Costco 2012 Annual Report Download - page 71

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 potentially dilutive common shares outstanding
(shares in 000’s):
2012 2011 2010
Net income available to common stockholders used in basic
and diluted net income per common share .............. $ 1,709 $ 1,462 $ 1,303
Interest on convertible notes, net of tax .................. 1 1 1
Net income available to common stockholders after assumed
conversions of dilutive securities ...................... $ 1,710 $ 1,463 $ 1,304
Weighted average number of common shares used in basic
net income per common share ....................... 433,620 436,119 438,611
Stock options and RSUs .............................. 4,906 6,063 6,409
Conversion of convertible notes ........................ 847 912 950
Weighted average number of common shares and dilutive
potential of common stock used in diluted net income per
share ............................................ 439,373 443,094 445,970
Anti-dilutive RSUs ................................... 15 0 1,141
Note 11—Commitments and Contingencies
Legal Proceedings
The Company is involved in a number of claims, proceedings and litigation arising from its business
and property ownership. In accordance with applicable accounting guidance, the Company establishes
an accrual for legal proceedings if and when those matters reach a stage where they present loss
contingencies that are both probable and reasonably estimable. In such cases, there may be a
possible exposure to loss in excess of any amounts accrued. The Company monitors those matters for
developments that would affect the likelihood of a loss and the accrued amount, if any, thereof, and
adjusts the amount as appropriate. If the loss contingency at issue is not both probable and reasonably
estimable, the Company does not establish an accrual, but will continue to monitor the matter for
developments that will make the loss contingency both probable and reasonably estimable. As of the
date of this report, the Company has recorded an accrual with respect to one matter described below,
which accrual is not material to the Company’s financial statements. In each case, there is a
reasonable possibility that a loss may be incurred, including a loss in excess of the applicable accrual.
For matters where no accrual has been recorded, the possible loss or range of loss (including any loss
in excess of our accrual) cannot in our view be reasonably estimated because, among other things,
(i) the remedies or penalties sought are indeterminate or unspecified, (ii) the legal and/or factual
theories are not well developed; and/or (iii) the matters involve complex or novel legal theories or a
large number of parties.
The Company is a defendant in the following matters, among others:
A case brought as a class action on behalf of certain present and former female managers, in which
plaintiffs allege denial of promotion based on gender in violation of Title VII of the Civil Rights Act of
1964 and California state law. Shirley “Rae” Ellis v. Costco Wholesale Corp., United States District
Court (San Francisco), Case No. C-04-3341-MHP. Plaintiffs seek compensatory damages, punitive
damages, injunctive relief, interest and attorneys’ fees. Class certification was granted by the district
court on January 11, 2007. On September 16, 2011, the United States Court of Appeals for the Ninth
Circuit reversed the order of class certification and remanded to the district court for further
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