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A MORE DETAILED ANALYSIS OF THE FINANCIAL REPORTS

A MORE DETAILED ANALYSIS OF THE FINANCIAL REPORTS. Discount, Variety Store - Costco Aileen Huang. Costco. Established in 1983 71,200 members 451 Warehouses/stores in U.S. Sales: $103m; Net income: $2m Competitors: Sam’s Club, BJ Wholesale

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A MORE DETAILED ANALYSIS OF THE FINANCIAL REPORTS

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  1. A MORE DETAILED ANALYSIS OF THE FINANCIAL REPORTS Discount, Variety Store - Costco Aileen Huang

  2. Costco • Established in 1983 • 71,200 members • 451 Warehouses/stores in U.S. • Sales: $103m; Net income: $2m • Competitors: Sam’s Club, BJ Wholesale • Started same time, only three big wholesale clubs still in operation • Market share 67% Sam’s Club; 17% Costco

  3. Short-term Securities • Risk-free securities • Unrealized gain/loss immaterial • Treat like cash?

  4. Deferred tax assets and liabilities

  5. Operating lease vs. capital lease • The companyleases land and/or buildings at warehouses and certain other office and distribution facilities, primarily under operating leases. • How to reflect operating leases on B/S?

  6. Other assets • Receivables from governmental entities: tax-related items including amounts deposited with taxing authorities • Cash surrender value: adjusts the carrying value of its employee life insurance contracts to the net cash surrender value • Goodwill: resulting from certain business combinations • reviewed for impairment in the fourth quarter of each fiscal year

  7. Life Insurance • The Company uses a combination of insurance and self-insurance mechanisms • a wholly-owned captive insurance subsidiary • participation in a reinsurance pool • Provide for potential liabilities for workers’ compensation, general liability, property damage, directors’ and officers’ liability, vehicle liability, and employee health care benefits. • As of the end of 2013 and 2012, these insurance liabilities were $727 and $688 in the aggregate • included in accounts payable, accrued salaries and benefits, and other current liabilities on the consolidated balance sheets

  8. Other current liabilities • Insurance-related liabilities: NFL

  9. Bank loans: short-term • No weighted-average interest rate available

  10. Bank loans: long-term • No weighted-average interest rate available

  11. Segment: categories • Stable percentage

  12. Segment: geographic • Total Revenue/operating income: Canadian operations much higher • PP&E: Other international operations much higher • 11 new warehouse openings vs. 12 U.S.

  13. Tax rate revisit • Adjustments to statutory rate: ESOP -2.1% • Marginal tax rate: 35%

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