Costco 2013 Annual Report Download - page 62

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60
$1,100 of 1.125% Senior Notes due December 15, 2017 (1.125% Notes); and $1,200 of 1.7% Senior Notes
due December 15, 2019 (1.7% Notes). Interest is payable on the 0.65% Notes semi-annually on June 7 and
December 7 of each year until its maturity date. On the 1.125% and 1.7% Notes, interest is due semi-annually
on June 15 and December 15 of each year until its maturity date. The Company, at its option, may redeem
the December 2012 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 December 2012 Notes to be
redeemed or the sum of the present value of the remaining scheduled payments of principal and interest to
maturity. Additionally, the Company will be required to make an offer to purchase the December 2012 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 December 2012 Notes. The discount and issuance costs
associated with the December 2012 Notes are being amortized to interest expense over the terms of the
notes. The December 2012 Notes are classified as a Level 2 measurement in the fair value hierarchy.
In October and December 2011, the Company’s Japanese subsidiary issued two series of 1.18% Yen-
denominated promissory notes through a private placement. For both series, interest is payable semi-
annually, and principal is due in October 2018. These notes are included in other long-term debt in the table
below and are classified as a Level 3 measurement in the fair value hierarchy.
In June 2008, the Company’s Japanese subsidiary entered into a ten-year term loan with a variable rate of
interest of Yen TIBOR (6-month) plus a 0.35% margin (0.68% and 0.78% at the end of 2013 and 2012,
respectively) on the outstanding balance. Interest is payable semi-annually and principal is due in June 2018.
This debt is included in other long-term debt in the table below and is classified as a Level 3 measurement
in the fair value hierarchy.
In October 2007, the Company’s Japanese subsidiary issued promissory notes through a private placement,
bearing interest at 2.695%. Interest is payable semi-annually, and principal is due in October 2017. These
notes are included in other long-term debt in the table below and are classified as a Level 3 measurement
in the fair value hierarchy.
In February 2007, the Company issued $1,100 of 5.5% Senior Notes due March 15, 2017 at a discount of
$6 (the 2007 Senior Note). Interest is payable semi-annually on March 15 and September 15 of each year
until its maturity date. The discount and issuance costs associated with the Senior Note is being amortized
to interest expense over the term of the note. The Company, at its option, may redeem the 2007 Senior Note
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 Note to be redeemed or the sum of the
present value 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 Note 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 Note. This note is classified as a Level 2 measurement in the fair value
hierarchy.
In August 1997, the Company 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 to the Company of $450. The remaining Zero Coupon
Notes outstanding are convertible into a maximum of 30,000 shares of Costco Common Stock shares at an
initial conversion price of $22.71. The Company, at its option, may redeem the Zero Coupon Notes (at the
discounted issue price plus accrued interest to date of redemption). At the end of 2013, $899 in principal
amount of Zero Coupon Notes had been converted by note holders into shares of Costco Common Stock.
These notes are included in other long-term debt in the table below and are classified as a Level 2
measurement in the fair value hierarchy.