Costco Wholesale Corporation Reports Third Quarter and Year-to-Date Operating Results for Fiscal 2005.ISSAQUAH, Wash. -- Costco Costco Wholesale Corporation (NASDAQ: COST) is the largest membership warehouse club chain in the world based on sales volume, headquartered in Issaquah, Washington, United States,[1] with its flagship warehouse in nearby Seattle. Wholesale Corporation (Nasdaq: COST) announced today its operating results for the third quarter (12 weeks) and the first thirty-six weeks of fiscal 2005, ended May 8, 2005. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the third quarter of fiscal 2005 increased 10% to $11.75 billion from $10.67 billion during the third quarter of fiscal 2004. On a comparable warehouse basis, that is warehouses open at least a year, net sales increased 7%. Net income for the third quarter of fiscal 2005 increased 6% to $209.8 million, or $.43 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, from $198.7 million, or $.42 per diluted share, during the third quarter of fiscal 2004. Net sales for the first thirty-six weeks of fiscal 2005 increased 10% to $35.50 billion from $32.31 billion during the first thirty-six weeks of fiscal 2004. Comparable warehouse sales during the first thirty-six weeks of fiscal 2005 increased 7% over the prior year's level. Net income for the first thirty-six weeks of fiscal 2005 increased 21% to $708.4 million, or $1.45 per diluted share, compared to net income for the first thirty-six weeks of fiscal 2004 of $585.6 million, or $1.23 per diluted share. In the second quarter of fiscal 2005, the Company realized a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. $52.1 million income tax benefit that resulted primarily from the settlement of a transfer pricing Transfer pricing refers to the pricing of goods and services within a multi-divisional organization, particularly in regard to cross-border transactions. For example, goods from the production division may be sold to the marketing division, or goods from a parent company may be dispute between the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of ; and also recorded a one-time cumulative pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of $16.0 million ($10.0 million after tax) related to an adjustment to its method of accounting for certain leases. The net effect of these two items positively impacted the Company's second quarter and year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. earnings figures by $42.1 million, or $0.08 per share. Without the impact of the $52.1 million income tax benefit and the $16.0 million ($10.0 million after-tax) cumulative charge to preopening expenses, net income for the first thirty-six weeks of fiscal 2005 would have been $666.3 million or $1.36 per share, reflecting a 14% increase in net income over the first thirty-six weeks of the prior year and an income tax rate for the first thirty-six weeks of 37.50%. Reported net sales were reduced by the implementation of Emerging Issues Task Force Issue No. 03-10 ("EITF EITF Emerging Issues Task Force EITF Edinburgh International Television Festival EITF Europe International Taekwon-Do Federation 03-10"), "Application of Issue No. 02-16 by Resellers to Sales Incentives Noun 1. sales incentive - remuneration offered to a salesperson for exceeding some predetermined sales goal bonus, incentive - an additional payment (or other remuneration) to employees as a means of increasing output Offered to Consumers by Manufacturers," which was effective at the beginning of the Company's fiscal 2004 third quarter, February 16, 2004. EITF 03-10, which primarily impacts Costco's vendor coupon and rebate rebate, partial refund of the total price paid for goods or services. In the United States, rebates were historically given by railroads to favored shippers as a return on transportation charges. programs, reduces net sales and merchandise costs by an equal amount and, therefore, does not affect the Company's consolidated gross profit or net income. Sales for the twelve-week third quarters are on a comparable after-coupon basis; however, had EITF 03-10 been in effect for the comparable 36-week reporting period in fiscal 2004, the reported net sales increase relative to that period this year would have been 11 percent; and the comparable sales increase for the 36-week reporting period would have been 8 percent. Costco currently operates 452 warehouses, including 334 in the United States and Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. , 64 in Canada, 15 in the United Kingdom, five in Korea, four in Taiwan, five in Japan and 25 in Mexico. The Company also operates Costco Online, an electronic commerce web site, at www.costco.com and at www.costco.ca in Canada. The Company plans to open eight to ten additional new warehouses prior to the end of its fiscal year 2005 on August 28, 2005. A conference call to discuss these third quarter results is scheduled for 8:00 a.m. (PDT PDT abbr. Pacific Daylight Time PDT Pacific Daylight Time PDT n abbr (US) (= Pacific Daylight Time) → hora de verano del Pacífico PDT ) today, May 26, 2005, and is available via a webcast on www.costco.com (click on Customer Service, then About Costco and lastly Webcasts). Certain statements contained in this release constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. For these purposes, forward-looking statements are statements that address activities, events, conditions or developments that the Company expects, or anticipates may occur in the future. 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. These risks and uncertainties include, but are not limited to, domestic and international economic conditions including exchange rates, the effects of competition and regulation, consumer and small business spending patterns and debt levels, rising costs associated with employees (including health care and workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. costs), conditions affecting the acquisition, development, ownership or use of real estate, actions of vendors, and other risks identified from time to time in the Company's public statements and reports filed with the SEC.
COSTCO WHOLESALE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(unaudited)
12 Weeks Ended 36 Weeks Ended
------------------------- -------------------------
May 8, May 9, May 8, May 9,
2005 2004 2005 2004
------------ ------------ ------------ ------------
REVENUE
Net sales $11,747,113 $10,672,737 $35,499,635 $32,312,773
Membership fees 249,787 224,502 733,345 654,918
------------ ------------ ------------ ------------
Total revenue 11,996,900 10,897,239 36,232,980 32,967,691
OPERATING EXPENSES
Merchandise costs 10,503,661 9,540,312 31,692,212 28,862,411
Selling, general
and
administrative 1,164,625 1,050,728 3,481,433 3,167,746
Preopening
expenses 9,475 4,552 42,856 18,893
Provision
(income) for
impaired assets
and closing
costs 3,000 (8,500) 9,800 (1,500)
------------ ------------ ------------ ------------
Operating income 316,139 310,147 1,006,679 920,141
OTHER INCOME
(EXPENSE)
Interest expense (8,476) (9,004) (27,098) (25,740)
Interest income
and other 30,159 14,188 70,528 35,163
------------ ------------ ------------ ------------
INCOME BEFORE
INCOME TAXES 337,822 315,331 1,050,109 929,564
Provision for
income taxes 128,034 116,673 341,716 343,939
------------ ------------ ------------ ------------
NET INCOME $ 209,788 $ 198,658 $ 708,393 $ 585,625
============ ============ ============ ============
NET INCOME PER
COMMON AND
COMMON EQUIVALENT
SHARE:
Basic $ 0.44 $ 0.43 $ 1.50 $ 1.28
------------ ------------ ------------ ------------
Diluted $ 0.43 $ 0.42 $ 1.45 $ 1.23
============ ============ ============ ============
Shares used in
calculation
(000's)
Basic 478,248 459,074 472,765 458,311
Diluted 493,282 482,485 492,247 481,395
Dividends per
share $ 0.115 $ 0.10 $ 0.315 $ 0.10
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