Costco 2002 Annual Report Download - page 16

significant derivative instruments the Company holds are interest rate swaps, which the Company uses to manage
the interest rate risk associated with its borrowings and to manage the Company’s mix of fixed and variable-rate
debt. As of September 1, 2002, the Company had “fixed-to-floating” interest rate swaps with an aggregate no-
tional amount of $600,000 and an aggregate fair value of $35,926, which is recorded in other assets. These swaps
were entered into effective November 13, 2001, and March 25, 2002, and are designated and qualify as fair value
hedges of the Company’s $300,000 7
1
⁄ 8 % Senior Notes and the Company’s $300,000 5
1
⁄ 2 % Senior Notes, re-
spectively. As the terms of the swaps match those of the underlying hedged debt, the changes in the fair value of
these swaps are offset by corresponding changes in the carrying amount of the hedged debt, and result in no net
earnings impact.
Financial Position and Cash Flows
Working capital totaled $180,806 at September 1, 2002, compared to a negative working capital position of
$229,732 at September 2, 2001. The increase of $410,538 was primarily due to an increase in net inventory lev-
els (inventories less accounts payable) of $232,087; increases in cash and cash equivalents of $202,933; an in-
crease in receivables of $150,093; and a decrease in short-term borrowings of $90,778, offset by increases in
other current liabilities of $116,897; accrued salaries and benefits of $106,454 and deferred membership income
of $37,932.
Net cash provided by operating activities totaled $1,018,243 in fiscal 2002, compared to $1,032,563 in fiscal
2001. The decrease of $14,320 is primarily a result of the change in the increase in net inventories (inventories
less accounts payable) of $256,258 and a decrease in the change in deferred income taxes of $28,618; offset by a
decrease in the receivables, other current assets, accrued and other current liabilities of approximately $136,042;
higher net income in fiscal 2002 over fiscal 2001 of $97,894 and a larger add-back for depreciation and amor-
tization of $40,484.
Net cash used in investing activities totaled $1,033,815 in fiscal 2002, compared to $1,339,843 in fiscal
2001, a decrease of $306,028. This decrease is primarily a result of decreases in additions to property and
equipment for new and remodeled warehouses of $408,944 and investments in unconsolidated joint ventures of
$27,500, which was offset by the decrease in the net cash proceeds from the sale of property and equipment of
$77,153 and the net cash proceeds from the sale of short-term investments of $36,671.
Net cash provided by financing activities totaled $217,828 in fiscal 2002 compared to $394,345 in fiscal
2001, a decrease of $176,517. The decrease primarily resulted from an increase in the net repayments of short-
term borrowings of $285,117 and a change in bank overdrafts of $251,797, offset by an overall increase in the
proceeds from the issuance of long-term debt of $218,049 and a decrease in repayments of long-term debt of
$140,788.
Stock Repurchase Program (dollars in thousands except per share data)
On November 30, 2001, the Company’s Board of Directors approved a stock repurchase program authoriz-
ing the repurchase of up to $500,000 of Costco Common Stock through November 30, 2004. Under the program,
the Company can repurchase shares at any time in the open market or in private transactions as market conditions
warrant. The repurchased shares would constitute authorized, but non-issued shares and would be used for gen-
eral corporate purposes, including stock option grants under stock option programs. To date, no shares have been
repurchased under this program.
Under a previous stock purchase program which expired in November, 2001, the Company repurchased
3.13 million shares of common stock at an average price of $31.96 per share, totaling approximately $99,946
(excluding commissions). The Company’s repurchase of its’ common shares under this program was transacted
entirely in fiscal 2000.
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