Costco 2006 Annual Report Download - page 66

The Company has not provided for U.S. deferred taxes on cumulative undistributed earnings of
non-U.S. affiliates aggregating $907,090 and $865,579 at September 3, 2006, and August 28, 2005,
respectively, as such earnings are deemed permanently reinvested. Because of the availability of U.S.
foreign tax credits and complexity of the computation, it is not practicable to determine the U.S. federal
income tax liability or benefit associated with such earnings if such earnings were not deemed to be
permanently reinvested.
Note 9—Net Income Per Common and Common Equivalent Share
The following data show the amounts used in computing net income per share and the effect on
income and the weighted average number of shares of dilutive potential common stock.
Fiscal Year Ended
September 3,
2006 August 28, 2005 August 29, 2004
Net income available to common stockholders used in
basic net income per share ....................... $1,103,215 $1,063,092 $882,393
Interest on convertible notes, net of tax ............... 3,040 7,672 11,607
Net income available to common stockholders after
assumed conversions of dilutive securities .......... $1,106,255 $1,070,764 $894,000
Weighted average number of common shares used in
basic net income per share (000’s) ................. 469,718 473,945 459,223
Stock options and restricted stock units (000’s) ........ 5,944 6,000 3,892
Conversion of convertible notes (000’s) ............... 4,679 12,090 19,344
Weighted number of common shares and dilutive
potential common stock used in diluted net income
(000’s) per share ............................... 480,341 492,035 482,459
The diluted share base calculation for fiscal years ended September 3, 2006, August 28, 2005 and
August 29, 2004, excludes 11,142,000, 12,575,000 and 24,748,000 stock options and restricted stock
units outstanding, respectively. These equity instruments are excluded due to their anti-dilutive effect.
Note 10—Commitments and Contingencies
Legal Proceedings
The Company is involved from time to time in claims, proceedings and litigation arising from its
business and property ownership. The Company is a defendant in the following matters, among others:
Two actions purportedly brought as class actions on behalf of certain present and former Costco
managers in California, in which plaintiffs principally allege that they have not been properly
compensated for overtime work. Scott M. Williams v. Costco Wholesale Corp., United States District
Court (San Diego), Case No. 02-CV-2003 NAJ (JFS); Superior Court for the County of San Diego,
Case No. GIC-792559; Greg Randall v. Costco Wholesale Corp., Superior Court for the County of Los
Angeles, Case No. BC-296369.
An overtime compensation case brought as a class action on behalf of present and former hourly
employees in California, in which plaintiffs principally allege that Costco’s semi-annual bonus formula is
improper with regard to retroactive overtime pay. Anthony Marin v. Costco Wholesale Corp., Superior
Court for the County of Alameda, Case No. RG-04150447.
An action purportedly brought as a class action on behalf of present and former hourly employees in
California, in which plaintiffs principally allege that Costco did not properly compensate and record hours
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