Costco 2010 Annual Report Download - page 21

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from overseas, delays in the delivery of goods to our depots or warehouses within a country in which
we operate and the temporary reduction in the availability of products in our warehouses. Public health
issues, such as a potential H1N1 flu pandemic (swine flu), whether occurring in the United States or
abroad, could disrupt our operations, disrupt the operations of suppliers or customers, or have an
adverse impact on consumer spending and confidence levels. We may be required to suspend
operations in some or all of our locations, which could have a material adverse effect on our business,
financial condition, and results of operations. These events could also reduce demand for our products
or make it difficult or impossible to receive products from suppliers.
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.
Any failure to comply with these laws could result in costs to satisfy environmental compliance,
remediation or compensatory requirements, or the imposition of severe penalties or restrictions on
operations by governmental agencies or courts that could adversely affect our operations.
Factors associated with climate change could adversely affect our business.
We use natural gas, diesel fuel, gasoline, and electricity in our distribution and sale operations.
Increased government regulations to limit carbon dioxide and other greenhouse gas emissions may
result in increased compliance costs and legislation or regulation affecting energy inputs could
materially affect our profitability. In addition, climate change could affect our ability to procure needed
commodities at costs and in quantities we currently experience. We also sell a substantial amount of
gasoline, the demand for which could be impacted by concerns about climate change and which also
could face increased regulation. Climate change may be associated with extreme weather conditions,
such as more intense hurricanes, thunderstorms, tornados and snow or ice storms, as well as rising
sea levels. Extreme weather conditions increase our costs, and damage resulting from extreme
weather may not be fully insured.
We are involved in a number of legal proceedings and audits, and while we cannot predict the
outcomes of such proceedings and other contingencies with certainty, some of these
outcomes may unfavorably affect our operations or increase our costs.
We are or may become involved in a number of legal proceedings and audits, including grand jury
investigations, other government investigations, consumer, employment, tort and other litigation (see
discussion of Legal Proceedings in Note 11 to the consolidated financial statements included in Item 8
of this Report). We cannot predict with certainty the outcomes of these legal proceedings and other
contingencies, including environmental remediation and other proceedings commenced by
governmental authorities. The outcome of some of these legal proceedings and other contingencies
could require us to take or refrain from taking actions which could unfavorably affect our operations or
could require us to pay substantial amounts of money. Additionally, defending against these lawsuits
and proceedings may involve significant expense and diversion of management’s attention and
resources. Our business requires compliance with a great variety of laws and regulations. Failure to
achieve compliance could subject us to lawsuits and other proceedings, and lead to damage awards,
fines and penalties.
We are subject to the risks of selling unsafe products.
If our merchandise offerings, including food and prepared food products for human consumption, drugs
and childrens’ products, do not meet or are perceived not to meet applicable safely standards or our
members’ expectations regarding safety, we could experience lost sales, increased costs and be
exposed to legal and reputational risk. The sale of these items involves the risk of injury to our
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