☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Washington
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|
91-1223280
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(State or other jurisdiction of
incorporation or organization)
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|
(I.R.S. Employer Identification No.)
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Large accelerated filer
☒
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|
Accelerated filer
☐
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Non-accelerated filer
☐
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
☐
|
Emerging growth company
☐
|
|
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Page
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PART I
|
|
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Item 1.
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||
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||
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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February 18,
2018 |
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September 3,
2017 |
||||
ASSETS
|
|
|
|
||||
CURRENT ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
4,781
|
|
|
$
|
4,546
|
|
Short-term investments
|
1,049
|
|
|
1,233
|
|
||
Receivables, net
|
2,001
|
|
|
1,432
|
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||
Merchandise inventories
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10,671
|
|
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9,834
|
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||
Other current assets
|
397
|
|
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272
|
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Total current assets
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18,899
|
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17,317
|
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PROPERTY AND EQUIPMENT
|
|
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|
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Land
|
6,129
|
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5,690
|
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Buildings and improvements
|
15,740
|
|
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15,127
|
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Equipment and fixtures
|
7,025
|
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6,681
|
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Construction in progress
|
909
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|
|
843
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29,803
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28,341
|
|
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Less accumulated depreciation and amortization
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(10,754
|
)
|
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(10,180
|
)
|
||
Net property and equipment
|
19,049
|
|
|
18,161
|
|
||
OTHER ASSETS
|
755
|
|
|
869
|
|
||
TOTAL ASSETS
|
$
|
38,703
|
|
|
$
|
36,347
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
CURRENT LIABILITIES
|
|
|
|
||||
Accounts payable
|
$
|
10,061
|
|
|
$
|
9,608
|
|
Accrued salaries and benefits
|
2,997
|
|
|
2,703
|
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||
Accrued member rewards
|
1,023
|
|
|
961
|
|
||
Deferred membership fees
|
1,656
|
|
|
1,498
|
|
||
Other current liabilities
|
3,176
|
|
|
2,725
|
|
||
Total current liabilities
|
18,913
|
|
|
17,495
|
|
||
LONG-TERM DEBT, excluding current portion
|
6,505
|
|
|
6,573
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OTHER LIABILITIES
|
1,232
|
|
|
1,200
|
|
||
Total liabilities
|
26,650
|
|
|
25,268
|
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COMMITMENTS AND CONTINGENCIES
|
|
|
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EQUITY
|
|
|
|
||||
Preferred stock $.01 par value; 100,000,000 shares authorized; no shares issued and outstanding
|
0
|
|
|
0
|
|
||
Common stock $.01 par value; 900,000,000 shares authorized; 438,883,000 and 437,204,000 shares issued and outstanding
|
4
|
|
|
4
|
|
||
Additional paid-in capital
|
5,920
|
|
|
5,800
|
|
||
Accumulated other comprehensive loss
|
(897
|
)
|
|
(1,014
|
)
|
||
Retained earnings
|
6,727
|
|
|
5,988
|
|
||
Total Costco stockholders’ equity
|
11,754
|
|
|
10,778
|
|
||
Noncontrolling interests
|
299
|
|
|
301
|
|
||
Total equity
|
12,053
|
|
|
11,079
|
|
||
TOTAL LIABILITIES AND EQUITY
|
$
|
38,703
|
|
|
$
|
36,347
|
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
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February 18,
2018 |
|
February 12,
2017 |
|
February 18,
2018 |
|
February 12,
2017 |
||||||||
REVENUE
|
|
|
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|
|
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|
||||||||
Net sales
|
$
|
32,279
|
|
|
$
|
29,130
|
|
|
$
|
63,396
|
|
|
$
|
56,599
|
|
Membership fees
|
716
|
|
|
636
|
|
|
1,408
|
|
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1,266
|
|
||||
Total revenue
|
32,995
|
|
|
29,766
|
|
|
64,804
|
|
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57,865
|
|
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OPERATING EXPENSES
|
|
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|
||||||||
Merchandise costs
|
28,733
|
|
|
25,927
|
|
|
56,350
|
|
|
50,215
|
|
||||
Selling, general and administrative
|
3,234
|
|
|
2,980
|
|
|
6,458
|
|
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5,920
|
|
||||
Preopening expenses
|
12
|
|
|
15
|
|
|
29
|
|
|
37
|
|
||||
Operating income
|
1,016
|
|
|
844
|
|
|
1,967
|
|
|
1,693
|
|
||||
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(37
|
)
|
|
(31
|
)
|
|
(74
|
)
|
|
(60
|
)
|
||||
Interest income and other, net
|
7
|
|
|
(4
|
)
|
|
29
|
|
|
22
|
|
||||
INCOME BEFORE INCOME TAXES
|
986
|
|
|
809
|
|
|
1,922
|
|
|
1,655
|
|
||||
Provision for income taxes
|
273
|
|
|
288
|
|
|
558
|
|
|
579
|
|
||||
Net income including noncontrolling interests
|
713
|
|
|
521
|
|
|
1,364
|
|
|
1,076
|
|
||||
Net income attributable to noncontrolling interests
|
(12
|
)
|
|
(6
|
)
|
|
(23
|
)
|
|
(16
|
)
|
||||
NET INCOME ATTRIBUTABLE TO COSTCO
|
$
|
701
|
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$
|
515
|
|
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$
|
1,341
|
|
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$
|
1,060
|
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NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO:
|
|
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||||||||
Basic
|
$
|
1.60
|
|
|
$
|
1.17
|
|
|
$
|
3.06
|
|
|
$
|
2.42
|
|
Diluted
|
$
|
1.59
|
|
|
$
|
1.17
|
|
|
$
|
3.04
|
|
|
$
|
2.41
|
|
Shares used in calculation (000’s):
|
|
|
|
|
|
|
|
||||||||
Basic
|
439,022
|
|
|
439,127
|
|
|
438,494
|
|
|
438,567
|
|
||||
Diluted
|
441,568
|
|
|
440,657
|
|
|
441,201
|
|
|
440,568
|
|
||||
CASH DIVIDENDS DECLARED PER COMMON SHARE
|
$
|
0.50
|
|
|
$
|
0.45
|
|
|
$
|
1.00
|
|
|
$
|
0.90
|
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
February 18,
2018 |
|
February 12,
2017 |
|
February 18,
2018 |
|
February 12,
2017 |
||||||||
NET INCOME INCLUDING NONCONTROLLING INTERESTS
|
$
|
713
|
|
|
$
|
521
|
|
|
$
|
1,364
|
|
|
$
|
1,076
|
|
Foreign-currency translation adjustment and other, net
|
150
|
|
|
114
|
|
|
127
|
|
|
(231
|
)
|
||||
Comprehensive income
|
863
|
|
|
635
|
|
|
1,491
|
|
|
845
|
|
||||
Less: Comprehensive income attributable to noncontrolling interests
|
22
|
|
|
14
|
|
|
33
|
|
|
19
|
|
||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO
|
$
|
841
|
|
|
$
|
621
|
|
|
$
|
1,458
|
|
|
$
|
826
|
|
|
24 Weeks Ended
|
||||||
|
February 18,
2018 |
|
February 12,
2017 |
||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
||||
Net income including noncontrolling interests
|
$
|
1,364
|
|
|
$
|
1,076
|
|
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
679
|
|
|
609
|
|
||
Stock-based compensation
|
346
|
|
|
322
|
|
||
Other non-cash operating activities, net
|
10
|
|
|
(49
|
)
|
||
Deferred income taxes
|
(64
|
)
|
|
45
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Merchandise inventories
|
(802
|
)
|
|
(735
|
)
|
||
Accounts payable
|
486
|
|
|
1,579
|
|
||
Other operating assets and liabilities, net
|
96
|
|
|
439
|
|
||
Net cash provided by operating activities
|
2,115
|
|
|
3,286
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
||||
Purchases of short-term investments
|
(407
|
)
|
|
(625
|
)
|
||
Maturities and sales of short-term investments
|
588
|
|
|
734
|
|
||
Additions to property and equipment
|
(1,328
|
)
|
|
(1,183
|
)
|
||
Other investing activities, net
|
(11
|
)
|
|
22
|
|
||
Net cash used in investing activities
|
(1,158
|
)
|
|
(1,052
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
||||
Change in bank checks outstanding
|
(33
|
)
|
|
(272
|
)
|
||
Repayments of long-term debt
|
(58
|
)
|
|
—
|
|
||
Tax withholdings on stock-based awards
|
(216
|
)
|
|
(201
|
)
|
||
Repurchases of common stock
|
(184
|
)
|
|
(190
|
)
|
||
Cash dividend payments
|
(220
|
)
|
|
(198
|
)
|
||
Other financing activities, net
|
(37
|
)
|
|
36
|
|
||
Net cash used in financing activities
|
(748
|
)
|
|
(825
|
)
|
||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
26
|
|
|
(44
|
)
|
||
Net change in cash and cash equivalents
|
235
|
|
|
1,365
|
|
||
CASH AND CASH EQUIVALENTS BEGINNING OF YEAR
|
4,546
|
|
|
3,379
|
|
||
CASH AND CASH EQUIVALENTS END OF PERIOD
|
$
|
4,781
|
|
|
$
|
4,744
|
|
|
|
|
|
||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
||||
Cash paid during the first half of year for:
|
|
|
|
||||
Interest (reduced by $7 and $8 for interest capitalized in 2018 and 2017, respectively)
|
$
|
78
|
|
|
$
|
54
|
|
Income taxes, net
|
$
|
661
|
|
|
$
|
458
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
|
|
|
|
||||
Cash dividend declared, but not yet paid
|
$
|
219
|
|
|
$
|
198
|
|
February 18, 2018:
|
Cost
Basis
|
|
Unrealized
Loss, Net
|
|
Recorded
Basis
|
||||||
Available-for-sale:
|
|
|
|
|
|
||||||
Government and agency securities
|
$
|
951
|
|
|
$
|
(14
|
)
|
|
$
|
937
|
|
Held-to-maturity:
|
|
|
|
|
|
||||||
Certificates of deposit
|
112
|
|
|
|
|
112
|
|
||||
Total short-term investments
|
$
|
1,063
|
|
|
$
|
(14
|
)
|
|
$
|
1,049
|
|
September 3, 2017:
|
Cost
Basis
|
|
Unrealized
Gains, Net
|
|
Recorded
Basis
|
||||||
Available-for-sale:
|
|
|
|
|
|
||||||
Government and agency securities
|
$
|
947
|
|
|
$
|
0
|
|
|
$
|
947
|
|
Mortgage-backed securities
|
1
|
|
|
0
|
|
|
1
|
|
|||
Total available-for-sale
|
948
|
|
|
0
|
|
|
948
|
|
|||
Held-to-maturity:
|
|
|
|
|
|
||||||
Certificates of deposit
|
285
|
|
|
|
|
285
|
|
||||
Total short-term investments
|
$
|
1,233
|
|
|
$
|
0
|
|
|
$
|
1,233
|
|
|
Available-For-Sale
|
|
Held-To-Maturity
|
||||||||
|
Cost Basis
|
|
Fair Value
|
|
|||||||
Due in one year or less
|
$
|
188
|
|
|
$
|
188
|
|
|
$
|
112
|
|
Due after one year through five years
|
727
|
|
|
714
|
|
|
0
|
|
|||
Due after five years
|
36
|
|
|
35
|
|
|
0
|
|
|||
Total
|
$
|
951
|
|
|
$
|
937
|
|
|
$
|
112
|
|
February 18, 2018:
|
Level 1
|
|
Level 2
|
||||
Money market mutual funds
(1)
|
$
|
10
|
|
|
$
|
0
|
|
Investment in government and agency securities
|
0
|
|
|
937
|
|
||
Forward foreign-exchange contracts, in asset position
(2)
|
0
|
|
|
2
|
|
||
Forward foreign-exchange contracts, in (liability) position
(2)
|
0
|
|
|
(20
|
)
|
||
Total
|
$
|
10
|
|
|
$
|
919
|
|
September 3, 2017:
|
Level 1
|
|
Level 2
|
||||
Money market mutual funds
(1)
|
$
|
7
|
|
|
$
|
0
|
|
Investment in government and agency securities
|
0
|
|
|
947
|
|
||
Investment in mortgage-backed securities
|
0
|
|
|
1
|
|
||
Forward foreign-exchange contracts, in asset position
(2)
|
0
|
|
|
2
|
|
||
Forward foreign-exchange contracts, in (liability) position
(2)
|
0
|
|
|
(8
|
)
|
||
Total
|
$
|
7
|
|
|
$
|
942
|
|
(1)
|
Included in cash and cash equivalents in the accompanying condensed consolidated balance sheets.
|
(2)
|
The asset and the liability values are included in other current assets and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. See Note 1 for additional information on derivative instruments.
|
|
February 18, 2018
|
|
September 3, 2017
|
||||
1.70% Senior Notes due December 2019
|
$
|
1,198
|
|
|
$
|
1,198
|
|
1.75% Senior Notes due February 2020
|
499
|
|
|
498
|
|
||
2.15% Senior Notes due May 2021
|
995
|
|
|
994
|
|
||
2.25% Senior Notes due February 2022
|
497
|
|
|
497
|
|
||
2.30% Senior Notes due May 2022
|
794
|
|
|
793
|
|
||
2.75% Senior Notes due May 2024
|
991
|
|
|
991
|
|
||
3.00% Senior Notes due May 2027
|
986
|
|
|
986
|
|
||
Other long-term debt
|
667
|
|
|
702
|
|
||
Total long-term debt
|
6,627
|
|
|
6,659
|
|
||
Less current portion
|
122
|
|
|
86
|
|
||
Long-term debt, excluding current portion
|
$
|
6,505
|
|
|
$
|
6,573
|
|
|
Shares Repurchased (000's)
|
|
Average Price per Share
|
|
Total Cost
|
|||||
Second quarter of 2018
|
313
|
|
|
$
|
187.70
|
|
|
$
|
59
|
|
First half of 2018
|
1,047
|
|
|
$
|
170.06
|
|
|
$
|
178
|
|
|
|
|
|
|
|
|||||
Second quarter of 2017
|
411
|
|
|
$
|
159.86
|
|
|
$
|
66
|
|
First half of 2017
|
1,220
|
|
|
$
|
153.98
|
|
|
$
|
188
|
|
|
Attributable to Costco
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
||||||
Equity at September 3, 2017
|
$
|
10,778
|
|
|
$
|
301
|
|
|
$
|
11,079
|
|
Comprehensive income:
|
|
|
|
|
|
||||||
Net income
|
1,341
|
|
|
23
|
|
|
1,364
|
|
|||
Foreign-currency translation adjustment and other, net
|
117
|
|
|
10
|
|
|
127
|
|
|||
Comprehensive income
|
1,458
|
|
|
33
|
|
|
1,491
|
|
|||
Stock-based compensation
|
348
|
|
|
0
|
|
|
348
|
|
|||
Release of vested restricted stock units (RSUs), including tax effects
|
(216
|
)
|
|
0
|
|
|
(216
|
)
|
|||
Repurchases of common stock
|
(178
|
)
|
|
0
|
|
|
(178
|
)
|
|||
Cash dividends declared and other
|
(436
|
)
|
|
(35
|
)
|
|
(471
|
)
|
|||
Equity at February 18, 2018
|
$
|
11,754
|
|
|
$
|
299
|
|
|
$
|
12,053
|
|
|
Attributable to Costco
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
||||||
Equity at August 28, 2016
|
$
|
12,079
|
|
|
$
|
253
|
|
|
$
|
12,332
|
|
Comprehensive income:
|
|
|
|
|
|
||||||
Net income
|
1,060
|
|
|
16
|
|
|
1,076
|
|
|||
Foreign-currency translation adjustment and other, net
|
(234
|
)
|
|
3
|
|
|
(231
|
)
|
|||
Comprehensive income
|
826
|
|
|
19
|
|
|
845
|
|
|||
Stock-based compensation
|
322
|
|
|
0
|
|
|
322
|
|
|||
Release of vested RSUs, including tax effects
|
(164
|
)
|
|
0
|
|
|
(164
|
)
|
|||
Repurchases of common stock
|
(188
|
)
|
|
0
|
|
|
(188
|
)
|
|||
Cash dividends declared and other
|
(435
|
)
|
|
0
|
|
|
(435
|
)
|
|||
Equity at February 12, 2017
|
$
|
12,440
|
|
|
$
|
272
|
|
|
$
|
12,712
|
|
•
|
7,393,000
time-based RSUs that vest upon continued employment over specified periods of time;
|
•
|
127,000
performance-based RSUs, granted to executive officers of the Company, for which the performance targets have been met. The awards vest upon continued employment over specified periods of time; and
|
•
|
205,000
performance-based RSUs, granted to executive officers of the Company, subject to achievement of performance targets for fiscal
2018
, as determined by the Compensation Committee of the Board of Directors after the end of the fiscal year. These awards are included in the table below and the Company recognized compensation expense for these awards as it is currently deemed probable that the targets will be achieved.
|
|
Number of
Units
(in 000’s)
|
|
Weighted-Average
Grant Date Fair
Value
|
|||
Outstanding at September 3, 2017
|
8,199
|
|
|
$
|
128.15
|
|
Granted
|
3,722
|
|
|
156.19
|
|
|
Vested and delivered
|
(4,067
|
)
|
|
129.49
|
|
|
Forfeited
|
(129
|
)
|
|
137.36
|
|
|
Outstanding at February 18, 2018
|
7,725
|
|
|
$
|
140.80
|
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
February 18,
2018 |
|
February 12,
2017 |
|
February 18,
2018 |
|
February 12,
2017 |
||||||||
Stock-based compensation expense before income taxes
|
$
|
112
|
|
|
$
|
111
|
|
|
$
|
346
|
|
|
$
|
322
|
|
Less recognized income tax benefit
(1)
|
(2
|
)
|
|
(37
|
)
|
|
(79
|
)
|
|
(106
|
)
|
||||
Stock-based compensation expense, net of income taxes
|
$
|
110
|
|
|
$
|
74
|
|
|
$
|
267
|
|
|
$
|
216
|
|
(1)
|
In the second quarter and first half of 2018, the income tax benefit reflects the permanent reduction in the U.S. federal statutory income tax rate from
35%
to
21%
.
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
February 18,
2018 |
|
February 12,
2017 |
|
February 18,
2018 |
|
February 12,
2017 |
||||||||
Net income available to common stockholders used in basic and diluted net income per common share
|
$
|
701
|
|
|
$
|
515
|
|
|
$
|
1,341
|
|
|
$
|
1,060
|
|
Weighted average number of common shares used in basic net income per common share
|
439,022
|
|
|
439,127
|
|
|
438,494
|
|
|
438,567
|
|
||||
RSUs and other
|
2,546
|
|
|
1,530
|
|
|
2,707
|
|
|
2,001
|
|
||||
Weighted average number of common shares and dilutive potential of common stock used in diluted net income per share
|
441,568
|
|
|
440,657
|
|
|
441,201
|
|
|
440,568
|
|
|
United States
Operations
|
|
Canadian
Operations
|
|
Other
International
Operations
|
|
Total
|
||||||||
Twelve Weeks Ended February 18, 2018
|
|
|
|
|
|
|
|
||||||||
Total revenue
|
$
|
23,687
|
|
|
$
|
4,745
|
|
|
$
|
4,563
|
|
|
$
|
32,995
|
|
Operating income
|
603
|
|
|
206
|
|
|
207
|
|
|
1,016
|
|
||||
Depreciation and amortization
|
262
|
|
|
31
|
|
|
51
|
|
|
344
|
|
||||
Additions to property and equipment
|
375
|
|
|
39
|
|
|
94
|
|
|
508
|
|
||||
Twelve Weeks Ended February 12, 2017
|
|
|
|
|
|
|
|
||||||||
Total revenue
|
$
|
21,764
|
|
|
$
|
4,229
|
|
|
$
|
3,773
|
|
|
$
|
29,766
|
|
Operating income
|
520
|
|
|
180
|
|
|
144
|
|
|
844
|
|
||||
Depreciation and amortization
|
241
|
|
|
27
|
|
|
44
|
|
|
312
|
|
||||
Additions to property and equipment
|
358
|
|
|
56
|
|
|
102
|
|
|
516
|
|
||||
Twenty-four Weeks Ended February 18, 2018
|
|
|
|
|
|
|
|
||||||||
Total revenue
|
$
|
46,500
|
|
|
$
|
9,516
|
|
|
$
|
8,788
|
|
|
$
|
64,804
|
|
Operating income
|
1,136
|
|
|
442
|
|
|
389
|
|
|
1,967
|
|
||||
Depreciation and amortization
|
514
|
|
|
63
|
|
|
102
|
|
|
679
|
|
||||
Additions to property and equipment
|
855
|
|
|
114
|
|
|
359
|
|
|
1,328
|
|
||||
Net property and equipment
|
12,690
|
|
|
1,852
|
|
|
4,507
|
|
|
19,049
|
|
||||
Total assets
|
26,417
|
|
|
3,825
|
|
|
8,461
|
|
|
38,703
|
|
|
United States
Operations
|
|
Canadian
Operations
|
|
Other
International
Operations
|
|
Total
|
||||||||
Twenty-four Weeks Ended February 12, 2017
|
|
|
|
|
|
|
|
||||||||
Total revenue
|
$
|
42,141
|
|
|
$
|
8,328
|
|
|
$
|
7,396
|
|
|
$
|
57,865
|
|
Operating income
|
1,026
|
|
|
371
|
|
|
296
|
|
|
1,693
|
|
||||
Depreciation and amortization
|
467
|
|
|
53
|
|
|
89
|
|
|
609
|
|
||||
Additions to property and equipment
|
784
|
|
|
166
|
|
|
233
|
|
|
1,183
|
|
||||
Net property and equipment
|
12,040
|
|
|
1,688
|
|
|
3,614
|
|
|
17,342
|
|
||||
Total assets
|
24,735
|
|
|
3,926
|
|
|
6,969
|
|
|
35,630
|
|
||||
Year Ended September 3, 2017
|
|
|
|
|
|
|
|
||||||||
Total revenue
|
$
|
93,889
|
|
|
$
|
18,775
|
|
|
$
|
16,361
|
|
|
$
|
129,025
|
|
Operating income
|
2,644
|
|
|
841
|
|
|
626
|
|
|
4,111
|
|
||||
Depreciation and amortization
|
1,044
|
|
|
124
|
|
|
202
|
|
|
1,370
|
|
||||
Additions to property and equipment
|
1,714
|
|
|
277
|
|
|
511
|
|
|
2,502
|
|
||||
Net property and equipment
|
12,339
|
|
|
1,820
|
|
|
4,002
|
|
|
18,161
|
|
||||
Total assets
|
24,068
|
|
|
4,471
|
|
|
7,808
|
|
|
36,347
|
|
•
|
Net sales increased
11%
to
$32,279
, driven by an increase in comparable sales of
8%
and sales at new warehouses opened since the end of the
second
quarter of fiscal
2017
;
|
•
|
Membership fee revenue increased
13%
to
$716
, primarily due to the fee increase and to sign-ups at existing and new warehouses;
|
•
|
Gross margin percentage decreased two basis points, primarily from the impact of gasoline price inflation on net sales;
|
•
|
SG&A expenses as a percentage of net sales decreased 21 basis points, due to the impact of gasoline price inflation and leveraging increased net sales;
|
•
|
Net income increased
36%
to
$701
, or
$1.59
per diluted share, compared to
$515
, or
$1.17
per diluted share in
2017
. The second quarter of 2018 was positively impacted by a net $74 tax benefit, or $0.17 per diluted share, due to the new U.S. tax law; and
|
•
|
On
January 30, 2018
, our Board of Directors declared a quarterly cash dividend of
$0.50
, which was paid on
March 2, 2018
.
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
February 18,
2018 |
|
February 12,
2017 |
|
February 18,
2018 |
|
February 12,
2017 |
||||||||
Net Sales
|
$
|
32,279
|
|
|
$
|
29,130
|
|
|
$
|
63,396
|
|
|
$
|
56,599
|
|
Changes in net sales:
|
|
|
|
|
|
|
|
||||||||
U.S.
|
9
|
%
|
|
5
|
%
|
|
10
|
%
|
|
4
|
%
|
||||
Canada
|
12
|
%
|
|
12
|
%
|
|
14
|
%
|
|
9
|
%
|
||||
Other International
|
21
|
%
|
|
1
|
%
|
|
19
|
%
|
|
3
|
%
|
||||
Total Company
|
11
|
%
|
|
6
|
%
|
|
12
|
%
|
|
4
|
%
|
||||
Changes in comparable sales:
|
|
|
|
|
|
|
|
||||||||
U.S.
|
7
|
%
|
|
3
|
%
|
|
9
|
%
|
|
2
|
%
|
||||
Canada
|
9
|
%
|
|
8
|
%
|
|
10
|
%
|
|
6
|
%
|
||||
Other International
|
16
|
%
|
|
(2
|
)%
|
|
13
|
%
|
|
(1
|
)%
|
||||
Total Company
|
8
|
%
|
|
3
|
%
|
|
9
|
%
|
|
2
|
%
|
||||
Changes in comparable sales excluding the impact of changes in foreign exchange rates and gasoline prices:
|
|
|
|
|
|
|
|
||||||||
U.S.
|
6
|
%
|
|
3
|
%
|
|
7
|
%
|
|
2
|
%
|
||||
Canada
|
2
|
%
|
|
2
|
%
|
|
3
|
%
|
|
3
|
%
|
||||
Other International
|
7
|
%
|
|
3
|
%
|
|
8
|
%
|
|
3
|
%
|
||||
Total Company
|
5
|
%
|
|
3
|
%
|
|
7
|
%
|
|
2
|
%
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
February 18,
2018 |
|
February 12,
2017 |
|
February 18,
2018 |
|
February 12,
2017 |
||||||||
Membership fees
|
$
|
716
|
|
|
$
|
636
|
|
|
$
|
1,408
|
|
|
$
|
1,266
|
|
Membership fees as a percentage of net sales
|
2.22
|
%
|
|
2.18
|
%
|
|
2.22
|
%
|
|
2.24
|
%
|
||||
Total paid members as of quarter end (000's)
|
50,400
|
|
|
48,300
|
|
|
—
|
|
|
—
|
|
||||
Total cardholders as of quarter end (000's)
|
92,200
|
|
|
88,100
|
|
|
—
|
|
|
—
|
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
February 18,
2018 |
|
February 12,
2017 |
|
February 18,
2018 |
|
February 12,
2017 |
||||||||
Net sales
|
$
|
32,279
|
|
|
$
|
29,130
|
|
|
$
|
63,396
|
|
|
$
|
56,599
|
|
Less merchandise costs
|
28,733
|
|
|
25,927
|
|
|
56,350
|
|
|
50,215
|
|
||||
Gross margin
|
$
|
3,546
|
|
|
$
|
3,203
|
|
|
$
|
7,046
|
|
|
$
|
6,384
|
|
Gross margin percentage
|
10.98
|
%
|
|
11.00
|
%
|
|
11.11
|
%
|
|
11.28
|
%
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
February 18,
2018 |
|
February 12,
2017 |
|
February 18,
2018 |
|
February 12,
2017 |
||||||||
SG&A expenses
|
$
|
3,234
|
|
|
$
|
2,980
|
|
|
$
|
6,458
|
|
|
$
|
5,920
|
|
SG&A expenses as a percentage of net sales
|
10.02
|
%
|
|
10.23
|
%
|
|
10.19
|
%
|
|
10.46
|
%
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
February 18,
2018 |
|
February 12,
2017 |
|
February 18,
2018 |
|
February 12,
2017 |
||||||||
Preopening expenses
|
$
|
12
|
|
|
$
|
15
|
|
|
$
|
29
|
|
|
$
|
37
|
|
Warehouse openings, including relocations
|
|
|
|
|
|
|
|
||||||||
United States
|
1
|
|
|
2
|
|
|
7
|
|
|
8
|
|
||||
Canada
|
0
|
|
|
0
|
|
|
1
|
|
|
3
|
|
||||
Other International
|
0
|
|
|
2
|
|
|
0
|
|
|
2
|
|
||||
Total warehouse openings, including relocations
|
1
|
|
|
4
|
|
|
8
|
|
|
13
|
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
February 18,
2018 |
|
February 12,
2017 |
|
February 18,
2018 |
|
February 12,
2017 |
||||||||
Interest expense
|
$
|
37
|
|
|
$
|
31
|
|
|
$
|
74
|
|
|
$
|
60
|
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
February 18,
2018 |
|
February 12,
2017 |
|
February 18,
2018 |
|
February 12,
2017 |
||||||||
Interest income
|
$
|
16
|
|
|
$
|
11
|
|
|
$
|
29
|
|
|
$
|
19
|
|
Foreign-currency transaction losses, net
|
(14
|
)
|
|
(20
|
)
|
|
(10
|
)
|
|
(7
|
)
|
||||
Other, net
|
5
|
|
|
5
|
|
|
10
|
|
|
10
|
|
||||
Interest income and other, net
|
$
|
7
|
|
|
$
|
(4
|
)
|
|
$
|
29
|
|
|
$
|
22
|
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
February 18,
2018 |
|
February 12,
2017 |
|
February 18,
2018 |
|
February 12,
2017 |
||||||||
Provision for income taxes
|
$
|
273
|
|
|
$
|
288
|
|
|
$
|
558
|
|
|
$
|
579
|
|
Effective tax rate
|
27.7
|
%
|
|
35.6
|
%
|
|
29.0
|
%
|
|
35.0
|
%
|
|
24 Weeks Ended
|
||||||
|
February 18,
2018 |
|
February 12,
2017 |
||||
Net cash provided by operating activities
|
$
|
2,115
|
|
|
$
|
3,286
|
|
Net cash used in investing activities
|
(1,158
|
)
|
|
(1,052
|
)
|
||
Net cash used in financing activities
|
(748
|
)
|
|
(825
|
)
|
Period
|
Total Number of Shares Purchased
|
|
Average Price Paid Per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Programs
(1)
|
|
Maximum Dollar Value of Shares that May Yet be Purchased Under the Programs
(1)
|
||||||
November 27, 2017 - December 24, 2017
|
116,000
|
|
|
$
|
184.82
|
|
|
116,000
|
|
|
$
|
2,609
|
|
December 25, 2017 - January 21, 2018
|
90,000
|
|
|
188.82
|
|
|
90,000
|
|
|
2,592
|
|
||
January 22, 2018 - February 18, 2018
|
107,000
|
|
|
189.87
|
|
|
107,000
|
|
|
2,571
|
|
||
Total second quarter
|
313,000
|
|
|
$
|
187.70
|
|
|
313,000
|
|
|
|
(1)
|
Our stock repurchase program is conducted under a $4,000 authorization approved by of our Board of Directors in April 2015, which expires in April 2019.
|
|
|
|
|
|
|
Incorporated by Reference
|
||||
Exhibit
Number
|
|
Exhibit Description
|
|
Filed
Herewith
|
|
Form
|
|
Period Ending
|
|
Filing Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10-Q
|
|
2/15/2015
|
|
3/11/2015
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8-K
|
|
|
|
11/2/2017
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
x
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
x
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
x
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
x
|
|
|
|
|
|
|
|
C
OSTCO
W
HOLESALE
C
ORPORATION
(Registrant)
|
||
|
|
|
|
March 14, 2018
|
By
|
|
/s/ W. C
RAIG
J
ELINEK
|
Date
|
|
|
W. Craig Jelinek
President, Chief Executive Officer and Director
|
|
|
|
|
March 14, 2018
|
By
|
|
/s/ R
ICHARD
A. G
ALANTI
|
Date
|
|
|
Richard A. Galanti
Executive Vice President, Chief Financial Officer and Director
|
a.
|
No Introductory Rate
. Effective January 25, 2018, the Co-Branded Cardholder Account Terms will no longer include an introductory rate of 0% for 7 months from date of account opening on purchases. Accordingly, as of January 25, 2018, the first row of the chart in
Schedule 4.05(a)
(Consumer Co-Branded Cardholder Account Terms) and first row of the chart in
Schedule 4.05(a)(ii)
(Small Business Co-Branded Card Terms) are each deleted and replaced with the following:
|
Annual Percentage Rate (APR) for purchases
|
Your APR will be
16.24%.
This APR will vary with the market based on the Prime Rate.
|
b.
|
No Foreign Exchange Fee and Incremental Rewards Costs
. Effective January 25, 2018, the Co-Branded Cardholder Account Terms will no longer include a fee for foreign purchases of 3% of the US dollar amount of each purchase.
|
i.
|
Accordingly, as of January 25, 2018, the references in the penultimate row of the chart in
Schedule 4.05(a)
(Consumer Co-Branded Cardholder Account Terms) and the penultimate row of the chart in
Schedule 4.05(a)(ii)
(Small Business Co-Branded Card Terms) to “
3%
of each purchase transaction in US dollars” are deleted and replaced with the following: “No fee”.
|
ii.
|
A new Paragraph (11) is added to
Schedule 9.01
as follows:
|
iii.
|
Exhibit 1
to
Schedule 9.01
is attached to this Amendment as
Attachment 1
.
|
COSTCO WHOLESALE CORPORATION
By:
/s/ Paul Latham
Name:
Paul Latham
Title:
SVP - Membership, Marketing, Services
|
CITIBANK, N.A.
By:
/s/ Val Greer
Name:
Val Greer
Title:
MD, Citi Cards
|
•
|
[*]
|
•
|
[*]
|
•
|
[*]
|
•
|
[*]
|
•
|
[*]
|
•
|
[*]
|
•
|
[*]
|
•
|
[*]
|
•
|
[*]
|
•
|
[*]
|
•
|
[*]
|
•
|
[*]
|
•
|
[*]
|
•
|
[*]
|
1)
|
I have reviewed this Quarterly Report on Form 10-Q of Costco Wholesale Corporation (“the registrant”);
|
2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4)
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ W. C
RAIG
J
ELINEK
|
|
W. Craig Jelinek
|
|
President, Chief Executive Officer and Director
|
|
1)
|
I have reviewed this Quarterly Report on Form 10-Q of Costco Wholesale Corporation (“the registrant”);
|
2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4)
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ R
ICHARD
A. G
ALANTI
|
|
Richard A. Galanti
|
|
Executive Vice President, Chief Financial Officer and Director
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ W. C
RAIG
J
ELINEK
|
|
Date: March 14, 2018
|
W. Craig Jelinek
|
|
|
President, Chief Executive Officer and Director
|
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ R
ICHARD
A. G
ALANTI
|
|
Date: March 14, 2018
|
Richard A. Galanti
|
|
|
Executive Vice President, Chief Financial Officer and Director
|
|
|