no amounts were outstanding under the
bank overdraft facility.
On November 15, 2005, upon the expiration of our $150 million bank credit facility in the U.S. with a
group of nine banks, we terminated our $500 million commercial paper program. At August 28, 2005, no
amounts were outstanding under the commercial paper program and no amounts were outstanding
under the credit facility. The applicable interest rate on the credit facility at August 28, 2005, was 3.92%.
Letters of Credit
We have letter of credit facilities (for commercial and standby letters of credit) totaling $400 million. The
outstanding commitments under these facilities at September 3, 2006 and August 28, 2005 totaled $85
million and $131 million, respectively, including $55 million and $65 million, respectively, in standby
letters of credit.
Financing Activities
In April 2003, our wholly-owned Japanese subsidiary issued promissory notes bearing interest at
0.92% in the aggregate amount of $34 million, through a private placement. Interest is payable semi-
annually and principal is due in April 2010.
In March 2002, we issued $300 million of 5
1
⁄ 2 % Senior Notes, carried at $301 million, 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, we entered into interest rate swap agreements converting the
interest to a floating rate indexed to LIBOR. We plan to repay the 5
1
⁄ 2 % Senior Notes at maturity from
our cash and cash equivalents and short-term investments balances.
In February 1996, we filed with the Securities and Exchange Commission a shelf registration statement
for $500 million of senior debt securities. In October 2001, additional debt securities of $100 million
were registered. The $300 million of 5
1
⁄ 2 % Senior Notes issued in March 2002 reduced the amount of
registered securities available for future issuance to $300 million. In April 2006, we cancelled the shelf
registration.
During fiscal 2006, $191 million in principal amount of our 3
1
⁄ 2 % Zero Coupon Convertible
Subordinated Notes were converted by note holders into 6.5 million shares of common stock. The
current Notes outstanding are convertible into a maximum of 2,925,057 shares of Costco common
stock at an initial conversion price of $22.71.
Derivatives
We have limited involvement with derivative financial instruments and use them only to manage well-
defined interest rate and foreign exchange risks. Forward foreign exchange contracts are used to
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