Costco 2011 Annual Report Download - page 10

BUSINESS OVERVIEW
Forward-Looking Statements
Certain statements contained in this Report constitute forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. They include statements that address activities,
events, conditions or developments that we expect or anticipate may occur in the future and may relate
to such matters as sales growth, increases in comparable store sales, cannibalization of existing
locations by new openings, price or fee changes, earnings performance, earnings per share, stock-
based compensation expense, warehouse openings and closures, the effect of adopting certain
accounting standards, future financial reporting, financing, margins, return on invested capital, strategic
direction, expense control, membership renewal rates, shopping frequency, litigation impact and the
demand for our products and services. Forward-looking statements may also be identified by the words
“believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,”
“may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.
Forward-looking statements are based on current expectations and assumptions and are subject to
risks and uncertainties that may cause actual results to differ materially from the forward-looking
statements. Such forward-looking statements involve risks and uncertainties that may cause actual
events, results, or performance to differ materially from those indicated by such statements, including,
without limitation, the factors set forth in Risk Factors, page 14, and other factors noted in the
Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the
consolidated financial statements and related notes of this Report. Forward-looking statements speak
only as of the date they are made, and we do not undertake to update these forward-looking
statements, except as required by law.
General
Costco Wholesale Corporation and its subsidiaries (Costco or the Company) are principally engaged in
the operation of membership warehouses in the United States, Canada, the United Kingdom, Japan,
Australia, through majority-owned subsidiaries in Taiwan and Korea, and a 50% owned joint venture in
Mexico (Mexico). At the beginning of fiscal 2011, we began consolidating our Mexico joint venture due
to the adoption of a new accounting standard. Mexico’s results previously were accounted for under
the equity method and our 50% share was included in “interest income and other, net” in the
consolidated statements of income. In the current year, the financial position and results of Mexico’s
operations are fully consolidated and the joint venture partner’s 50% share is included in “net income
attributable to noncontrolling interests” in the consolidated statements of income. The initial
consolidation of Mexico increased total assets, liabilities, and revenue by approximately 3%, with no
impact on net income or net income per common share attributable to Costco. See discussion in Note
1 to the consolidated financial statements included in this Report.
We report on a 52/53-week fiscal year, consisting of thirteen four-week periods and ending on the
Sunday nearest the end of August. The first three quarters consist of three periods each, and the
fourth quarter consists of four periods (five weeks in the thirteenth period in a 53-week year). The
material seasonal impact in our operations is an increased level of net sales and earnings during the
winter holiday season. References to 2011, 2010, and 2009 relate to the 52-week fiscal years ended
August 28, 2011, August 29, 2010, and August 30, 2009, respectively.
We operate membership warehouses based on the concept that offering our members low prices on a
limited selection of nationally branded and private-label products in a wide range of merchandise
categories will produce high sales volumes and rapid inventory turnover. This turnover, when
combined with the operating efficiencies achieved by volume purchasing, efficient distribution and
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