8-KOther EventsExhibits & Filings

COSTCO WHOLESALE CORP /NEW 8-K Report, Corporate Update (Apr 17, 2020)

Filed April 17, 2020For Securities:COST

Summary

Costco Wholesale Corporation (COST) announced a significant debt issuance through an underwriting agreement for approximately $4.0 billion in aggregate principal amount of Senior Notes. This offering comprises $1.25 billion of 1.375% Senior Notes due 2027, $1.75 billion of 1.600% Senior Notes due 2030, and $1 billion of 1.750% Senior Notes due 2032. The proceeds from this offering, expected to close on April 20, 2020, will be issued under the company's existing shelf registration statement, indicating a strategic move to secure long-term financing. This issuance occurred amidst the early stages of the COVID-19 pandemic, a factor that the company has explicitly identified as a material risk impacting its business operations, financial condition, and results. The company has also updated its risk factor disclosures to highlight the adverse effects of the COVID-19 outbreak. These impacts include disruptions to business functions, supply chains, and member traffic. Costco anticipates increased operating expenses exceeding $250 million for the fiscal quarter ending May 10, 2020, due to measures taken to protect employees, such as increased compensation and benefits, and operational adjustments mandated by local authorities. Investors should note that the full extent of the pandemic's impact remains uncertain and highly unpredictable.

Key Highlights

  • 1Costco issued $4 billion in Senior Notes across three tranches: $1.25 billion (1.375% due 2027), $1.75 billion (1.600% due 2030), and $1 billion (1.750% due 2032).
  • 2The debt issuance was conducted under an underwriting agreement with Credit Suisse Securities (USA) LLC, BofA Securities, Inc., and Citigroup Global Markets Inc.
  • 3The Senior Notes were issued under the company's existing Shelf Registration Statement on Form S-3.
  • 4The issuance and sale of the Senior Notes were expected to close on April 20, 2020.
  • 5Costco is supplementing its risk factors to address the adverse impacts of the COVID-19 outbreak on its business.
  • 6The company estimates increased operating expenses exceeding $250 million for the fiscal quarter ending May 10, 2020, due to COVID-19 related measures and disruptions.
  • 7The filing includes updated disclosures on operational restrictions, employee compensation adjustments, and general business uncertainty caused by the pandemic.

Frequently Asked Questions

While the filing doesn't explicitly state the use of proceeds, such large debt issuances are typically done to fund general corporate purposes, including capital expenditures, working capital needs, potential acquisitions, or to refinance existing debt. Given the timing during the COVID-19 pandemic, it could also be to bolster liquidity and financial flexibility.

The company expects significant negative impacts from COVID-19. This includes business disruptions, reduced member traffic, and decreased sales in certain merchandise categories. Additionally, Costco anticipates increased operating expenses exceeding $250 million for the quarter ending May 10, 2020, due to employee compensation increases and other precautionary measures.

Costco is issuing $1.25 billion of 1.375% Senior Notes due June 20, 2027, $1.75 billion of 1.600% Senior Notes due April 20, 2030, and $1 billion of 1.750% Senior Notes due April 20, 2032. These notes are issued under the Company's Shelf Registration Statement.

Supplementing risk factors means that the company is adding new risks or updating existing ones to reflect current conditions. In this case, Costco is explicitly acknowledging the COVID-19 pandemic as a material risk to its business, which was not as fully detailed in its previous annual report.