Costco 1998 Annual Report Download - page 17

MERRILL CORPORATION NETWORK COMPOSITION SYSTEM BSANDFO // 1-DEC-98 23:38 DISK004:[98SEA7.98SEA2097]DM2097A.;7
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COSTCO COMPANIES A/R (Y/E 8-31-98) Proj: P1826SEA98 Job: 98SEA2097 File: DM2097A.;7
Merrill/Seattle [phone] Page Dim: 8.250N X 10.750NCopy Dim: 38. X 54.3
result of Year 2000 issues; however, possible consequences include, but are not limited to, delays in
delivery or receipt of merchandise, inability to process transactions, loss of communications, and similar
interruptions of normal business activities. To the extent practicable, the Company is evaluating contin-
gency plans to minimize the effect on the Company’s operations in the event of any third party system or
product failure. The Company will continue to make every effort to ensure that its business, financial
condition and results of operations will not be adversely impacted by a failure of its systems or the systems
of others.
Financial Position and Cash Flows
Working capital totaled approximately $431,000 at August 30, 1998, compared to working capital of
$146,000 at August 31, 1997. The increase in net working capital was primarily due to an increase in cash
and cash equivalents of approximately $186,000, an increase in short-term investments of approximately
$76,000, increases in receivables and other current assets of approximately $32,000, reductions in short-
term borrowings of approximately $25,000 and other current liabilities of approximately $15,000, offset by
increases in accrued salaries and benefits of approximately $50,000.
Net cash provided by operating activities totaled $737,610 in fiscal 1998 compared to $590,249 in fiscal
1997. The increase in net cash from operating activities is primarily a result of increased net income.
Net cash used in investing activities totaled $609,446 in fiscal 1998 compared to $543,173 in fiscal
1997. The investing activities primarily relate to additions to property and equipment for new and
remodeled warehouses of $571,904 and $553,374 in fiscal 1998 and 1997, respectively. Additionally, the
Company received proceeds from the sale of property and equipment of $80,698 in fiscal 1998 compared
to $40,946 in fiscal 1997. The Company invested $75,549 in short-term investments during fiscal 1998.
Net cash provided by financing activities totaled $66,591 in fiscal 1998 compared to $25,144 in fiscal
1997. This increase is due to a decline in net repayments on short and long-term borrowings and an
increase in proceeds from minority interests and the exercise of stock options.
The Company’s balance sheet as of August 30, 1998 reflects a $783,506 or 14% increase in total assets
since August 31, 1997. The increase is primarily due to a net increase in property and equipment and
merchandise inventory related to the Company’s expansion program and an increase in cash and cash
equivalents and short-term investments.
Stock Repurchase Program
On November 5, 1998, the Company announced that its Board of Directors had authorized a stock
repurchase program of up to $500 million of Costco Common Stock over the next three years. The
Company expects to repurchase shares from time to time in the open market or in private transactions as
market conditions warrant. The Company expects to fund stock purchases from cash and short-term
investments on hand, as well as from future operating cash flows. The repurchased shares will be held as
treasury shares and used for general corporate purposes including stock option grants under stock option
programs.
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