Note 4—Debt

Short-Term Borrowings

The Company enters into various short-term bank credit facilities. There were no amounts outstanding under these facilities at the end of 2012 and 2011, and the total credit available was $438 and $391, respectively. The various credit facilities provide for applicable interest rates ranging from 0.58% to 3.96% in 2012 and 0.58% to 4.39% in 2011.

The weighted average borrowings, maximum borrowings, and weighted average interest rate under all short-term borrowing arrangements were as follows for 2012 and 2011:


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
2012:
Bank borrowings:
Japan	$	83	$	57		0.58	%
Bank overdraft facility:
United Kingdom		3		0		1.50

2011:
Bank borrowings:
Canada	$	6	$	4		3.00	%
Japan		70		20		0.58
Bank overdraft facility:
United Kingdom		16		4		1.50

Long-Term Debt

The carrying value and estimated fair value of the Company’s long-term debt at the end of 2012 and 2011 consisted of the following:


	2012				2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
5.5% Senior Notes due March 2017	$	1,097	$	1,325	$	1,097	$	1,314
5.3% Senior Notes due March 2012		0		0		900		924
Other long-term debt		285		338		156		197

Total long-term debt		1,382		1,663		2,153		2,435
Less current portion		1		1		900		924

Long-term debt, excluding current portion	$	1,381	$	1,662	$	1,253	$	1,511

The estimated fair value of the Company’s debt was based primarily on reported market values, recently completed market transactions and estimates based upon interest rates, maturities, and credit risk.

In February 2007, the Company issued $900 of 5.3% Senior Notes that were due March 15, 2012 (2012 Notes) at a discount of $2 and $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 until their respective maturity date. The discount and issuance costs associated with the Senior Notes have been amortized to interest expense over the terms of those notes. The Company, at its option, may redeem the remaining 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 remaining 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 remaining 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. On March 15, 2012, the Company paid the outstanding principal balance and associated interest on the 2012 Notes with its existing sources of cash and cash equivalents and short-term investments. These 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 above 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 (0.78% 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. This debt is included in other long-term debt in the table above 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 above and are classified as a Level 3 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 832,000 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) any time after August 2002. These notes are included in other long-term debt in the table above and are classified as a Level 2 measurement in the fair value hierarchy. At the end of 2012, $864 in principal amount of Zero Coupon Notes had been converted by note holders into shares of Costco Common Stock.

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


2013	$	1
2014		1
2015		1
2016		0
2017		1,128
Thereafter		251

Total	$	1,382