Costco 2009 Annual Report Download - page 83

Note 10—Net Income Per Common and Common Equivalent Share
The following table shows 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 (shares in
000’s).
2009 2008 2007
Net income available to common stockholders used in basic net
income per share ..................................... $1,086 $1,283 $1,083
Interest on convertible notes, net of tax ..................... 1 1 1
Net income available to common stockholders after assumed
conversions of dilutive securities ......................... $1,087 $1,284 $1,084
Weighted average number of common shares used in basic net
income per share ..................................... 433,988 434,442 447,659
Stock options and restricted stock units ..................... 5,072 8,268 7,621
Conversion of convertible notes ........................... 1,394 1,530 2,361
Weighted number of common shares and dilutive potential of
common stock used in diluted net income per share per
share ............................................... 440,454 444,240 457,641
Anti-dilutive stock options and RSUs ....................... 8,045 11 692
Note 11—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 cases 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); Greg Randall v. Costco Wholesale Corp.,
Superior Court for the County of Los Angeles, Case No. BC-296369. On February 21, 2008 the court in
Randall tentatively granted in part and denied in part plaintiffs’ motion for class certification. That order
was finalized by the court on May 13, 2008. The parties in Randall have agreed on a partial settlement
of the action (resolving all claims except for the miscalculation claim), requiring a payment of up to $16
by the Company, which was reserved for in 2008. The Court granted final approval of the settlement on
June 22, 2009. Settlement distribution is underway. The miscalculation claim from the Randall case
was refiled as a separate action by stipulation, alleging that the Company miscalculated the rates of
pay for all department and ancillary managers in California in violation of Labor Code Section 515(d).
On October 2, 2009, the court granted the Company’s motion for summary judgement. Terry Head v.
Costco Wholesale Corp., Superior Court for the County of Los Angeles, Case No. BC-409805. In the
Williams action, the parties have achieved a settlement in principle for a gross amount of $440
thousand. Any settlement will be subject to court approval.
On December 26, 2007, another putative class action was filed, also principally alleging denial of
overtime compensation. The complaint alleges misclassification of certain California managers. On
March 6, 2008, Costco filed a motion to dismiss. On May 15, 2008, the court partially granted the
motion, dismissing certain claims and refusing to expand the statute of limitations for the remaining
claims. An answer to the complaint was filed on May 27, 2008. Plainiff’s class certification motion is
pending. Jesse Drenckhahn v. Costco Wholesale Corp., United States District Court (Los Angeles),
Case No. CV08-1408 FMC (JMJ).
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