Debt

12 Months Ended

Aug. 28, 2011

Debt

Debt

Note 4—Debt

Bank Credit Facilities and Commercial Paper Programs

The Company enters into various short-term bank credit facilities. At the end of 2011 and 2010, the total amount of credit under these facilities was $391 and $341, respectively. The total amount outstanding was $26 at the end of 2010. There was nothing outstanding at the end of 2011. The various credit facilities provide for applicable interest rates ranging from 0.58% to 4.39% in 2011 and 0.61% to 3.63% in 2010.

Short-Term Borrowings

The weighted average borrowings, maximum borrowings, and weighted average interest rate under all short-term borrowing arrangements were as follows for 2011 and 2010:

Category of Aggregate Short-term Borrowings	Maximum Amount Outstanding During the Fiscal Year		Average Amount Outstanding During the Fiscal Year		Weighted Average Interest Rate During the Fiscal Year
Year ended August 28, 2011
Bank borrowings:
Canada	$	6	$	4		3.00	%
Japan		70		20		0.58
Bank overdraft facility:
United Kingdom		16		4		1.50
Year ended August 29, 2010
Bank borrowings:
Canada	$	1	$	1		2.75	%
Japan		64		39		0.63
Bank overdraft facility:
United Kingdom		5		2		1.50

Long-Term Debt

Long-term debt at the end of 2011 and 2010 consisted of the following:

	2011		2010
5.5% Senior Notes due March 2017	$	1,097	$	1,096
5.3% Senior Notes due March 2012		900		899
2.695% Promissory notes due October 2017		85		77
0.35% over Yen TIBOR (6-month) Term Loan due June 2018		39		35
3.5% Zero Coupon convertible subordinated notes due August 2017		31		32
Other long-term debt		1		2
Total long-term debt		2,153		2,141
Less current portion of 5.3% Senior Notes due March 2012		900		0
Long-term debt, excluding current portion	$	1,253	$	2,141

In April 2010, the Company's Japanese subsidiary paid the outstanding principal and interest balances related to the 0.92% promissory notes due April 2010, originally issued in April 2003.

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 (0.79% and 0.84% at the end of 2011 and 2010, respectively) on the outstanding balance. Interest is payable semi-annually in December and June and principal is due in June 2018.

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. The Company guarantees all financing instruments issued by its Japanese subsidiary.

In February 2007, the Company issued $900 of 5.3% Senior Notes due March 15, 2012 (2012 Notes) at a discount of $2 and $1,100 of 5.5% Senior Notes due March 15, 2017 (2017 Notes) 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 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. 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 March 2011, the Company reclassified its 2012 Notes to a current liability within the current portion of long-term debt of the consolidated balance sheets to reflect its remaining maturity of less than one year.

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 878,000 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 after August 2002. As of August 28, 2011, $862 in principal amount of Zero Coupon Notes had been converted by note holders into shares of Costco Common Stock, of which the principal converted during 2011, 2010 and 2009 is detailed in the table below:

	2011		2010		2009
Principal converted during period	$	3	$	1	$	25
Principal converted, including the related debt discount	$	2	$	1	$	19
Shares issued upon conversion (000's)		65		18		562

The carrying value and estimated fair value of long-term debt consisted of the following at the end of 2011 and 2010:

	2011				2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
2017 Notes	$	1,097	$	1,314	$	1,096	$	1,295
2012 Notes		900		924		899		961
Zero Coupon Notes		31		63		32		51
Other long-term debt		125		134		114		122
Total long-term debt		2,153		2,435		2,141		2,429
Less current portion		900		924		0		0
Long-term debt, excluding current portion	$	1,253	$	1,511	$	2,141	$	2,429

The estimated fair value of the zero coupon notes is based upon quoted market prices. All of the Company's other debt obligations are based upon quoted market prices of similar types of borrowing arrangements.

Maturities of long-term debt during the next five fiscal years and thereafter are as follows:

2012	$	900
2013		0
2014		0
2015		0
2016		0
Thereafter		1,253
Total	$	2,153