☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Washington | 91-1223280 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer ☒ | Accelerated filer ☐ | |
Non-accelerated filer ☐ (Do not check if a smaller reporting company) | Smaller reporting company ☐ |
Page | ||
PART I | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
February 12, 2017 | August 28, 2016 | ||||||
ASSETS | |||||||
CURRENT ASSETS | |||||||
Cash and cash equivalents | $ | 4,744 | $ | 3,379 | |||
Short-term investments | 1,221 | 1,350 | |||||
Receivables, net | 1,597 | 1,252 | |||||
Merchandise inventories | 9,530 | 8,969 | |||||
Other current assets | 368 | 268 | |||||
Total current assets | 17,460 | 15,218 | |||||
PROPERTY AND EQUIPMENT | |||||||
Land | 5,436 | 5,395 | |||||
Buildings and improvements | 14,395 | 13,994 | |||||
Equipment and fixtures | 6,363 | 6,077 | |||||
Construction in progress | 697 | 701 | |||||
26,891 | 26,167 | ||||||
Less accumulated depreciation and amortization | (9,549 | ) | (9,124 | ) | |||
Net property and equipment | 17,342 | 17,043 | |||||
OTHER ASSETS | 828 | 902 | |||||
TOTAL ASSETS | $ | 35,630 | $ | 33,163 | |||
LIABILITIES AND EQUITY | |||||||
CURRENT LIABILITIES | |||||||
Accounts payable | $ | 8,764 | $ | 7,612 | |||
Current portion of long-term debt | 2,257 | 1,100 | |||||
Accrued salaries and benefits | 2,780 | 2,629 | |||||
Accrued member rewards | 910 | 869 | |||||
Deferred membership fees | 1,458 | 1,362 | |||||
Other current liabilities | 2,691 | 2,003 | |||||
Total current liabilities | 18,860 | 15,575 | |||||
LONG-TERM DEBT, excluding current portion | 2,815 | 4,061 | |||||
OTHER LIABILITIES | 1,243 | 1,195 | |||||
Total liabilities | 22,918 | 20,831 | |||||
COMMITMENTS AND CONTINGENCIES | |||||||
EQUITY | |||||||
Preferred stock $.005 par value; 100,000,000 shares authorized; no shares issued and outstanding | 0 | 0 | |||||
Common stock $.005 par value; 900,000,000 shares authorized; 438,941,000 and 437,524,000 shares issued and outstanding | 2 | 2 | |||||
Additional paid-in capital | 5,631 | 5,490 | |||||
Accumulated other comprehensive loss | (1,333 | ) | (1,099 | ) | |||
Retained earnings | 8,140 | 7,686 | |||||
Total Costco stockholders’ equity | 12,440 | 12,079 | |||||
Noncontrolling interests | 272 | 253 | |||||
Total equity | 12,712 | 12,332 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 35,630 | $ | 33,163 |
12 Weeks Ended | 24 Weeks Ended | ||||||||||||||
February 12, 2017 | February 14, 2016 | February 12, 2017 | February 14, 2016 | ||||||||||||
REVENUE | |||||||||||||||
Net sales | $ | 29,130 | $ | 27,567 | $ | 56,599 | $ | 54,194 | |||||||
Membership fees | 636 | 603 | 1,266 | 1,196 | |||||||||||
Total revenue | 29,766 | 28,170 | 57,865 | 55,390 | |||||||||||
OPERATING EXPENSES | |||||||||||||||
Merchandise costs | 25,927 | 24,469 | 50,215 | 48,090 | |||||||||||
Selling, general and administrative | 2,980 | 2,835 | 5,920 | 5,641 | |||||||||||
Preopening expenses | 15 | 10 | 37 | 36 | |||||||||||
Operating income | 844 | 856 | 1,693 | 1,623 | |||||||||||
OTHER INCOME (EXPENSE) | |||||||||||||||
Interest expense | (31 | ) | (31 | ) | (60 | ) | (64 | ) | |||||||
Interest income and other, net | (4 | ) | 16 | 22 | 44 | ||||||||||
INCOME BEFORE INCOME TAXES | 809 | 841 | 1,655 | 1,603 | |||||||||||
Provision for income taxes | 288 | 286 | 579 | 561 | |||||||||||
Net income including noncontrolling interests | 521 | 555 | 1,076 | 1,042 | |||||||||||
Net income attributable to noncontrolling interests | (6 | ) | (9 | ) | (16 | ) | (16 | ) | |||||||
NET INCOME ATTRIBUTABLE TO COSTCO | $ | 515 | $ | 546 | $ | 1,060 | $ | 1,026 | |||||||
NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO: | |||||||||||||||
Basic | $ | 1.17 | $ | 1.24 | $ | 2.42 | $ | 2.34 | |||||||
Diluted | $ | 1.17 | $ | 1.24 | $ | 2.41 | $ | 2.32 | |||||||
Shares used in calculation (000’s): | |||||||||||||||
Basic | 439,127 | 439,648 | 438,567 | 438,990 | |||||||||||
Diluted | 440,657 | 441,559 | 440,568 | 441,457 | |||||||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.45 | $ | 0.40 | $ | 0.90 | $ | 0.80 |
12 Weeks Ended | 24 Weeks Ended | ||||||||||||||
February 12, 2017 | February 14, 2016 | February 12, 2017 | February 14, 2016 | ||||||||||||
NET INCOME INCLUDING NONCONTROLLING INTERESTS | $ | 521 | $ | 555 | $ | 1,076 | $ | 1,042 | |||||||
Foreign-currency translation adjustment and other, net | 114 | (244 | ) | (231 | ) | (229 | ) | ||||||||
Comprehensive income | 635 | 311 | 845 | 813 | |||||||||||
Less: Comprehensive income attributable to noncontrolling interests | 14 | 4 | 19 | 10 | |||||||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO | $ | 621 | $ | 307 | $ | 826 | $ | 803 |
24 Weeks Ended | |||||||
February 12, 2017 | February 14, 2016 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net income including noncontrolling interests | $ | 1,076 | $ | 1,042 | |||
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities: | |||||||
Depreciation and amortization | 609 | 556 | |||||
Stock-based compensation | 322 | 287 | |||||
Excess tax benefits on stock-based awards | (37 | ) | (74 | ) | |||
Other non-cash operating activities, net | (12 | ) | 5 | ||||
Deferred income taxes | 45 | (15 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Merchandise inventories | (735 | ) | (98 | ) | |||
Accounts payable | 1,579 | (482 | ) | ||||
Other operating assets and liabilities, net | 439 | 381 | |||||
Net cash provided by operating activities | 3,286 | 1,602 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Purchases of short-term investments | (625 | ) | (499 | ) | |||
Maturities and sales of short-term investments | 734 | 886 | |||||
Additions to property and equipment | (1,183 | ) | (1,339 | ) | |||
Other investing activities, net | 22 | 0 | |||||
Net cash used in investing activities | (1,052 | ) | (952 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Bank overdraft | (272 | ) | (146 | ) | |||
Proceeds from short-term borrowings | 0 | 99 | |||||
Repayments of long-term debt | 0 | (1,200 | ) | ||||
Minimum tax withholdings on stock-based awards | (201 | ) | (219 | ) | |||
Excess tax benefits on stock-based awards | 37 | 74 | |||||
Repurchases of common stock | (190 | ) | (213 | ) | |||
Cash dividend payments | (198 | ) | (176 | ) | |||
Other financing activities, net | (1 | ) | (6 | ) | |||
Net cash used in financing activities | (825 | ) | (1,787 | ) | |||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (44 | ) | (31 | ) | |||
Net change in cash and cash equivalents | 1,365 | (1,168 | ) | ||||
CASH AND CASH EQUIVALENTS BEGINNING OF YEAR | 3,379 | 4,801 | |||||
CASH AND CASH EQUIVALENTS END OF PERIOD | $ | 4,744 | $ | 3,633 | |||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||
Cash paid during the first half of year for: | |||||||
Interest (reduced by $8, interest capitalized in 2017 and 2016) | $ | 54 | $ | 52 | |||
Income taxes, net | $ | 458 | $ | 447 | |||
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: | |||||||
Cash dividend declared, but not yet paid | $ | 198 | $ | 176 |
February 12, 2017: | Cost Basis | Unrealized Loss, Net | Recorded Basis | ||||||||
Available-for-sale: | |||||||||||
Government and agency securities | $ | 1,051 | $ | (2 | ) | $ | 1,049 | ||||
Asset and mortgage-backed securities | 1 | 0 | 1 | ||||||||
Total available-for-sale | 1,052 | (2 | ) | 1,050 | |||||||
Held-to-maturity: | |||||||||||
Certificates of deposit | 171 | 171 | |||||||||
Total short-term investments | $ | 1,223 | $ | (2 | ) | $ | 1,221 |
August 28, 2016: | Cost Basis | Unrealized Gains, Net | Recorded Basis | ||||||||
Available-for-sale: | |||||||||||
Government and agency securities | $ | 1,028 | $ | 6 | $ | 1,034 | |||||
Asset and mortgage-backed securities | 1 | 0 | 1 | ||||||||
Total available-for-sale | 1,029 | 6 | 1,035 | ||||||||
Held-to-maturity: | |||||||||||
Certificates of deposit | 306 | 306 | |||||||||
Bankers' acceptances | 9 | 9 | |||||||||
Total held-to-maturity | 315 | 315 | |||||||||
Total short-term investments | $ | 1,344 | $ | 6 | $ | 1,350 |
Available-For-Sale | Held-To-Maturity | ||||||||||
Cost Basis | Fair Value | ||||||||||
Due in one year or less | $ | 160 | $ | 160 | $ | 171 | |||||
Due after one year through five years | 837 | 836 | 0 | ||||||||
Due after five years | 55 | 54 | 0 | ||||||||
$ | 1,052 | $ | 1,050 | $ | 171 |
February 12, 2017: | Level 1 | Level 2 | |||||
Money market mutual funds(1) | $ | 32 | $ | 0 | |||
Investment in government and agency securities | 0 | 1,049 | |||||
Investment in asset and mortgage-backed securities | 0 | 1 | |||||
Forward foreign-exchange contracts, in asset position(2) | 0 | 6 | |||||
Forward foreign-exchange contracts, in (liability) position(2) | 0 | (8 | ) | ||||
Total | $ | 32 | $ | 1,048 |
August 28, 2016: | Level 1 | Level 2 | |||||
Money market mutual funds(1) | $ | 222 | $ | 0 | |||
Investment in government and agency securities | 0 | 1,034 | |||||
Investment in asset and mortgage-backed securities | 0 | 1 | |||||
Forward foreign-exchange contracts, in asset position(2) | 0 | 11 | |||||
Forward foreign-exchange contracts, in (liability) position(2) | 0 | (13 | ) | ||||
Total | $ | 222 | $ | 1,033 |
(1) | Included in cash and cash equivalents in the accompanying condensed consolidated balance sheets. |
(2) | The asset and the liability values are included in other current assets and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. See Note 1 for additional information on derivative instruments. |
February 12, 2017 | August 28, 2016 | ||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||
5.5% Senior Notes due March 2017 | $ | 1,100 | $ | 1,105 | $ | 1,100 | $ | 1,129 | |||||||
1.125% Senior Notes due December 2017 | 1,099 | 1,100 | 1,099 | 1,103 | |||||||||||
1.7% Senior Notes due December 2019 | 1,197 | 1,210 | 1,196 | 1,219 | |||||||||||
1.75% Senior Notes due February 2020 | 498 | 499 | 498 | 508 | |||||||||||
2.25% Senior Notes due February 2022 | 497 | 497 | 497 | 512 | |||||||||||
Other long-term debt | 681 | 705 | 771 | 803 | |||||||||||
Total long-term debt | 5,072 | 5,116 | 5,161 | 5,274 | |||||||||||
Less current portion | 2,257 | 2,264 | 1,100 | 1,130 | |||||||||||
Long-term debt, excluding current portion | $ | 2,815 | $ | 2,852 | $ | 4,061 | $ | 4,144 |
Shares Repurchased (000's) | Average Price per Share | Total Cost | ||||||||
Second quarter of 2017 | 411 | $ | 159.86 | $ | 66 | |||||
First half of 2017 | 1,220 | $ | 153.98 | $ | 188 | |||||
Second quarter of 2016 | 531 | $ | 150.02 | $ | 80 | |||||
First half of 2016 | 1,429 | $ | 146.79 | $ | 210 |
Attributable to Costco | Noncontrolling Interests | Total Equity | |||||||||
Equity at August 28, 2016 | $ | 12,079 | $ | 253 | $ | 12,332 | |||||
Comprehensive income: | |||||||||||
Net income | 1,060 | 16 | 1,076 | ||||||||
Foreign-currency translation adjustment and other, net | (234 | ) | 3 | (231 | ) | ||||||
Comprehensive income | 826 | 19 | 845 | ||||||||
Stock-based compensation | 322 | 0 | 322 | ||||||||
Release of vested restricted stock units (RSUs), including tax effects | (164 | ) | 0 | (164 | ) | ||||||
Repurchases of common stock | (188 | ) | 0 | (188 | ) | ||||||
Cash dividends declared and other | (435 | ) | 0 | (435 | ) | ||||||
Equity at February 12, 2017 | $ | 12,440 | $ | 272 | $ | 12,712 |
Attributable to Costco | Noncontrolling Interests | Total Equity | |||||||||
Equity at August 30, 2015 | $ | 10,617 | $ | 226 | $ | 10,843 | |||||
Comprehensive income: | |||||||||||
Net income | 1,026 | 16 | 1,042 | ||||||||
Foreign-currency translation adjustment and other, net | (223 | ) | (6 | ) | (229 | ) | |||||
Comprehensive income | 803 | 10 | 813 | ||||||||
Stock-based compensation | 287 | 0 | 287 | ||||||||
Release of vested RSUs, including tax effects | (145 | ) | 0 | (145 | ) | ||||||
Repurchases of common stock | (210 | ) | 0 | (210 | ) | ||||||
Cash dividends declared | (352 | ) | 0 | (352 | ) | ||||||
Distribution to noncontrolling interest | 0 | (2 | ) | (2 | ) | ||||||
Equity at February 14, 2016 | $ | 11,000 | $ | 234 | $ | 11,234 |
• | 7,662,000 time-based RSUs, which vest upon continued employment over specified periods of time; |
• | 165,000 performance-based RSUs, granted to certain executive officers of the Company, for which the performance targets have been met. The awards vest upon continued employment over specified periods of time; and |
• | 251,000 performance-based RSUs, granted to executive officers of the Company, subject to achievement of performance targets for fiscal 2017, as determined by the Compensation Committee of the Board of Directors after the end of the fiscal year. These awards are included in the table below and the Company recognized compensation expense for these awards as it is currently deemed probable that the targets will be achieved. |
Number of Units (in 000’s) | Weighted-Average Grant Date Fair Value | |||||
Outstanding at August 28, 2016 | 8,326 | $ | 120.56 | |||
Granted | 3,855 | 144.11 | ||||
Vested and delivered | (3,984 | ) | 119.44 | |||
Forfeited | (119 | ) | 129.93 | |||
Outstanding at February 12, 2017 | 8,078 | $ | 132.21 |
12 Weeks Ended | 24 Weeks Ended | ||||||||||||||
February 12, 2017 | February 14, 2016 | February 12, 2017 | February 14, 2016 | ||||||||||||
Stock-based compensation expense before income taxes | $ | 111 | $ | 101 | $ | 322 | $ | 287 | |||||||
Less recognized income tax benefit | (37 | ) | (34 | ) | (106 | ) | (97 | ) | |||||||
Stock-based compensation expense, net of income taxes | $ | 74 | $ | 67 | $ | 216 | $ | 190 |
12 Weeks Ended | 24 Weeks Ended | ||||||||||||||
February 12, 2017 | February 14, 2016 | February 12, 2017 | February 14, 2016 | ||||||||||||
Net income available to common stockholders used in basic and diluted net income per common share | $ | 515 | $ | 546 | $ | 1,060 | $ | 1,026 | |||||||
Weighted average number of common shares used in basic net income per common share | 439,127 | 439,648 | 438,567 | 438,990 | |||||||||||
RSUs | 1,522 | 1,900 | 1,993 | 2,456 | |||||||||||
Conversion of convertible notes | 8 | 11 | 8 | 11 | |||||||||||
Weighted average number of common shares and dilutive potential of common stock used in diluted net income per share | 440,657 | 441,559 | 440,568 | 441,457 |
United States Operations | Canadian Operations | Other International Operations | Total | ||||||||||||
Twelve Weeks Ended February 12, 2017 | |||||||||||||||
Total revenue | $ | 21,764 | $ | 4,229 | $ | 3,773 | $ | 29,766 | |||||||
Operating income | 520 | 180 | 144 | 844 | |||||||||||
Depreciation and amortization | 241 | 27 | 44 | 312 | |||||||||||
Additions to property and equipment | 358 | 56 | 102 | 516 | |||||||||||
Twelve Weeks Ended February 14, 2016 | |||||||||||||||
Total revenue | $ | 20,642 | $ | 3,791 | $ | 3,737 | $ | 28,170 | |||||||
Operating income | 552 | 156 | 148 | 856 | |||||||||||
Depreciation and amortization | 212 | 24 | 49 | 285 | |||||||||||
Additions to property and equipment | 460 | 30 | 134 | 624 | |||||||||||
Twenty-four Weeks Ended February 12, 2017 | |||||||||||||||
Total revenue | $ | 42,141 | $ | 8,328 | $ | 7,396 | $ | 57,865 | |||||||
Operating income | 1,026 | 371 | 296 | 1,693 | |||||||||||
Depreciation and amortization | 467 | 53 | 89 | 609 | |||||||||||
Additions to property and equipment | 784 | 166 | 233 | 1,183 | |||||||||||
Net property and equipment | 12,040 | 1,688 | 3,614 | 17,342 | |||||||||||
Total assets | 24,735 | 3,926 | 6,969 | 35,630 | |||||||||||
Twenty-four Weeks Ended February 14, 2016 | |||||||||||||||
Total revenue | $ | 40,488 | $ | 7,673 | $ | 7,229 | $ | 55,390 | |||||||
Operating income | 1,003 | 339 | 281 | 1,623 | |||||||||||
Depreciation and amortization | 416 | 49 | 91 | 556 | |||||||||||
Additions to property and equipment | 917 | 71 | 351 | 1,339 | |||||||||||
Net property and equipment | 11,327 | 1,325 | 3,413 | 16,065 | |||||||||||
Total assets | 22,733 | 3,076 | 6,579 | 32,388 | |||||||||||
Year Ended August 28, 2016 | |||||||||||||||
Total revenue | $ | 86,579 | $ | 17,028 | $ | 15,112 | $ | 118,719 | |||||||
Operating income | 2,326 | 778 | 568 | 3,672 | |||||||||||
Depreciation and amortization | 946 | 109 | 200 | 1,255 | |||||||||||
Additions to property and equipment | 1,823 | 299 | 527 | 2,649 | |||||||||||
Net property and equipment | 11,745 | 1,628 | 3,670 | 17,043 | |||||||||||
Total assets | 22,511 | 3,480 | 7,172 | 33,163 |
• | Net sales increased 6% to $29,130, driven by sales at new warehouses opened since the end of the second quarter of fiscal 2016 and a 3% increase in comparable sales. Net and comparable sales results were positively impacted by higher gasoline prices; |
• | Membership fee revenue increased 5% to $636, primarily due to sign-ups at existing and new warehouses and executive membership upgrades; |
• | Gross margin percentage decreased 24 basis points, primarily from gross margin decreases in our warehouse ancillary and other businesses; |
• | SG&A expenses as a percentage of net sales decreased five basis points; |
• | Net income decreased 6% to $515, or $1.17 per diluted share, compared to $546, or $1.24 per diluted share in 2016; |
• | On January 27, 2017, our Board of Directors declared a quarterly cash dividend in the amount of $0.45 per share, which was paid on February 24, 2017; and |
• | On March 2, 2017, subsequent to the end of the second quarter, we announced an increase in our annual membership fees in the U.S. and Canada. |
12 Weeks Ended | 24 Weeks Ended | ||||||||||||||
February 12, 2017 | February 14, 2016 | February 12, 2017 | February 14, 2016 | ||||||||||||
Net Sales | $ | 29,130 | $ | 27,567 | $ | 56,599 | $ | 54,194 | |||||||
Changes in net sales: | |||||||||||||||
U.S. | 5 | % | 4 | % | 4 | % | 4 | % | |||||||
Canada | 12 | % | (5 | )% | 9 | % | (7 | )% | |||||||
Other International | 1 | % | 5 | % | 3 | % | 3 | % | |||||||
Total Company | 6 | % | 3 | % | 4 | % | 2 | % | |||||||
Changes in comparable sales: | |||||||||||||||
U.S. | 3 | % | 3 | % | 2 | % | 3 | % | |||||||
Canada | 8 | % | (7 | )% | 6 | % | (8 | )% | |||||||
Other International | (2 | )% | (3 | )% | (1 | )% | (4 | )% | |||||||
Total Company | 3 | % | 1 | % | 2 | % | 0 | % | |||||||
Increases in comparable sales excluding the impact of changes in foreign exchange rates and gasoline prices: | |||||||||||||||
U.S. | 3 | % | 4 | % | 2 | % | 5 | % | |||||||
Canada | 2 | % | 10 | % | 3 | % | 10 | % | |||||||
Other International | 3 | % | 6 | % | 3 | % | 6 | % | |||||||
Total Company | 3 | % | 5 | % | 2 | % | 6 | % |
12 Weeks Ended | 24 Weeks Ended | ||||||||||||||
February 12, 2017 | February 14, 2016 | February 12, 2017 | February 14, 2016 | ||||||||||||
Membership fees | $ | 636 | $ | 603 | $ | 1,266 | $ | 1,196 | |||||||
Membership fees as a percentage of net sales | 2.18 | % | 2.19 | % | 2.24 | % | 2.21 | % | |||||||
Total paid members as of quarter end (000's) | 48,300 | 46,100 | — | — | |||||||||||
Total cardholders as of quarter end (000's) | 88,100 | 84,000 | — | — |
12 Weeks Ended | 24 Weeks Ended | ||||||||||||||
February 12, 2017 | February 14, 2016 | February 12, 2017 | February 14, 2016 | ||||||||||||
Net sales | $ | 29,130 | $ | 27,567 | $ | 56,599 | $ | 54,194 | |||||||
Less merchandise costs | 25,927 | 24,469 | 50,215 | 48,090 | |||||||||||
Gross margin | $ | 3,203 | $ | 3,098 | $ | 6,384 | $ | 6,104 | |||||||
Gross margin percentage | 11.00 | % | 11.24 | % | 11.28 | % | 11.26 | % |
12 Weeks Ended | 24 Weeks Ended | ||||||||||||||
February 12, 2017 | February 14, 2016 | February 12, 2017 | February 14, 2016 | ||||||||||||
SG&A expenses | $ | 2,980 | $ | 2,835 | $ | 5,920 | $ | 5,641 | |||||||
SG&A expenses as a percentage of net sales | 10.23 | % | 10.28 | % | 10.46 | % | 10.41 | % |
12 Weeks Ended | 24 Weeks Ended | ||||||||||||||
February 12, 2017 | February 14, 2016 | February 12, 2017 | February 14, 2016 | ||||||||||||
Preopening expenses | $ | 15 | $ | 10 | $ | 37 | $ | 36 | |||||||
Warehouse openings, including relocations | |||||||||||||||
United States | 2 | 1 | 8 | 10 | |||||||||||
Canada | 0 | 0 | 3 | 1 | |||||||||||
Other International | 2 | 0 | 2 | 3 | |||||||||||
Total warehouse openings, including relocations | 4 | 1 | 13 | 14 |
12 Weeks Ended | 24 Weeks Ended | ||||||||||||||
February 12, 2017 | February 14, 2016 | February 12, 2017 | February 14, 2016 | ||||||||||||
Interest expense | $ | 31 | $ | 31 | $ | 60 | $ | 64 |
12 Weeks Ended | 24 Weeks Ended | ||||||||||||||
February 12, 2017 | February 14, 2016 | February 12, 2017 | February 14, 2016 | ||||||||||||
Interest income | $ | 11 | $ | 7 | $ | 19 | $ | 16 | |||||||
Foreign-currency transaction (losses) gains, net | (20 | ) | 6 | (7 | ) | 24 | |||||||||
Other, net | 5 | 3 | 10 | 4 | |||||||||||
Interest income and other, net | $ | (4 | ) | $ | 16 | $ | 22 | $ | 44 |
12 Weeks Ended | 24 Weeks Ended | ||||||||||||||
February 12, 2017 | February 14, 2016 | February 12, 2017 | February 14, 2016 | ||||||||||||
Provision for income taxes | $ | 288 | $ | 286 | $ | 579 | $ | 561 | |||||||
Effective tax rate | 35.6 | % | 34.0 | % | 35.0 | % | 35.0 | % |
24 Weeks Ended | |||||||
February 12, 2017 | February 14, 2016 | ||||||
Net cash provided by operating activities | $ | 3,286 | $ | 1,602 | |||
Net cash used in investing activities | (1,052 | ) | (952 | ) | |||
Net cash used in financing activities | (825 | ) | (1,787 | ) |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs(1) | Maximum Dollar Value of Shares that May Yet be Purchased Under the Programs(1) | |||||||||
November 21, 2016 - December 18, 2016 | 149,000 | $ | 154.11 | 149,000 | $ | 3,077 | |||||||
December 19, 2016 - January 15, 2017 | 138,000 | 161.77 | 138,000 | 3,055 | |||||||||
January 16, 2017 - February 12, 2017 | 124,000 | 164.61 | 124,000 | 3,034 | |||||||||
Total second quarter | 411,000 | $ | 159.86 | 411,000 |
(1) | Our stock repurchase program is conducted under a $4,000 authorization approved by of our Board of Directors in April 2015, which expires in April 2019. |
Incorporated by Reference | ||||||||||
Exhibit Number | Exhibit Description | Filed Herewith | Form | Period Ending | Filing Date | |||||
3.1 | Articles of Incorporation as amended of the registrant | 10-Q | 2/15/2015 | 3/11/2015 | ||||||
3.2 | Bylaws as amended of the registrant | 8-K | 9/30/2016 | |||||||
10.1* | Executive Employment Agreement, effective January 1, 2017, between W. Craig Jelinek and Costco Wholesale | 10-Q | 11/20/2016 | 12/15/2016 | ||||||
31.1 | Rule 13(a) – 14(a) Certifications | x | ||||||||
32.1 | Section 1350 Certifications | x | ||||||||
101.INS | XBRL Instance Document | x | ||||||||
101.SCH | XBRL Taxonomy Extension Schema Document | x | ||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | x | ||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | x | ||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | x | ||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | x |
COSTCO WHOLESALE CORPORATION (Registrant) | |||
March 8, 2017 | By | /s/ W. CRAIG JELINEK | |
Date | W. Craig Jelinek President, Chief Executive Officer and Director | ||
March 8, 2017 | By | /s/ RICHARD A. GALANTI | |
Date | Richard A. Galanti Executive Vice President, Chief Financial Officer and Director |
1) | I have reviewed this Quarterly Report on Form 10-Q of Costco Wholesale Corporation (“the registrant”); |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4) | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5) | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ W. CRAIG JELINEK | |
W. Craig Jelinek | |
President, Chief Executive Officer and Director |
1) | I have reviewed this Quarterly Report on Form 10-Q of Costco Wholesale Corporation (“the registrant”); |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4) | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5) | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ RICHARD A. GALANTI | |
Richard A. Galanti | |
Executive Vice President, Chief Financial Officer and Director |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ W. CRAIG JELINEK | Date: March 8, 2017 | |
W. Craig Jelinek | ||
President, Chief Executive Officer and Director |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ RICHARD A. GALANTI | Date: March 8, 2017 | |
Richard A. Galanti | ||
Executive Vice President, Chief Financial Officer and Director |
Document and Entity Information - shares |
6 Months Ended | |
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Feb. 12, 2017 |
Mar. 01, 2017 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Feb. 12, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | COST | |
Entity Registrant Name | COSTCO WHOLESALE CORP /NEW | |
Entity Central Index Key | 0000909832 | |
Current Fiscal Year End Date | --09-03 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 438,941,216 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Feb. 12, 2017 |
Aug. 28, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.005 | $ 0.005 |
Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.005 | $ 0.005 |
Common stock, shares authorized | 900,000,000 | 900,000,000 |
Common stock, shares issued | 438,941,000 | 437,524,000 |
Common stock, shares outstanding | 438,941,000 | 437,524,000 |
Condensed Consolidated Statements Of Income - USD ($) shares in Thousands, $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 12, 2017 |
Feb. 14, 2016 |
Feb. 12, 2017 |
Feb. 14, 2016 |
|
REVENUE | ||||
Net sales | $ 29,130 | $ 27,567 | $ 56,599 | $ 54,194 |
Membership fees | 636 | 603 | 1,266 | 1,196 |
Total revenue | 29,766 | 28,170 | 57,865 | 55,390 |
OPERATING EXPENSES | ||||
Merchandise costs | 25,927 | 24,469 | 50,215 | 48,090 |
Selling, general and administrative | 2,980 | 2,835 | 5,920 | 5,641 |
Preopening expenses | 15 | 10 | 37 | 36 |
Operating income | 844 | 856 | 1,693 | 1,623 |
OTHER INCOME (EXPENSE) | ||||
Interest expense | (31) | (31) | (60) | (64) |
Interest income and other, net | (4) | 16 | 22 | 44 |
INCOME BEFORE INCOME TAXES | 809 | 841 | 1,655 | 1,603 |
Provision for income taxes | 288 | 286 | 579 | 561 |
Net income including noncontrolling interests | 521 | 555 | 1,076 | 1,042 |
Net income attributable to noncontrolling interests | (6) | (9) | (16) | (16) |
NET INCOME ATTRIBUTABLE TO COSTCO | $ 515 | $ 546 | $ 1,060 | $ 1,026 |
NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO: | ||||
Basic (in dollars per share) | $ 1.17 | $ 1.24 | $ 2.42 | $ 2.34 |
Diluted (in dollars per share) | $ 1.17 | $ 1.24 | $ 2.41 | $ 2.32 |
Shares used in calculation (000's) | ||||
Basic (shares) | 439,127 | 439,648 | 438,567 | 438,990 |
Diluted (shares) | 440,657 | 441,559 | 440,568 | 441,457 |
CASH DIVIDENDS DECLARED PER COMMON SHARE | $ 0.45 | $ 0.40 | $ 0.90 | $ 0.80 |
Condensed Consolidated Statements Of Comprehensive Income - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 12, 2017 |
Feb. 14, 2016 |
Feb. 12, 2017 |
Feb. 14, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||||
NET INCOME INCLUDING NONCONTROLLING INTERESTS | $ 521 | $ 555 | $ 1,076 | $ 1,042 |
Foreign-currency translation adjustment and other, net | 114 | (244) | (231) | (229) |
Comprehensive income | 635 | 311 | 845 | 813 |
Less: Comprehensive income attributable to noncontrolling interests | 14 | 4 | 19 | 10 |
COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO | $ 621 | $ 307 | $ 826 | $ 803 |
Condensed Consolidated Statements Of Cash Flows (Parenthetical) - USD ($) $ in Millions |
6 Months Ended | |
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Feb. 12, 2017 |
Feb. 14, 2016 |
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Statement of Cash Flows [Abstract] | ||
Interest capitalized | $ 8 | $ 8 |
Summary of Significant Accounting Policies |
6 Months Ended |
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Feb. 12, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Policies | Note 1—Summary of Significant Accounting Policies Description of Business Costco Wholesale Corporation (Costco or the Company), a Washington corporation, and its subsidiaries operate membership warehouses based on the concept that offering 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. At February 12, 2017, Costco operated 727 warehouses worldwide: 508 United States (U.S.) locations (in 44 states, Washington, D.C., and Puerto Rico), 94 Canada locations, 36 Mexico locations, 28 United Kingdom (U.K.) locations, 25 Japan locations, 13 Korea locations, 13 Taiwan locations, eight Australia locations and two Spain locations. The Company's online business operates websites in the U.S., Canada, U.K., Mexico, Korea, and Taiwan. Basis of Presentation The condensed consolidated financial statements include the accounts of Costco, its wholly-owned subsidiaries, and subsidiaries in which it has a controlling interest. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. All material inter-company transactions between and among the Company and its consolidated subsidiaries have been eliminated in consolidation. The Company’s net income excludes income attributable to noncontrolling interests in its operations in Taiwan and Korea. Unless otherwise noted, references to net income relate to net income attributable to Costco. These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (U.S. GAAP) for complete financial statements. Therefore, the interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report filed on Form 10-K for the fiscal year ended August 28, 2016. Fiscal Year End The Company operates on a 52/53 week fiscal year basis, with the fiscal year ending on the Sunday closest to August 31. Fiscal 2017 is a 53-week year ending on September 3, 2017. References to the second quarters of 2017 and 2016 relate to the 12-week fiscal quarters ended February 12, 2017, and February 14, 2016, respectively. References to the first half of 2017 and 2016 relate to the twenty-four weeks ended February 12, 2017, and February 14, 2016, respectively. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. Fair Value of Financial Instruments The Company accounts for certain assets and liabilities at fair value. The carrying value of the Company’s financial instruments, including cash and cash equivalents, receivables and accounts payable, approximate fair value due to their short-term nature or variable interest rates. See Notes 2, 3, and 4 for the carrying value and fair value of the Company’s investments, derivative instruments, and fixed-rate debt, respectively. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying a fair value hierarchy, which requires maximizing the use of observable inputs when measuring fair value. The three levels of inputs are: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Significant unobservable inputs that are not corroborated by market data. The Company’s current financial liabilities have fair values that approximate their carrying values. The Company’s long-term financial liabilities consist of long-term debt, which is recorded on the balance sheet at issuance price and adjusted for any applicable unamortized discounts or premiums and debt issuance costs. There have been no material changes to the valuation techniques utilized in the fair value measurement of assets and liabilities as disclosed in the Company's 2016 Form 10-K. Merchandise Inventories Merchandise inventories are stated at the lower of cost or market. U.S. merchandise inventories are valued by the cost method of accounting, using the last-in, first-out (LIFO) basis. The Company believes the LIFO method more fairly presents the results of operations by more closely matching current costs with current revenues. The Company records an adjustment each quarter, if necessary, for the projected annual effect of inflation or deflation, and these estimates are adjusted to actual results determined at year-end, after actual inflation rates and inventory levels for the year have been determined. Canadian and Other International merchandise inventories are predominantly valued using the cost and retail inventory methods, respectively, using the first-in, first-out (FIFO) basis. As of February 12, 2017, U.S. merchandise inventories valued at LIFO approximated FIFO after considering the lower of cost or market principle. As of August 28, 2016, the cumulative impact of the LIFO valuation on merchandise inventories was immaterial. Derivatives The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business. It manages these fluctuations, in part, through the use of forward foreign-exchange contracts, seeking to economically hedge the impact of fluctuations of foreign exchange on known future expenditures denominated in a non-functional foreign-currency. The contracts relate primarily to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries, whose functional currency is not the U.S. dollar. Currently, these contracts do not qualify for derivative hedge accounting. The Company seeks to mitigate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features. The aggregate notional amounts of open, unsettled forward foreign-exchange contracts were $521 and $572 at February 12, 2017, and August 28, 2016, respectively. The Company seeks to manage counterparty risk associated with these contracts by limiting transactions to counterparties with which the Company has an established banking relationship. There can be no assurance that this practice is effective. The contracts are limited to less than one year in duration. See Note 3 for information on the fair value of unsettled forward foreign-exchange contracts as of February 12, 2017, and August 28, 2016. The unrealized gains or losses recognized in interest income and other, net in the accompanying condensed consolidated statements of income relating to the net changes in the fair value of unsettled forward foreign-exchange contracts was a net loss of $29 in the second quarter and immaterial in first half of 2017. Unrealized gains or losses on unsettled forward foreign-exchange contracts were immaterial in the second quarter and first half of 2016. The Company is exposed to fluctuations in prices for the energy it consumes, particularly electricity and natural gas, which it seeks to partially mitigate through the use of fixed-price contracts for certain of its warehouses and other facilities, primarily in the U.S. and Canada. The Company also enters into variable-priced contracts for some purchases of natural gas, in addition to fuel for its gas stations, on an index basis. These contracts meet the characteristics of derivative instruments, but generally qualify for the “normal purchases or normal sales” exception under authoritative guidance and require no mark-to-market adjustment. Foreign Currency The Company recognizes foreign-currency transaction gains and losses related to revaluing or settling monetary assets and liabilities denominated in currencies other than the functional currency in interest income and other, net in the accompanying condensed consolidated statements of income. Generally, these include the U.S. dollar cash and cash equivalents and the U.S. dollar payables of consolidated subsidiaries revalued to their functional currency. Also included are realized foreign-currency gains or losses from settlements of forward foreign-exchange contracts. These items resulted in a net gain of $9 and a net loss of $8 in the second quarter and first half of 2017, respectively, as compared to a net gain of $11 and $30 in the second quarter and first half of 2016, respectively. Stock Repurchase Programs Repurchased shares of common stock are retired, in accordance with the Washington Business Corporation Act. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value is deducted by allocation to additional paid-in capital and retained earnings. The amount allocated to additional paid-in capital is the current value of additional paid-in capital per share outstanding and is applied to the number of shares repurchased. Any remaining amount is allocated to retained earnings. See Note 5 for additional information. Recent Accounting Pronouncements Not Yet Adopted In May 2014, the Financial Accounting Standards Board (FASB) issued new guidance on the recognition of revenue from contracts with customers. The guidance converges the requirements for reporting revenue and requires disclosures sufficient to describe the nature, amount, timing, and uncertainty of revenue and cash flows arising from these contracts. Transition is permitted either retrospectively or as a cumulative effect adjustment as of the date of adoption. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2019 and is in the process of evaluating the impact and method of adoption of the standard and its related amendments. The Company is reviewing current accounting policies, business processes, systems and controls to identify potential differences or changes that would result from applying the new standard. The Company is still evaluating whether or not there will be a material impact on the Company's consolidated financial statements and related disclosures as a result of adopting this standard. In February 2016, the FASB issued new guidance on leases, which will require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms greater than twelve months. The standard is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2020. While the Company continues to evaluate this standard and the effect on related disclosures, the primary effect of adoption will be to record right-of-use assets and corresponding lease obligations for current operating leases. The adoption is expected to have a material impact on the Company's consolidated balance sheets, but not on results of operations or cash flows. In March 2016, the FASB issued new guidance on stock compensation, intended to simplify accounting for share-based payment transactions. The guidance will change accounting for income taxes, forfeitures, and minimum statutory tax withholding requirements. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2016, with early adoption permitted. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2018. Adoption of this guidance will likely be material to the provision for income taxes on the Company’s consolidated income statements and earnings per share amounts for the change in the recognition of excess tax benefits or deficiencies. Due to the Company's annual vesting and release in its first fiscal quarter, this may create increased volatility in these amounts during that quarter of each fiscal year. Previously these amounts were reflected in equity. Additionally, these amounts will be reflected as an operating activity instead of financing activity in the consolidated statements of cash flows. Adoption of this guidance is not expected to have a material effect on the consolidated balance sheets, statements of cash flows, or related disclosures. |
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Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Note 2—Investments The Company's major categories of investments have not materially changed from the annual reporting period ended August 28, 2016. The Company’s investments were as follows:
At February 12, 2017, and August 28, 2016, there were no available-for-sale securities with continuous unrealized-loss positions. There were no unrealized gains and losses on cash and cash equivalents at the end of the second quarter of 2017 and unrealized gains and losses on cash and cash equivalents were not material during the first half of 2017. There were no unrealized gains and losses on cash and cash equivalents during the second quarter and first half of 2016. The proceeds from sales of available-for-sale securities were $34 and $139 during the second quarter of 2017 and 2016, respectively, and $66 and $189 during the first half of 2017 and 2016, respectively. Gross realized gains or losses from sales of available-for-sale securities during the second quarter and first half of 2017 and 2016 were not material. The maturities of available-for-sale and held-to-maturity securities at February 12, 2017, were as follows:
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Fair Value Measurement |
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Fair Value Measurement | Note 3—Fair Value Measurement Assets and Liabilities Measured at Fair Value on a Recurring Basis The tables below present information regarding financial assets and financial liabilities that are measured at fair value on a recurring basis and indicate the level within the hierarchy reflecting the valuation techniques utilized to determine fair value.
_______________
At February 12, 2017, and August 28, 2016, the Company did not hold any Level 3 financial assets or liabilities that were measured at fair value on a recurring basis. There were no transfers in or out of Level 1 or 2 during the second quarter or first half of 2017 or 2016. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Financial assets measured at fair value on a nonrecurring basis include held-to-maturity investments that are carried at amortized cost. There were no fair value adjustments to these financial assets during the second quarter or first half of 2017 or 2016. Nonfinancial assets measured at fair value on a nonrecurring basis include items such as long-lived assets. There were no fair value adjustments resulting from an impairment to nonfinancial assets during the second quarter or first half of 2017 or 2016. |
Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Note 4—Debt The estimated fair value of the Company’s debt is based primarily on reported market values, recently completed market transactions, and estimates based upon interest rates, maturities, and credit risk. Substantially all of the Company's long-term debt is valued using Level 2 inputs. The carrying and estimated fair values of the Company’s long-term debt consisted of the following:
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Equity and Comprehensive Income |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity and Comprehensive Income | Note 5—Equity and Comprehensive Income Dividends The Company’s current quarterly dividend rate is $0.45 per share, compared to $0.40 per share in the second quarter of 2016. On January 27, 2017, the Board of Directors declared a quarterly cash dividend in the amount of $0.45 per share, which was paid subsequent to the end of the second quarter, on February 24, 2017. Stock Repurchase Programs Stock repurchase activity during the second quarter and first half of 2017 and 2016 is summarized below:
These amounts may differ from the stock repurchase balances in the accompanying condensed consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of a quarter. The remaining amount available for stock repurchases under our approved plan, which expires in April 2019, was $3,034 at February 12, 2017. Purchases are made from time-to-time, as conditions warrant, in the open market or in block purchases and pursuant to plans under SEC Rule 10b5-1. Components of Equity and Comprehensive Income The following tables show the changes in equity attributable to Costco and the noncontrolling interests of consolidated subsidiaries:
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Stock-Based Compensation Plans |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation Plans | Note 6—Stock-Based Compensation The Seventh Restated 2002 Stock Incentive Plan authorized the issuance of 23,500,000 shares (13,429,000 RSUs) of common stock for future grants in addition to the shares authorized under the previous plan. The Company issues new shares of common stock upon vesting of RSUs. Shares for vested RSUs are generally delivered to participants annually, net of shares equal to the minimum statutory withholding taxes. Summary of Restricted Stock Unit Activity At February 12, 2017, 11,332,000 shares were available to be granted as RSUs and the following awards were outstanding:
The following table summarizes RSU transactions during the first half of 2017:
The remaining unrecognized compensation cost related to non-vested RSUs at February 12, 2017, was $911, and the weighted-average period over which this cost will be recognized is 1.8 years. Summary of Stock-Based Compensation The following table summarizes stock-based compensation expense and the related tax benefits under the Company’s plans:
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Net Income per Common and Common Equivalent Share |
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Net Income Per Common and Common Equivalent Share | Note 7—Net Income per Common and Common Equivalent Share The following table shows the amounts used in computing net income per share and the weighted average number of shares of potentially dilutive common shares outstanding (shares in 000’s):
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Commitments and Contingencies |
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Feb. 12, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 8—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. There may be exposure to loss in excess of any amounts accrued. The Company monitors those matters for developments that affect the likelihood of a loss (taking into account where applicable indemnification arrangements concerning suppliers and insurers) and the accrued amount, if any, thereof, and adjusts the amount as appropriate. As of the date of this Report, the Company previously recorded an immaterial accrual with respect to two matters described below. 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. 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 the 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: Numerous putative class actions have been brought around the United States against motor fuel retailers, including the Company, alleging that they have been overcharging consumers by selling gasoline or diesel that is warmer than 60 degrees without adjusting the volume sold to compensate for heat-related expansion or disclosing the effect of such expansion on the energy equivalent received by the consumer. The Company is named in the following actions: Raphael Sagalyn, et al., v. Chevron USA, Inc., et al., Case No. 07-430 (D. Md.); Phyllis Lerner, et al., v. Costco Wholesale Corporation, et al., Case No. 07-1216 (C.D. Cal.); Linda A. Williams, et al., v. BP Corporation North America, Inc., et al., Case No. 07-179 (M.D. Ala.); James Graham, et al. v. Chevron USA, Inc., et al., Civil Action No. 07-193 (E.D. Va.); Betty A. Delgado, et al., v. Allsups, Convenience Stores, Inc., et al., Case No. 07-202 (D.N.M.); Gary Kohut, et al. v. Chevron USA, Inc., et al., Case No. 07-285 (D. Nev.); Mark Rushing, et al., v. Alon USA, Inc., et al., Case No. 06-7621 (N.D. Cal.); James Vanderbilt, et al., v. BP Corporation North America, Inc., et al., Case No. 06-1052 (W.D. Mo.); Zachary Wilson, et al., v. Ampride, Inc., et al., Case No. 06-2582 (D.Kan.); Diane Foster, et al., v. BP North America Petroleum, Inc., et al., Case No. 07-02059 (W.D. Tenn.); Mara Redstone, et al., v. Chevron USA, Inc., et al., Case No. 07-20751 (S.D. Fla.); Fred Aguirre, et al. v. BP West Coast Products LLC, et al., Case No. 07-1534 (N.D. Cal.); J.C. Wash, et al., v. Chevron USA, Inc., et al.; Case No. 4:07cv37 (E.D. Mo.); Jonathan Charles Conlin, et al., v. Chevron USA, Inc., et al.; Case No. 07 0317 (M.D. Tenn.); William Barker, et al. v. Chevron USA, Inc., et al.; Case No. 07-cv-00293 (D.N.M.); Melissa J. Couch, et al. v. BP Products North America, Inc., et al., Case No. 07cv291 (E.D. Tex.); S. Garrett Cook, Jr., et al., v. Hess Corporation, et al., Case No. 07cv750 (M.D. Ala.); Jeff Jenkins, et al. v. Amoco Oil Company, et al., Case No. 07-cv-00661 (D. Utah); and Mark Wyatt, et al., v. B. P. America Corp., et al., Case No. 07-1754 (S.D. Cal.). On June 18, 2007, the Judicial Panel on Multidistrict Litigation assigned the action, entitled In re Motor Fuel Temperature Sales Practices Litigation, MDL Docket No 1840, to Judge Kathryn Vratil in the United States District Court for the District of Kansas. On April 12, 2009, the Company agreed to settle the actions in which it is named as a defendant. Under the settlement, which was subject to final approval by the court, the Company agreed, to the extent allowed by law and subject to other terms and conditions in the agreement, to install over five years from the effective date of the settlement temperature-correcting dispensers in the States of Alabama, Arizona, California, Florida, Georgia, Kentucky, Nevada, New Mexico, North Carolina, South Carolina, Tennessee, Texas, Utah, and Virginia. Other than payments to class representatives, the settlement does not provide for cash payments to class members. On September 22, 2011, the court preliminarily approved a revised settlement, which did not materially alter the terms. On April 24, 2012, the court granted final approval of the revised settlement. A class member who objected has filed a notice of appeal from the order approving the settlement, and the appeal is pending. Plaintiffs moved for an award of $10 in attorneys’ fees, as well as an award of costs and payments to class representatives. A report and recommendation was issued in favor of a fee award of $4. On August 24, 2016, the district court affirmed the report and recommendation. On March 20, 2014, the Company filed a notice invoking a “most favored nation” provision under the settlement, under which it seeks to adopt provisions in later settlements with certain other defendants. The motion was denied on January 23, 2015. Final judgment was entered on September 22, 2015, and the Company's appeal is pending; and A class action alleging violation of California Wage Order 7-2001 by failing to provide seating to member service assistants who act as greeters and exit attendants in the Company’s California warehouses. Canela v. Costco Wholesale Corp., et al. (Case No. 5:13-cv-03598, N.D. Cal. filed July 1, 2013) The complaint seeks relief under the California Labor Code, including civil penalties and attorneys’ fees. The Company has filed an answer denying the material allegations of the complaint. The Company has received notices from most states stating that they have appointed an agent to conduct an examination of the books and records of the Company to determine whether it has complied with state unclaimed property laws. In addition to seeking the turnover of unclaimed property subject to escheat laws, the states may seek interest, penalties, costs of examinations, and other relief. Certain states have separately also made requests for payment by the Company concerning a specific type of property, some of which have been paid in immaterial amounts. The Company received from the Drug Enforcement Administration subpoenas and administrative inspection warrants concerning the Company's fulfillment of prescriptions related to controlled substances and related practices. Offices of the United States Attorney in various districts communicated to the Company their belief that the Company had committed civil regulatory violations concerning these subjects. On January 19, 2017, a civil settlement of these matters was announced, under which the Company is required to pay $12, for which the Company previously accrued. On November 23, 2016, the Company’s Canadian subsidiary received from the Ontario Ministry of Health and Long Term Care a request for an inspection and information concerning compliance with the anti-rebate provisions in the Ontario Drug Benefit Act and the Drug Interchangeability and Dispensing Fee Act. The Company is seeking to cooperate with the request. In November 2016, the Company received notices of violation from the Connecticut Department of Energy and Environmental Protection regarding hazardous waste practices at its Connecticut warehouses, primarily concerning unsalable pharmaceuticals. The Company is seeking to cooperate concerning the resolution of these notices. The Company does not believe that any pending claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position; however, it is possible that an unfavorable outcome of some or all of the matters, however unlikely, could result in a charge that might be material to the results of an individual fiscal quarter. |
Segment Reporting |
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Segment Reporting | Note 9—Segment Reporting The Company and its subsidiaries are principally engaged in the operation of membership warehouses in the U.S., Canada, Mexico, U.K., Japan, Australia, and Spain and through majority-owned subsidiaries in Taiwan and Korea. Reportable segments are largely based on management’s organization of the operating segments for operational decisions and assessments of financial performance, which consider geographic locations. The material accounting policies of the segments are the same as described in the notes to the consolidated financial statements included in the Company's Annual Report filed on Form 10-K for the fiscal year ended August 28, 2016, and Note 1 above. Inter-segment net sales and expenses have been eliminated in computing total revenue and operating income. Certain operating expenses, predominantly stock-based compensation, are incurred on behalf of the Company's Canadian and Other International Operations, but are included in the U.S. Operations because those costs are not allocated internally and generally come under the responsibility of the Company's U.S. management team.
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Subsequent Event Subsequent Events (Notes) |
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Feb. 12, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 10—Subsequent Event On March 2, 2017, the Company announced membership fee increases in the U.S. and Canada effective June 1, 2017. The annual membership fee for Goldstar (individual), Business and Business add-on members will increase $5 to $60 per year. The Executive membership fee will increase from $110 to $120 (annual membership fee of $60, plus the Executive upgrade of $60), and the maximum annual 2% reward will increase from $750 to $1,000. |
Summary of Significant Accounting Policies (Policies) |
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Feb. 12, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The condensed consolidated financial statements include the accounts of Costco, its wholly-owned subsidiaries, and subsidiaries in which it has a controlling interest. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. All material inter-company transactions between and among the Company and its consolidated subsidiaries have been eliminated in consolidation. The Company’s net income excludes income attributable to noncontrolling interests in its operations in Taiwan and Korea. Unless otherwise noted, references to net income relate to net income attributable to Costco. These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (U.S. GAAP) for complete financial statements. Therefore, the interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report filed on Form 10-K for the fiscal year ended August 28, 2016. |
Fiscal Year End | Fiscal Year End The Company operates on a 52/53 week fiscal year basis, with the fiscal year ending on the Sunday closest to August 31. Fiscal 2017 is a 53-week year ending on September 3, 2017. References to the second quarters of 2017 and 2016 relate to the 12-week fiscal quarters ended February 12, 2017, and February 14, 2016, respectively. References to the first half of 2017 and 2016 relate to the twenty-four weeks ended February 12, 2017, and February 14, 2016, respectively. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company accounts for certain assets and liabilities at fair value. The carrying value of the Company’s financial instruments, including cash and cash equivalents, receivables and accounts payable, approximate fair value due to their short-term nature or variable interest rates. See Notes 2, 3, and 4 for the carrying value and fair value of the Company’s investments, derivative instruments, and fixed-rate debt, respectively. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying a fair value hierarchy, which requires maximizing the use of observable inputs when measuring fair value. The three levels of inputs are: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Significant unobservable inputs that are not corroborated by market data. The Company’s current financial liabilities have fair values that approximate their carrying values. The Company’s long-term financial liabilities consist of long-term debt, which is recorded on the balance sheet at issuance price and adjusted for any applicable unamortized discounts or premiums and debt issuance costs. There have been no material changes to the valuation techniques utilized in the fair value measurement of assets and liabilities as disclosed in the Company's 2016 Form 10-K. |
Merchandise Inventories | Merchandise Inventories Merchandise inventories are stated at the lower of cost or market. U.S. merchandise inventories are valued by the cost method of accounting, using the last-in, first-out (LIFO) basis. The Company believes the LIFO method more fairly presents the results of operations by more closely matching current costs with current revenues. The Company records an adjustment each quarter, if necessary, for the projected annual effect of inflation or deflation, and these estimates are adjusted to actual results determined at year-end, after actual inflation rates and inventory levels for the year have been determined. Canadian and Other International merchandise inventories are predominantly valued using the cost and retail inventory methods, respectively, using the first-in, first-out (FIFO) basis. As of February 12, 2017, U.S. merchandise inventories valued at LIFO approximated FIFO after considering the lower of cost or market principle. As of August 28, 2016, the cumulative impact of the LIFO valuation on merchandise inventories was immaterial. |
Derivatives | Derivatives The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business. It manages these fluctuations, in part, through the use of forward foreign-exchange contracts, seeking to economically hedge the impact of fluctuations of foreign exchange on known future expenditures denominated in a non-functional foreign-currency. The contracts relate primarily to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries, whose functional currency is not the U.S. dollar. Currently, these contracts do not qualify for derivative hedge accounting. The Company seeks to mitigate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features. The aggregate notional amounts of open, unsettled forward foreign-exchange contracts were $521 and $572 at February 12, 2017, and August 28, 2016, respectively. The Company seeks to manage counterparty risk associated with these contracts by limiting transactions to counterparties with which the Company has an established banking relationship. There can be no assurance that this practice is effective. The contracts are limited to less than one year in duration. See Note 3 for information on the fair value of unsettled forward foreign-exchange contracts as of February 12, 2017, and August 28, 2016. The unrealized gains or losses recognized in interest income and other, net in the accompanying condensed consolidated statements of income relating to the net changes in the fair value of unsettled forward foreign-exchange contracts was a net loss of $29 in the second quarter and immaterial in first half of 2017. Unrealized gains or losses on unsettled forward foreign-exchange contracts were immaterial in the second quarter and first half of 2016. The Company is exposed to fluctuations in prices for the energy it consumes, particularly electricity and natural gas, which it seeks to partially mitigate through the use of fixed-price contracts for certain of its warehouses and other facilities, primarily in the U.S. and Canada. The Company also enters into variable-priced contracts for some purchases of natural gas, in addition to fuel for its gas stations, on an index basis. These contracts meet the characteristics of derivative instruments, but generally qualify for the “normal purchases or normal sales” exception under authoritative guidance and require no mark-to-market adjustment. |
Foreign Currency | Foreign Currency The Company recognizes foreign-currency transaction gains and losses related to revaluing or settling monetary assets and liabilities denominated in currencies other than the functional currency in interest income and other, net in the accompanying condensed consolidated statements of income. Generally, these include the U.S. dollar cash and cash equivalents and the U.S. dollar payables of consolidated subsidiaries revalued to their functional currency. Also included are realized foreign-currency gains or losses from settlements of forward foreign-exchange contracts. These items resulted in a net gain of $9 and a net loss of $8 in the second quarter and first half of 2017, respectively, as compared to a net gain of $11 and $30 in the second quarter and first half of 2016, respectivel |
Stock Repurchase Programs | . Stock Repurchase Programs Repurchased shares of common stock are retired, in accordance with the Washington Business Corporation Act. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value is deducted by allocation to additional paid-in capital and retained earnings. The amount allocated to additional paid-in capital is the current value of additional paid-in capital per share outstanding and is applied to the number of shares repurchased. Any remaining amount is allocated to retained earnings. See Note 5 for additional informatio |
Recent Accounting Pronouncements Not Yet Adopted | . Recent Accounting Pronouncements Not Yet Adopted In May 2014, the Financial Accounting Standards Board (FASB) issued new guidance on the recognition of revenue from contracts with customers. The guidance converges the requirements for reporting revenue and requires disclosures sufficient to describe the nature, amount, timing, and uncertainty of revenue and cash flows arising from these contracts. Transition is permitted either retrospectively or as a cumulative effect adjustment as of the date of adoption. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2019 and is in the process of evaluating the impact and method of adoption of the standard and its related amendments. The Company is reviewing current accounting policies, business processes, systems and controls to identify potential differences or changes that would result from applying the new standard. The Company is still evaluating whether or not there will be a material impact on the Company's consolidated financial statements and related disclosures as a result of adopting this standard. In February 2016, the FASB issued new guidance on leases, which will require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms greater than twelve months. The standard is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2020. While the Company continues to evaluate this standard and the effect on related disclosures, the primary effect of adoption will be to record right-of-use assets and corresponding lease obligations for current operating leases. The adoption is expected to have a material impact on the Company's consolidated balance sheets, but not on results of operations or cash flows. In March 2016, the FASB issued new guidance on stock compensation, intended to simplify accounting for share-based payment transactions. The guidance will change accounting for income taxes, forfeitures, and minimum statutory tax withholding requirements. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2016, with early adoption permitted. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2018. Adoption of this guidance will likely be material to the provision for income taxes on the Company’s consolidated income statements and earnings per share amounts for the change in the recognition of excess tax benefits or deficiencies. Due to the Company's annual vesting and release in its first fiscal quarter, this may create increased volatility in these amounts during that quarter of each fiscal year. Previously these amounts were reflected in equity. Additionally, these amounts will be reflected as an operating activity instead of financing activity in the consolidated statements of cash flows. Adoption of this guidance is not expected to have a material effect on the consolidated balance sheets, statements of cash flows, or related disclosures. |
Investments (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale and Held-to-maturity Investments | The Company’s investments were as follows:
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Maturities of Available-for-sale and Held-to-maturity Securities | The maturities of available-for-sale and held-to-maturity securities at February 12, 2017, were as follows:
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Fair Value Measurement (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Assets and Liabilities Measured on Recurring Basis | The tables below present information regarding financial assets and financial liabilities that are measured at fair value on a recurring basis and indicate the level within the hierarchy reflecting the valuation techniques utilized to determine fair value.
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Value and Estimated Fair Value of Company's Long-term Debt | The carrying and estimated fair values of the Company’s long-term debt consisted of the following:
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Equity and Comprehensive Income (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Repurchased During Period | Stock repurchase activity during the second quarter and first half of 2017 and 2016 is summarized below:
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Components Of Equity And Comprehensive Income | The following tables show the changes in equity attributable to Costco and the noncontrolling interests of consolidated subsidiaries:
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Stock-Based Compensation Plans (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of RSU Transactions | The following table summarizes RSU transactions during the first half of 2017:
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Summary of Stock-Based Compensation Expense and Related Tax Benefits | The following table summarizes stock-based compensation expense and the related tax benefits under the Company’s plans:
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Net Income per Common and Common Equivalent Share (Tables) |
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Schedule of Earnings Per Share, Basic and Diluted | The following table shows the amounts used in computing net income per share and the weighted average number of shares of potentially dilutive common shares outstanding (shares in 000’s):
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Segment Reporting (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Information, by Segment | Certain operating expenses, predominantly stock-based compensation, are incurred on behalf of the Company's Canadian and Other International Operations, but are included in the U.S. Operations because those costs are not allocated internally and generally come under the responsibility of the Company's U.S. management team.
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Investments - Proceeds from Sales of Available-for-sale Securities (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
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Feb. 12, 2017 |
Feb. 14, 2016 |
Feb. 12, 2017 |
Feb. 14, 2016 |
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Investments, Debt and Equity Securities [Abstract] | ||||
Proceeds | $ 34 | $ 139 | $ 66 | $ 189 |
Investments - Maturities of Available-for-sale and Held-to-maturity Securities (Details) $ in Millions |
Feb. 12, 2017
USD ($)
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Available-for-sale, Cost Basis | |
Due in one year or less | $ 160 |
Due after one year through five years | 837 |
Due after five years | 55 |
Available-for-sale, cost basis, total | 1,052 |
Available-for-sale, Fair Value | |
Due in one year or less | 160 |
Due after one year through five years | 836 |
Due after five years | 54 |
Available-for-sale, recorded basis, total | 1,050 |
Held-to-maturity | |
Due in one year or less | 171 |
Due after one year through five years | 0 |
Due after five years | 0 |
Held-to-maturity, cost basis, total | $ 171 |
Debt (Carrying Value and Estimated Fair Value of Company's Long-term Debt) (Details) - USD ($) $ in Millions |
6 Months Ended | |
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Feb. 12, 2017 |
Aug. 28, 2016 |
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Debt Instrument [Line Items] | ||
Total long-term debt, carrying value | $ 5,072 | $ 5,161 |
Less current portion, carrying value | 2,257 | 1,100 |
Long-term debt, excluding current portion | 2,815 | 4,061 |
Total long-term debt, fair value | 5,116 | 5,274 |
Less current portion, fair value | 2,264 | 1,130 |
Long-term debt, excluding current portion, fair value | $ 2,852 | 4,144 |
5.5% Senior Notes Due March 2017 | ||
Debt Instrument [Line Items] | ||
Debt instrument, interest rate, stated percentage | 5.50% | |
Debt instrument, maturity date | Mar. 15, 2017 | |
Total long-term debt, carrying value | $ 1,100 | 1,100 |
1.125% Senior Notes Due December 2017 | ||
Debt Instrument [Line Items] | ||
Debt instrument, interest rate, stated percentage | 1.125% | |
Debt instrument, maturity date | Dec. 15, 2017 | |
Total long-term debt, carrying value | $ 1,099 | 1,099 |
1.7% Senior Notes Due December 2019 | ||
Debt Instrument [Line Items] | ||
Debt instrument, interest rate, stated percentage | 1.70% | |
Debt instrument, maturity date | Dec. 15, 2019 | |
Total long-term debt, carrying value | $ 1,197 | 1,196 |
1.75% Senior Notes Due February 2020 | ||
Debt Instrument [Line Items] | ||
Debt instrument, interest rate, stated percentage | 1.75% | |
Debt instrument, maturity date | Feb. 15, 2020 | |
Total long-term debt, carrying value | $ 498 | 498 |
2.25% Senior Notes Due February 2022 | ||
Debt Instrument [Line Items] | ||
Debt instrument, interest rate, stated percentage | 2.25% | |
Debt instrument, maturity date | Feb. 15, 2022 | |
Total long-term debt, carrying value | $ 497 | 497 |
Other Long-term Debt | ||
Debt Instrument [Line Items] | ||
Total long-term debt, carrying value | 681 | 771 |
Fair Value, Inputs, Level 2 | 5.5% Senior Notes Due March 2017 | ||
Debt Instrument [Line Items] | ||
Total long-term debt, fair value | 1,105 | 1,129 |
Fair Value, Inputs, Level 2 | 1.125% Senior Notes Due December 2017 | ||
Debt Instrument [Line Items] | ||
Total long-term debt, fair value | 1,100 | 1,103 |
Fair Value, Inputs, Level 2 | 1.7% Senior Notes Due December 2019 | ||
Debt Instrument [Line Items] | ||
Total long-term debt, fair value | 1,210 | 1,219 |
Fair Value, Inputs, Level 2 | 1.75% Senior Notes Due February 2020 | ||
Debt Instrument [Line Items] | ||
Total long-term debt, fair value | 499 | 508 |
Fair Value, Inputs, Level 2 | 2.25% Senior Notes Due February 2022 | ||
Debt Instrument [Line Items] | ||
Total long-term debt, fair value | 497 | 512 |
Fair Value, Inputs, Level 3 | Other Long-term Debt | ||
Debt Instrument [Line Items] | ||
Total long-term debt, fair value | $ 705 | $ 803 |
Equity and Comprehensive Income - Additional Information - Dividends (Detail) - $ / shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 12, 2017 |
Feb. 14, 2016 |
Feb. 12, 2017 |
Feb. 14, 2016 |
|
Dividends Payable [Line Items] | ||||
Dividends declared | $ 0.45 | $ 0.40 | $ 0.90 | $ 0.80 |
Dividend Rate | ||||
Dividends Payable [Line Items] | ||||
Dividends declared | $ 0.45 | $ 0.40 |
Equity and Comprehensive Income (Stock Repurchased During Period) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 12, 2017 |
Feb. 14, 2016 |
Feb. 12, 2017 |
Feb. 14, 2016 |
|
Equity [Abstract] | ||||
Shares repurchased (000's) | 411 | 531 | 1,220 | 1,429 |
Average price per share | $ 159.86 | $ 150.02 | $ 153.98 | $ 146.79 |
Total cost | $ 66 | $ 80 | $ 188 | $ 210 |
Equity and Comprehensive Income Equity and Comprehensive Income - Additional Information - Stock Repurchase Programs (Details) $ in Millions |
Feb. 12, 2017
USD ($)
|
---|---|
Equity [Abstract] | |
Stock repurchase program, remaining authorized repurchase amount | $ 3,034 |
Changes in Equity Attributes to Costco and the Noncontrolling Interests of Consolidated Subsidiaries (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 12, 2017 |
Feb. 14, 2016 |
Feb. 12, 2017 |
Feb. 14, 2016 |
|
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Equity at beginning of period | $ 12,332 | $ 10,843 | ||
Comprehensive income: | ||||
Net income | $ 521 | $ 555 | 1,076 | 1,042 |
Foreign-currency translation adjustment and other, net | 114 | (244) | (231) | (229) |
COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO | 621 | 307 | 826 | 803 |
Comprehensive income (loss), net of tax, attributable to noncontrolling interest | 14 | 4 | 19 | 10 |
Comprehensive income | 635 | 311 | 845 | 813 |
Stock-based compensation | 322 | 287 | ||
Release of vested restricted stock units (RSUs), including tax effects | (164) | (145) | ||
Repurchases of common stock | (66) | (80) | (188) | (210) |
Cash dividends declared | (435) | (352) | ||
Distribution to noncontrolling interest | (2) | |||
Equity at end of period | 12,712 | 11,234 | 12,712 | 11,234 |
Attributable to Costco | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Equity at beginning of period | 12,079 | 10,617 | ||
Comprehensive income: | ||||
Net income | 1,060 | 1,026 | ||
Foreign-currency translation adjustment and other, net | (234) | (223) | ||
COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO | 826 | 803 | ||
Stock-based compensation | 322 | 287 | ||
Release of vested restricted stock units (RSUs), including tax effects | (164) | (145) | ||
Repurchases of common stock | (188) | (210) | ||
Cash dividends declared | (435) | (352) | ||
Equity at end of period | 12,440 | 11,000 | 12,440 | 11,000 |
Noncontrolling Interests | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Equity at beginning of period | 253 | 226 | ||
Comprehensive income: | ||||
Net income | 16 | 16 | ||
Foreign-currency translation adjustment and other, net | 3 | (6) | ||
Comprehensive income (loss), net of tax, attributable to noncontrolling interest | 19 | 10 | ||
Distribution to noncontrolling interest | (2) | |||
Equity at end of period | $ 272 | $ 234 | $ 272 | $ 234 |
Stock-Based Compensation Plans - Additional Information (Detail) $ in Millions |
6 Months Ended |
---|---|
Feb. 12, 2017
USD ($)
shares
| |
Restricted Stock Units (RSUs) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Additional number of shares authorized | 13,429,000 |
Number of shares available to be granted as RSUs | 11,332,000 |
Time-based RSUs awards outstanding | 7,662,000 |
Performance-based RSUs awards outstanding | 165,000 |
Outstanding performance-based RSUs awards granted, subject to achievement of performance targets | 251,000 |
Unrecognized compensation cost | $ | $ 911 |
Weighted-average recognition period | 1 year 9 months 18 days |
Seventh Restated 2002 Incentive Plan | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Additional number of shares authorized | 23,500,000 |
Stock-Based Compensation Plans - Summary of RSU Transactions (Details) shares in Thousands |
6 Months Ended |
---|---|
Feb. 12, 2017
$ / shares
shares
| |
Number of units | |
Outstanding at August 28, 2016 | shares | 8,326 |
Granted | shares | 3,855 |
Vested and delivered | shares | (3,984) |
Forfeited | shares | (119) |
Outstanding at February 12, 2017 | shares | 8,078 |
Weighted average grant date fair value | |
Outstanding at August 28, 2016 | $ / shares | $ 120.56 |
Granted | $ / shares | 144.11 |
Vested and delivered | $ / shares | 119.44 |
Forfeited | $ / shares | 129.93 |
Outstanding at February 12, 2017 | $ / shares | $ 132.21 |
Stock-Based Compensation Plans - Summary of Stock-Based Compensation Expense (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 12, 2017 |
Feb. 14, 2016 |
Feb. 12, 2017 |
Feb. 14, 2016 |
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||
Stock-based compensation expense before income taxes | $ 111 | $ 101 | $ 322 | $ 287 |
Less recognized income tax benefit | (37) | (34) | (106) | (97) |
Stock-based compensation expense, net of income taxes | $ 74 | $ 67 | $ 216 | $ 190 |
Net Income per Common and Common Equivalent Share - Schedule of Earnings per Share Effect on Net Income and Weighted Average Number of Dilutive Potential Common Stock (Details) - USD ($) shares in Thousands, $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 12, 2017 |
Feb. 14, 2016 |
Feb. 12, 2017 |
Feb. 14, 2016 |
|
Earnings Per Share [Abstract] | ||||
Net income available to common stockholders used in basic and diluted net income per common share | $ 515 | $ 546 | $ 1,060 | $ 1,026 |
Weighted average number of common shares used in basic net income per common share | 439,127 | 439,648 | 438,567 | 438,990 |
RSUs | 1,522 | 1,900 | 1,993 | 2,456 |
Conversion of convertible notes | 8 | 11 | 8 | 11 |
Weighted average number of common shares and dilutive potential of common stock used in diluted net income per share | 440,657 | 441,559 | 440,568 | 441,457 |
Commitments and Contingencies - Additional Information (Detail) $ in Millions |
6 Months Ended |
---|---|
Feb. 12, 2017
USD ($)
| |
Motor Fuel Temperature Sales Practices [Domain] | |
Loss Contingencies [Line Items] | |
Damages sought | $ 10 |
Damages awarded | 4 |
Drug Enforcement Administration [Domain] | |
Loss Contingencies [Line Items] | |
Damages awarded | $ 12 |
Segment Reporting Information by Segment (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Feb. 12, 2017 |
Feb. 14, 2016 |
Feb. 12, 2017 |
Feb. 14, 2016 |
Aug. 28, 2016 |
|
Segment Reporting Information [Line Items] | |||||
Total revenue | $ 29,766 | $ 28,170 | $ 57,865 | $ 55,390 | $ 118,719 |
Operating income | 844 | 856 | 1,693 | 1,623 | 3,672 |
Depreciation and amortization | 312 | 285 | 609 | 556 | 1,255 |
Additions to property and equipment | 516 | 624 | 1,183 | 1,339 | 2,649 |
Net property and equipment | 17,342 | 16,065 | 17,342 | 16,065 | 17,043 |
Total assets | 35,630 | 32,388 | 35,630 | 32,388 | 33,163 |
Operating Segments [Member] | United States Operations | |||||
Segment Reporting Information [Line Items] | |||||
Total revenue | 21,764 | 20,642 | 42,141 | 40,488 | 86,579 |
Operating income | 520 | 552 | 1,026 | 1,003 | 2,326 |
Depreciation and amortization | 241 | 212 | 467 | 416 | 946 |
Additions to property and equipment | 358 | 460 | 784 | 917 | 1,823 |
Net property and equipment | 12,040 | 11,327 | 12,040 | 11,327 | 11,745 |
Total assets | 24,735 | 22,733 | 24,735 | 22,733 | 22,511 |
Operating Segments [Member] | Canadian Operations | |||||
Segment Reporting Information [Line Items] | |||||
Total revenue | 4,229 | 3,791 | 8,328 | 7,673 | 17,028 |
Operating income | 180 | 156 | 371 | 339 | 778 |
Depreciation and amortization | 27 | 24 | 53 | 49 | 109 |
Additions to property and equipment | 56 | 30 | 166 | 71 | 299 |
Net property and equipment | 1,688 | 1,325 | 1,688 | 1,325 | 1,628 |
Total assets | 3,926 | 3,076 | 3,926 | 3,076 | 3,480 |
Operating Segments [Member] | Other International Operations | |||||
Segment Reporting Information [Line Items] | |||||
Total revenue | 3,773 | 3,737 | 7,396 | 7,229 | 15,112 |
Operating income | 144 | 148 | 296 | 281 | 568 |
Depreciation and amortization | 44 | 49 | 89 | 91 | 200 |
Additions to property and equipment | 102 | 134 | 233 | 351 | 527 |
Net property and equipment | 3,614 | 3,413 | 3,614 | 3,413 | 3,670 |
Total assets | $ 6,969 | $ 6,579 | $ 6,969 | $ 6,579 | $ 7,172 |
Subsequent Event (Details) - USD ($) |
6 Months Ended | 9 Months Ended | |
---|---|---|---|
Feb. 12, 2017 |
May 31, 2017 |
Jun. 01, 2017 |
|
Subsequent Event [Line Items] | |||
Maximum Reward Rebate Percentage Per Customer Yearly | 2.00% | ||
Subsequent Event [Member] | |||
Subsequent Event [Line Items] | |||
Membership Fee Increase | $ 5 | ||
Membership Fee | 60 | ||
Membership Fee Executive- Old | $ 110 | ||
Membership Fee Executive | 120 | ||
Membership Fee Upgrade | 60 | ||
Maximum Annual Membership Rebate Amount Per Member - Old | $ 750 | ||
Maximum Annual Membership Rebate Amount Per Member | $ 1,000 |
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