<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 15, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0-20355
COSTCO COMPANIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0572969
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
999 LAKE DRIVE
ISSAQUAH, WASHINGTON 98027
(Address of principal executive office)
(425) 313-8100
(Registrant's telephone number, including area code)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
The registrant had 215,651,544 common shares, par value $.01, outstanding at
March 13, 1998.
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<PAGE>
COSTCO COMPANIES, INC.
AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I--FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ITEM 1--FINANCIAL STATEMENTS.............................................. 3
Condensed Consolidated Balance Sheets................................... 11
Condensed Consolidated Statements of Income............................. 12
Condensed Consolidated Statements of Cash Flows......................... 13
Notes to Condensed Consolidated Financial Statements.................... 14
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................... 3
PART II--OTHER INFORMATION
ITEM 1--LEGAL PROCEEDINGS................................................. 8
ITEM 2--CHANGES IN SECURITIES............................................. 8
ITEM 3--DEFAULTS UPON SENIOR SECURITIES................................... 8
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............... 8
ITEM 5--OTHER INFORMATION................................................. 9
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K.................................. 9
Exhibit (28) Report of Independent Public Accountants................... 17
</TABLE>
2
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Costco Companies, Inc.'s (the "Company" or "Costco") unaudited condensed
consolidated balance sheet as of February 15, 1998, the condensed consolidated
balance sheet as of August 31, 1997, and the unaudited condensed consolidated
statements of income and cash flows for the 12- and 24-week periods ended
February 15, 1998 and February 16, 1997 are included elsewhere herein. Also,
included elsewhere herein are notes to the unaudited condensed consolidated
financial statements and the results of the limited review performed by Arthur
Andersen LLP, independent public accountants.
The Company reports on a 52/53-week fiscal year, consisting of 13 four-week
periods and ending on the Sunday nearest the end of August. Fiscal 1998 is a
52-week year with period 13 ending on August 30, 1998. The first, second, and
third quarters consist of 12 weeks each and the fourth quarter consists of 16
weeks.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
It is suggested that this management discussion be read in conjunction with
the management discussion included in the Company's fiscal 1997 annual report on
Form 10-K previously filed with the Securities and Exchange Commission.
COMPARISON OF THE 12 WEEKS ENDED FEBRUARY 15, 1998 AND FEBRUARY 16, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Net income for the second quarter of fiscal 1998 increased 29% to $125,993,
or $0.56 per share (diluted), from $97,449, or $0.46 per share (diluted), during
the second quarter of fiscal 1997.
Net sales increased 11% to $5,697,098 during the second quarter of fiscal
1998 from $5,147,425 during the second quarter of fiscal 1997. This increase was
due to opening a net of 11 new warehouses (15 opened, 4 closed) since the end of
the second quarter of fiscal 1997 and an increase in comparable warehouse sales.
Comparable sales, that is sales in warehouses open for at least a year,
increased 9 percent during the second quarter of fiscal 1998, reflecting new
marketing and merchandising efforts, including the rollout of fresh foods and
various ancillary businesses to certain existing locations. Changes in prices of
merchandise did not contribute to sales increases.
Membership fees and other revenue increased 7% to $97,908 or 1.72% of net
sales in the second quarter of fiscal 1998 from $91,468 or 1.78% of net sales in
the second quarter of fiscal 1997. Membership fees include new membership
sign-ups at the new warehouses opened since the end of the second quarter of
fiscal 1997.
Gross margin (defined as net sales minus merchandise costs) increased 13% to
$598,106 or 10.50% of net sales in the second quarter of fiscal 1998 from
$528,217 or 10.26% of net sales in the second quarter of fiscal 1997. The 24
basis point increase in gross margin as a percentage of net sales reflects the
Company's greater purchasing power, expanded use of its depot facilities,
improved fresh foods margins, and increased sales penetration of certain higher
gross margin ancillary businesses. The gross margin figures reflect accounting
for merchandise costs on the last-in, first-out (LIFO) method. The second
quarters of fiscal 1998 and 1997 each included a $2,500 LIFO provision.
Selling, general and administrative expenses as a percent of net sales
decreased to 8.40% during the second quarter of fiscal 1998 from 8.47% during
the second quarter of fiscal 1997. This improvement in selling, general and
administrative expenses as a percent of net sales was due to the increase in
comparable warehouse sales noted above, and a year-over-year expense improvement
at the Company's core warehouse operations and Central and Regional
administrative offices, which was partially offset by higher
3
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expenses associated with international expansion and continued expansion and
rollout of certain ancillary businesses.
Preopening expenses totaled $4,071 or 0.07% of net sales during the second
quarter of fiscal 1998 compared to $6,087 or 0.12% of net sales during the
second quarter of fiscal 1997. One warehouse was opened in the second quarter of
fiscal 1998, compared to two new locations opened during the last year's second
quarter (including a relocated warehouse). Preopening expenses also included
costs related to remodels, including expanded fresh foods and ancillary
operations at existing warehouses, as well as costs associated with expanding
international operations.
Interest expense totaled $10,965 in the second quarter of fiscal 1998
compared to $17,243 in the second quarter of fiscal 1997. The decrease in
interest expense is primarily related to the call for redemption of both the
Company's 6 3/4% ($285,079 principal amount) and 5 1/2% ($179,338 principal
amount) Convertible Subordinated Debentures during the second quarter of fiscal
1997, and the call for redemption of the Company's 5 3/4% ($300,000 principal
amount) Convertible Subordinated Debentures during the fourth quarter of fiscal
1997. In the aggregate, approximately $302,000 of these three convertible
debentures were converted into common stock (13.1 million shares) and
approximately $462,000 were redeemed for cash. This reduction in debt was offset
by the raising of approximately $450,000 through the issuance of 3 1/2%
($900,000 principal amount at maturity) Zero Coupon Convertible Subordinated
Notes during the fourth quarter of fiscal 1997. (See "Note 2--Debt").
Interest income and other totaled $7,743 in the second quarter of fiscal
1998 compared to $3,461 in the second quarter of fiscal 1997. The increase
primarily reflects interest earned on higher balances of cash and cash
equivalents during the second quarter of fiscal 1998.
The effective income tax rate on earnings in the second quarter of fiscal
1998 was 40.00% compared to 40.50% effective tax rate in the second quarter of
fiscal 1997. The decrease in the effective tax rate was related primarily to
decreases in foreign taxes.
COMPARISON OF THE 24 WEEKS ENDED FEBRUARY 15, 1998 AND FEBRUARY 16, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Net operating results for the first half of fiscal 1998 reflect net income
of $223,919, or $0.99 per share (diluted), compared to net income of $129,259,
or $0.62 per share (diluted), during the first half of fiscal 1997. Net income
in the first half of fiscal 1997 included a non-cash, pretax charge of $65,000
($38,675 after-tax) reflecting a provision for the impairment of long-lived
assets as required by the Company's adoption of Statement of Financial
Accounting Standard No. 121. Excluding the $65,000 asset impairment charge, net
income for the first half of fiscal 1997 would have been $167,934, or $0.79 per
share (diluted).
Net sales increased 11% to $11,018,354 during the first half of fiscal 1998
from $9,933,061 during the first half of fiscal 1997. This increase was
primarily due to an increase in comparable warehouse sales and opening a net of
11 warehouses (15 opened, 4 closed) since the end of the second quarter of
fiscal 1997. Comparable sales, that is sales in warehouses open for at least a
year, increased 8 percent during the first half of fiscal 1998, reflecting new
marketing and merchandising efforts, including the rollout of fresh foods and
various ancillary businesses to certain existing locations. Changes in prices of
merchandise did not materially contribute to sales increases.
Membership fees and other revenue increased to $206,415 or 1.87% of net
sales in the first half of fiscal 1998 from $189,240 or 1.91% of net sales in
the first half of fiscal 1997. Membership fees include new membership sign-ups
at the new warehouses opened since the end of the second quarter of fiscal 1997.
Gross margin (defined as net sales minus merchandise costs) increased 13% to
$1,140,066 or 10.35% of net sales in the first half of fiscal 1998 from
$1,005,483 or 10.12% of net sales in the first half of fiscal 1997. The 23 basis
point increase in gross margin as a percentage of net sales reflects the
Company's greater purchasing power, expanded use of its depot facilities,
improved fresh foods and softlines margins,
4
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and increased sales penetration of certain higher gross margin ancillary
businesses. The gross margin figures reflect accounting for merchandise costs on
the last-in, first-out (LIFO) method. The first half of fiscal 1998 and 1997
each included a $5,000 LIFO provision.
Selling, general and administrative expenses as a percent of net sales
decreased to 8.62% during the first half of fiscal 1998 from 8.68% during the
first half of fiscal 1997. This improvement in selling, general and
administrative expenses as a percent of net sales was due to the increase in
comparable warehouse sales noted above, and a year-over-year expense improvement
at the Company's core warehouse operations and Central and Regional
administrative offices, which was partially offset by higher expenses associated
with international expansion and continued expansion and rollout of certain
ancillary businesses.
Preopening expenses totaled $11,414 or 0.10% of net sales during the first
half of fiscal 1998 compared to $16,284 or 0.16% of net sales during the first
half of fiscal 1997. Nine warehouses were opened in the first half of fiscal
1998 (including one relocated warehouse), compared to eleven new locations
during the last year's first half (including four relocated warehouses).
Preopening expenses also included costs related to remodels, including expanded
fresh foods and ancillary operations at existing warehouses, as well as costs
associated with expanding international operations.
In the first half of fiscal 1998 the Company recorded a pre-tax provision
for warehouse closing costs of $2,000, or $.01 per share on an after-tax basis
(diluted), compared to a pre-tax provision for warehouse closing costs of $5,000
or $.01 per share on an after-tax basis (diluted) recorded in the first half of
fiscal 1997. The provisions included estimated closing costs for warehouses
closed in each respective fiscal year, including closing costs associated with
warehouses which were relocated to new facilities. There was one warehouse
relocated in the first half of fiscal 1998 compared to four relocations and one
outright closing in the first half of fiscal 1997.
Interest expense totaled $21,888 in the first half of fiscal 1998 compared
to $36,176 in the first half of fiscal 1997. The decrease in interest expense is
primarily related to the call for redemption of the Company's 6 3/4% ($285,079
principal amount) and 5 1/2% ($179,338 principal amount) Convertible
Subordinated Debentures during the second quarter of fiscal 1997, and the call
for redemption of the Company's 5 3/4% ($300,000 principal amount) Convertible
Subordinated Debentures during the fourth quarter of fiscal 1997. In the
aggregate, approximately $302,000 of these three convertible debentures were
converted into common stock (13.1 million shares) and approximately $462,000
were redeemed for cash. This reduction in debt was offset by the raising of
approximately $450,000 through the issuance of 3 1/2% ($900,000 principal amount
at maturity) Zero Coupon Convertible Subordinated Notes during the fourth
quarter of fiscal 1997. (See "Note 2--Debt").
Interest income and other totaled $11,463 in the first half of fiscal 1998
compared to $7,119 in the first half of fiscal 1997. The increase primarily
reflects interest earned on higher balances of cash and cash equivalents during
the first half of fiscal 1998.
The effective income tax rate on earnings in the first half of fiscal 1998
was 40.00% compared to a 40.50% effective tax rate in the first half of fiscal
1997. The decrease in the effective tax rate was related primarily to decreases
in foreign taxes.
LIQUIDITY AND CAPITAL RESOURCES
(DOLLARS IN THOUSANDS)
The discussion below contains forward-looking statements that involve risks
and uncertainties, and should be read in conjunction with the Company's reports
filed previously with the Securities and Exchange Commission. Actual results may
differ materially.
5
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EXPANSION PLANS
Costco's primary requirement for capital is the financing of the land,
building and equipment costs for new warehouses plus the costs of initial
warehouse operations and working capital requirements, as well as additional
capital for international expansion through investments in foreign subsidiaries
and joint ventures.
While there can be no assurance that current expectations will be realized,
and plans are subject to change upon further review, it is management's current
intention to spend an aggregate of approximately $400,000 to $450,000 during
fiscal 1998 in the United States and Canada for real estate, construction,
remodeling and equipment for warehouse clubs and related operations; and
approximately $60,000 to $80,000 for international expansion, including the
United Kingdom, Asia and other potential ventures. These expenditures will be
financed with a combination of cash provided from operations, the use of cash
and cash equivalents (which totaled $340,689 at February 15, 1998), short-term
borrowings under revolving credit facilities, and/or commercial paper facilities
and other financing sources as required. A total of approximately $281,000 has
been spent on capital expenditures during the first half of fiscal 1998, which
includes the acquisition costs of seven sites in Michigan from the Hechinger
Company, a home improvement warehouse operation. The Company concluded a
purchase agreement with Hechinger Company in the first quarter of fiscal 1998,
and intends to invest approximately $70,000 in these facilities, including
initial warehouse purchase and remodeling costs and working capital
requirements.
Expansion plans for the United States and Canada during fiscal 1998 are to
open approximately 16 to 17 new warehouse clubs, including five locations
acquired from the Hechinger Company (noted above), as well as one or two
relocations of existing warehouses to larger and better-located warehouses.
Through the end of the first half of fiscal 1998, the Company has opened 6
warehouses in the United States (including the relocation of its Pomona,
California warehouse to Chino Hills, California), 2 warehouses in Canada, and 1
warehouse in the United Kingdom. The Company also consolidated several of its
Southern California distribution (depot) facilities into a larger,
state-of-the-art facility in Mira Loma, California in the second quarter of
fiscal 1998. The Company also expects to continue expansion of its international
operations and plans to open one or two additional units in the United Kingdom
through its 60%-owned subsidiary during calendar 1998. Other international
markets are being assessed.
Costco and its Mexico-based joint venture partner, Controladora Comercial
Mexicana, each own a 50% interest in Price Club Mexico. As of February 15, 1998,
Price Club Mexico operated 14 Price Club warehouses in Mexico.
BANK CREDIT FACILITIES AND COMMERCIAL PAPER PROGRAMS (ALL AMOUNTS STATED IN
US DOLLARS)
The Company has in place a $500,000 commercial paper program supported by a
$500,000 bank credit facility with a group of 12 banks, of which $250,000
expires on January 25, 1999, and $250,000 expires on January 30, 2001. At
February 15, 1998, no amount was outstanding under the loan facility or the
commercial paper program.
In addition, a wholly-owned Canadian subsidiary has a $144,000 commercial
paper program supported by a $101,000 bank credit facility with three Canadian
banks, which expires in March 1999. At February 15, 1998, no amount was
outstanding under the bank credit facility or the Canadian commercial paper
program.
The Company has agreed to limit the combined amount outstanding under the
U.S. and Canadian commercial paper programs to the $601,000 combined amounts of
the respective supporting bank credit facilities.
6
<PAGE>
LETTERS OF CREDIT
The Company has separate letter of credit facilities (for commercial and
standby letters of credit), totaling approximately $258,000. The outstanding
commitments under these facilities at February 15, 1998 totaled approximately
$122,000, including approximately $42,000 in standby letters of credit for
workers' compensation requirements.
DERIVATIVES
The Company has limited involvement with derivative financial instruments
and uses them only to manage well-defined interest rate and foreign exchange
risks. Forward foreign exchange contracts are used to hedge the impact of
fluctuations of foreign exchange on inventory purchases. The amount of interest
rate and foreign exchange contracts outstanding at quarter-end or in place
during the first half of fiscal 1998 was immaterial to the Company's results of
operations or its financial position.
YEAR 2000
Like most corporations, the Company is reliant upon computer information
systems to run its business. Many computer systems process dates using two
digits to identify the year, and some of these systems are unable to properly
process dates beginning with the year 2000. The Company has developed plans to
address this Year 2000 issue and is modifying and updating its computer systems
so that they will be Year 2000 compliant. The Company believes that the costs
connected with such preparations will not be material to the Company's financial
results.
FINANCIAL POSITION AND CASH FLOWS
Due to rapid inventory turnover, the Company's operations provide a higher
level of supplier trade payables in relation to inventory than generally
encountered in other forms of retailing. When combined with other current
liabilities, the resulting amount typically approaches or exceeds the current
assets needed to operate the business (e.g., merchandise inventories, accounts
receivable and other current assets). Working capital totaled approximately
$240,000 at February 15, 1998 compared to $146,000 at August 31, 1997.
Net cash provided by operating activities totaled $433,865 in the first half
of fiscal 1998 compared to $247,746 in the first half of fiscal 1997. The
increase in net cash from operating activities is primarily a result of
increased net income and decreased owned inventory (inventory less trade
payables) during the first half of fiscal 1998 compared to the first half of
fiscal 1997.
Net cash used in investing activities totaled $268,587 in the first half of
fiscal 1998 compared to $285,539 in the first half of fiscal 1997. The investing
activities primarily relate to additions to property and equipment for new and
remodeled warehouses of $281,079 and $285,113 in the first half of fiscal 1998
and 1997, respectively. The Company opened 9 warehouses (including one
relocation) in the first half of fiscal 1998 compared to 11 warehouses
(including four relocations) opened in the first half of fiscal 1997. The first
half of fiscal 1998 also includes a payment to the Hechinger Company for the
acquisition of seven locations in Michigan (including five in the Detroit
market, which the Company plans to operate).
Net cash provided by financing activities totaled $1,705 in the first half
of fiscal 1998 compared to $23,155 in the first half of fiscal 1997. This
decrease reflects the utilization of operating cash flows from the first half of
fiscal 1998 operating activities, as well as the use of cash balances generated
from the fourth quarter 1997 issuance of 3 1/2% Zero Coupon Subordinated Notes,
to finance expansion plans.
The Company's balance sheet as of February 15, 1998 reflects a $397,391 or
7% increase in total assets since August 31, 1997. The increase is primarily due
to higher cash balances and a net increase in property and equipment primarily
related to the Company's expansion program.
7
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PART II--OTHER INFORMATION
(DOLLARS IN THOUSANDS)
ITEM 1. LEGAL PROCEEDINGS
On April 6, 1992, The Price Company was served with a Complaint in an action
entitled FECHT ET AL. V. THE PRICE COMPANY ET AL., Case No. 92-497, United
States District Court, Southern District of California (the "Court").
Subsequently, on April 22, 1992, The Price Company was served with a First
Amended Complaint in the action. The case was dismissed without prejudice by the
Court on September 21, 1992, on the grounds the plaintiffs had failed to state a
sufficient claim against defendants. Subsequently, plaintiffs filed a Second
Amended Complaint which, in the opinion of The Price Company's counsel, alleged
substantially the same facts as the prior complaint. The Complaint alleged
violation of certain state and federal laws during the time period prior to The
Price Company's earnings release for the second quarter of fiscal year 1992. The
case was dismissed with prejudice by the Court on March 9, 1993, on grounds the
plaintiffs had failed to state a sufficient claim against defendants. Plaintiffs
filed an Appeal in the Ninth Circuit Court of Appeals. In an opinion dated
November 20, 1995, the Ninth Circuit reversed and remanded the lawsuit. In
February 1997, the Court granted the plaintiffs' motion for certification of a
class consisting of all purchasers of the common stock of The Price Company from
April 3, 1991 through April 2, 1992. The Company believes that this lawsuit is
without merit and is vigorously defending the lawsuit. The Company does not
believe that the ultimate outcome of such litigation will have a material
adverse effect on the Company's financial position or results of operations.
The Company is involved from time to time in claims, proceedings and
litigation arising from its business and property ownership. The Company does
not believe that any such claim, proceeding or litigation, either alone or in
the aggregate, will have a material adverse effect on the Company's financial
position or results of operations.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders was held on January 21, 1998 at
the Meydenbauer Center Hall in Bellevue, Washington. Stockholders of record at
the close of business on December 5, 1997 were entitled to notice of and to vote
in person or by proxy at the annual meeting. At the date of record, there were
214,384,241 shares outstanding. Certain matters presented for vote received the
required majority approval and had the following total, for, against and
abstained votes as noted below.
(1) To elect three Class II directors to hold office until the 2001 Annual
Meeting of Stockholders and until their successors are elected and qualified.
<TABLE>
<CAPTION>
W/H AUTHORITY AND
TOTAL SHARES AGAINST ABSTAINED VOTES/
VOTED/(%) FOR VOTES/(%) VOTES/(%) (%)
------------- ------------- ------------ ------------------
<S> <C> <C> <C> <C>
Hamilton E. James................................ 178,111,255 174,476,895 -- 3,634,360
(Class II) 83.08% 97.96% -- 2.04%
Frederick O. Paulsell............................ 178,111,255 175,476,624 -- 2,634,631
(Class II) 83.08% 98.52% -- 1.48%
Jill A. Ruckelshaus.............................. 178,111,255 175,505,574 -- 2,605,681
(Class II) 83.08% 98.54% -- 1.46%
</TABLE>
8
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(2) To amend The Costco Companies, Inc. 1993 Combined Stock Grant and Stock
Option Plan to clarify the eligibility requirements and to conform to changes
under Section 16 of the Securities Exchange Act.
<TABLE>
<CAPTION>
W/H AUTHORITY AND
TOTAL SHARES FOR AGAINST ABSTAINED VOTES/
VOTED/(%) VOTES/(%) VOTES/(%) (%)
------------ ------------ ---------- ------------------
<S> <C> <C> <C> <C>
178,111,255 141,040,667 34,585,387 2,485,201
83.08% 79.19% 19.42% 1.39%
</TABLE>
(3) To consider and ratify the selection of the Company's independent public
accountants, Arthur Andersen LLP.
<TABLE>
<CAPTION>
W/H AUTHORITY AND
TOTAL SHARES FOR AGAINST ABSTAINED VOTES/
VOTED/(%) VOTES/(%) VOTES/(%) (%)
------------ ------------ ---------- ------------------
<S> <C> <C> <C> <C>
Arthur Andersen LLP..................... 178,111,255 177,705,460 78,799 326,996
83.08% 99.77% .05% .18%
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein or incorporated by reference:
(27.1) Financial Data Schedule
(27.2) Restated Financial Data Schedule--Fiscal year ends 1995, 1996
and Quarters 1, 2, 3 of 1996
(27.3) Restated Financial Data Schedule--Fiscal year end 1997, Quarters
1, 2, 3 of 1997 and Quarter 1 of 1998
(28) Report of Independent Public Accountants
(b) No reports on Form 8-K were filed for the 12 weeks ended February 15,
1998.
9
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SIGNATURES
Pursuant to the requirements 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.
<TABLE>
<S> <C>
COSTCO COMPANIES, INC.
REGISTRANT
--------------------------------------
Date: March 19, 1998 James D. Sinegal
PRESIDENT AND CHIEF EXECUTIVE OFFICER
--------------------------------------
Richard A. Galanti
Date: March 19, 1998 EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
</TABLE>
10
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COSTCO COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FEBRUARY 15, AUGUST 31,
1998 1997
------------ ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................. $ 340,689 $ 175,508
Receivables, net...................................... 173,304 147,133
Merchandise inventories, net.......................... 1,758,236 1,686,525
Other current assets.................................. 76,169 100,784
------------ ----------
Total current assets................................ 2,348,398 2,109,950
------------ ----------
PROPERTY AND EQUIPMENT
Land and land rights.................................. 1,157,450 1,094,607
Buildings and leasehold and land improvements......... 2,085,622 1,933,740
Equipment and fixtures................................ 897,380 840,578
Construction in progress.............................. 44,857 81,417
------------ ----------
4,185,309 3,950,342
Less-accumulated depreciation and amortization........ (865,951) (795,708)
------------ ----------
Net property and equipment.......................... 3,319,358 3,154,634
------------ ----------
OTHER ASSETS.......................................... 205,949 211,730
------------ ----------
$ 5,873,705 $5,476,314
------------ ----------
------------ ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank checks outstanding............................... $ 6,734 $ 14,930
Short-term borrowings................................. -- 25,460
Accounts payable...................................... 1,486,367 1,379,379
Accrued salaries and benefits......................... 350,393 302,681
Accrued sales and other taxes......................... 94,939 90,774
Other current liabilities............................. 169,474 150,823
------------ ----------
Total current liabilities........................... 2,107,907 1,964,047
LONG-TERM DEBT........................................ 922,159 917,001
DEFERRED INCOME TAXES AND OTHER LIABILITIES........... 44,480 38,967
------------ ----------
Total liabilities................................... 3,074,546 2,920,015
------------ ----------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST..................................... 99,645 88,183
------------ ----------
STOCKHOLDERS' EQUITY
Preferred stock $.01 par value; 100,000,000 shares
authorized; no shares issued and outstanding........ -- --
Common stock $.01 par value; 900,000,000 shares
authorized; 215,103,000 and 213,593,000 shares
issued and outstanding.............................. 2,151 2,136
Additional paid-in capital............................ 741,501 706,324
Accumulated foreign currency translation.............. (106,139) (78,426)
Retained earnings..................................... 2,062,001 1,838,082
------------ ----------
Total stockholders' equity.......................... 2,699,514 2,468,116
------------ ----------
$ 5,873,705 $5,476,314
------------ ----------
------------ ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
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COSTCO COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
12 WEEKS ENDED 24 WEEKS ENDED
-------------------------- ----------------------------
FEBRUARY 15, FEBRUARY 16, FEBRUARY 15, FEBRUARY 16,
1998 1997 1998 1997
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
REVENUE
Net sales.............................................. $ 5,697,098 $ 5,147,425 $ 11,018,354 $ 9,933,061
Membership fees and other.............................. 97,908 91,468 206,415 189,240
------------ ------------ ------------- -------------
Total revenue........................................ 5,795,006 5,238,893 11,224,769 10,122,301
OPERATING EXPENSES
Merchandise costs...................................... 5,098,992 4,619,208 9,878,288 8,927,578
Selling, general and administrative.................... 478,732 436,036 949,443 862,140
Preopening expenses.................................... 4,071 6,087 11,414 16,284
Provision for impaired assets and warehouse closing
costs................................................ -- -- 2,000 70,000
------------ ------------ ------------- -------------
Operating income..................................... 213,211 177,562 383,624 246,299
OTHER INCOME (EXPENSE)
Interest expense....................................... (10,965) (17,243) (21,888) (36,176)
Interest income and other.............................. 7,743 3,461 11,463 7,119
------------ ------------ ------------- -------------
INCOME BEFORE PROVISION FOR INCOME TAXES............... 209,989 163,780 373,199 217,242
Provision for income taxes............................. 83,996 66,331 149,280 87,983
------------ ------------ ------------- -------------
NET INCOME............................................. $ 125,993 $ 97,449 $ 223,919 $ 129,259(a)
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE:
Basic................................................ $ 0.59 $ 0.47 $ 1.05 $ 0.64
Diluted.............................................. $ 0.56 $ 0.46 $ 0.99 $ 0.62(a)
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
Shares used in calculation (000's)
Basic................................................ 214,590 206,540 214,211 201,573
Diluted.............................................. 230,482 222,894 229,962 217,565
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
</TABLE>
- ------------------------
(a) Net income and net income per common and common equivalent share would have
been $167,934 and $0.79, respectively, without the effect of adopting FAS
No. 121, using 224,838 diluted shares.
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
COSTCO COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
24 WEEKS ENDED
--------------------------
FEBRUARY 15, FEBRUARY 16,
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................................................ $ 223,919 $ 129,259
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization....................................................... 94,046 79,909
Provision for asset impairments..................................................... -- 65,000
Increase in merchandise inventories................................................. (80,768) (155,362)
Increase in accounts payable........................................................ 113,865 96,502
Other............................................................................... 82,803 32,438
------------ ------------
Total adjustments................................................................. 209,946 118,487
------------ ------------
Net cash provided by operating activities........................................... 433,865 247,746
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment................................................... (281,079) (285,113)
Proceeds from the sale of property and equipment...................................... 15,385 7,603
Other................................................................................. (2,893) (8,029)
------------ ------------
Net cash used in investing activities............................................... (268,587) (285,539)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (payments on) proceeds from short-term borrowings................................. (24,979) 159,477
Decrease in bank checks outstanding................................................... (7,958) (9,618)
Net proceeds from long-term borrowings................................................ 2,338 2,589
Payments on long-term debt and notes payable.......................................... (3,660) (164,624)
Proceeds from minority interests, net................................................. 10,222 16,669
Exercise of stock options............................................................. 25,742 18,662
------------ ------------
Net cash provided by financing activities........................................... 1,705 23,155
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,802) 231
------------ ------------
Net increase/(decrease) in cash and cash equivalents................................ 165,181 (14,407)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 175,508 101,955
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 340,689 $ 87,548
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amounts capitalized)(a)............................................ $ 16,367 $ 45,763
Income taxes........................................................................ 102,463 65,400
</TABLE>
- ------------------------
(a) Interest on the 3 1/2% ($900 million principal amount at maturity) Zero
Coupon Subordinated Notes requires no cash payments; rather the principal
accretes to full value at maturity. Semi-annual interest payments on the
5 1/2% and 6 3/4% convertible debentures were paid on September 3, 1996,
subsequent to the beginning of the first quarter of fiscal 1997, which began
September 2, 1996. These debentures were redeemed during fiscal 1997.
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
COSTCO COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
NOTE (1)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The unaudited consolidated financial statements include the accounts of
Costco Companies, Inc., a Delaware corporation, and its subsidiaries ("Costco"
or the "Company"). Costco is a holding company which operates primarily through
its major subsidiaries, The Price Company and subsidiaries, and Costco Wholesale
Corporation and subsidiaries. All intercompany transactions between the Company
and its subsidiaries have been eliminated in consolidation. Costco primarily
operates membership warehouses under the "Costco Wholesale" name.
Costco operates membership warehouses that offer very low prices on a
limited selection of nationally-branded and selected private label products in a
wide range of merchandise categories in no-frills, self-service warehouse
facilities. As of February 15, 1998, Costco operated 269 warehouses clubs: 205
in the United States (23 states); 56 in Canada (in nine Canadian provinces);
seven in the United Kingdom; and one warehouse in Taiwan. As of February 15,
1998, the Company also operated (through a 50%-owned joint venture) 14
warehouses in Mexico, and had a license agreement for the operation of two
membership warehouses in Korea.
The Company's investment in the Price Club Mexico joint venture and in other
unconsolidated joint ventures that are less than majority owned are accounted
for under the equity method.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and pursuant to the rules and regulations of the Securities
and Exchange Commission. While these statements reflect all normal recurring
adjustments which are, in the opinion of management, necessary for fair
presentation of the results of the interim period, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the financial statements and footnotes thereto included in the Company's annual
report filed on Form 10-K for the fiscal year ended August 31, 1997.
FISCAL YEARS
The Company reports on a 52/53-week fiscal year, ending on the Sunday
nearest the end of August. Fiscal 1998 is a 52-week fiscal year, with the first,
second and third quarters consisting of 12 weeks each and the fourth quarter,
ending August 30, 1998, consisting of 16 weeks.
MERCHANDISE INVENTORIES
Merchandise inventories are recorded at the lower of cost or market as
determined by the retail inventory method, and are stated using the last-in,
first-out (LIFO) method for U.S. merchandise inventories, and the first-in,
first-out (FIFO) method for foreign merchandise inventories. If the FIFO method
had been used, merchandise inventory would have been $21,150 higher at both
February 15, 1998 and February 16, 1997.
The Company provides for estimated inventory losses between physical
inventory counts on the basis of a standard percentage of sales. This provision
is adjusted to reflect the actual shrinkage results of physical inventory counts
which generally occur in the second and fourth fiscal quarters.
14
<PAGE>
COSTCO COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (CONTINUED)
(UNAUDITED)
NOTE (1)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
In the second quarter of fiscal 1998, the Company adopted the Financial
Accounting Standards Board Statement No. 128, "Earnings per Share" (SFAS No.
128). SFAS No. 128 established new standards for computing and presenting
earnings per share (EPS) for entities with publicly-held common stock.
The following data show the amounts used in computing earnings per share and
the effect on income and the weighted average number of shares of dilutive
potential common stock.
<TABLE>
<CAPTION>
12 WEEKS ENDED 24 WEEKS ENDED
-------------------------- --------------------------
FEBRUARY 15, FEBRUARY 16, FEBRUARY 15, FEBRUARY 16,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income available to common stockholders used in basic
EPS..................................................... $ 125,993 $ 97,449 $ 223,919 $ 129,259
Interest on convertible bonds............................. 2,198 4,228 4,396 5,855
------------ ------------ ------------ ------------
Net income available to common stockholders after assumed
conversions of dilutive securities...................... $ 128,191 $ 101,677 $ 228,315 $ 135,114
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of common shares used in basic
EPS..................................................... 214,590 206,540 214,211 201,573
Stock options............................................. 5,673 3,713 5,532 3,211
Conversion of convertible bonds........................... 10,219 12,641 10,219 12,781
------------ ------------ ------------ ------------
Weighted number of common shares and dilutive potential
common stock used in diluted EPS........................ 230,482 222,894 229,962 217,565
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The 5 3/4% debentures convertible into 7,273 common shares were not included
in computing diluted EPS for the 24 weeks ended in fiscal 1997 because their
effect was antidilutive.
ADOPTION OF FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENT NO. 121
The Company adopted Statement of Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of " (SFAS No. 121), as of the first quarter of fiscal 1997. In
accordance with SFAS No. 121, the Company recorded a pretax, non-cash charge of
$65,000 reflecting its estimate of impairment relating principally to excess
property and closed warehouses. The charge reflects the difference between
carrying value and fair-market value, which was based on market valuations for
those assets whose carrying value was not recoverable through future cash flows.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
15
<PAGE>
COSTCO COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (CONTINUED)
(UNAUDITED)
NOTE (2)--DEBT
BANK LINES OF CREDIT AND COMMERCIAL PAPER PROGRAMS
The Company has in place a $500,000 commercial paper program supported by a
$500,000 bank credit facility with a group of 12 banks, of which $250,000
expires on January 25, 1999, and $250,000 expires on January 30, 2001. At
February 15, 1998, no amount was outstanding under the loan facility or the
commercial paper program.
In addition, a wholly-owned Canadian subsidiary has a $144,000 commercial
paper program supported by a $101,000 bank credit facility with three Canadian
banks, which expires in March 1999. At February 15, 1998, no amount was
outstanding under the bank credit facility or the Canadian commercial paper
program.
The Company has agreed to limit the combined amount outstanding under the
U.S. and Canadian commercial paper programs to the $601,000 combined amounts of
the respective supporting bank credit facilities.
LETTERS OF CREDIT
The Company also has separate letter of credit facilities (for commercial
and standby letters of credit), totaling approximately $258,000. The outstanding
commitments under these facilities at February 15, 1998 totaled approximately
$122,000, including approximately $42,000 in standby letters of credit for
workers' compensation requirements.
NOTE (3)--INCOME TAXES
The following is a reconciliation of the federal statutory income tax rate
to the effective income tax rate for income before income taxes:
<TABLE>
<CAPTION>
24 WEEKS ENDED 24 WEEKS ENDED
FEBRUARY 15, 1998 FEBRUARY 16, 1997
----------------------- ----------------------
<S> <C> <C> <C> <C>
Federal statutory income tax rate.................................. $ 130,620 35.00% $ 76,035 35.00%
State, foreign and other income taxes, net......................... 18,660 5.00% 11,948 5.50%
---------- ----------- --------- -----------
$ 149,280 40.00% $ 87,983 40.50%
---------- ----------- --------- -----------
---------- ----------- --------- -----------
</TABLE>
NOTE (4)--COMMITMENTS AND CONTINGENCIES
The Company is involved from time to time in claims, proceedings and
litigation arising from its business and property ownership. The Company does
not believe that any such claim, proceeding or litigation, either alone or in
the aggregate, will have a material adverse effect on the Company's financial
position or results of operations. See Item 1. Legal Proceedings on page 8.
16
<PAGE>
EXHIBIT 28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Costco Companies, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
Costco Companies, Inc. (a Delaware corporation) and subsidiaries as of February
15, 1998, and the related condensed consolidated statements of income for the
twelve-week and twenty-four-week periods ended February 15, 1998 and February
16, 1997, and the condensed consolidated statements of cash flows for the
twenty-four-week periods then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Seattle, Washington
March 10, 1998
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-30-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-15-1998
<CASH> 340,689
<SECURITIES> 0
<RECEIVABLES> 178,171
<ALLOWANCES> 4,867
<INVENTORY> 1,758,236
<CURRENT-ASSETS> 2,348,398
<PP&E> 4,185,309
<DEPRECIATION> 865,951
<TOTAL-ASSETS> 5,873,705
<CURRENT-LIABILITIES> 2,107,907
<BONDS> 922,159
0
0
<COMMON> 743,652
<OTHER-SE> 1,955,862
<TOTAL-LIABILITY-AND-EQUITY> 5,873,705
<SALES> 11,018,354
<TOTAL-REVENUES> 11,224,769
<CGS> 9,878,288
<TOTAL-COSTS> 10,841,145
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,888
<INCOME-PRETAX> 373,199
<INCOME-TAX> 149,280
<INCOME-CONTINUING> 223,919
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 223,919
<EPS-PRIMARY> 1.05
<EPS-DILUTED> .99
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> 12-MOS 3-MOS 6-MOS 9-MOS
12-MOS
<FISCAL-YEAR-END> SEP-03-1995 SEP-01-1996 SEP-01-1996 SEP-01-1996
SEP-01-1996
<PERIOD-START> AUG-29-1994 SEP-04-1995 SEP-04-1995 SEP-04-1995
SEP-04-1995
<PERIOD-END> SEP-03-1995 NOV-26-1995 FEB-18-1996 MAY-12-1996
SEP-01-1996
<CASH> 45,688 12,876 40,496 80,531
101,955
<SECURITIES> 0 0 0 0
0
<RECEIVABLES> 151,293 182,190 180,298 140,004
140,965
<ALLOWANCES> 4,628 5,026 4,102 3,314
3,498
<INVENTORY> 1,422,272 1,818,165 1,393,803 1,497,564
1,500,842
<CURRENT-ASSETS> 1,702,319 2,090,737 1,699,327 1,798,319
1,828,304
<PP&E> 3,062,035 3,177,637 3,283,733 3,378,872
3,543,536
<DEPRECIATION> 526,442 551,836 579,823 610,389
655,226
<TOTAL-ASSETS> 4,437,419 4,925,472 4,600,691 4,760,593
4,911,861
<CURRENT-LIABILITIES> 1,692,938 2,135,671 1,749,646 1,721,076
1,771,594
<BONDS> 1,099,815 1,098,681 1,092,842 1,232,457
1,229,221
0 0 0 0
0
0 0 0 0
0
<COMMON> 305,941 306,848 308,166 313,902
323,796
<OTHER-SE> 1,224,803 1,271,815 1,320,508 1,364,480
1,454,002
<TOTAL-LIABILITY-AND-EQUITY> 4,437,419 4,925,472 4,600,691 4,760,593
4,911,861
<SALES> 17,905,926 4,295,862 8,901,932 13,138,139
19,213,866
<TOTAL-REVENUES> 18,247,286 4,383,564 9,072,259 13,383,747
19,566,456
<CGS> 16,225,848 3,887,116 8,041,108 11,871,031
17,345,315
<TOTAL-COSTS> 17,813,954 4,282,539 8,834,444 13,058,492
19,075,733
<OTHER-EXPENSES> 0 0 0 0
0
<LOSS-PROVISION> 0 0 0 0
0
<INTEREST-EXPENSE> 67,911 17,771 35,272 54,466
78,078
<INCOME-PRETAX> 368,204 84,345 205,921 276,174
423,477
<INCOME-TAX> 150,963 34,792 84,942 113,921
174,684
<INCOME-CONTINUING> 217,241 49,553 120,979 162,253
248,793
<DISCONTINUED> (83,363) 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 133,878 49,553 120,979 162,253
248,793
<EPS-PRIMARY> .66 .25 .62 .83
1.27
<EPS-DILUTED> .66 .25 .59 .80
1.22
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
3-MOS
<FISCAL-YEAR-END> AUG-31-1997 AUG-31-1997 AUG-31-1997 AUG-31-1997
AUG-30-1998
<PERIOD-START> SEP-02-1996 SEP-02-1996 SEP-02-1996 SEP-02-1996
SEP-01-1997
<PERIOD-END> NOV-24-1996 FEB-16-1997 MAY-11-1997 AUG-31-1997
NOV-23-1997
<CASH> 111,011 87,548 136,660 175,508
205,693
<SECURITIES> 0 0 0 0
0
<RECEIVABLES> 174,234 171,705 134,933 151,493
208,355
<ALLOWANCES> 4,412 3,840 3,895 4,360
4,563
<INVENTORY> 1,992,675 1,660,210 1,647,216 1,686,525
2,099,981
<CURRENT-ASSETS> 2,348,256 1,993,961 1,993,550 2,109,950
2,587,410
<PP&E> 3,677,903 3,761,759 3,829,771 3,950,342
4,123,191
<DEPRECIATION> 693,279 720,382 749,793 795,708
832,514
<TOTAL-ASSETS> 5,520,599 5,225,373 5,258,964 5,476,314
6,085,166
<CURRENT-LIABILITIES> 2,336,199 2,094,635 2,059,677 1,964,047
2,454,451
<BONDS> 1,231,174 765,421 760,010 917,001
920,368
0 0 0 0
0
0 0 0 0
0
<COMMON> 326,502 648,732 668,636 708,460
722,175
<OTHER-SE> 1,503,078 1,590,284 1,644,702 1,759,656
1,847,444
<TOTAL-LIABILITY-AND-EQUITY> 5,520,599 5,225,373 5,258,964 5,476,314
6,085,166
<SALES> 4,785,636 9,933,061 14,685,506 21,484,118
5,321,256
<TOTAL-REVENUES> 4,883,408 10,122,301 14,958,530 21,874,404
5,429,763
<CGS> 4,308,369 8,927,578 13,210,736 19,314,485
4,779,296
<TOTAL-COSTS> 4,814,670 9,876,002 14,592,098 21,293,692
5,259,350
<OTHER-EXPENSES> 0 0 0 0
0
<LOSS-PROVISION> 0 0 0 0
0
<INTEREST-EXPENSE> 18,933 36,176 50,839 76,281
10,923
<INCOME-PRETAX> 53,462 217,242 326,770 520,329
163,210
<INCOME-TAX> 21,652 87,983 131,246 208,132
65,284
<INCOME-CONTINUING> 31,810 129,259 195,524 312,197
97,926
<DISCONTINUED> 0 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 31,810 129,259 195,524 312,197
97,926
<EPS-PRIMARY> .16 .64 .95 1.51
.46
<EPS-DILUTED> .16 .62 .93 1.47
.44
</TABLE>
