Costco 1998 Annual Report Download - page 25

MERRILL CORPORATION NETWORK COMPOSITION SYSTEM CPICARD // 3-DEC-98 18:50 DISK004:[98SEA7.98SEA2097]DW2097A.;6
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COSTCO COMPANIES A/R (Y/E 8-31-98) Proj: P1826SEA98 Job: 98SEA2097 File: DW2097A.;6
Merrill/Seattle [phone] Page Dim: 8.250N X 10.750NCopy Dim: 38. X 54.3
COSTCO COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)
Note 1—Summary of Significant Accounting Policies (Continued)
The following data show the amounts used in computing earnings per share and the effect on income
and the weighted average number of shares of dilutive potential common stock.
52 Weeks Ended
August 30, 1998 August 31, 1997 September 1, 1996
Net income available to common
stockholders used in basic EPS . . . $459,842 $$312,197 $248,793
Interest on convertible bonds, net of
tax ....................... 9,529 17,325 17,100
Net income available to common
stockholders after assumed
conversions of dilutive securities . . $469,371 $329,522 $265,893
Weighted average number of
common shares used in basic EPS . 215,506 207,379 195,662
Stock options ................. 5,960 4,001 2,035
Conversion of convertible bonds .... 10,219 13,288 20,193
Weighted number of common shares
and dilutive potential common
stock used in diluted EPS ....... 231,685 224,668 217,890
The 53⁄4% debentures convertible into 7,273 common shares were not included in computing diluted
EPS for the 52 weeks ended in fiscal 1996 because their effect was antidilutive.
On November 5, 1998, the Company announced that its Board of Directors had authorized a stock
repurchase program of up to $500,000 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.
Preopening Expenses
Preopening expenses related to new warehouses, major remodels/expansions, regional offices and
other startup operations are expensed as incurred.
Membership Fees
Membership fee revenue represents annual membership fees paid by substantially all of the Com-
pany’s members. In accordance with historical and industry practice, annual membership fees are recog-
nized as income when received.
Effective with the first quarter of fiscal 1999, the Company will change its method of accounting for
membership fee income from a ‘‘cash basis’’, which historically has been consistent with generally accepted
accounting principles and industry practice, to a ‘‘deferred basis’’. If the deferred method (assuming
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9 C Cs: 6514