Costco 2014 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 amount we expect to spend on our
expansion plans, the effect of adopting certain accounting standards, future financial reporting, financing,
margins, return on invested capital, strategic direction, expense controls, membership renewal rates,
shopping frequency, litigation, 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. 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 the section titled “Risk Factors”, and other factors
noted in the section titled “Management's Discussion and Analysis of Financial Condition and Results of
Operations” and in the consolidated financial statements and related notes in this Report. Forward-looking
statements speak only as of the date they are made, and we do not undertake to update them, except as
required by law.
General
Costco Wholesale Corporation and its subsidiaries (Costco or the Company) began operations in 1983 in
Seattle, Washington. We are principally engaged in the operation of membership warehouses in the
United States (U.S.) and Puerto Rico, Canada, United Kingdom (U.K.), Mexico, Japan, Australia, Spain,
and through majority-owned subsidiaries in Taiwan and Korea. Our common stock trades on the
NASDAQ Global Select Market under the symbol “COST.”
Prior to the July 2012 acquisition of the 50% noncontrolling interest in our joint venture in Mexico, the
financial position and results of Mexico's operations were consolidated, and the joint venture partner's
share was included in "net income attributable to noncontrolling interests" in the consolidated statements
of income. Subsequent to the acquisition, we have included 100% of Mexico's operations within "net
income attributable to Costco" in the consolidated statements of income.
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 2014 and 2013 relate to the 52-week fiscal years ended August 31, 2014
and September 1, 2013, respectively. References to 2012 relate to the 53-week fiscal year ended
September 2, 2012.
We operate membership warehouses based on the concept that offering our members low prices on a
limited selection of nationally branded and select private-label products in a wide range of merchandise
categories will produce high sales volumes and rapid inventory turnover. When combined with the
operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of
merchandise in no-frills, self-service warehouse facilities, these volumes and turnover enable us to
operate profitably at significantly lower gross margins than traditional wholesalers, mass merchandisers,
supermarkets, and supercenters. We generally sell inventory before we are required to pay many of our
merchandise vendors, even though we take advantage of early payment discounts when available. To the
extent that sales increase and inventory turnover becomes more rapid, more inventory is financed
through payment terms provided by suppliers rather than by our working capital.
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