Costco 2006 Annual Report Download - page 18

Our international operations subject us to risks associated with the legislative, judicial,
accounting, regulatory, political and economic factors specific to the countries or regions in
which we operate, which could adversely affect our financial performance.
Our international operations could form a larger portion of our net sales in future years. Future
operating results internationally could be negatively affected by a variety of factors, many beyond our
control. These factors include political conditions, economic conditions, regulatory constraints, currency
regulations and exchange rates, and other matters in any of the countries or regions in which we
operate, now or in the future. Other factors that may impact international operations include foreign
trade, monetary and fiscal policies both of the United States and of other countries, laws and
regulations of foreign governments, agencies and similar organizations, and risks associated with
having major facilities located in countries which have been historically less stable than the
United States.
Implementation of technology initiatives could disrupt our operations in the near term and fail
to provide the anticipated benefits.
We have made and will continue to make significant technology investments both in our warehouses
and in our administrative functions. The cost and potential problems and interruptions associated with
the implementation of technology initiatives could disrupt or reduce the efficiency of our operations in
the near term. In addition, new or upgraded technology might not provide the anticipated benefits; it
might take longer than expected to realize the anticipated benefits or the technology might fail.
Market expectations for our financial performance is high.
We believe that the price of our stock reflects high market expectations for our future operating results.
Any failure to meet these expectations for our comparable warehouse sales growth rates, earnings per
share and new warehouse openings could cause the market price of our stock to drop.
Cost related to natural disasters could adversely affect our financial performance.
The occurrence of one or more natural disasters, such as hurricanes or earthquakes (particularly in
California where over 30% of our net sales are generated) could adversely affect our operations and
financial performance. Such events could result in physical damage to one or more of our properties,
the temporary closure of one or more warehouses or depots, the temporary lack of an adequate work
force in a market, the temporary or long-term disruption in the supply of products from some local and
overseas suppliers, the temporary disruption in the transport of goods from overseas, delay in the
delivery of goods to our depots or warehouses within a country in which we are operating and the
temporary reduction in the availability of products in our warehouses.
We are subject to a wide variety of federal, state, regional, local and international laws and
regulations relating to the use, storage, discharge, and disposal of hazardous materials and
hazardous and non-hazardous wastes, and other environmental matters.
While we believe that our operations are currently in material compliance with all environmental laws,
any failure to comply with these laws could result in costs to satisfy environmental compliance,
remediation requirements, or the imposition of severe penalties or restrictions on operations by
government agencies or courts that could adversely affect our operations.
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