Costco Wholesale Corporation (NASDAQ:COST) Q2 2015 Earnings Conference Call - Final Transcript

Mar 05, 2015 • 11:00 am ET


Costco Wholesale Corporation (NASDAQ:COST) Q2 2015 Earnings Conference Call - Final Transcript


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Good morning. My name is Brandy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter Earnings and February Sales Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Mr. Richard Galanti, Chief Financial Officer. Sir, you may begin your conference.

Richard Galanti

Thank you, Brandy. Good morning to everyone. This morning's release we'll review our second quarter and first half fiscal 2015 operating results for the 12-week and 24-week periods ended February 15 and our monthly four-week sales results for the four-week period ending this past Sunday, March 1. The discussions we well be having will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause actual events, results and our performance to differ materially from those indicated by such statements. The risks and uncertainties include, but are not limited to, those outlined in today's call, as well as other risks identified from time-to-time in the Company's public statements and reports filed with the SEC.

Forward-looking statements speak only as of the date they are made and we do not undertake to update these statements except as required by law. To begin with, our 12-week second quarter fiscal '15 operating results, as you saw this morning for the quarter reported earnings per share came in at a $1.35, up 29% from last year's $1.05. As noted in this morning's release, this year's net income was positively impacted by a $57 million or $0.13 a share income tax benefit. This was in connection with a portion of the $5 per share special cash dividend paid by the Company last month to Company's 401(k) plan participants. Partially offsetting this reduction to the income tax line was a $14 million or $0.03 a share income tax charge related to an ongoing overseas income tax letter.

And the net impact of these two discrete tax items to our reported second quarter earnings $1.35 earnings per share was $43 million or $0.10 a share to the positive. So excluding these two items EPS for the second quarter would have been a $1.25 or up 19%. Other factors that have impacted our second quarter when you're comparing year-over-year results, gasoline operations as results of the case in Q1'15, we benefited from strong margins and profits in our gas business, I'll speak to this a little bit more, when I discuss our gross margin. FX as compared to year ago, in Q2 this year, the foreign currencies where we operate weakened versus the US dollar in all countries but primarily in Canada, Mexico and Japan, this resulted in our foreign earnings in Q2 when converted into US Dollars being lower by about 32 million pre-tax or $0.05 a share and those earnings would have been had FX exchange rates been flat year-over-year, so again another