filings.toolsCostco Wholesale (COST) 10-K risk factor changes: FY2017 vs FY2016
The 2017-09-03 10-K against the 2016-08-28 one, compared heading by heading and sentence by sentence. One of these filings carries no fiscal year tag, so its year is the calendar year of the period end.
Item 1A41 rewritten11 added10 removed82 unchanged
All filing items364 rewritten1,278 added1,071 removed634 unchanged
Summary
counted, not written
- Item 1A headings could not be compared: only 0 carried over between the two years, which usually means one filing was read wrongly, so none is reported as new or removed.
- Sentence by sentence, 1,278 added, 1,071 removed, 364 rewritten and 634 unchanged across 14 items that differ.
- New this year: Item 16. Form 10-K Summary.
Sentences by item
21 items, with every count and a link to each item that changed
Underlined words on a shaded ground are new in FY2017; struck-through words were in FY2016. Sentences that are wholly new or wholly gone are labelled rather than marked.
Item 1A. Risk Factors (Continued)
41 rewritten, 11 added, 10 removed, 82 unchanged
[removed: Our] warehouse and online businesses depend upon the secure transmission of encrypted confidential information over public networks, including information permitting cashless payments.
Privacy and [removed: information security] [added: information-security] laws and regulations change, and compliance with them may result in cost increases due to necessary systems changes and the development of new processes.
We are also subject to payment card association [removed: rules] and network operating rules, including data security rules, certification requirements and rules governing electronic funds transfers, which could change over time.
We might sell [removed: unsafe products, resulting in] [added: products that cause unexpected] illness or injury to our members, harm to our reputation, and [added: expose us to] litigation.
If our merchandise offerings, [removed: including] [added: such as] food and prepared food products for human consumption, drugs, children's products, pet products, and durable goods, do not meet or are perceived not to meet applicable safety standards or our members' expectations regarding safety, we could experience lost sales, increased costs, [removed: and legal and] [added: litigation or] reputational [removed: losses.][added: harm.]
[removed: While we are subject to governmental inspection and regulations and work to comply in all material respects] with applicable laws and regulations, we cannot be sure that consumption or use of our products will not cause a health-related illness or injury in the future or that we will not be subject to claims, lawsuits, or government investigations relating to such matters resulting in costly product recalls and other liabilities that could adversely affect our business and results of operations.
Even if a product liability claim is unsuccessful or is not fully pursued, [removed: related] negative publicity could adversely affect our reputation with existing and potential members and our corporate and brand image, and these effects could be long term.
It is difficult to consistently and successfully predict the products and services [added: that] our members will desire.
Failure to [removed: timely] identify [added: timely] or effectively respond to changing consumer tastes, preferences (including those relating to sustainability of product sources and animal welfare) and spending patterns could negatively affect our relationship with our members, the demand for our products and services and our market share.
Our [removed: members, especially younger members,] [added: members] are increasingly using [removed: computers, tablets,] mobile phones, [added: tablets, computers,] and other devices to shop and to interact with us through social media.
[removed: As part of our multichannel strategy, we] [added: We] are making technology investments in our websites and mobile applications.
Our success depends on the continued contributions of members of our senior management and other key operations, merchandising and administrative [removed: personnel, and the loss of these contributions could have a material adverse effect on our business.][added: personnel.]
Our ability to control labor and benefit costs is subject to numerous [added: internal and] external factors, including regulatory changes, prevailing wage rates, and healthcare and other insurance costs.
We compete for members, employees, sites, products and services and in other important respects with a wide range of local, regional and national wholesalers and retailers, both in the United States and in foreign countries, including other warehouse club operators, supermarkets, supercenters, [removed: department and specialty stores,] [added: internet retailers,] gasoline stations, [added: hard discounters,] and [removed: internet retailers.][added: department and specialty stores.]
Higher energy and gasoline costs, inflation, levels of unemployment, healthcare costs, consumer debt levels, foreign-currency exchange rates, unsettled financial markets, weaknesses in housing and real estate markets, reduced consumer confidence, changes [added: and uncertainties] related to government fiscal and tax [removed: policies,] [added: policies including increased duties, tariffs, or other restrictions,] sovereign debt crises, and other economic factors could adversely affect demand for our products and [removed: services or] [added: services,] require a change in [added: product mix, or impact] the [removed: mix] [added: cost] of [removed: products we sell.][added: or ability to purchase inventory.]
Rapid and significant changes in commodity prices [added: and our ability and desire to pass them through to our members] may affect our sales and profit margins.
General economic conditions can also be affected by [added: significant events like] the outbreak of [removed: war,] [added: war or] acts of [removed: terrorism, or other significant national or international events.][added: terrorism.]
Vendors may be unable to supply us with quality merchandise at [removed: the right] [added: competitive] prices in a timely manner or may fail to adhere to our high standards, resulting in adverse effects on our business, merchandise inventories, sales, and profit margins.
We depend heavily on our ability to purchase [added: quality] merchandise in sufficient quantities at competitive prices.
As [removed: these] [added: the] quantities [added: we require] continue to grow, we have no assurances of continued supply, [added: appropriate] pricing or access to new products, and any vendor [removed: could at any time] [added: has the ability to] change the terms upon which [removed: it sells] [added: they sell] to us or discontinue selling to us.
[added: These deficiencies] may delay or preclude delivery of merchandise to us and might not be identified before we sell such merchandise to our members.
During [removed: 2016,] [added: 2017,] our international operations, including Canada, generated 27% and [removed: 39%] [added: 36%] of our net sales and operating income, respectively.
Our international operations have accounted for an [removed: increasingly larger] [added: increasing] portion of our [removed: warehouses] [added: warehouses,] and we plan to continue [removed: expanding them.][added: international growth.]
[removed: Our consolidated financial statements are denominated in U.S. dollars, and to] [added: To] prepare [removed: those] [added: our consolidated] financial [removed: statements] [added: statements,] we must translate the financial statements of our international operations from local currencies into U.S. dollars using exchange rates for the current period.
Future fluctuations in currency exchange rates over time that are unfavorable to us may adversely affect the financial performance of our Canadian and Other International [removed: operating segments] [added: operations] and have a corresponding adverse period-over-period effect on our results of operations.
Natural disasters or other [removed: catastrophic events] [added: catastrophes] could negatively affect our business, financial condition, and results of operations.
Such events could result in physical damage to one or more of our properties, the temporary closure of one or more [removed: warehouses or] [added: warehouses,] depots, [added: manufacturing or home office facilities,] the temporary lack of an adequate work force in a market, the temporary or long-term disruption in the supply of products from some local or overseas suppliers, the temporary disruption in the transport of goods to or from overseas, delays in the delivery of goods to our warehouses or depots within the countries in which we operate, and the temporary reduction in the availability of products in our warehouses.
These events could also reduce demand for our products or make it difficult or impossible to [removed: receive products from suppliers.][added: procure products.]
[removed: Increased] U.S. and foreign government [removed: and agency] regulations [removed: to limit] [added: limiting] carbon dioxide and other greenhouse gas emissions may result in increased compliance costs and legislation or regulation affecting energy inputs that could materially affect [removed: our profitability.]
[removed: In addition, climate] [added: Climate] change could affect our ability to procure needed commodities at costs and in quantities we currently experience.
We also sell a substantial amount of gasoline, the demand for which could be impacted by concerns about climate change and which [removed: also] could face increased regulation.
We believe that the price of our stock [removed: generally] [added: currently] reflects high market expectations for our future operating results.
Any failure to meet or delay in meeting these expectations, including our [added: warehouse and e-commerce] comparable sales growth rates, membership renewal rates, [added: new member sign-ups,] gross margin, earnings, earnings per share, new warehouse openings, or dividend or stock repurchase policies could cause the market price of our stock to decline.
During [removed: 2016,] [added: 2017,] we operated [removed: 214] [added: 227] warehouses in [removed: eight] [added: 10] countries outside of the [removed: U.S.] [added: U.S.,] and we plan to continue expanding our international operations.
These factors include political [removed: conditions,] [added: and] economic conditions, regulatory constraints, currency regulations, [added: policy changes such as the U.K.'s vote to withdraw from the European Union, commonly known as "Brexit",] and other matters in any of the countries or regions in which we operate, now or in the future.
Accounting principles and related pronouncements, implementation guidelines, and interpretations we apply to a wide range of matters that are relevant to our business, including, but not limited to, revenue recognition, merchandise inventories, vendor rebates and other vendor consideration, impairment of long-lived assets, self-insurance liabilities, and income taxes are highly complex and involve [removed: many] subjective assumptions, estimates and judgments by our management.
As [removed: the] tax rates vary among countries, a change in earnings attributable to the various jurisdictions in which we operate could result in an unfavorable change in our overall tax provision.
Failure to comply with these laws could result in [added: harm to our members, employees or others,] significant costs to satisfy environmental compliance, remediation or compensatory requirements, or the imposition of severe penalties or restrictions on operations by governmental agencies or courts that could adversely affect our business, financial condition and results of operations.
We are, or may become involved, in a number of legal proceedings and audits including grand jury investigations, government and agency investigations, and consumer, employment, tort, unclaimed property laws, and other [removed: litigation (see discussion of Legal Proceedings in Note 10 to the consolidated financial statements included in Item 8 of this Report).][added: litigation.]
We cannot predict with certainty the outcomes of these [removed: legal] proceedings and other contingencies, including environmental remediation and other proceedings commenced by governmental authorities.
While we are subject to governmental inspection and regulations and work to comply in all material respects
Failure to identify and implement a succession plan for key senior management could negatively impact the business.
We may incur property, casualty or other losses not covered by our insurance.
We are predominantly self-insured, with insurance coverage for certain catastrophic risks, for employee health care benefits, workers’ compensation, general liability, property damage, directors’ and officers’ liability, vehicle liability and inventory loss.
The types and amounts of insurance may vary from time to time based on our decisions with respect to risk retention and regulatory requirements.
The occurrence of significant claims, a substantial rise in costs to maintain our insurance or the failure to maintain adequate insurance coverage could have an adverse impact on our financial condition and results of operations.
We are primarily self-insured as it relates to property damage, due to the substantial premiums required for insurance coverage over physical losses caused by certain natural disasters, as well as the limitations on available coverage for such losses.
Although we maintain specific coverages for losses from physical damages in excess of certain amounts to guard against catastrophic losses, we still bear the risk of losses incurred as a result of any physical damage to, or the destruction of, any warehouses, depots, manufacturing or home office facilities, loss or spoilage of inventory, and business interruption caused by any such events to the extent they are below catastrophic levels of coverage, as well as any losses to the extent they exceed our aggregate limits of applicable coverages.
Such losses could materially impact our cash flow and results of operations.
We buy from numerous domestic and foreign manufacturers and importers.
our profitability.
If we do not maintain the privacy and security of member-related and other business information, we could damage our reputation with members, incur substantial additional costs, and become subject to litigation.
We receive, retain, and transmit personal information about our members and entrust that information to third-party business associates, including cloud service providers that perform activities for us.
As of October 1, 2015, the payment card industry shifted the liability of certain credit card transactions to retailers who are not able to process Europay, MasterCard, Visa (“EMV”) chip enabled card transactions.
As a result, before our implementation of the EVM technology is complete, we may be liable for costs incurred by payment card issuing banks or other third parties for fraudulent transactions initiated through EMV chip enabled cards before our implementation of EMV chip technology.
Implementation of the EMV chip technology and receipt of final certification is subject to hardware installation, software modification, and certification with our third-party transaction service providers.
If we fail to comply with these rules or transaction processing requirements, we may not be able to accept certain payment methods.
We purchase our merchandise from numerous domestic and foreign manufacturers and importers and have thousands of vendor relationships.
These deficiencies
Our operations in countries other than the U.S. are conducted primarily in the local currencies of those countries.
Extreme weather conditions increase our costs and resulting damage to our properties may not be fully insured.
An excerpt. Shown here: 40 of 41 rewritten, all 11 added and all 10 removed. The counts are complete. For every sentence, read Item 1A. Risk Factors (Continued) in the FY2017 filing and the FY2016 filing.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk (amounts in millions) (Continued)
5 rewritten, 0 added, 12 removed, 16 unchanged
[removed: For those investments that are classified as available-for-sale, the unrealized gains or] losses related to fluctuations in market volatility and interest rates are reflected within stockholders’ equity in accumulated other comprehensive income.
As of the end of [removed: 2016,] [added: 2017,] the majority of our long-term debt [removed: is] [added: has] fixed [removed: rate Senior Notes,] [added: interest rates and is] carried at [removed: $4,390.][added: $6,632.]
See Note 1 and Note 3 to the consolidated financial statements included in Item 8 of this Report for additional information on the fair value of unsettled forward foreign-exchange contracts at the end of [removed: 2016] [added: 2017] and [removed: 2015.][added: 2016.]
A hypothetical 10% strengthening of the functional currency compared to the non-functional currency exchange rates at [removed: August 28, 2016] [added: September 3, 2017] would have decreased the fair value of the contracts by [removed: $56] [added: $69] and resulted in an unrealized loss in the consolidated statements of income for the same amount.
We are exposed to fluctuations in prices for energy that we consume, particularly electricity and natural gas, which we seek to partially mitigate through fixed-price contracts for certain of our warehouses and other facilities, [removed: predominately] [added: predominantly] in the U.S. and Canada.
Our exposure to financial market risk results from fluctuations in interest rates and foreign currency exchange rates.
We do not engage in speculative or leveraged transactions or hold or issue financial instruments for trading purposes.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our investment holdings that are diversified among various instruments considered to be cash equivalents as defined in Note 1 to the consolidated financial statements included in Item 8 of this Report, as well as short-term investments in government and agency securities, and asset and mortgage-backed securities with effective maturities of generally three months to five years at the date of purchase.
The primary objective of our investment activities is to preserve principal and secondarily to generate yields.
The majority of our short-term investments are in fixed interest rate securities.
These securities are subject to changes in fair value due to interest rate fluctuations.
Our policy limits investments in the U.S. to direct U.S. government and government agency obligations, repurchase agreements collateralized by U.S. government and government agency obligations, and U.S. government and government agency money market funds.
Our wholly-owned captive insurance subsidiary invests in U.S. government and government agency obligations, corporate notes and bonds, and asset and mortgage-backed securities with a minimum overall portfolio average credit rating of AA+.
Our Canadian and Other International subsidiaries’ investments are primarily in money market funds, bankers’ acceptances, and bank certificates of deposit, generally denominated in local currencies.
A 100 basis-point change in interest rates as of the end of 2016 would have an incremental change in fair market value of $22.
Item 7A—Quantitative and Qualitative Disclosures About Market Risk (amounts in millions)(Continued)
Item 1. Business (Continued)
70 rewritten, 11 added, 7 removed, 101 unchanged
Our average warehouse space is approximately [removed: 144,000] [added: 145,000] square feet, with newer units slightly larger.
Because shoppers are attracted principally by the quality of merchandise and [removed: the availability of] low prices, our warehouses are not elaborate.
By strictly controlling the entrances and exits of our warehouses and using a membership format, we have [removed: limited] inventory losses (shrinkage) [removed: to amounts] well below those of typical [removed: discount] retail operations.
Merchandise is generally stored on racks above the sales floor and displayed on pallets containing large quantities, [removed: thereby] reducing labor required.
In general, with variations by country, our warehouses accept certain [removed: debit and credit cards, co-branded] [added: credit, including the] Costco [removed: credit] [added: co-branded card, and debit] cards, cash, [removed: or] [added: and] checks.
We seek to limit [removed: specific] items [removed: in each product line] to fast-selling models, sizes, and colors.
We carry an average of approximately [removed: 3,700] [added: 3,800] active stock keeping units (SKUs) per warehouse in our core warehouse business, significantly less than other broadline retailers.
| • | [removed: Other] [added: Ancillary] (including gas stations and pharmacy) |
Ancillary businesses within or next to our warehouses provide expanded products and [removed: services and encourage] [added: services, encouraging] members to shop more frequently.
We [removed: sell gasoline in all countries except Mexico, Korea, and Taiwan and] operated [added: 536,] 508, [removed: 472,] and [removed: 445] [added: 472] gas stations at the end of [added: 2017,] 2016, [removed: 2015,] and [removed: 2014,] [added: 2015,] respectively.
[removed: Ancillary] [added: These] businesses [removed: also] include [added: our gas stations, pharmacy,] optical dispensing centers, food courts, and hearing-aid centers.
Our online businesses, which include e-commerce, business delivery, and travel, [removed: operate websites in all countries except Japan, Australia, and Spain.][added: vary by country.]
[removed: They] [added: Online businesses] provide our members additional products and services, [removed: typically] [added: many] not found in our warehouses.
Net sales for our online business were approximately 4% of our [added: total] net sales in [removed: 2016] [added: 2017] and [added: 2016, respectively, and] 3% in [removed: 2015 and 2014, respectively.][added: 2015.]
We generally have not experienced difficulty in obtaining sufficient quantities of [removed: merchandise,] [added: merchandise] and believe that if one or more of our current sources of supply became unavailable, we would be able to obtain alternative sources without substantial disruption of [added: our business.]
[removed: our business.][added: Our]
We also purchase [removed: private label] [added: private-label] merchandise, as long as quality and member demand are comparable and the value to our members is [removed: greater as compared to brand-name items.][added: significant.]
Gold Star memberships are available to individuals; Business memberships are limited to businesses, including individuals with a business license, retail sales license or [removed: other evidence of business existence.][added: comparable evidence.]
Our member renewal rate was 90% in the U.S. and [removed: Canada,] [added: Canada] and [removed: 88%] [added: 87%] on a worldwide basis in [removed: 2016.][added: 2017.]
| | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | | | [removed: 2014] [added: 2015] | |
| Gold Star | [removed: 36,800] [added: 38,600] | | | [removed: 34,000] [added: 36,800] | | | [removed: 31,600] [added: 34,000] | |
| Business, including add-ons | 10,800 | | | [removed: 10,600] [added: 10,800] | | | [removed: 10,400] [added: 10,600] | |
| Total paid members | [removed: 47,600] [added: 49,400] | | | [removed: 44,600] [added: 47,600] | | | [removed: 42,000] [added: 44,600] | |
| Household cards | [removed: 39,100] [added: 40,900] | | | [removed: 36,700] [added: 39,100] | | | [removed: 34,400] [added: 36,700] | |
| Total cardholders | [removed: 86,700] [added: 90,300] | | | [removed: 81,300] [added: 86,700] | | | [removed: 76,400] [added: 81,300] | |
Paid cardholders [added: (except Business add-ons)] are eligible to upgrade to an Executive membership in the [removed: U.S. and] [added: U.S.,] Canada, [removed: for an additional annual fee of $55, and in] Mexico and the [removed: U.K.,] [added: U.K.] for [removed: which the] [added: an] additional annual [removed: fee varies.][added: fee, which varies by country.]
[removed: This program also offers (except in Mexico)] [added: Executive members have access to] additional savings and benefits on various business and consumer [removed: services,] [added: services (except in Mexico),] such as auto and home insurance, the Costco auto purchase program and check printing services.
Executive members represented [removed: 39%] [added: 38%] of paid [removed: cardholders] [added: members] at the end of [removed: 2016, 2015, and 2014.][added: 2017.]
Executive members generally spend more than other members, and [removed: where executive memberships are offered] the percentage of our net sales attributable to these members continues to increase.
| Full-time employees | [removed: 126,000] [added: 133,000] | | | [removed: 117,000] [added: 126,000] | | | [removed: 112,000] [added: 117,000] | |
| Part-time employees | [removed: 92,000] [added: 98,000] | | | [removed: 88,000] [added: 92,000] | | | [removed: 83,000] [added: 88,000] | |
| Total employees | [removed: 218,000] [added: 231,000] | | | [removed: 205,000] [added: 218,000] | | | [removed: 195,000] [added: 205,000] | |
Our industry is highly competitive, based on factors such as price, merchandise quality and selection, location, [added: convenience, distribution strategy,] and customer service.
We compete on a worldwide basis with global, national, and regional wholesalers and retailers, including supermarkets, supercenters, [added: internet retailers, gasoline stations, hard discounters,] department and specialty stores, [removed: gasoline stations, internet retailers,] and operators selling a single category or narrow range of merchandise.
[removed: Competitors such as] Wal-Mart, Target, Kroger, and Amazon.com are among our significant general merchandise retail competitors.
We also compete with warehouse club operations (primarily [removed: Wal-Mart’s] [added: Wal-Mart’s,] Sam’s Club and BJ’s Wholesale Club), and nearly every major U.S. [added: and Mexico] metropolitan area has multiple club operations.
We [removed: have invested significantly in the development and protection of our well-recognized brands, including the Costco Wholesale® series of trademarks and our private label brand, Kirkland Signature.® We] believe that Kirkland Signature products are [removed: premium] [added: high quality] products, offered to our members at prices that are generally lower than those for similar national brand products and that they help lower costs, differentiate our merchandise offerings from other retailers, and generally earn higher margins.
We rely on trademark and copyright laws, [removed: trade secret] [added: trade-secret] protection, and confidentiality, license and other agreements with our suppliers, employees and others to protect our intellectual property rights.
Copies of the code are available free of [removed: charge,] [added: charge] by writing to Secretary, Costco Wholesale Corporation, 999 Lake Drive, Issaquah, WA 98027.
| W. Craig Jelinek | President and Chief Executive Officer. Mr. Jelinek has been President and Chief Executive Officer since January 2012 and a director since February 2010. He was President and Chief Operating Officer from February 2010 to December 2011. Prior to that he was Executive Vice President, Chief Operating Officer, Merchandising since 2004. | 1995 | [removed: 64] [added: 65] |
We sell gasoline in all countries except Korea and France, with the number of warehouses with gas stations varying significantly by country.
In the U.S. and Canada, we offer all of our online businesses.
We operate e-commerce websites in all countries except Japan, Australia, Spain, Iceland, and France.
Effective June 1, 2017, we increased our annual membership fees in the U.S. and Canada for Gold Star (individual), Business and Business add-on by $5 to $60 per year.
The Executive membership fee increased from $110 to $120 (annual membership fee of $60, plus Executive upgrade of $60), and the maximum annual 2% reward, which is earned on qualified purchases and can be redeemed only at Costco warehouses, increased from $750 to $1,000.
Our annual membership fees in our Other International operations vary by country.
| | 2017 | | | 2016 | | | 2015 | |
Approximately 15,600 employees are union employees.
We have invested significantly in the development and protection of our well-recognized brands, including the Costco Wholesale® trademarks and our private-label brand, Kirkland Signature®.
If we do not maintain the privacy and security of member-related and other business information, we could damage our reputation with members, incur substantial additional costs, and become subject to litigation.
We receive, retain, and transmit personal information about our members and entrust that information to third-party business associates, including cloud service providers that perform activities for us.
Marketing activities for new locations generally include community outreach to local businesses in new and existing markets and direct mail to prospective new members.
Ongoing promotional programs primarily relate to coupon mailers, The Costco Connection (a magazine we publish for our members), and promotional e-mails to members.
Our annual fee for these memberships is $55 in our U.S. and Canadian operations and varies by country in our Other International operations.
Executive members earn a 2% reward on qualified purchases (up to a maximum reward of $750 per year in our U.S. and Canadian operations and varies in our Other International operations), which can be redeemed only at Costco warehouses.
Approximately 15,000 employees, in a minority of our locations, are represented by the International Brotherhood of Teamsters.
| Jeffrey H. Brotman | Chairman of the Board. Mr. Brotman is a co-founder of Costco and has been a director since its inception. | 1983 | 74 |
These risks are not the only risks that we face.
An excerpt. Shown here: 40 of 70 rewritten, all 11 added and all 7 removed. The counts are complete. For every sentence, read Item 1. Business (Continued) in the FY2017 filing and the FY2016 filing.
Cover and table of contents
41 rewritten, 12 added, 6 removed, 64 unchanged
| [removed: ý] [added: ☒] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended [removed: August 28, 2016][added: September 3, 2017]
| [removed: ¨] [added: ☐] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Common Stock, [removed: $.005] [added: $.01] Par Value | | The NASDAQ Global Select Market |
YES [removed: ý] [added: ☒] NO [removed: o][added: ☐]
YES [removed: o] [added: ☐] NO [removed: ý][added: ☒]
| Large accelerated filer [removed: ý] [added: ☒] | | Accelerated filer [removed: o] [added: ☐] |
| Non-accelerated filer [removed: o] [added: ☐] (Do not check if a smaller company) | | Smaller reporting company [removed: o] [added: ☐] |
The aggregate market value of the voting stock held by non-affiliates of the registrant as of February [removed: 14, 2016] [added: 12, 2017] was [removed: $64,810,523,114.][added: $74,963,307,820.]
The number of shares outstanding of the registrant’s common stock as of October [removed: 4, 2016] [added: 10, 2017] was [removed: 437,126,569.][added: 436,989,606.]
Portions of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on January [removed: 26, 2017,] [added: 30, 2018,] are incorporated by reference into Part III of this Form 10-K.
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED [removed: AUGUST 28, 2016][added: SEPTEMBER 3, 2017]
| Item 1. | [removed: [Business](#s65D2CCD4F1A45C85B2F5DBAE7B105C6C)] [added: [Business](#s7021DAA379AEF7256C606A0B56788999)] | [removed: [3](#s65D2CCD4F1A45C85B2F5DBAE7B105C6C)] [added: [3](#s7021DAA379AEF7256C606A0B56788999)] |
| Item 1A. | [Risk [removed: Factors](#sEC2FF1ADF4FE54838488508910EA9038)] [added: Factors](#s5B1D8F89662AB35539196A0B793AF4F1)] | [removed: [8](#sEC2FF1ADF4FE54838488508910EA9038)] [added: [8](#s5B1D8F89662AB35539196A0B793AF4F1)] |
| Item 1B. | [Unresolved Staff [removed: Comments](#sAF97631070B55B4F8CD6A071F94899F8)] [added: Comments](#sB1A247D4A910C17CFF516A0B796CD562)] | [removed: [15](#sAF97631070B55B4F8CD6A071F94899F8)] [added: [15](#sB1A247D4A910C17CFF516A0B796CD562)] |
| Item 2. | [removed: [Properties](#sC731AD9FA36D5707AEBEC5C536FE306E)] [added: [Properties](#sA17174D1AE7C3E4CEE2F6A0B798E6DC0)] | [removed: [16](#sC731AD9FA36D5707AEBEC5C536FE306E)] [added: [16](#sA17174D1AE7C3E4CEE2F6A0B798E6DC0)] |
| Item 3. | [Legal [removed: Proceedings](#sFC558B711A6B54EB8724A5613757DB5D)] [added: Proceedings](#s7FB5DDF29F494258B2226A0B79C05231)] | [removed: [16](#sFC558B711A6B54EB8724A5613757DB5D)] [added: [16](#s7FB5DDF29F494258B2226A0B79C05231)] |
| Item 4. | [Mine Safety [removed: Disclosures](#s76592E171002572EA3ECA7D0C226DB4A)] [added: Disclosures](#s538DD4E06FA7A40312C46A0B79E1C8CC)] | [removed: [17](#s76592E171002572EA3ECA7D0C226DB4A)] [added: [16](#s538DD4E06FA7A40312C46A0B79E1C8CC)] |
| Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s0534AE746D0C5813BBE2FCDF0520A573)] [added: Securities](#sB1BE3E8245AA93B2DC966A0B7A35D2D4)] | [removed: [17](#s0534AE746D0C5813BBE2FCDF0520A573)] [added: [17](#sB1BE3E8245AA93B2DC966A0B7A35D2D4)] |
| Item 6. | [Selected Financial [removed: Data](#s06E33003D1B456D6AADF2BB2EC953D69)] [added: Data](#s8BF4AC128FE65A90B72B6A0B7A678B4F)] | [removed: [19](#s06E33003D1B456D6AADF2BB2EC953D69)] [added: [18](#s8BF4AC128FE65A90B72B6A0B7A678B4F)] |
| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s4897FF815840531E8D7E0ABE6E849E66)] [added: Operations](#sB0CE2BFDA9ED5C9085616A0B7A942427)] | [removed: [20](#s4897FF815840531E8D7E0ABE6E849E66)] [added: [19](#sB0CE2BFDA9ED5C9085616A0B7A942427)] |
| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sE2C72D2B35B75FBB918808D96304AD7F)] [added: Risk](#sA7660C2D88CC1061AED06A0B7BD57351)] | [removed: [31](#sE2C72D2B35B75FBB918808D96304AD7F)] [added: [30](#sA7660C2D88CC1061AED06A0B7BD57351)] |
| Item 8. | [Financial Statements and Supplementary [removed: Data](#sACFDF7A71DCA54E88416ABFB5B30C477)] [added: Data](#s2B2726A2F9236B4C13516A0B7C073944)] | [removed: [33](#sACFDF7A71DCA54E88416ABFB5B30C477)] [added: [32](#s2B2726A2F9236B4C13516A0B7C073944)] |
| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#sDA95F8306C8B5E8CA5B8E31604378C1B)] [added: Disclosure](#sB6F7675053D8FF37B7EF6A0B7C298E54)] | [removed: [33](#sDA95F8306C8B5E8CA5B8E31604378C1B)] [added: [32](#sB6F7675053D8FF37B7EF6A0B7C298E54)] |
| Item 9A. | [Controls and [removed: Procedures](#s7A4D3025040D5AE8B794019F0DBCEA50)] [added: Procedures](#sD28A1E3B54925CC836146A0B7C5AFA73)] | [removed: [33](#s7A4D3025040D5AE8B794019F0DBCEA50)] [added: [32](#sD28A1E3B54925CC836146A0B7C5AFA73)] |
| Item 9B. | [Other [removed: Information](#sC488BF0BBF265E6C90A33702A1E1B3B8)] [added: Information](#sE16DFAA126BF413F12DB6A0B7C7D738A)] | [removed: [34](#sC488BF0BBF265E6C90A33702A1E1B3B8)] [added: [33](#sE16DFAA126BF413F12DB6A0B7C7D738A)] |
| [PART [removed: III](#s02190ABD2B9459C6970A71A2EEC8D983)] [added: III](#sA5433F7382972BFD2B8C6A0B7CAD1791)] | | |
| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#s81462FF75C385224B710AC036DC3B583)] [added: Governance](#sFED2537827D056A6DDAF6A0B7CCE602E)] | [removed: [35](#s81462FF75C385224B710AC036DC3B583)] [added: [33](#sFED2537827D056A6DDAF6A0B7CCE602E)] |
| Item 11. | [Executive [removed: Compensation](#sC825805AA8C15749AD72E3C7C8603E9D)] [added: Compensation](#s7EFC5682139ED51772216A0B7D02CB4D)] | [removed: [35](#sC825805AA8C15749AD72E3C7C8603E9D)] [added: [33](#s7EFC5682139ED51772216A0B7D02CB4D)] |
| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s37CDEF71B296527693862EE2BB3855EC)] [added: Matters](#sC5A6F21E01C8724B99B66A0B7D23B80D)] | [removed: [35](#s37CDEF71B296527693862EE2BB3855EC)] [added: [34](#sC5A6F21E01C8724B99B66A0B7D23B80D)] |
| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#sD91E684078EA5068B97775E0011AEF55)] [added: Independence](#s795AF4FF540531FDA6496A0B7D54B8B6)] | [removed: [35](#sD91E684078EA5068B97775E0011AEF55)] [added: [34](#s795AF4FF540531FDA6496A0B7D54B8B6)] |
| Item 14. | [Principal Accounting Fees and [removed: Services](#s7A693BEF48995AF9A855F0F16D3FBC58)] [added: Services](#s53467940D1321A763A656A0B7D76DAF8)] | [removed: [35](#s7A693BEF48995AF9A855F0F16D3FBC58)] [added: [34](#s53467940D1321A763A656A0B7D76DAF8)] |
| Item 15. | [Exhibits, Financial Statement [removed: Schedules](#sB0B8B0D9F8635BBBA492DAEBB50E0C83)] [added: Schedules](#s13BB950C0CF77DE58D6F6A0B7DC8C4AD)] | [removed: [36](#sB0B8B0D9F8635BBBA492DAEBB50E0C83)] [added: [34](#s13BB950C0CF77DE58D6F6A0B7DC8C4AD)] |
Costco Wholesale Corporation and its subsidiaries (Costco or the Company) began operations in [removed: 1983] [added: 1983,] in Seattle, Washington.
We are principally engaged in the operation of membership warehouses in the United States (U.S.) and Puerto Rico, Canada, United Kingdom (U.K.), Mexico, Japan, Australia, Spain, [added: France, Iceland] and through majority-owned subsidiaries in Taiwan and Korea.
Costco operated [added: 741,] 715, [removed: 686,] and [removed: 663] [added: 686] warehouses worldwide at [added: September 3, 2017,] August 28, 2016, [added: and] August 30, 2015, [removed: and August 31, 2014,] respectively.
The material seasonal impact in our operations is [removed: an] increased [removed: level of] net sales and earnings during the winter holiday season.
References to [removed: 2016, 2015,] [added: 2016] and [removed: 2014] [added: 2015] relate to the 52-week fiscal years ended August 28, 2016, [added: and] August 30, 2015, [removed: and August 31, 2014,] respectively.
We buy most of our merchandise directly from manufacturers and route it to [removed: a] cross-docking consolidation [removed: point (depot)] [added: points (depots)] or directly to our warehouses.
Our depots receive large shipments from manufacturers and quickly ship these goods to [removed: our] individual warehouses.
10-K 1 cost10k90317.htm 10-K
YES ☒ NO ☐
YES ☒ NO ☐
| Emerging growth company ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
YES ☐ NO ☒
| [PART I](#sD6E9AD219CB9FCA6EB2F6A0B78E8AE4F) | | |
| [PART II](#sBC3F01574F6EF5CDF0326A0B7A14B395) | | |
| [PART IV](#sBCBE7D0DAA780CFBA42D6A0B7DA70782) | | |
| Item 16. | [Form 10-K Summary](#s2960e74129804ad79a675bc789ef1246) | [36](#s2960e74129804ad79a675bc789ef1246) |
| | [Signatures](#s670FC087EA8FB911A6806A0B7DFB46C6) | [37](#s670FC087EA8FB911A6806A0B7DFB46C6) |
References to 2017 relate to the 53-week fiscal year ended September 3, 2017.
10-K 1 cost10k82816.htm 10-K
| [PART I](#s6CD41802B2FE54CAA82FA416CBAB824F) | | |
| [PART II](#sBE5D226DBDC45A43A6CE83DC54E841D3) | | |
| [PART IV](#s24D8DC3056F45B75B9B5F7A45C0D16BE) | | |
| | [Signatures](#s4D7D2BE1F6C25CE8AD1F3F3734094E40) | [37](#s4D7D2BE1F6C25CE8AD1F3F3734094E40) |
To the extent that sales increase and inventory turnover becomes more rapid, more inventory is financed through payment terms provided by suppliers rather than by our working capital.
An excerpt. Shown here: 40 of 41 rewritten, all 12 added and all 6 removed. The counts are complete. For every sentence, read Cover and table of contents in the FY2017 filing and the FY2016 filing.
Item 2. Properties
16 rewritten, 6 added, 9 removed, 16 unchanged
| United States and Puerto Rico | [removed: 407] [added: 416] | | | [removed: 94] [added: 98] | | | [removed: 501] [added: 514] | |
| Canada | [removed: 80] [added: 85] | | | [removed: 11] [added: 12] | | | [removed: 91] [added: 97] | |
| Mexico | [removed: 36] [added: 37] | | | — | | | [removed: 36] [added: 37] | |
| Japan | [removed: 11] [added: 12] | | | 14 | | | [removed: 25] [added: 26] | |
| Korea | [removed: 5] [added: 6] | | | 7 | | | [removed: 12] [added: 13] | |
| Taiwan | — | | | [removed: 12] [added: 13] | | | [removed: 12] [added: 13] | |
| Australia | [removed: 5] [added: 6] | | | 3 | | | [removed: 8] [added: 9] | |
| (1) | [removed: 98] [added: 102] of the [removed: 147] [added: 154] leases are land-only leases, where Costco owns the building. |
The following schedule shows warehouse [removed: openings for the past five fiscal years] [added: openings, net of closings] and [added: relocations, and] expected [removed: warehouse] openings through December 31, [removed: 2016:][added: 2017:]
| [removed: Openings by Fiscal Year(1)] | United States | | | Canada | | | Other International | | | Total | | | Total Warehouses in Operation | |
| 2013 [added: and prior] | [removed: 12] [added: 451] | | | [removed: 3] [added: 85] | | | [removed: 11] [added: 98] | | | [removed: 26] [added: 634] | | | 634 | |
| [removed: 2017] [added: 2018] (expected through [removed: 12/31/2016)] [added: 12/31/2017)] | [removed: 5] [added: 4] | | | [removed: 3] [added: 1] | | | — | | | [removed: 8] [added: 5] | | | [removed: 723] [added: 746] | |
At the end of [removed: 2016,] [added: fiscal 2017,] our warehouses contained approximately [removed: 103.2] [added: 107.3] million square feet of operating floor space: [removed: 73.3] [added: 75.4] million in the U.S.; [removed: 12.6] [added: 13.5] million in Canada; and [removed: 17.3] [added: 18.4] million in Other [removed: International locations.][added: International.]
[removed: Additionally, we] [added: We] operate [removed: regional] depots for the consolidation and distribution of most merchandise shipments to the warehouses, and various processing, packaging, and other facilities to support ancillary and other businesses, [removed: which includes] [added: including] our online business.
We operate 24 [removed: depots] [added: depots,] consisting of approximately [removed: 10.1] [added: 11.0] million square feet.
Our executive offices are located in Issaquah, Washington, and we [removed: operate] [added: maintain] 18 regional offices in the U.S., Canada and Other International locations.
At September 3, 2017 we operated 741 membership warehouses:
| Iceland | — | | | 1 | | | 1 | |
| France | 1 | | | — | | | 1 | |
| Total | 587 | | | 154 | | | 741 | |
| 2017 | 13 | | | 6 | | | 7 | | | 26 | | | 741 | |
| Total | 518 | | | 98 | | | 130 | | | 746 | | | | |
At August 28, 2016 we operated 715 membership warehouses:
NUMBER OF WAREHOUSES
| Total | 568 | | | 147 | | | 715 | |
_______________
| | |
| --- | --- |
| 2012 and prior | 439 | | | 82 | | | 87 | | | 608 | | | 608 | |
| Total | 506 | | | 94 | | | 123 | | | 723 | | | | |
| (1) | Net of closings and relocations. |
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
7 rewritten, 9 added, 9 removed, 24 unchanged
Our common stock is traded on the NASDAQ Global Select Market under the symbol “COST.” On October [removed: 4, 2016,] [added: 10, 2017,] we had [removed: 8,572] [added: 8,629] stockholders of record.
The following table shows the quarterly high and low closing prices [added: of our common stock] as reported by NASDAQ for each quarter during the last two fiscal years and the quarterly cash dividend declared per [removed: share of our common stock.][added: share.]
| Fourth Quarter | [removed: $ |] 169.04 | | | [removed: $] | 141.29 | | | [removed: $] | 0.450 | | | [added: |]
| (1) | Includes a special cash dividend of [removed: $5.00] [added: $7.00] per share. |
The following table sets forth information on our common stock repurchase program activity for the fourth quarter of fiscal [removed: 2016] [added: 2017] (dollars in millions, except per share data):
| Total fourth quarter | | | [removed: 856,000] [added: 1,512,000] | | | [removed: $153.34] [added: $159.21] | | | [removed: 856,000] [added: 1,512,000] | | | |
| (1) | [removed: Our] [added: The] repurchase program is conducted under a $4,000 authorization approved by our Board of Directors in April 2015, which expires in April 2019. |
| 2017: | | | | | | | | | | | | |
| Fourth Quarter | $ | 182.20 | | | $ | 150.44 | | | $ | 0.500 | | |
| Third Quarter | 182.45 | | | | 164.55 | | | | 7.500 | | | (1) |
| Second Quarter | 172.00 | | | | 150.11 | | | | 0.450 | | | |
| First Quarter | 163.98 | | | | 142.24 | | | | 0.450 | | | |
| May 8—June 4, 2017 | | | 92,000 | | | $171.87 | | | 92,000 | | | $2,973 |
| June 5—July 2, 2017 | | | 573,000 | | | 162.00 | | | 573,000 | | | $2,881 |
| July 3—July 30, 2017 | | | 451,000 | | | 155.06 | | | 451,000 | | | $2,811 |
| July 31—September 3, 2017 | | | 396,000 | | | 156.95 | | | 396,000 | | | $2,749 |
| 2015: | | | | | | | | | | | | |
| Fourth Quarter | 146.89 | | | | 132.71 | | | | 0.400 | | | |
| Third Quarter | 153.14 | | | | 143.05 | | | | 0.400 | | | |
| Second Quarter | 155.92 | | | | 137.31 | | | | 5.355 | | | (1) |
| First Quarter | 140.01 | | | | 121.35 | | | | 0.355 | | | |
| May 9—June 5, 2016 | | | 416,000 | | | $146.08 | | | 416,000 | | | $3,292 |
| June 6—July 3, 2016 | | | 234,000 | | | 154.81 | | | 234,000 | | | $3,256 |
| July 4—July 31, 2016 | | | 66,000 | | | 164.12 | | | 66,000 | | | $3,245 |
| August 1—August 28, 2016 | | | 140,000 | | | 167.34 | | | 140,000 | | | $3,222 |
Item 6. Selected Financial Data
154 rewritten, 72 added, 50 removed, 226 unchanged
| | [added: Sept. 3, 2017 | | | |] Aug. 28, 2016 | | | | Aug. 30, 2015 | | | | Aug. 31, 2014 | | | | Sept. 1, 2013 | | | [removed: | Sept. 2, 2012 | | |]
| As of and for the year ended | [removed: (52] [added: (53] weeks) | | | | (52 weeks) | | | | (52 weeks) | | | | (52 weeks) | | | | [removed: (53] [added: (52] weeks) | | |
| Net sales | $ | [removed: 116,073] [added: 126,172] | | | $ | [removed: 113,666] [added: 116,073] | | | $ | [removed: 110,212] [added: 113,666] | | | $ | [removed: 102,870] [added: 110,212] | | | $ | [removed: 97,062] [added: 102,870] | |
| Membership fees | [removed: 2,646] [added: 2,853] | | | | [removed: 2,533] [added: 2,646] | | | | [removed: 2,428] [added: 2,533] | | | | [removed: 2,286] [added: 2,428] | | | | [removed: 2,075] [added: 2,286] | | |
| Gross margin(1) as a percentage of net sales | [removed: 11.35] [added: 11.33] | | % | | [removed: 11.09] [added: 11.35] | | % | | [removed: 10.66] [added: 11.09] | | % | | [removed: 10.62] [added: 10.66] | | % | | [removed: 10.55] [added: 10.62] | | % |
| Selling, general and administrative expenses as a percentage of net sales | [removed: 10.40] [added: 10.26] | | % | | [removed: 10.07] [added: 10.40] | | % | | [removed: 9.89] [added: 10.07] | | % | | [removed: 9.82] [added: 9.89] | | % | | [removed: 9.81] [added: 9.82] | | % |
| Operating income | $ | [removed: 3,672] [added: 4,111] | | | $ | [removed: 3,624] [added: 3,672] | | | $ | [removed: 3,220] [added: 3,624] | | | $ | [removed: 3,053] [added: 3,220] | | | $ | [removed: 2,759] [added: 3,053] | |
| Net income attributable to [removed: Costco(2)] [added: Costco] | [removed: 2,350] [added: 2,679] | | | | [removed: 2,377] [added: 2,350] | | | | [removed: 2,058] [added: 2,377] | | | | [removed: 2,039] [added: 2,058] | | | | [removed: 1,709] [added: 2,039] | | |
| Net income per diluted common share attributable to Costco | [removed: 5.33] [added: 6.08] | | | | [removed: 5.37] [added: 5.33] | | | | [removed: 4.65] [added: 5.37] | | | | [removed: 4.63] [added: 4.65] | | | | [removed: 3.89] [added: 4.63] | | |
| Cash dividends declared per common share | [removed: 1.70] [added: 8.90] | | | | [removed: 6.51] [added: 1.70] | | | | [removed: 1.33] [added: 6.51] | | | | [removed: 8.17] [added: 1.33] | | | | [removed: 1.03] [added: 8.17] | | |
| Changes in comparable [removed: sales(3)] [added: sales(2)] | | | | | | | | | | | | | | | | | | | |
| United States | [removed: 1] [added: 4] | | % | | [removed: 3] [added: 1] | | % | | [removed: 5] [added: 3] | | % | | [removed: 6] [added: 5] | | % | | [removed: 7] [added: 6] | | % |
| Canada | [added: 5 | | % | |] (3 | | )% | | (5 | | )% | | 2 | | % | | 9 | | % | [removed: | 8 | | % |]
| Other International | [removed: (3] [added: 2] | | [removed: )%] [added: %] | | (3 | | )% | | [removed: 3] [added: (3] | | [removed: %] [added: )%] | | [removed: 1] [added: 3] | | % | | [removed: 3] [added: 1] | | % |
| Total Company | [removed: 0] [added: 4] | | % | | [removed: 1] [added: 0] | | % | | [removed: 4] [added: 1] | | % | | [removed: 6] [added: 4] | | % | | [removed: 7] [added: 6] | | % |
| Increase in Total Company comparable sales excluding the impact of changes in foreign currency and gasoline prices | 4 | | % | | [removed: 7] [added: 4] | | % | | [removed: 6] [added: 7] | | % | | 6 | | % | | 6 | | % |
| Net property and equipment | $ | [removed: 17,043] [added: 18,161] | | | $ | [removed: 15,401] [added: 17,043] | | | $ | [removed: 14,830] [added: 15,401] | | | $ | [removed: 13,881] [added: 14,830] | | | $ | [removed: 12,961] [added: 13,881] | |
| Total assets | [removed: 33,163] [added: 36,347] | | | | [removed: 33,017] [added: 33,163] | | | | [removed: 32,662] [added: 33,017] | | | | [removed: 29,936] [added: 32,662] | | | | [removed: 26,827] [added: 29,936] | | |
| Long-term debt, excluding current portion | [removed: 4,061] [added: 6,573] | | | | [removed: 4,852] [added: 4,061] | | | | [removed: 5,084] [added: 4,852] | | | | [removed: 4,986] [added: 5,084] | | | | [removed: 1,380] [added: 4,986] | | |
| Costco stockholders’ equity | $ | [removed: 12,079] [added: 10,778] | | | $ | [removed: 10,617] [added: 12,079] | | | $ | [removed: 12,303] [added: 10,617] | | | $ | [removed: 10,833] [added: 12,303] | | | $ | [removed: 12,361] [added: 10,833] | |
| Beginning of year | [removed: 686] [added: 715] | | | | [removed: 663] [added: 686] | | | | [removed: 634] [added: 663] | | | | [removed: 608] [added: 634] | | | | [removed: 592] [added: 608] | | |
| [removed: Opened(4)] [added: Opened] | [removed: 33] [added: 28] | | | | [removed: 26] [added: 33] | | | | [removed: 30] [added: 26] | | | | [removed: 26] [added: 30] | | | | [removed: 17] [added: 26] | | |
| End of year | [removed: 715] [added: 741] | | | | [removed: 686] [added: 715] | | | | [removed: 663] [added: 686] | | | | [removed: 634] [added: 663] | | | | [removed: 608] [added: 634] | | |
| Total paid members (000's) | [removed: 47,600] [added: 49,400] | | | | [removed: 44,600] [added: 47,600] | | | | [removed: 42,000] [added: 44,600] | | | | [removed: 39,000] [added: 42,000] | | | | [removed: 36,900] [added: 39,000] | | |
| [removed: (3)] [added: (2)] | Includes net sales from warehouses and websites operating for more than one year. For fiscal [removed: 2013 and 2012,] [added: 2017,] the prior year includes the comparable [removed: 52 and] 53 [removed: weeks, respectively.] [added: weeks.] |
We define comparable sales as sales from warehouses open for more than one year, including remodels, relocations and expansions, as well as online sales related to [added: e-commerce] websites operating for more than one year.
Generally, rising gasoline prices benefit net sales growth which, given the higher sales base, negatively impacts our gross margin percentage but decreases our selling, general and administrative [added: (SG&A)] expenses as a percentage of net sales.
Our [removed: online] [added: e-commerce] business growth both domestically and internationally has also increased our sales.
While we believe that we have achieved successes in this area historically, some significant costs are partially outside our control, most [removed: particularly health care and utility expenses.]
[added: Rather, we believe that] achieving our longer-term objectives of reducing employee turnover and enhancing employee satisfaction requires maintaining compensation levels that are better than the industry average for much of our workforce.
Because our business is operated on very low [added: gross] margins, modest changes in various items in the income statement, particularly merchandise costs and [removed: selling, general and administrative] [added: SG&A] expenses, can have substantial impacts on net income.
[removed: Additionally, we] [added: We] operate our lower-margin gasoline business in all countries except [removed: Mexico, Korea,] [added: Korea] and [removed: Taiwan.][added: France.]
Fiscal [removed: years 2016, 2015] [added: year 2017 was a 53-week fiscal year ending on September 3, 2017, while 2016] and [removed: 2014] [added: 2015] were 52-week fiscal years ending on August 28, 2016, [removed: August 30, 2015] and August [removed: 31, 2014,] [added: 30, 2015,] respectively.
Highlights for fiscal year [removed: 2016] [added: 2017] included:
| • | We opened [removed: 29] [added: 26] net new warehouses in [removed: 2016, 21] [added: 2017: 13] in the U.S., [removed: two] [added: six] in Canada, and [removed: six] [added: seven] in our Other International segment, compared to [removed: 23] [added: 29] net new warehouses in [removed: 2015;] [added: 2016;] |
| • | Membership fee revenue increased [removed: 4%] [added: 8%] to [removed: $2,646,] [added: $2,853,] primarily due to membership sign-ups at existing and new [removed: warehouses and executive membership upgrades, partially offset by the negative impact] [added: warehouses, an extra week] of [removed: changes] [added: membership fees] in [removed: most foreign currencies relative to] [added: 2017,] the [removed: U.S. dollar;] [added: annual fee increase, and executive membership upgrades;] |
[removed: | • | Gross margin percentage increased 26 basis points, primarily from] [added: Excluding] the impact of gasoline price [removed: deflation] [added: inflation] on net [removed: sales; |][added: sales, gross margin as a percentage of adjusted net sales was 11.40%, an increase of five basis points.]
| • | Net income [removed: decreased 1%] [added: increased 14%] to [removed: $2,350,] [added: $2,679,] or [removed: $5.33] [added: $6.08] per diluted share compared to [removed: $2,377,] [added: $2,350,] or [removed: $5.37] [added: $5.33] per diluted share in [removed: 2015.] [added: 2016.] The [removed: 2015] [added: 2017] results were positively impacted by a [removed: $57] [added: $82] tax benefit, or [removed: $0.13] [added: $0.19] per diluted share, in connection with the special cash dividend paid to the Company's 401(k) Plan [removed: participants;] [added: participants and other net benefits of approximately $51, or $0.07 per diluted share, for non-recurring net legal and other matters;] |
| • | [removed: The] [added: In April 2017, the] Board of Directors approved an increase in the quarterly cash dividend from [removed: $0.40 to] $0.45 [added: to $0.50] per [removed: share in April 2016; and] [added: share.] |
| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |
| Closed due to relocation | (2 | | ) | | (4 | | ) | | (3 | | ) | | (1 | | ) | | 0 | | |
particularly health care and utility expenses.
| • | Net sales increased 9% to $126,172, driven by a 4% increase in comparable sales, sales at new warehouses opened in 2016 and 2017, and the benefit of one additional week of sales in 2017; |
| • | Gross margin percentage decreased two basis points; |
| • | SG&A expenses as a percentage of net sales decreased 14 basis points, driven by lower costs associated with the co-branded credit card arrangement in the U.S.; |
| • | In 2017, we re-paid long-term debt totaling $2,200 representing the aggregate principal balances of the 5.5% and 1.125% Senior Notes; we issued $3,800 in aggregate principal amount of Senior Notes which funded a special cash dividend of $7.00 per share paid in May 2017 (approximately $3,100); and |
2017 vs. 2016
Net sales increased $10,099 or 9% during 2017, primarily due to a 4% increase in comparable sales, new warehouses opened in 2016 and 2017, and the benefit of one additional week of sales in 2017.
The negative impact was driven by Other International operations, partially offset by positive impacts attributable to our Canadian operations.
The negative impact was primarily attributable to our Canadian operations and within certain of our Other International
| | 2017 | | | | 2016 | | | | 2015 | | |
2017 vs. 2016
In the first fiscal quarter of 2017, we increased our annual membership fees in certain of our Other International operations.
Effective June 1, 2017, we also increased our annual membership fees in the U.S. and Canada for Gold Star (individual), Business and Business add-on by $5 to $60 and for Executive Membership from$110 to $120 (annual membership fee of $60, plus the Executive upgrade of $60); and the maximum 2% reward associated with Executive Membership increased from $750 to $1,000 annually.
We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period.
These fee increases had a positive impact on membership fee revenues during 2017 of approximately $23 and will positively impact the next several quarters.
We expect these increases to positively impact membership fee revenue by approximately $175 in fiscal 2018.
| | 2017 | | | | 2016 | | | | 2015 | | |
| Net sales | $ | 126,172 | | | $ | 116,073 | | | $ | 113,666 | |
2017 vs. 2016
Total gross margin percentage decreased two basis points compared to 2016.
This increase was primarily due to amounts earned under the co-branded credit card arrangement in the U.S. of 15 basis points and a benefit of three basis points from non-recurring legal settlements and other matters.
The improvement in terms in our current co-brand agreement as compared to the prior co-brand arrangement led to substantial year over year benefits in fiscal 2017.
Changes of comparable magnitude will not occur in subsequent years.
These increases were partially offset by a six basis point decrease in our core merchandise categories, primarily due to food and sundries as a result of a decrease in sales penetration.
The gross margin percentage was also negatively impacted by five basis points due to a LIFO benefit in 2016 and one basis point in warehouse ancillary and other businesses.
Gross margin on a segment basis, when expressed as a percentage of the segment's own sales and excluding the impact of changes in gasoline prices on net sales (segment gross margin percentage), increased in our U.S. operations, due to amounts earned under the co-branded credit card arrangement and non-recurring legal settlements and other matters as discussed above.
These increases were partially offset by a decrease in core merchandise categories, predominantly food and sundries as a result of a decrease in sales penetration, and a LIFO benefit in 2016.
The segment gross margin percentage in our Canadian operations increased, primarily due to increases in warehouse ancillary and other businesses, primarily our pharmacy business, partially offset by a decrease in our core merchandise categories, largely fresh foods.
| | 2017 | | | | 2016 | | | | 2015 | | |
2017 vs. 2016
SG&A expenses as a percentage of net sales decreased 14 basis points compared to 2016.
Operating costs related to warehouses, ancillary, and other businesses, which includes e-commerce and travel, were lower by nine basis points, primarily due to lower costs associated with the co-branded credit card arrangement in the U.S. of 18 basis points.
The improvement in terms in our current co-brand agreement as compared to the prior co-brand arrangement led to substantial year over year benefits in fiscal 2017.
Changes of comparable magnitude will not occur in subsequent years.
This was partially offset by higher payroll and employee benefit expenses of 11 basis points, primarily in our U.S. operations.
Stock compensation expense was also higher by one basis point.
| | 2017 | | | | 2016 | | | | 2015 | | |
In 2017, we entered into two new international markets, Iceland and France.
| | 2017 | | | | 2016 | | | | 2015 | | |
| Closed(4) | (4 | | ) | | (3 | | ) | | (1 | | ) | | 0 | | | | (1 | | ) |
| | |
| --- | --- |
| (2) | Includes 50% of the results of Costco Mexico's operations in fiscal 2012 prior to the July acquisition of our former joint venture partner's 50% equity interest. The remainder of fiscal 2012 and thereafter include 100% of Costco Mexico's results of operations. |
| (4) | Includes warehouse relocations and closures. |
Rather, we believe that
| • | Net sales increased 2% to $116,073, driven by sales at new warehouses opened in 2015 and 2016, while comparable sales were flat. Net and comparable sales results were negatively impacted by changes in most foreign currencies relative to the U.S. dollar and decreases in the price of gasoline; |
| • | Selling, general and administrative (SG&A) expenses as a percentage of net sales increased 33 basis points, largely driven by the impact of gasoline price deflation on net sales; |
| • | Changes in foreign currencies relative to the U.S. dollar adversely impacted diluted earnings per share by $0.24, largely driven by changes in the Canadian dollar and Mexican peso; |
| • | In December 2015, we paid the outstanding principal balance and associated interest on the 0.65% Senior Notes of approximately $1,204, from our cash and cash equivalents and short-term investments; |
| • | In June 2016, we transitioned to our new Citibank-Visa exclusive co-branded credit card in the U.S. (described in further detail in Item 9B of this Report). |
The negative impact was attributable to most foreign countries in which we operate, predominantly Canada of $1,646, Mexico of $550, and UK of $224.
2015 vs. 2014
Net sales increased $3,454 or 3% during 2015.
This was attributable to sales at new warehouses opened in 2014 and 2015 and a 1% increase in comparable sales.
The negative impact was attributable to all foreign countries in which we operate, predominantly Canada of
$2,027, Mexico of $385, and Japan of $368.
Membership fees increased 4% in 2015.
These increases were partially offset by changes in foreign currencies relative to the U.S. dollar, which negatively impacted membership fees by approximately $76 in 2015.
increase in hardlines, partially offset by food and sundries due to a decrease in sales penetration.
Our gross margin percentage increased 43 basis points compared to 2014 and most of the improvement was derived from the impact of gasoline price deflation on net sales.
Excluding this impact, gross margin as a percentage of adjusted net sales was 10.81%, an increase of 15 basis points from the prior year.
This increase was predominantly due to: an increase in our warehouse ancillary and other business gross margin of 23 basis points, due primarily to our gasoline business; partially offset by a negative contribution from core merchandise categories of 12 basis points, as a result of a decrease in their sales penetration.
A LIFO benefit in 2015 compared to a charge in 2014 positively contributed five basis points.
The LIFO benefit resulted largely from lower costs of gasoline.
Segment gross margin percentage increased in our U.S. operations, primarily due to our gasoline business and the LIFO benefit discussed above.
The segment gross margin percentage in our Other International operations decreased, primarily in food and sundries.
Our investment in modernizing our information systems is ongoing and expected to continue to negatively impact SG&A expenses.
SG&A expenses as a percentage of net sales increased 18 basis points, mostly due to the negative impact of gasoline price deflation on net sales.
This was due to lower warehouse operating costs of 16 basis points, primarily from improvements in payroll expenses in our core business as a result of leveraging increased sales.
Higher stock compensation expense also negatively impacted our SG&A expenses by four basis points, due to an appreciation in the trading price of our stock at the time of grant.
The increase in interest expense is primarily due to the Senior Notes issued in February 2015.
The increase in net foreign-currency transaction gains was primarily attributable to favorable mark-to-market adjustments for forward foreign exchange contracts compared to the prior year.
The increase was also attributable to net gains on the revaluation or settlement of monetary assets and liabilities during the year.
if repatriated would not result in an adverse tax consequence.
During 2016, we repatriated the earnings in our Canadian operations that in 2015 were no longer considered indefinitely reinvested.
Accordingly, we no longer consider that portion to be indefinitely reinvested.
The primary uses of cash in 2016 were related to the $1,200 repayment of our 0.65% Senior Notes in December 2015, dividend payments of $746, repurchases of common stock, and payment of withholding taxes on stock-based awards.
Net cash used in financing activities in 2015 included a $5.00 per share special cash dividend, totaling approximately $2,201, partially offset by the issuance of $1,000 in Senior Notes.
In March 2016, our Japanese subsidiary issued approximately $103 of 0.63% Guaranteed Senior Notes through a private placement.
An excerpt. Shown here: 40 of 154 rewritten, 40 of 72 added and 40 of 50 removed. The counts are complete. For every sentence, read Item 6. Selected Financial Data in the FY2017 filing and the FY2016 filing.
Item 8. Financial Statements and Supplementary Data
7 rewritten, 0 added, 0 removed, 11 unchanged
| [Reports of Independent Registered Public Accounting [removed: Firm](#s3A8A13F1931E55E391CE3C0E2815CC90)] [added: Firm](#s46329FC0FA40161B74D36A0B7E1DC914)] | [removed: [39](#s3A8A13F1931E55E391CE3C0E2815CC90)] [added: [39](#s46329FC0FA40161B74D36A0B7E1DC914)] |
| [Consolidated Balance Sheets, as of [removed: August 28, 2016] [added: September 3, 2017] and August [removed: 30, 2015](#s140B531CB524590A84A7A34E55266798)] [added: 28, 2016](#s972158F7B7285F6A0A2A6A0B567A055A)] | [removed: [41](#s140B531CB524590A84A7A34E55266798)] [added: [41](#s972158F7B7285F6A0A2A6A0B567A055A)] |
| [Consolidated Statements of Income, for the [added: 53 weeks ended September 3, 2017 and] 52 weeks ended August 28, [removed: 2016, August 30, 2015] [added: 2016] and August [removed: 31, 2014](#sC05092660F7B533B87612A1F2904A90F)] [added: 30, 2015](#s106DBF2B4C461DA8C7C76A0B56962FDD)] | [removed: [42](#sC05092660F7B533B87612A1F2904A90F)] [added: [42](#s106DBF2B4C461DA8C7C76A0B56962FDD)] |
| [Consolidated Statements of Comprehensive Income, for the [added: 53 weeks ended September 3, 2017 and] 52 weeks ended August 28, [removed: 2016, August 30, 2015] [added: 2016] and August [removed: 31, 2014](#sC4FBEA1FA9F5580BA86D095618FDAEE6)] [added: 30, 2015](#s5F3F6D033A426DBE29C96A0B56A775C2)] | [removed: [43](#sC4FBEA1FA9F5580BA86D095618FDAEE6)] [added: [43](#s5F3F6D033A426DBE29C96A0B56A775C2)] |
| [Consolidated Statements of Equity, for the [added: 53 weeks ended September 3, 2017 and] 52 weeks ended August 28, [removed: 2016, August 30, 2015] [added: 2016] and August [removed: 31, 2014](#s744F9D8DF1945729B6928F9CF96A5D5B)] [added: 30, 2015](#s71BE60831FBC49DC7BF16A0B56AD95A2)] | [removed: [44](#s744F9D8DF1945729B6928F9CF96A5D5B)] [added: [44](#s71BE60831FBC49DC7BF16A0B56AD95A2)] |
| [Consolidated Statements of Cash Flows, for the [added: 53 weeks ended September 3, 2017 and] 52 weeks ended August 28, [removed: 2016, August 30, 2015] [added: 2016] and August [removed: 31, 2014](#s612136A8B8105681A4D5F0292161EED7)] [added: 30, 2015](#sC09F61E6A08A87512AF16A0B56F07860)] | [removed: [45](#s612136A8B8105681A4D5F0292161EED7)] [added: [45](#sC09F61E6A08A87512AF16A0B56F07860)] |
| [Notes to Consolidated Financial [removed: Statements](#s8A520608138D56DB82D9DD5864061E5F)] [added: Statements](#s8ADE0DA14BBCDED5B3186A0B7F6EDD4A)] | [removed: [46](#s8A520608138D56DB82D9DD5864061E5F)] [added: [46](#s8ADE0DA14BBCDED5B3186A0B7F6EDD4A)] |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
1 rewritten, 3 added, 0 removed, 5 unchanged
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our fiscal quarter ended [removed: August 28, 2016,] [added: September 3, 2017,] that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.
Our internal control over financial reporting
Item 9A. Controls and Procedures (Continued)
3 rewritten, 0 added, 2 removed, 15 unchanged
[removed: Our internal control over financial reporting] is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Under the supervision and with the participation of our management, we assessed the effectiveness of our internal control over financial reporting as of [removed: August 28, 2016,] [added: September 3, 2017,] using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013).
Based on its assessment, management has concluded that our internal control over financial reporting was effective as of [removed: August 28, 2016.][added: September 3, 2017.]
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.
Item 9B. Other Information
0 rewritten, 1 added, 16 removed, 1 unchanged
None.
In February 2015, we entered into a Co-Branded Credit Card Program Agreement (the “Program Agreement”) with Citibank, N.A. (“Citi”).
Under the terms of the Program Agreement, Citi became the exclusive issuer of our co-branded credit cards to our members.
Additionally, Visa U.S.A. Inc. became the credit card network for Costco in the United States and Puerto Rico.
Citi purchased the current co-branded credit card portfolio from American Express in June 2016.
On June 20, 2016, we began accepting all Visa cards, including the Citi co-branded credit cards, replacing American Express.
We receive various forms of consideration under the Program Agreement.
The initial term of the Program Agreement is ten years.
Under the Program Agreement, Costco earns a royalty on purchases made with the co-branded card other than from Costco ("external spend").
The royalty varies based on the amount of external spend in relation to total spend.
In addition, Costco will fund a portion of the loyalty reward cardholders earn under the program on external spend.
Loyalty rewards under the program are as follows: 4% on eligible gasoline purchases, 3% on restaurant and eligible travel purchases, 2% on all purchases from Costco and Costco.com, and 1% on all other purchases.
These rewards may be adjusted over the term of the program.
The loyalty rewards earned by co-branded cardholders will be in the form of certificates redeemable at Costco, for cash or merchandise.
Costco also receives a bounty on approved new credit card accounts acquired through Costco
channels.
Additionally, the base discount Costco pays related to Visa acceptance is lower than previously paid for American Express acceptance.
Item 10. Directors, Executive Officers and Corporate Governance
1 rewritten, 0 added, 0 removed, 1 unchanged
The information required by this Item concerning our directors and nominees for director is incorporated herein by reference to the sections entitled “Proposal 1: Election of Directors,” “Directors,” “Committees of the Board” and “Section 16(a) Beneficial Ownership Reporting Compliance” in Costco’s Proxy Statement for its [removed: 2017] [added: 2018] annual meeting of stockholders, which will be filed with the SEC within 120 days of the end of our fiscal year (“Proxy Statement”).
Item 15. Exhibits, Financial Statement Schedules
18 rewritten, 20 added, 950 removed, 63 unchanged
| [removed: (b)] [added: (c)] | Financial Statement Schedules—None. |
[added: | (b) | Exhibits:] The [removed: following] [added: required] exhibits are filed as part of this Annual Report on Form 10-K or are incorporated herein by reference. [added: |]
| [removed: 3.1] [added: [3.1](http://www.sec.gov/Archives/edgar/data/909832/000090983215000003/costex3110q21515.htm)] | | [removed: Articles] [added: [Articles] of Incorporation as amended of Costco [removed: Wholesale] [added: Wholesale](http://www.sec.gov/Archives/edgar/data/909832/000090983215000003/costex3110q21515.htm) Corporation] | | | | 10-Q | | 2/15/2015 | | 3/11/2015 |
| [removed: 10.1*] [added: [10.1*](http://www.sec.gov/Archives/edgar/data/909832/000119312512428890/d388097dex101.htm)] | | [removed: Costco] [added: [Costco] Wholesale Executive Health [removed: Plan] [added: Plan](http://www.sec.gov/Archives/edgar/data/909832/000119312512428890/d388097dex101.htm)] | | | | 10-K | | 9/2/2012 | | 10/19/2012 |
| [removed: 10.1.2*] [added: [10.1.2*](http://www.sec.gov/Archives/edgar/data/909832/000119312510059399/dex10113.htm)] | | [removed: Fifth] [added: [Fifth] Restated 2002 Stock Incentive [removed: Plan] [added: Plan](http://www.sec.gov/Archives/edgar/data/909832/000119312510059399/dex10113.htm)] | | | | 10-Q | | 2/14/2010 | | 3/17/2010 |
| [removed: 10.1.3*] [added: [10.1.3*](http://www.sec.gov/Archives/edgar/data/909832/000119312512030161/d292236dex42.htm)] | | [removed: Sixth] [added: [Sixth] Restated 2002 Stock Incentive [removed: Plan] [added: Plan](http://www.sec.gov/Archives/edgar/data/909832/000119312512030161/d292236dex42.htm)] | | | | 8-K | | | | 1/31/2012 |
| [removed: 10.1.4*] [added: [10.1.4*](http://www.sec.gov/Archives/edgar/data/909832/000090983214000028/costdefproxy2014.htm#sADEFC67A06AE143EB0AD50BB166A9871)] | | [removed: Seventh] [added: [Seventh] Restated 2002 Stock Incentive [removed: Plan] [added: Plan](http://www.sec.gov/Archives/edgar/data/909832/000090983214000028/costdefproxy2014.htm#sADEFC67A06AE143EB0AD50BB166A9871)] | | | | DEF 14A | | | | 12/19/2014 |
| [removed: 10.1.5*] [added: [10.1.5*](http://www.sec.gov/Archives/edgar/data/909832/000090983215000017/costex1011110q112215.htm)] | | [removed: Seventh] [added: [Seventh] Restated 2002 Stock Incentive Plan Restricted Stock Unit Award Agreement-U.S. [removed: Employee] [added: Employee](http://www.sec.gov/Archives/edgar/data/909832/000090983215000017/costex1011110q112215.htm)] | | | | 10-Q | | 11/22/2015 | | 12/17/2015 |
| [removed: 10.1.6*] [added: [10.1.6*](http://www.sec.gov/Archives/edgar/data/909832/000090983215000017/costex1011210q112215.htm)] | | [removed: Seventh] [added: [Seventh] Restated 2002 Stock Incentive Plan Restricted Stock Unit Award Agreement-Non-U.S. [removed: Employee] [added: Employee](http://www.sec.gov/Archives/edgar/data/909832/000090983215000017/costex1011210q112215.htm)] | | | | 10-Q | | 11/22/2015 | | 12/17/2015 |
| [removed: 10.1.7*] [added: [10.1.7*](http://www.sec.gov/Archives/edgar/data/909832/000090983215000017/costex1011310q112215.htm)] | | [removed: Seventh] [added: [Seventh] Restated 2002 Stock Incentive Plan Restricted Stock Unit Award Agreement-Non-Executive [removed: Director] [added: Director](http://www.sec.gov/Archives/edgar/data/909832/000090983215000017/costex1011310q112215.htm)] | | | | 10-Q | | 11/22/2015 | | 12/17/2015 |
| [removed: 10.1.8*] [added: [10.1.8*](http://www.sec.gov/Archives/edgar/data/909832/000090983215000017/costex1011410q112215.htm)] | | [removed: Seventh] [added: [Seventh] Restated 2002 Stock Incentive Plan Letter Agreement for 2016 Performance-Based Restricted Stock [removed: Units-Executive] [added: Units-Executive](http://www.sec.gov/Archives/edgar/data/909832/000090983215000017/costex1011410q112215.htm)] | | | | 10-Q | | 11/22/2015 | | 12/17/2015 |
| [removed: 10.1.9*] [added: [10.1.10*](http://www.sec.gov/Archives/edgar/data/909832/000090983215000014/costex1011510k83015.htm)] | | [removed: Executive] [added: [Executive] Employment Agreement, [removed: effective] [added: dated] August 31, 2015, [removed: as amended,] between [removed: Craig Jelinek and] Costco Wholesale Corporation [added: and W. Craig Jelinek](http://www.sec.gov/Archives/edgar/data/909832/000090983215000014/costex1011510k83015.htm)] | | [removed: x] | | [added: 10-K] | | [added: 8/30/2015] | | [added: 10/14/2015] |
| [removed: 10.2*] [added: [10.2*](http://www.sec.gov/Archives/edgar/data/909832/000103221099001718/0001032210-99-001718.txt)] | | [removed: Form] [added: [Form] of Indemnification [removed: Agreement] [added: Agreement](http://www.sec.gov/Archives/edgar/data/909832/000103221099001718/0001032210-99-001718.txt)] | | | | 14A | | | | 12/13/1999 |
| [removed: 10.5] [added: [10.5](http://www.sec.gov/Archives/edgar/data/909832/000090983215000012/costex10110qa51015.htm)] | | [removed: Citibank,] [added: [Citibank,] N.A. Co-Branded Credit Card [removed: Agreement] [added: Agreement](http://www.sec.gov/Archives/edgar/data/909832/000090983215000012/costex10110qa51015.htm)] | | | | 10-Q/A | | 5/10/2015 | | 8/31/2015 |
| [removed: 10.5.1] [added: [10.5.1](http://www.sec.gov/Archives/edgar/data/909832/000090983215000017/costex10210q112215.htm)] | | [removed: First] [added: [First] Amendment to Citi, N.A. Co-Branded Credit Card [removed: Agreement] [added: Agreement](http://www.sec.gov/Archives/edgar/data/909832/000090983215000017/costex10210q112215.htm)] | | | | 10-Q | | 11/22/2015 | | 12/17/2015 |
| [removed: 10.5.2] [added: [10.5.2](http://www.sec.gov/Archives/edgar/data/909832/000090983216000023/costex10110q21416.htm)] | | [removed: Second] [added: [Second] Amendment to Citi, N.A. Co-Branded Credit Card [removed: Agreement] [added: Agreement](http://www.sec.gov/Archives/edgar/data/909832/000090983216000023/costex10110q21416.htm)] | | | | 10-Q | | 2/14/2016 | | 3/9/2016 |
| [removed: 10.5.3*] [added: [10.5.3](http://www.sec.gov/Archives/edgar/data/909832/000090983216000032/costex105310k82816.htm)] | | [removed: Third] [added: [Third] Amendment to Citi, N.A. Co-Branded Credit Card [removed: Agreement] [added: Agreement](http://www.sec.gov/Archives/edgar/data/909832/000090983216000032/costex105310k82816.htm)] | | [removed: x] | | [added: 10-K] | | [added: 8/28/2016] | | [added: 10/12/2016] |
| [removed: 23.1] [added: [23.1](https://www.sec.gov/Archives/edgar/data/909832/000090983217000014/costex23110k90317.htm)] | | [removed: Consent] [added: [Consent] of Independent Registered Public Accounting [removed: Firm] [added: Firm](https://www.sec.gov/Archives/edgar/data/909832/000090983217000014/costex23110k90317.htm)] | | x | | | | | | |
| [3.2](http://www.sec.gov/Archives/edgar/data/909832/000119312516727544/d66078dex32.htm) | | [Bylaws as amended of](http://www.sec.gov/Archives/edgar/data/909832/000119312516727544/d66078dex32.htm) Costco Wholesale Corporation | | | | 8-K | | | | 9/30/2016 |
| [4.1](http://www.sec.gov/Archives/edgar/data/909832/000119312517172294/d398248dex41.htm) | | [Form of 2.150% Senior Notes due May 18, 2021](http://www.sec.gov/Archives/edgar/data/909832/000119312517172294/d398248dex41.htm) | | | | 8-K | | | | 5/16/2017 |
| [4.2](http://www.sec.gov/Archives/edgar/data/909832/000119312517172294/d398248dex42.htm) | | [Form of 2.300% Senior Notes due May 18, 2022](http://www.sec.gov/Archives/edgar/data/909832/000119312517172294/d398248dex42.htm) | | | | 8-K | | | | 5/16/2017 |
| [4.3](http://www.sec.gov/Archives/edgar/data/909832/000119312517172294/d398248dex43.htm) | | [Form of 2.750% Senior Notes due May 18, 2024](http://www.sec.gov/Archives/edgar/data/909832/000119312517172294/d398248dex43.htm) | | | | 8-K | | | | 5/16/2017 |
| [4.4](http://www.sec.gov/Archives/edgar/data/909832/000119312517172294/d398248dex44.htm) | | [Form of 3.000% Senior Notes due May 18, 2027](http://www.sec.gov/Archives/edgar/data/909832/000119312517172294/d398248dex44.htm) | | | | 8-K | | | | 5/16/2017 |
| [10.1.9*](http://www.sec.gov/Archives/edgar/data/909832/000090983216000032/costex101910k82816.htm) | | [Amendment to Executive Employment Agreement, dated July 21, 2016, between W. Craig Jelinek and Costco Wholesale Corporation](http://www.sec.gov/Archives/edgar/data/909832/000090983216000032/costex101910k82816.htm) | | | | 10-K | | 8/28/2016 | | 10/12/2016 |
| [10.1.11*](http://www.sec.gov/Archives/edgar/data/909832/000090983216000040/costex10110q112016.htm) | | [Executive Employment Agreement, effective January 1, 2017, between W. Craig Jelinek and Costco Wholesale Corporation](http://www.sec.gov/Archives/edgar/data/909832/000090983216000040/costex10110q112016.htm) | | | | 10-Q | | 11/20/2016 | | 12/16/2016 |
| [10.4*](http://www.sec.gov/Archives/edgar/data/909832/000144530513002422/costex10510k2013.htm) | | [Deferred Compensation Plan](http://www.sec.gov/Archives/edgar/data/909832/000144530513002422/costex10510k2013.htm) | | | | 10-K | | 9/1/2013 | | 10/16/2013 |
| | | | | | | Incorporated by Reference | | | | |
| Exhibit Number | | Exhibit Description | | Filed Herewith | | Form | | Period Ending | | Filing Date |
| [10.7*](http://www.sec.gov/Archives/edgar/data/909832/000119312516758884/d280773dex101.htm) | | [Fiscal 2017 Executive Bonus Plan](http://www.sec.gov/Archives/edgar/data/909832/000119312516758884/d280773dex101.htm) | | | | 8-K | | | | 11/3/2016 |
| [21.1](https://www.sec.gov/Archives/edgar/data/909832/000090983217000014/costex21110k90317.htm) | | [Subsidiaries of the Company](https://www.sec.gov/Archives/edgar/data/909832/000090983217000014/costex21110k90317.htm) | | x | | | | | | |
| [31.1](https://www.sec.gov/Archives/edgar/data/909832/000090983217000014/costex31110k90317.htm) | | [Rule 13a – 14(a) Certifications](https://www.sec.gov/Archives/edgar/data/909832/000090983217000014/costex31110k90317.htm) | | x | | | | | | |
| [32.1](https://www.sec.gov/Archives/edgar/data/909832/000090983217000014/costex32110k90317.htm) | | [Section 1350 Certifications](https://www.sec.gov/Archives/edgar/data/909832/000090983217000014/costex32110k90317.htm) | | x | | | | | | |
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3.Exhibits:
The required exhibits are included at the end of the Form 10-K Annual Report and are described in the Exhibit Index immediately preceding the first exhibit.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
October 11, 2016
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| --- | --- | --- | --- |
| | COSTCO WHOLESALE CORPORATION (Registrant) | | |
| | By | | /s/ RICHARD A. GALANTI |
| | | | Richard A. Galanti Executive Vice President, Chief Financial Officer and Director |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| By | | /s/ W. CRAIG JELINEK | | | | October 11, 2016 |
| | | W. Craig Jelinek President, Chief Executive Officer and Director | | | | |
| By | | /s/ JEFFREY H. BROTMAN | | | | October 11, 2016 |
| | | Jeffrey H. Brotman Chairman of the Board | | | | |
| By | | /s/ RICHARD A. GALANTI | | | | October 11, 2016 |
| | | Richard A. Galanti Executive Vice President, Chief Financial Officer and Director (Principal Financial Officer) | | | | |
| By | | /s/ DAVID S. PETTERSON | | | | October 11, 2016 |
| | | David S. Petterson Senior Vice President and Controller (Principal Accounting Officer) | | | | |
| By | | /s/ SUSAN L. DECKER | | | | October 11, 2016 |
| | | Susan L. Decker Director | | | | |
| By | | /s/ DANIEL J. EVANS | | | | October 11, 2016 |
| | | Daniel J. Evans Director | | | | |
| By | | /s/ HAMILTON E. JAMES | | | | October 11, 2016 |
| | | Hamilton E. James Director | | | | |
| By | | /s/ RICHARD M. LIBENSON | | | | October 11, 2016 |
| | | Richard M. Libenson Director | | | | |
| By | | /s/ JOHN W. MEISENBACH | | | | October 11, 2016 |
| | | John W. Meisenbach Director | | | | |
| By | | /s/ CHARLES T. MUNGER | | | | October 11, 2016 |
| | | Charles T. Munger Director | | | | |
| By | | /S/ JEFFREY S. RAIKES | | | | October 11, 2016 |
| | | Jeffrey S. Raikes Director | | | | |
| By | | /S/ JAMES D. SINGEGAL | | | | October 11, 2016 |
| | | James D. Sinegal Director | | | | |
| By | | /S/ JOHN W. STANTON | | | | October 11, 2016 |
An excerpt. Shown here: all 18 rewritten, all 20 added and 40 of 950 removed. The counts are complete. For every sentence, read Item 15. Exhibits, Financial Statement Schedules in the FY2017 filing and the FY2016 filing.
Item 16. Form 10-K Summary
0 rewritten, 1,133 added, 0 removed, 0 unchanged
New section this year
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
October 17, 2017
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| --- | --- | --- | --- |
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| | COSTCO WHOLESALE CORPORATION (Registrant) | | |
| | | | |
| | By | | /s/ RICHARD A. GALANTI |
| | | | Richard A. Galanti Executive Vice President, Chief Financial Officer and Director |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
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| By | | /s/ W. CRAIG JELINEK | | | | October 17, 2017 |
| | | W. Craig Jelinek President, Chief Executive Officer and Director | | | | |
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| By | | /s/ HAMILTON E. JAMES | | | | October 17, 2017 |
| | | Hamilton E. James Chairman of the Board | | | | |
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| By | | /s/ RICHARD A. GALANTI | | | | October 17, 2017 |
| | | Richard A. Galanti Executive Vice President, Chief Financial Officer and Director (Principal Financial Officer) | | | | |
| | | | | | | |
| By | | /s/ DANIEL M. HINES | | | | October 17, 2017 |
| | | Daniel M. Hines Senior Vice President and Corporate Controller (Principal Accounting Officer) | | | | |
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| By | | /s/ SUSAN L. DECKER | | | | October 17, 2017 |
| | | Susan L. Decker Director | | | | |
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| By | | /s/ KENNETH D. DENMAN | | | | October 17, 2017 |
| | | Kenneth D. Denman Director | | | | |
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| By | | /s/ DANIEL J. EVANS | | | | October 17, 2017 |
| | | Daniel J. Evans Director | | | | |
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| --- | --- | --- | --- | --- | --- | --- |
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| By | | /s/ JOHN W. MEISENBACH | | | | October 17, 2017 |
An excerpt. Shown here: all 0 rewritten, 40 of 1,133 added and all 0 removed. The counts are complete. For every sentence, read Item 16. Form 10-K Summary in the FY2017 filing.