Costco 2007 Annual Report Download - page 32

Download and view the complete annual report

Please find page 32 of the 2007 Costco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 84

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84

The reserve for warehouse closing costs, classified within other current liabilities, at the end of fiscal
2007 and 2006 included:
September 2,
2007
September 3,
2006
Reserve for warehouse closing costs:
Future lease obligations ............................... $6,086 $5,950
Other .............................................. 737 1,091
Total ........................................... $6,823 $7,041
Interest Expense
Fiscal 2007 Fiscal 2006 Fiscal 2005
Interest expense ............................. $64,079 $12,570 $34,437
2007 vs. 2006
Interest expense totaled $64.1 million in fiscal 2007, compared to $12.6 million in fiscal 2006. On
February 20, 2007, we issued $900 million of 5.3% Senior Notes due March 15, 2012 (2012 Notes) at
a discount of $2.5 million and $1.1 billion of 5.5% Senior Notes due March 15, 2017 (2017 Notes) at a
discount of $5.9 million, (together the 2007 Senior Notes). The increase in interest expense for fiscal
2007 resulted primarily from the additional interest incurred related to the 2007 Senior Notes, offset by
lower interest expense resulting from the repayment of the $300 million 5.5% Senior Notes (2002
Senior Notes) in March 2007. In addition, interest expense decreased on the 3.5% Zero Coupon
Convertible Subordinated Notes (Zero Coupon Notes) as note holders converted approximately $61.2
million in principal amount of the Zero Coupon Notes into common stock, or $42.3 million after
factoring in the related debt discount.
2006 vs. 2005
Interest expense totaled $12.6 million in fiscal 2006, compared to $34.4 million in fiscal 2005. Interest
expense in fiscal 2006 primarily included interest on the 2002 Senior Notes, the Zero Coupon Notes,
and balances outstanding under our bank credit facilities and promissory notes. In fiscal 2005, interest
expense also included interest on the 7 1/8% Senior Notes. The decrease in interest expense in fiscal
2006 resulted primarily from the repayment of the 7 1/8% Senior Notes in June 2005. In addition,
interest expense decreased on the Zero Coupon Notes as note holders converted into common stock
approximately $286.5 million in principal amount of the Zero Coupon Notes, or $188.9 million after
factoring in the related debt discount. The amount of interest capitalized increased in fiscal 2006 due to
increased warehouse openings, contributing to the decrease in interest expense, as both interest rates
and the dollar amount of projects under construction increased. The overall decrease in interest
expense in fiscal 2006 was partially offset by the increase in interest rates on the 2002 Senior Notes,
which were swapped into variable rate debt in March 2002.
Interest Income and Other
Fiscal 2007 Fiscal 2006 Fiscal 2005
Interest income ........................... $128,413 $113,712 $ 81,915
Earnings of affiliates ....................... 35,622 28,180 26,459
Minority interest and other .................. 1,449 (3,537) 722
Interest Income and other ............... $ 165,484 $ 138,355 $ 109,096
30