Costco 2007 Annual Report Download - page 65

repurchases of the Company’s common stock. The $8,433 discount and $1,963 issuance costs
associated with the Senior Notes are being amortized to interest expense over the terms of those
notes.
The Company, at its option, may redeem the 2007 Senior Notes at any time, in whole or in part, at a
redemption price plus accrued interest up to the redemption date. The redemption price is equal to the
greater of 100% of the principal amount of the 2007 Senior Notes to be redeemed, or the sum of the
present values of the remaining scheduled payments of principal and interest to maturity. Additionally,
the Company will be required to make an offer to purchase the 2007 Senior Notes at a price of 101%
of the principal amount plus accrued and unpaid interest to the date of repurchase, upon certain events
as defined by the terms of the 2007 Senior Notes.
In April 2003, the Company’s wholly-owned Japanese subsidiary issued promissory notes bearing
interest at 0.92% in the aggregate amount of $34,444, through a private placement. Interest is payable
semi-annually and principal is due in April 2010. In November 2002, the Company’s wholly-owned
Japanese subsidiary issued promissory notes bearing interest at 0.88% in the aggregate amount of
$25,833, through a private placement. Interest is payable semi-annually and principal is due in
November 2009. In July 2001, the Company’s wholly-owned Japanese subsidiary issued 1.187%
promissory notes in the aggregate amount of $25,833, through a private placement. Interest is payable
semi-annually and principal is due in July 2008. In October 2000, the Company’s wholly-owned
Japanese subsidiary issued 2.07% promissory notes in the aggregate amount of $30,139, through a
private placement. Interest is payable annually and principal is due in October 2007 and will be
refinanced. As of September 2, 2007, the 1.187% and the 2.07% promissory notes are reported in the
current portion of long-term debt on the consolidated balance sheets. 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 of 3.5% Zero
Coupon Convertible Subordinated Notes (Zero Coupon Notes) due in August 2017. The Zero Coupon
Notes were priced with a yield to maturity of 3.5%, resulting in gross proceeds to the Company of $449,640.
The current Zero Coupon Notes outstanding are convertible into a maximum of 1,535,907 shares of Costco
Common Stock shares at an initial conversion price of $22.71. Holders of the Zero Coupon Notes may
require the Company to purchase the Zero Coupon Notes (at the discounted issue price plus accrued
interest to date of purchase) in August 2012. The Company, at its option, may redeem the Zero Coupon
Notes (at the discounted issue price plus accrued interest to date of redemption) any time in or after
August 2002. As of September 2, 2007, $832,383 in principal amount of the Zero Coupon Notes had been
converted by note holders to shares of Costco Common Stock, of which $61,173 and $286,456 in principal
were converted in fiscal 2007 and 2006, respectively, or $42,330 and $188,935 in fiscal 2007 and 2006,
respectively, after factoring in the related debt discount.
At September 2, 2007, the fair value of the Zero Coupon Notes, based on market quotes, was
approximately $94,326, the fair value of the 2012 Notes and 2017 Notes was $912,330 and
$1,115,917, respectively, and the fair value of other long-term debt approximated its carrying value.
Maturities of long-term debt during the next five fiscal years and thereafter are as follows:
2008 .................................................... $ 59,905
2009 .................................................... 1,248
2010 .................................................... 60,879
2011 .................................................... 464
2012 .................................................... 897,992
Thereafter ................................................ 1,147,395
Total ................................................ $2,167,883
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