Costco 1998 Annual Report Download - page 34

MERRILL CORPORATION NETWORK COMPOSITION SYSTEM CPICARD // 3-DEC-98 18:50 DISK004:[98SEA7.98SEA2097]DW2097A.;6
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COSTCO COMPANIES A/R (Y/E 8-31-98) Proj: P1826SEA98 Job: 98SEA2097 File: DW2097A.;6
Merrill/Seattle [phone] Page Dim: 8.250N X 10.750NCopy Dim: 38. X 54.3
COSTCO COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)
Note 6—Income Taxes (Continued)
The components of the deferred tax assets and liabilities are as follows:
August 30, 1998 August 31, 1997
Accrued liabilities ........................... $ 93,158 $79,663
Other .................................... 14,010 15,735
Total deferred tax assets ..................... 107,168 95,398
Property and equipment ...................... 67,293 45,647
Merchandise inventories ...................... 33,589 22,765
Other .................................... 1,022 1,208
Total deferred tax liabilities .................. 101,904 69,620
Net deferred tax assets ....................... $ 5,264 $25,778
The deferred tax accounts at August 30, 1998 and August 31, 1997 include current deferred income
tax assets of $59,667 and $59,322, respectively, and non-current deferred income tax liabilities of $54,403
and $33,544, respectively.
Note 7—Commitments and Contingencies
Legal Proceedings
On April 6, 1992, The Price Company was served with a Complaint in an action entitled Fecht et al. v.
The Price Company et al., Case No. 92-497, United States District Court, Southern District of California
(the ‘‘Court’’). Subsequently, on April 22, 1992, The Price Company was served with a First Amended
Complaint in the action. The case was dismissed without prejudice by the Court on September 21, 1992, on
the grounds the plaintiffs had failed to state a sufficient claim against defendants. Subsequently, plaintiffs
filed a Second Amended Complaint which, in the opinion of The Price Company’s counsel, alleged
substantially the same facts as the prior complaint. The Complaint alleged violation of certain state and
federal laws during the time period prior to The Price Company’s earnings release for the second quarter
of fiscal year 1992. The case was dismissed with prejudice by the Court on March 9, 1993, on grounds the
plaintiffs had failed to state a sufficient claim against defendants. Plaintiffs filed an Appeal in the Ninth
Circuit Court of Appeals. In an opinion dated November 20, 1995, the Ninth Circuit reversed and
remanded the lawsuit. In February 1997, the Court granted the plaintiffs’ motion for certification of a class
consisting of all purchasers of the common stock of The Price Company from April 3, 1991 through
April 2, 1992. In May 1998, the parties reached an agreement in principle to resolve the lawsuit. In
July 1998, the Court preliminarily approved the settlement, and in October 1998, the Court entered an
Order approving the settlement and dismissing the lawsuit. The Company’s estimated portion of the
proposed settlement amount is not material to the Company’s financial position or results of operations.
The Company is involved from time to time in claims, proceedings and litigation arising from its
business and property ownership. The Company does not believe that any such claim, proceeding or
litigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial
position or results of operations.
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9 C Cs: 1073