Costco 2008 Annual Report Download - page 34

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Provision for Income Taxes
2008 2007 2006
Income tax expense ....................... $716,249 $627,219 $648,202
Effective tax rate .......................... 35.83% 36.68% 37.01%
The effective income tax rate on earnings in 2008, 2007 and 2006 was 35.83%, 36.68% and 37.01%,
respectively. The lower tax rate in 2008 was primarily attributable to non-recurring benefits recognized
during the year.
Net Income
2008 2007 2006
Net income .......................... $1,282,725 $1,082,772 $1,103,215
Unusual items (net of tax) .............. — 119,496 —
Net income, as adjusted ............... $1,282,725 $1,202,268 $1,103,215
Diluted earnings per share ............. $ 2.89 $ 2.37 $ 2.30
Shares used to calculate diluted net
income per common share ........... 444,240 457,641 480,341
Diluted earnings per share increase ...... 22% 3% 6%
2008 vs. 2007
Net income for 2008 was $1.28 billion, or $2.89 per diluted share, compared to $1.08 billion, or $2.37
per diluted share, during 2007. The unusual items previously discussed totaled $119.5 million, net of
tax, or $0.26 per diluted share in 2007. Exclusive of these items, earnings in 2007 were $2.63 per
diluted share. Net income per diluted share in 2008 represents an increase of 10% over this adjusted
amount. During 2008, we repurchased and retired 13.8 million shares of common stock, favorably
impacting earnings per diluted share by approximately $0.03.
2007 vs. 2006
Net income for 2007 was $1.08 billion, or $2.37 per diluted share, compared to $1.10 billion, or $2.30
per diluted share during 2006. The unusual items previously discussed totaled $119.5 million, net of
tax, or $0.26 per diluted share in 2007. Exclusive of these items, earnings for 2007 were $2.63 per
diluted share, a 14% increase over the prior year. During 2007, we repurchased and retired
36.4 million shares of common stock, favorably impacting earnings per diluted share by approximately
$0.03.
LIQUIDITY AND CAPITAL RESOURCES
The following table itemizes our most liquid assets at the end of 2008 and 2007 (dollars in thousands):
2008 2007
Cash and cash equivalents ........................... $2,619,429 $2,779,733
Short-term investments .............................. 655,584 575,787
Total .......................................... $3,275,013 $3,355,520
Our primary sources of liquidity are cash flows generated from warehouse operations and existing
cash and cash equivalents and short-term investments balances, which were $3.28 billion and $3.36
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