Costco 2001 Annual Report Download

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YEAR ENDED SEPTEMBER 2, 2001
Annual
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2001
2001
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2001

Table of contents

  • Page 1
    Annual Report 2001 2001 YEAR ENDED SEPTEMBER 2, 2001

  • Page 2
    ...spin-off of most of its non-warehouse assets to Price Enterprises, Inc., the Company changed its name to Costco Companies, Inc. On August 30, 1999, the Company reincorporated from Delaware to Washington and changed its name to Costco Wholesale Corporation, which trades on the NASDAQ under the symbol...

  • Page 3
    FINANCIAL HIGHLIGHTS 1

  • Page 4
    ...and Jacksonville, Florida. Expansion plans for fiscal 2002 include three openings in Puerto Rico (two of which are now open); two additional units in both Kansas and North Carolina; two warehouses in the Pittsburgh, Pennsylvania market (one of which is open); two locations in San Antonio, Texas (one...

  • Page 5
    ...retail company to offer these unique cards. Last year, these members earned millions of dollars in rebate rewards on their American Express Cash Rebate co-branded cards, providing significant additional value to being a Costco member. In terms of merchandise sales, the foods and sundries departments...

  • Page 6
    ... Diego San Francisco S. San Francisco San Jose (2) San Juan Capistrano San Leandro San Marcos Sand City Santa Clara Santa Clarita Santa Cruz Santa Maria Santa Rosa Santee Signal Hill Simi Valley Stockton Sunnyvale Temecula Torrance Tustin Vallejo Van Nuys MEXICO Victorville Visalia Vista West Lake...

  • Page 7
    ... Everett Federal Way Issaquah Kennewick Kirkland Lynnwood Puyallup Seattle Sequim Silverdale Spokane N. Spokane Tacoma Tukwila Tumwater Union Gap E. Wenatchee Puerto Rico (2) Bayamon Caguas Montana (4) Billings Bozeman Kalispell Missoula Nevada (5) Carson City Henderson Las Vegas Reno Summerlin New...

  • Page 8
    ...in the number of warehouses open in any period because the joint venture is accounted for on the equity basis and therefore their operations are not consolidated in the Company's financial statements. The Company's headquarters are located in Issaquah, Washington. Additionally, the Company maintains...

  • Page 9
    ...2000. This information includes all adjustments which management considers necessary for a fair presentation. 52 Weeks Ended September 2, 2001 First Quarter 12 Weeks Second Quarter 12 Weeks Third Quarter 12 Weeks Fourth Quarter 16 Weeks Total 52 Weeks First Quarter 12 Weeks 53 Weeks Ended September...

  • Page 10
    ... (000's) Balance Sheet Data Working capital (deficit) Property and equipment, net Total assets Short-term debt Long-term debt and capital lease obligations Stockholders' equity SALES INCREASE (DECREASE) FROM PRIOR YEAR Total Comparable units MEMBERS AT YEAR END (000'S) Business (primary cardholders...

  • Page 11
    ...) (182) $ (112) 100.0% 2.0 102.0 90.7 8.8 0.2 - 99.8 2.2 (0.3) 0.1 (0.7) 1.3 0.6 0.7 - 0.7 (0.3) (1.1) (0.7%) $15,155 309 15,464 13,751 1,315 28 5 15,099 365 (46) 17 - 336 133 203 - 203 20 - 223 100.0% 2.0 102.0 90.7 8.7 0.2 - 99.6 2.4 (0.3) 0.1 - 2.2 0.9 1.3 - 1.3 0.1 - 1.4% $13,820 277 14,097...

  • Page 12
    ... of net sales decreased by six basis points due to costs related to the Executive Membership two percent reward program, which was somewhat offset by gross margin improvement in the Company's core merchandising activities and ancillary operations. The gross margin figures reflect accounting for most...

  • Page 13
    ... also include costs related to remodels and expanded ancillary operations at existing warehouses, as well as expanded international operations. The provision for impaired assets and closing costs was $18,000 in fiscal 2001 compared to $7,000 in fiscal 2000. The fiscal 2001 provision includes charges...

  • Page 14
    ... Pre-opening expenses also include costs related to remodels, expanded fresh foods and ancillary operations at existing warehouses, as well as expanded international operations, and the opening of two new regional offices. The provision for impaired assets and closing costs was $7,000 in fiscal 2000...

  • Page 15
    ... international markets are being assessed. Costco and its Mexico-based joint venture partner, Controladora Comercial Mexicana, each own a 50% interest in Costco Mexico. As of September 2, 2001, Costco Mexico operated 20 warehouses in Mexico and plans to open one or two new warehouse clubs during...

  • Page 16
    ... 20 warehouses in Mexico. Net cash provided by financing activities totaled $394,345 in fiscal 2001 compared to $58,605 in fiscal 2000. The increase in financing activity for the current year relates to an increase in short-term borrowings (primarily through the Company's commercial paper program...

  • Page 17
    ... payable to banks in April 2001. The Company's balance sheet as of September 2, 2001 reflects a $1,455,846 or 17% increase in total assets since September 3, 2000. The increase is primarily due to a net increase in property and equipment and merchandise inventory related to the Company's expansion...

  • Page 18
    ... to vary as a result of future business requirements, market conditions and other factors. As of September 2, 2001, all of the Company's debt is fixed rate. The Company's long-term debt includes its $851,877 principal amount at maturity Zero Coupon Subordinated Notes, Senior Notes with a principal...

  • Page 19
    ... Financial Officer REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS We have audited the accompanying consolidated balance sheets of Costco Wholesale Corporation (a Washington corporation) and subsidiaries (''Costco'') as of September 2, 2001 and September 3, 2000, and the related consolidated statements...

  • Page 20
    COSTCO WHOLESALE CORPORATION CONSOLIDATED BALANCE SHEETS (dollars in thousands except par value) ASSETS September 2, 2001 September 3, 2000 CURRENT ASSETS Cash and cash equivalents ...Short-term investments ...Receivables, net ...Merchandise inventories, net . Other current assets ... ... ... ... ...

  • Page 21
    COSTCO WHOLESALE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share data) 52 Weeks Ended September 2, 2001 53 Weeks Ended September 3, 2000 52 Weeks Ended August 29, 1999 REVENUE Net sales ...Membership fees and other ...Total revenue ...OPERATING EXPENSES ...

  • Page 22
    COSTCO WHOLESALE CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the 52 weeks ended September 2, 2001, the 53 weeks ended September 3, 2000 and the 52 weeks ended August 29, 1999 (in thousands) Common Stock Shares Amount Additional Paid-In Capital Other Accumulated Comprehensive ...

  • Page 23
    ... of discount on zero coupon notes ...16,654 16,222 16,064 Net gain on sale of property and equipment and other ...(15,934) (5,358) (10,443) Provision for impaired assets ...15,231 10,956 31,080 Change in deferred income taxes ...40,797 8,264 (22,666) Tax benefit from exercise of stock options...

  • Page 24
    ... warehouse facilities. At September 2, 2001, Costco operated 365 warehouse clubs: 264 in the United States; 60 in Canada; 11 in the United Kingdom; five in Korea; three in Taiwan; two in Japan; and 20 warehouses in Mexico with a joint venture partner. The Company's investment in the Costco Mexico...

  • Page 25
    ... vendor rebates and promotional allowances and other miscellaneous amounts due to the Company, and are net of allowance for doubtful accounts of $3,474 at September 2, 2001 and $3,368 at September 3, 2000. Merchandise Inventories, net Merchandise inventories are valued at the lower of cost or market...

  • Page 26
    ... equivalents on hand. Costco Wholesale UK Limited currently operates eleven Costco warehouse locations. Accounts Payable The Company's banking system provides for the daily replenishment of major bank accounts as checks are presented. Accordingly, included in accounts payable at September 2, 2001...

  • Page 27
    ... marketing to prospective new members and annual direct mail marketing programs to existing members promoting selected merchandise. Marketing and promotional costs are expensed as incurred. Preopening Expenses Preopening expenses related to new warehouses, major remodels/expansions, regional offices...

  • Page 28
    COSTCO WHOLESALE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (dollars in thousands, except per share data) Note 1-Summary of Significant Accounting Policies (Continued) Net Income Per Common and Common Equivalent Share The following data show the amounts used in computing ...

  • Page 29
    ... 142. In June 2001, the FASB issued SFAS No. 143, ''Accounting for Asset Retirement Obligations,'' effective for the Company on January 1, 2003. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated...

  • Page 30
    COSTCO WHOLESALE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (dollars in thousands, except per share data) Note 1-Summary of Significant Accounting Policies (Continued) amounts of assets and liabilities at the date of the financial statements and the reported amounts of ...

  • Page 31
    ... Average Interest Rate During the Fiscal Year Category of Aggregate Short-term Borrowings Fiscal year ended September 2, 2001 Bank borrowings: U.S...Canadian ...Other International ...Commercial Paper: U.S...Canadian ...Fiscal year ended September 3, 2000 Bank borrowings: U.S...Canadian ...Other...

  • Page 32
    ... placement. Interest is payable semi-annually and principal is due on July 9, 2008. During April 2001, the Company retired its unsecured note payable to banks of $140,000 using cash provided from operations, cash and cash equivalents, and short-term borrowings under its commercial paper program. On...

  • Page 33
    ... and Stock Option Plan (the New Stock Option Plan) provides for the issuance of up to 60 million shares of its common stock upon the exercise of stock options and up to 3,333,332 shares through stock grants. Prior to the merger of The Price Company and Costco Wholesale Corporation, various incentive...

  • Page 34
    ... (Continued) Costco Wholesale Corporation (collectively the Old Stock Option Plans). Options were granted for a maximum term of ten years, and were exercisable upon vesting. Options granted under these plans generally vest ratably over five to nine years. Subsequent to the merger, new grants of...

  • Page 35
    COSTCO WHOLESALE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (dollars in thousands, except per share data) Note 4-Stock Options (Continued) Stock option transactions relating to the aggregate of the Old and New Stock Option Plans are summarized below (shares in thousands): ...

  • Page 36
    COSTCO WHOLESALE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (dollars in thousands, except per share data) Note 5-Retirement Plans (Continued) for the California union employees. The plan currently allows pre-tax deferral against which the Company matches 50% of the first ...

  • Page 37
    ... have a material adverse effect on the Company's financial position or results of its operations. Note 8-Segment Reporting The Company and its subsidiaries are principally engaged in the operation of membership warehouses in the United States, Canada, Japan and through majority-owned subsidiaries in...

  • Page 38
    COSTCO WHOLESALE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (dollars in thousands, except per share data) Note 8-Segment Reporting (Continued) Taiwan and Korea and through a 50%-owned joint venture in Mexico. The Company's reportable segments are based on management ...

  • Page 39
    ... Nasdaq Stock Market's National Market under the symbol ''COST.'' The following table sets forth the closing high and low sales prices of Costco Common Stock for the period January 1, 1999 through November 30, 2001. The quotations are as reported in published financial sources. Costco Common Stock...

  • Page 40
    ...Hicok Pierre Riel Senior Vice President, General Manager-San Senior Vice President, General Manager- Diego Region Eastern Canada Region Dennis A. Hoover Ginnie Roeglin Senior Vice President, General Manager-Bay Senior Vice President, Membership, MarketArea Region ing, Member Services & Publishing 38

  • Page 41
    ... President, E-commerce, Business Delivery & Special Order James D. Sinegal President & Chief Executive Officer John D. Thelan Senior...Corporate Treasurer Country Manager-Taiwan James Klauer Richard Delie GMM-Corporate Non-Foods GMM-Corporate Non-Foods Paul Latham Gerard Dempsey Costco Trading & Gas...

  • Page 42
    ...Operations-Security/Labor Relations Robert E. Nelson Financial Planning & Investor Relations David Nickel GMM-Non-Foods-Canadian Division Gary F. Ojendyk GMM-Corporate Non-Foods Richard J. Olin Legal, General Counsel Mario Omoss Operations-Texas Region John R. Osterhaus Photo, Optical & Hearing Aids...

  • Page 43
    ... INFORMATION A copy of Costco's annual report to the Securities and Exchange Commission on Form 10-K and quarterly reports on Form 10-Q will be provided to any shareholder upon written request directed to Investor Relations, Costco Wholesale Corporation, 999 Lake Drive, Issaquah, Washington...

  • Page 44