Costco 2012 Annual Report Download - page 37

Bank Credit Facilities and Commercial Paper Programs
As of September 2, 2012, we had total borrowing capacity within our bank credit facilities of $438, of
which $370 was maintained by our international operations. Of the $370 maintained by our
international operations, $224 is guaranteed by the Company. We maintain bank credit facilities for
working capital and general corporate purposes. There were no outstanding short-term borrowings
under any of the bank credit facilities at the end of 2012 and 2011. The Company has letter of credit
facilities, for commercial and stand-by letters of credit, totaling $160. The outstanding commitments
under these facilities at the end of 2012 totaled $125, including $101 million in stand-by letters of credit
with expiration dates within one year. All of the bank credit facilities have various expiration dates, all
within one year, and generally, we intend to renew these facilities prior to their expiration. The amount
of borrowings available at any time under our bank credit facilities is reduced by the amount of standby
and commercial letters of credit outstanding at that time.
Financing Activities
In the first and second quarters of fiscal 2012, our Japanese subsidiary issued 1.18%
yen-denominated promissory notes through a private placement. These notes were issued in two
series, with the first funding in October 2011 and the second funding in December 2011. For both
series, interest is payable semi-annually, and principal is due in October 2018.
In April 2010, our Japanese subsidiary paid the outstanding principal and interest balances totaling $44
related to the 0.92% promissory notes due April 2010, originally issued in April 2003.
In June 2008, our Japanese subsidiary entered into a ten-year term loan in the amount of $38, with a
variable rate of interest of yen TIBOR (6-month) plus a 0.35% margin (0.78% and 0.79% at the end of
2012 and 2011, respectively) on the outstanding balance. Interest is payable semi-annually and
principal is due in June 2018.
In October 2007, our Japanese subsidiary issued promissory notes through a private placement in the
amount of $83, bearing interest at 2.695%. Interest is payable semi-annually, and principal is due in
October 2017.
In February 2007, we issued $900 of 5.3% Senior Notes that were due March 15, 2012 (2012 Notes) at
a discount of $2 and issued $1,100 of 5.5% Senior Notes due March 15, 2017 at a discount of $6
(together the 2007 Senior Notes). Interest on the 2007 Senior Notes is payable semi-annually on
March 15 and September 15 of each year. The discount and issuance costs associated with the 2007
Senior Notes are being amortized to interest expense over the terms of those notes. At our option, we
may redeem the 2007 Senior Notes at any time, in whole or in part, at a redemption price plus accrued
interest. 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, we 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. On
March 15, 2012, we paid the outstanding principal balance and associated interest on the 2012 Notes
with our existing sources of cash and cash equivalents and short-term investments.
In August 1997, we sold $900 principal amount at maturity 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 of $450. The remaining Zero Coupon
Notes outstanding are convertible into a maximum of 832,000 shares of Costco Common Stock at an
initial conversion price of $22.71. At our option, we may redeem the Zero Coupon Notes (at the
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