ISSAQUAH, WA -- (MARKET WIRE) -- December 14, 2006 -- Costco Wholesale Corporation (
NASDAQ:
COST)
announced today its operating results for the first quarter (12 weeks) of
fiscal 2007, ended November 26, 2006.
Net sales for the first quarter of fiscal 2007 increased 9% to $13.85
billion from $12.67 billion during the first quarter of fiscal 2006. On a
comparable warehouse basis, that is warehouses open at least one year, net
sales increased 4%.
Net income for the first quarter of fiscal 2007 increased 10% to $237
million, or $.51 per diluted share, from $216 million, or $.45 per diluted
share, during the first quarter of fiscal 2006.
In connection with the review of stock options announced by the Company on
October 12, 2006, and guidance issued by the U.S. Internal Revenue Service
on November 30, 2006, the Compensation Committee of the Board of Directors
has approved a program intended to protect over 1,000 employees who are
United States taxpayers from certain adverse tax consequences. The program
involves increasing the exercise prices on certain stock options granted
from 2000 to 2003, while the Company makes payments to employees to reduce
adverse income tax consequences from their options having been granted
originally at prices lower than the revised prices. The Company is also
examining the availability of similar alternatives for employees outside
the United States. In total, the Company currently estimates that it will
record a non-recurring, pretax charge to earnings of approximately $70
million (approximately $45 million after-tax) in the second quarter of
fiscal 2007, the twelve weeks ending February 18, 2007. The ultimate
amount of that charge will depend in part upon alternatives available in
other countries, which are currently under review and which may affect
options granted from 1996 to 2003. Over the next few years, the Company
would expect to recoup $25 million in proceeds, not subject to income
taxes, from these increases in option prices; but the increased proceeds
would not flow through the income statement. Thus, the real economic
consequences of a $45 million after-tax charge would be significantly lower
than the income statement consequences. Jim Sinegal, president and chief
executive officer, stated: "We do not intend for our options-holding
employees to be penalized for historical issues associated with some of our
stock option grants, and this program is consistent with our corporate
value of taking care of our employees."
Costco currently operates 504 warehouses, including 371 in the United
States and Puerto Rico, 70 in Canada, 19 in the United Kingdom, five in
Korea, four in Taiwan, five in Japan and 30 in Mexico. The Company also
operates Costco Online, an electronic commerce web site, at
www.costco.com
and at
www.costco.ca in Canada.
A conference call to discuss these first quarter results is scheduled for
8:00 a.m. (PT) today, December 14, 2006, and is available via a webcast on
www.costco.com (click on Investor Relations and "Webcasts").
Certain statements contained in this document constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995. For these purposes, forward-looking statements are statements
that address activities, events, conditions or developments that the
Company expects or anticipates may occur in the future. Such
forward-looking statements involve risks and uncertainties that may cause
actual events, results or performance to differ materially from those
indicated by such statements. These risks and uncertainties include, but
are not limited to, domestic and international economic conditions
including exchange rates, the effects of competition and regulation,
consumer and small business spending patterns and debt levels, conditions
affecting the acquisition, development, ownership or use of real estate,
actions of vendors, rising costs associated with employees (including
health care and workers' compensation costs), rising costs associated with
the acquisition of merchandise (including the direct and indirect effects
of the rising cost of petroleum-based products and fuel and energy costs),
geopolitical conditions and other risks identified from time to time in the
Company's public statements and reports filed with the Securities and
Exchange Commission.
COSTCO WHOLESALE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(unaudited)
12 Weeks Ended
-----------------------------
November 26, November 20,
2006 2005
-------------- --------------
REVENUE
Net sales $ 13,852,321 $ 12,670,792
Membership fees 299,303 262,554
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Total revenue 14,151,624 12,933,346
OPERATING EXPENSES
Merchandise costs 12,388,958 11,330,171
Selling, general and administrative 1,382,467 1,264,092
Preopening expenses 22,727 12,377
Provision for impaired assets and closing
costs, net 4,332 1,211
------------- -------------
Operating income 353,140 325,495
OTHER INCOME (EXPENSE)
Interest expense (2,140) (3,724)
Interest income and other 27,111 25,540
------------- -------------
INCOME BEFORE INCOME TAXES 378,111 347,311
Provision for income taxes 141,225 131,493
------------- -------------
NET INCOME $ 236,886 $ 215,818
============= =============
NET INCOME PER COMMON SHARE:
Basic $ 0.52 $ 0.46
============= =============
Diluted $ 0.51 $ 0.45
============= =============
Shares used in calculation (000's)
Basic 458,873 472,717
Diluted 467,836 486,367
Dividends per share $ 0.130 $ 0.115
Contact Information: CONTACTS:
Richard Galanti, 425/313-8203
Bob Nelson, 425/313-8255
Jeff Elliott, 425/313-8264