What changed in this filing

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Item 1. Financial Statements

2021-12-22 compared with 2021-06-03 · 104 added, 194 removed, 358 unchanged (45% of the section changed)

3 unchanged sentences

(amounts in millions, except per share data) (unaudited)

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2021 November 22,

Net sales $ 49,417 $ 42,347

4 unchanged sentences

Selling, general and administrative 4,718 4,320

Preopening expenses 10 8 41 29

Operating income 1,693 1,430

5 unchanged sentences

Net income including noncontrolling interests 1,345 1,181

1,233 852 3,385 2,655

Net income attributable to noncontrolling interests ( 21 ) ( 15 )

( 13 ) ( 14 ) ( 48 ) ( 42 )

NET INCOME ATTRIBUTABLE TO COSTCO $ 1,324 $ 1,166

9 unchanged sentences

(amounts in millions) (unaudited)

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2021 November 22,

NET INCOME INCLUDING NONCONTROLLING INTERESTS

1 unchanged sentence

Foreign-currency translation adjustment and other, net

54 ( 396 ) 411 ( 224 )

Comprehensive income 1,273 1,390

50 unchanged sentences

(amounts in millions) (unaudited)

12 Weeks Ended May 9, 2021

12 Weeks Ended November 21, 2021

Common Stock Additional

7 unchanged sentences

Shares (000s) Amount

BALANCE AT FEBRUARY 14, 2021 442,654 $ 4 $ 6,843 $ ( 961 ) $ 9,766 $ 15,652 $ 477 $ 16,129

BALANCE AT AUGUST 29, 2021 441,825 $ 4 $ 7,031 $ ( 1,137 ) $ 11,666 $ 17,564 $ 514 $ 18,078

— — — — 1,324 1,324 21 1,345

8 unchanged sentences

Cash dividend declared — — — — ( 350 ) ( 350 ) — ( 350 )

BALANCE AT MAY 9, 2021 442,141 $ 4 $ 6,921 $ ( 909 ) $ 10,466 $ 16,482 $ 492 $ 16,974

12 Weeks Ended May 10, 2020

Common Stock Additional

Capital Accumulated

Comprehensive

Income (Loss) Retained

Earnings Total Costco

Stockholders’

Equity Noncontrolling

Interests Total

Shares (000s) Amount

BALANCE AT FEBRUARY 16, 2020 441,622 $ 4 $ 6,506 $ ( 1,280 ) $ 11,384 $ 16,614 $ 385 $ 16,999

— — — — 838 838 14 852

Foreign-currency translation adjustment and other, net

— — — ( 398 ) — ( 398 ) 2 ( 396 )

Stock-based compensation

— — 90 — — 90 — 90

Release of vested RSUs, including tax effects

7 — ( 1 ) — — ( 1 ) — ( 1 )

Repurchases of common stock

( 106 ) — ( 2 ) — ( 29 ) ( 31 ) — ( 31 )

Cash dividend declared — — — — ( 310 ) ( 310 ) — ( 310 )

BALANCE AT MAY 10, 2020 441,523 $ 4 $ 6,593 $ ( 1,678 ) $ 11,883 $ 16,802 $ 401 $ 17,203

The accompanying notes are an integral part of these condensed consolidated financial statements.

COSTCO WHOLESALE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(amounts in millions) (unaudited)

36 Weeks Ended May 9, 2021

BALANCE AT NOVEMBER 21, 2021 443,434 $ 4 $ 7,064 $ ( 1,211 ) $ 12,606 $ 18,463 $ 537 $ 19,000

12 Weeks Ended November 22, 2020

Common Stock Additional

13 unchanged sentences

— — 342 — — 342 — 342

Release of vested restricted stock units (RSUs), including tax effects

1,926 — ( 312 ) — — ( 312 ) — ( 312 )

Repurchases of common stock

( 1,040 ) — ( 17 ) — ( 351 ) ( 368 ) — ( 368 )

Cash dividends declared

— — — — ( 5,399 ) ( 5,399 ) — ( 5,399 )

BALANCE AT MAY 9, 2021 442,141 $ 4 $ 6,921 $ ( 909 ) $ 10,466 $ 16,482 $ 492 $ 16,974

36 Weeks Ended May 10, 2020

Common Stock Additional

Capital Accumulated

Comprehensive

Income (Loss) Retained

Earnings Total Costco

Stockholders’

Equity Noncontrolling

Interests Total

Shares (000s) Amount

BALANCE AT SEPTEMBER 1, 2019 439,625 $ 4 $ 6,417 $ ( 1,436 ) $ 10,258 $ 15,243 $ 341 $ 15,584

— — — — 2,613 2,613 42 2,655

Foreign-currency translation adjustment and other, net

— — — ( 242 ) — ( 242 ) 18 ( 224 )

Stock-based compensation

— — 510 — — 510 — 510

Release of vested RSUs, including tax effects

3 unchanged sentences

Cash dividends declared — — — — ( 4,740 ) ( 4,740 ) — ( 4,740 )

BALANCE AT MAY 10, 2020 441,523 $ 4 $ 6,593 $ ( 1,678 ) $ 11,883 $ 16,802 $ 401 $ 17,203

BALANCE AT NOVEMBER 22, 2020 442,955 $ 4 $ 6,725 $ ( 1,101 ) $ 9,232 $ 14,860 $ 449 $ 15,309

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

12 Weeks Ended

2021 November 22,

CASH FLOWS FROM OPERATING ACTIVITIES

15 unchanged sentences

Additions to property and equipment ( 1,055 ) ( 893 )

Acquisitions — ( 1,133 )

Other investing activities, net ( 43 ) —

2 unchanged sentences

Change in bank payments outstanding ( 46 ) 40

Proceeds from issuance of long-term debt — 3,992

Repayments of long-term debt — ( 1,700 )

Repayments of short-term borrowings ( 40 ) —

Tax withholdings on stock-based awards ( 355 ) ( 311 )

2 unchanged sentences

Other financing activities, net ( 11 ) ( 39 )

Net cash (used in) provided by financing activities ( 5,769 ) 771

Net cash used in financing activities ( 839 ) ( 700 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

3 unchanged sentences

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the first thirty-six weeks of the year for:

Cash paid during the first 12 weeks of the year for:

Income taxes, net $ 206 $ 123

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

Cash dividend declared, but not yet paid

Leased assets obtained in exchange for finance lease liabilities $ 118 $ 51

Leased assets obtained in exchange for operating lease liabilities $ 61 $ 44

The accompanying notes are an integral part of these condensed consolidated financial statements.

5 unchanged sentences

Costco Wholesale Corporation (Costco or the Company), a Washington corporation, and its subsidiaries operate membership warehouses based on the concept that offering members low prices on a limited selection of nationally-branded and private-label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover.

For the period ended May 9, 2021, Costco operated 809 warehouses worldwide:

559 in the United States (U.S.) located in 45 states, Washington, D.C., and Puerto Rico, 105 in Canada, 39 in Mexico, 29 in the United Kingdom (U.K.), 29 in Japan, 16 in Korea, 14 in Taiwan, 12 in Australia, three in Spain, and one each in Iceland, France and China.

For the period ended November 21, 2021, Costco operated 823 warehouses worldwide:

571 in the United States (U.S.) located in 46 states, Washington, D.C., and Puerto Rico, 105 in Canada, 39 in Mexico, 30 in Japan, 29 in the United Kingdom (U.K.), 16 in Korea, 14 in Taiwan, 13 in Australia, three in Spain, and one each in Iceland, France and China.

The Company operates e-commerce websites in the U.S., Canada, Mexico, U.K., Korea, Taiwan, Japan, and Australia.

13 unchanged sentences

Fiscal 2022 is a 52-week year ending on August 28, 2022.

References to the third quarter of 2021 and 2020 relate to the 12-week fiscal quarters ended May 9, 2021, and May 10, 2020.

References to the first thirty-six weeks of 2021 and 2020 relate to the 36 weeks ended May 9, 2021, and May 10, 2020.

References to the first quarter of 2022 and 2021 relate to the 12-week fiscal quarters ended November 21, 2021, and November 22, 2020.

Use of Estimates

4 unchanged sentences

Actual results could differ from those estimates and assumptions.

Note 2—Acquisition of Innovel

On March 17, 2020, the Company acquired Innovel Solutions for $ 999 , using existing cash and cash equivalents.

Innovel (now known as Costco Wholesale Logistics or CWL) provides final-mile delivery, installation and white-glove capabilities for big and bulky products across the United States and Puerto Rico.

Its financial results have been included in the Company's consolidated financial statements from the date of acquisition.

As of May 9, 2021, the provisional period of the acquisition has ended, and the Company has completed the accounting for the acquisition.

The net purchase price of $ 999 has been allocated to the tangible and intangible assets of $ 294 and liabilities assumed of $ 235 , based on fair values on the acquisition date.

The remaining unallocated net purchase price of $ 940 was recorded as goodwill.

Goodwill represents the acquisition's benefits to the Company, which include the ability to serve more members and improve delivery times, enabling growth in certain segments of our U.S.

e-commerce operations.

The Company assigned this goodwill, which is deductible for tax purposes, to reporting units within the U.S.

Changes to the purchase price allocation originally recorded in the third quarter of 2020 were not material.

Property and Equipment, Net

The Company capitalizes certain computer software and costs incurred in developing or obtaining software for internal use.

In the first quarter of 2022, the Company recognized a $ 118 write-off of certain information technology assets, which was recorded in selling, general and administrative expenses, in the condensed consolidated statements of income.

Reclassification

Reclassifications were made to our first quarter 2021 condensed consolidated statements of income to conform with current period presentation.

Note 2—Investments

The Company's investments were as follows:

November 21, 2021:

Basis Unrealized

13 unchanged sentences

Total short-term investments $ 911 $ 6 $ 917

Gross unrecognized holding gains and losses on available-for-sale securities were not material for the periods ended May 9, 2021, and August 30, 2020 .

Gross unrecognized holding gains and losses on available-for-sale securities were not material for the periods ended November 21, 2021, and August 29, 2021 .

At those dates, there were no available-for-sale securities in a continuous unrealized-loss position.

There were no sales of available-for-sale securities during the first thirty-six weeks of 2021 or 2020.

The maturities of available-for-sale and held-to-maturity securities at May 9, 2021, are as follows:

There were no sales of available-for-sale securities during the first quarter of 2022 or 2021.

The maturities of available-for-sale and held-to-maturity securities at November 21, 2021, are as follows:

Available-For-Sale Held-To-Maturity

10 unchanged sentences

Forward foreign-exchange contracts, in (liability) position (2)

( 21 ) ( 21 )

Total $ 381 $ 408

2 unchanged sentences

(2) The asset and liability values are included in other current assets and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets.

At May 9, 2021, and August 30, 2020, the Company did not hold any Level 1 or 3 financial assets or liabilities that were measured at fair value on a recurring basis.

There were no transfers between levels during the first thirty-six weeks of 2021 or 2020.

At November 21, 2021, and August 29, 2021, the Company did not hold any Level 1 or 3 financial assets or liabilities that were measured at fair value on a recurring basis.

There were no transfers between levels during the first quarter of 2022 or 2021.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

1 unchanged sentence

These assets are measured at fair value if determined to be impaired.

There were no fair value adjustments to these items during the first thirty-six weeks of 2021 or 2020.

There were no fair value adjustments to these items during the first quarter of 2022 or 2021.

The carrying value of the Company’s long-term debt consisted of the following:

16 unchanged sentences

Other long-term debt consists of Guaranteed Senior Notes issued by the Company's Japan subsidiary, valued using Level 3 inputs.

The fair value of the Company's long-term debt, including the current portion, was approximately $ 7,750 and $ 7,987 at May 9, 2021, and August 30, 2020.

The fair value of the Company's long-term debt, including the current portion, was approximately $ 7,541 and $ 7,692 at November 21, 2021, and August 29, 2021.

Subsequent to the end of the quarter, on December 1, 2021, the Company repaid, prior to maturity, the 2.300 % Senior Notes at a redemption price plus accrued interest as specified in the Notes' agreement.

Note 5—Equity

The Company’s current quarterly dividend is $ 0.79 per share, compared to $ 0.70 in the third quarter of 2020.

On April 14, 2021, the Board of Directors declared a quarterly cash dividend in the amount of $ 0.79 per share, which was paid on May 14, 2021.

The Company’s current quarterly dividend is $ 0.79 per share, compared to $ 0.70 in the first quarter of 2021.

On October 13, 2021, the Board of Directors declared a quarterly cash dividend in the amount of $ 0.79 per share, which was paid on November 12, 2021.

On December 11, 2020, an aggregate payment of approximately $ 4,430 was made in connection with the special cash dividend of $ 10.00 per share, declared on November 16, 2020.

Stock Repurchase Programs

Stock repurchase activity during the third quarter and first thirty-six weeks of 2021 and 2020 is summarized below:

The Company's stock repurchase program is conducted under a $ 4,000 authorization by the Board of Directors, which expires in April 2023.

The remaining amount available for stock repurchases under the approved plan was $ 3,215 at November 21, 2021.

Stock repurchase activity during the first quarter of 2022 and 2021 is summarized below:

Shares Repurchased (000s) Average Price per Share Total Cost

Third quarter of 2021 519 $ 346.19 $ 179

First thirty-six weeks of 2021 1,040 $ 353.87 $ 368

Third quarter of 2020 106 $ 296.38 $ 31

First thirty-six weeks of 2020 368 $ 298.53 $ 110

First quarter of 2022 77 $ 455.08 $ 35

First quarter of 2021 213 $ 359.45 $ 77

These amounts may differ from the stock repurchase balances in the accompanying condensed consolidated statements of cash flows due to changes in unsettled stock repurchases at quarter end.

The remaining amount available for stock repurchases under the approved plan was $ 3,377 at May 9, 2021.

Purchases are made from time to time, as conditions warrant, in the open market or in block purchases and pursuant to plans under SEC Rule 10b5-1.

3 unchanged sentences

Shares for vested RSUs are generally delivered to participants annually, net of shares withheld for taxes.

As required by the Company's Seventh Restated 2002 Incentive Plan and 2019 Incentive Plan, in conjunction with a special cash dividend paid in the second quarter of 2021, the number of shares subject to outstanding RSUs was increased on the dividend record date to preserve their value.

They were adjusted by multiplying the number of outstanding shares by a factor of 1.019 (rounded up to a whole share), representing the ratio of the Nasdaq closing price of $ 391.77 on November 30, 2020, which was the last trading day immediately prior to the ex-dividend date, to the Nasdaq opening price of $ 384.50 on the ex-dividend date, December 1, 2020.

The outstanding RSUs increased by approximately 94,000 .

The adjustment did not result in additional stock-based compensation expense, as the fair value of the awards did not change.

As further required by the plans, the maximum number of shares issuable was proportionally adjusted, which resulted in an additional 222,000 RSU shares available to be granted.

Summary of Restricted Stock Unit Activity

At May 9, 2021, 11,981,000 shares were available to be granted as RSUs, and the following awards were outstanding:

• 4,242,000 time-based RSUs, which vest upon continued employment over specified periods;

At November 21, 2021, 10,334,000 shares were available to be granted as RSUs, and the following awards were outstanding:

• 3,463,000 time-based RSUs, which vest upon continued employment over specified periods and accelerates upon achievement of the long-service term;

• 39,000 performance-based RSUs, granted to executive officers of the Company, for which the performance targets have been met.

1 unchanged sentence

• 82,000 performance-based RSUs, granted to executive officers of the Company, subject to achievement of performance targets for fiscal 2022, as determined by the Compensation Committee of the Board of Directors after the end of the fiscal year.

These awards are included in the table below.

The Company recognized compensation expense for these awards in the third quarter of 2021, as it is currently deemed probable that the targets will be achieved.

The following table summarizes RSU transactions during the first thirty-six weeks of 2021:

These awards are not included in the table below or in the amount of unrecognized compensation cost.

The following table summarizes RSU transactions during the first quarter of 2022:

Units (in 000s) Weighted-Average

4 unchanged sentences

Forfeited ( 12 ) 298.67

Special cash dividend 94 N/A

Outstanding at May 9, 2021 4,373 $ 257.87

The remaining unrecognized compensation cost related to unvested RSUs at May 9, 2021, was $ 852 , and the weighted-average period over which this cost will be recognized is 1.7 years.

Outstanding at November 21, 2021 3,502 $ 334.16

The remaining unrecognized compensation cost related to unvested RSUs at November 21, 2021, was $ 1,089 , and the weighted-average period over which this cost will be recognized is 1.8 years.

Summary of Stock-Based Compensation

The following table summarizes stock-based compensation expense and the related tax benefits:

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2021 November 22,

Stock-based compensation expense

$ 87 $ 88 $ 550 $ 508

Less recognized income tax benefit

18 18 115 105

Stock-based compensation expense, net $ 303 $ 266

$ 69 $ 70 $ 435 $ 403

The Company's reported effective income tax rate for the first thirty-six weeks of 2021 was 26.4 %, excluding the impact of discrete net tax benefits.

The provision for income taxes was favorably impacted by discrete tax items, including $ 75 related to the excess tax benefit on stock compensation, $ 70 related to the portion of the special cash dividend payable through our 401(k) plan and $ 19 primarily related to a reduction in the valuation allowance against certain deferred tax assets.

The Company is subject to multiple examinations for value added, sales-based, payroll, product, import or other non-income taxes in various jurisdictions.

In certain cases, the Company has received assessments from the authorities.

The possible losses or range of possible losses associated with these matters are either immaterial or an estimate of the possible loss or range of loss cannot be made at this time.

If certain matters or a group of matters were to be decided adversely to the Company, it could result in a charge that might be material to the results of an individual fiscal quarter or year.

Note 7—Net Income per Common and Common Equivalent Share

The following table shows the amounts used in computing net income per share and the weighted average number of shares of basic and potentially dilutive common shares outstanding (shares in 000s):

12 Weeks Ended 36 Weeks Ended

12 Weeks Ended

2021 November 22,

Net income attributable to Costco

9 unchanged sentences

Legal Proceedings

The Company is involved in a number of claims, proceedings and litigation arising from its business and property ownership.

The Company is involved in a number of claims, proceedings and litigations arising from its business and property ownership.

In accordance with applicable accounting guidance, the Company establishes an accrual for legal proceedings if and when those matters present loss contingencies that are both probable and reasonably estimable.

8 unchanged sentences

and/or (iii) the matters involve complex or novel legal theories or a large number of parties.

The Company is a defendant in an action commenced in August 2013 under the California Labor Code Private Attorneys General Act (PAGA) alleging violation of California Wage Order 7-2001 for failing to provide seating to member service assistants who work at entrance and exit doors in the Company’s California warehouses.

The Company is a defendant in an action commenced in August 2013 under the California Labor Code Private Attorneys General Act (PAGA) alleging violation of California Wage Order 7-2001 for failing to provide seating to employees who work at entrance and exit doors in California warehouses.

Costco Wholesale Corp., et al.

3 unchanged sentences

The Company filed an answer denying the material allegations of the complaint.

In January 2019, an employee brought similar claims for relief concerning Costco employees engaged at member services counters in California.

Costco Wholesale Corp.

Alameda Superior Court).

The Company filed an answer denying the material allegations of the complaint.

On February 4, 2021, the court finally approved a settlement, under which payment of an immaterial amount has been made.

In December 2018, a depot employee raised similar claims, alleging that depot employees in California did not receive suitable seating or appropriate workplace temperature conditions.

In December 2018, a depot employee raised similar claims, alleging that depot employees in California did not receive suitable seating or reasonably comfortable workplace temperature conditions.

Costco Wholesale Corp.

4 unchanged sentences

The workplace temperature claims continue in litigation.

In January 2019, a former seasonal employee filed a class action, alleging failure to provide California seasonal employees meal and rest breaks, proper wage statements, and appropriate wages.

Costco Wholesale Corp.

19-CV-340438;

Santa Clara Superior Court).

The complaint seeks relief under the California Labor Code, including civil penalties and attorneys’ fees.

In October 2019, the parties reached an agreement on a class settlement for an immaterial amount, which received court approval in January 2021.

In March 2019, employees filed a class action against the Company alleging claims under California law for failure to pay overtime, to provide meal and rest periods and itemized wage statements, to timely pay wages due to terminating employees, to pay minimum wages, and for unfair business practices.

5 unchanged sentences

In January 2020, the plaintiffs dismissed their Labor Code claims without prejudice, and the court remanded the action to state court.

The remand is being appealed.

The remand was appealed;

the appeal is in abeyance due to a pending settlement for an immaterial amount that was agreed upon in February 2021.

The Court preliminarily approved the settlement in October 2021, and the Court's final review is scheduled for May 2022.

In May 2019, an employee filed a class action against the Company alleging claims under California law for failure to pay overtime, to provide itemized wage statements, to timely pay wages due to terminating employees, to pay minimum wages, and for unfair business practices.

2 unchanged sentences

Relief is sought under the California Labor Code, including civil penalties and attorneys' fees.

The Company has moved for partial summary judgment, and the parties have filed competing motions regarding class certification.

In August 2019, Rough filed a companion case in state court seeking penalties under PAGA.

The Company has moved for partial summary judgement, and the parties have filed competing motions regarding class certification.

In August 2019, the plaintiff filed a companion case in state court seeking penalties under PAGA.

Costco Wholesale Corp.

4 unchanged sentences

Costco Wholesale Corp .

3:19-cv-05624;

3:19-cv-05624-EMC;

The Company filed an answer denying the material allegations of the complaint.

In June 2021, the plaintiff agreed to dismiss his claims for failure to provide meal and rest breaks and to pay minimum wages.

In July 2021, the parties reached an agreement settling for an immaterial amount the remaining claim and related derivative claims.

In April 2020, an employee, alleging underpayment of sick pay, filed a class and representative action against the Company, alleging claims under California law for failure to pay all wages at termination and for Labor Code penalties under PAGA.

1 unchanged sentence

5:20-cv-04119;

The Company filed a motion to dismiss as to the plaintiff's amended complaint, and the case has been stayed, due to the plaintiff's bankruptcy.

The case was stayed due to the plaintiff's bankruptcy, and his individual claim was settled for an immaterial amount.

A request for dismissal of the class and representative action is pending.

In July 2020, an employee filed an action under PAGA on behalf of all California non-exempt employees alleging violations of California Labor Code provisions regarding meal and rest periods, minimum wage, overtime, wage statements, reimbursement of expenses, and payment of wages at termination.

Costco Wholesale Corp.

Costco Wholesale Corporation (Case No.

37-2020-00023551-CU-OE-CTL;

5 unchanged sentences

1:20-cv-06067;

An amended complaint has been filed, and the Company has denied the material allegations of the amended complaint.

An amended complaint was filed, and the Company has denied the material allegations of the amended complaint.

In August 2021, a former employee filed a similar suit, asserting collective and class claims on behalf of non-exempt employees under the FLSA and New York law.

Costco Wholesale Corp.

2:21-cv-4814;

The Company answered the complaint on October 21, 2021, denying the material allegations.

In February 2021, a former employee filed a class action against the Company alleging violations of California Labor Code regarding payment of wages, meal and rest periods, wage statements, reimbursement of expenses, payment of final wages to terminated employees, and for unfair business practices.

1 unchanged sentence

5:21-cv-00716:

Cal.) In May 2021, the Company filed a motion to dismiss the complaint.

In December 2017, the United States Judicial Panel on Multidistrict Litigation consolidated numerous cases concerning the impacts of opioid abuses filed against various defendants by counties, cities, hospitals, Native American tribes, third-party payors, and others.

In re National Prescription Opiate

Litigation (MDL No.

Included are federal cases that name the Company, including actions filed by counties and cities in Michigan, New Jersey, Oregon, Virginia and South Carolina and a third-party payor in Ohio, class actions filed on behalf of infants born with opioid-related medical conditions in 40 states, and class actions and individual actions filed on behalf of individuals seeking to recover alleged increased insurance costs associated with opioid abuse in 42 states and American Samoa.

Similar actions were commenced against the Company in state courts in Utah (2019) and Texas (2021).

Claims against the Company in state courts in New Jersey, Oklahoma, and Arizona have been dismissed.

The Company is defending all of these matters.

The Company and its CEO and CFO are defendants in putative class actions brought on behalf of shareholders who acquired Company stock between June 6 and October 25, 2018.

Costco Wholesale Corp., et al.

The complaints allege violations of the federal securities laws stemming from the Company’s disclosures concerning internal control over financial reporting.

They seek unspecified damages, equitable relief, interest, and costs and attorneys’ fees.

On January 30, 2019, an order was entered consolidating the actions, and a consolidated amended complaint was filed on April 16, 2019.

On November 26, 2019, the court entered an order dismissing the consolidated amended complaint and granting the plaintiffs leave to file a further amended complaint.

A further amended complaint was filed on March 9, which the court dismissed with prejudice on August 19, 2020.

An appeal in the Ninth Circuit is pending.

Members of the Board of Directors, one other individual, and the Company are defendants in a shareholder derivative action related to the internal controls and related disclosures identified in the putative class actions, alleging that the individual defendants breached their fiduciary duties.

Hamilton James, Susan Decker, Kenneth Denman, Richard Galanti, Craig Jelinek, Richard Libenson, John Meisenbach, Charles Munger, Jeffrey Raikes, John Stanton, Mary Agnes Wilderotter, and Costco Wholesale Corp.

The complaint seeks unspecified damages, disgorgement of compensation, corporate governance changes, and costs and attorneys' fees.

Because the complaint is derivative in nature, it does not seek monetary damages from the Company, which is a nominal defendant.

By agreement among the parties the action has been stayed pending further proceedings in the class action.

Similar actions were filed in King County Superior Court on February 20, 2019, Elliott v.

19-2-04824-7), April 16, 2019, Brad Shuman, et ano.

Hamilton James, Susan Decker, Kenneth Denman, Richard Galanti, Craig Jelinek, John Meisenbach, Charles Munger, Jeffrey Raikes, John Stanton, Mary Agnes Wilderotter, and Costco Wholesale Corp.

19-2-10460-1), and June 12, 2019, Rahul Modi v.

Hamilton James, Susan Decker, Kenneth Denman, Richard Galanti, Craig Jelinek, John Meisenbach, Charles Munger, Jeffrey Raikes, John Stanton, Mary Agnes Wilderotter, and Costco Wholesale Corp.

19-2-15514-1).

These actions have also been stayed.

On June 23, 2020, a putative class action was filed against the Company, the “Board of Directors,” the “Costco Benefits Committee” and others under the Employee Retirement Income Security Act, in the United States District Court for the Eastern District of Wisconsin.

Costco Wholesale, et al.

The class is alleged to be beneficiaries of the Costco 401(k) plan from June 23, 2014, and the claims are that the defendants breached their fiduciary duties in the operation and oversight of the plan.

The complaint seeks injunctive relief, damages, interest, costs, and attorneys' fees.

On September 11, 2020, the defendants filed a motion to dismiss the complaint, and on September 21 the plaintiffs filed an amended complaint, which the defendants have also moved to dismiss.

In May 2021, the Company filed a motion to dismiss the complaint, which was granted with leave to amend.

In June 2021, the plaintiff filed an amended complaint, which the Company moved to dismiss later that month.

The court granted the motion in part in July 2021 with leave to amend.

In August 2021, the plaintiff filed a second amended complaint and filed a separate representative action under PAGA asserting the same Labor Code claims and seeking civil penalties and attorneys' fees.

The Company filed an answer to the second amended class action complaint, denying the material allegations.

In July 2021, a former temporary staffing employee filed a class action against the Company and a staffing company alleging violations of the California Labor Code regarding payment of wages, meal and rest periods, wage statements, the timeliness of wages and final wages, and for unfair business practices.

Costco Wholesale Corp.

STK-CV-UOE-2021-0006024;

San Joaquin Superior Court).

The Company will move to compel arbitration of the plaintiff's individual claims and to dismiss the class action complaint.

On September 7, 2021, the same former employee filed a separate representative action under PAGA asserting the same Labor Code violations and seeking civil penalties and attorneys' fees.

The complaint has not yet been served.

In September 2021, an employee filed a class action against the Company alleging violations of the California Labor Code regarding the alleged failure to provide sick pay, failure to timely pay wages due at separation from employment, and for violations of California's unfair competition law.

De Benning v.

Costco Wholesale Corp.

34-2021-00309030-CU-OE-GDS;

Sacramento Superior Court).

The Company has not yet responded to the complaint.

Beginning in December 2017, the United States Judicial Panel on Multidistrict Litigation consolidated numerous cases concerning the impacts of opioid abuses filed against various defendants by counties, cities, hospitals, Native American tribes, third-party payors, and others.

In re National Prescription Opiate Litigation (MDL No.

Included are cases that name the Company, including actions filed by counties and cities in Michigan, New Jersey, Oregon, Virginia and South Carolina, a third-party payor in Ohio, and a hospital in Texas, class actions filed on behalf of infants born with opioid-related medical conditions in 40 states, and class actions and individual actions filed on behalf of individuals seeking to recover alleged increased insurance costs associated with opioid abuse in 43 states and American Samoa.

Claims against the Company in state courts in New Jersey, Oklahoma, Utah, and Arizona have been dismissed.

The Company is defending all of the pending matters.

The Company does not believe that any pending claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows;

1 unchanged sentence

Note 9—Segment Reporting

The Company and its subsidiaries are principally engaged in the operation of membership warehouses in the U.S., Canada, Mexico, U.K., Japan, Korea, Australia, Spain, Iceland, France and China and through a majority-owned subsidiary in Taiwan.

The Company and its subsidiaries are principally engaged in the operation of membership warehouses in the U.S., Canada, Mexico, Japan, U.K., Korea, Australia, Spain, Iceland, France and China and through a majority-owned subsidiary in Taiwan.

Reportable segments are largely based on management’s organization of the operating segments for operational decisions and assessments of financial performance, which consider geographic locations.

1 unchanged sentence

Inter-segment net sales and expenses have been eliminated in computing total revenue and operating income.

Certain operating expenses, predominantly stock-based compensation, are incurred on behalf of the Company's Canadian and Other International operations, but are included in the U.S.

operations because those costs generally come under the responsibility of the Company's U.S.

management team.

Effective for the 12 weeks ending November 21, 2021, stock-based compensation was allocated to the segments.

This change reflected a decision to evaluate the financial performance of the Company's segments inclusive of this expense.

Operating income was restated in each of the segments for all prior periods to reflect this change.

The following table provides information for the Company's reportable segments:

4 unchanged sentences

Operations Total

12 Weeks Ended May 9, 2021

Total revenue $ 32,759 $ 6,299 $ 6,219 $ 45,277

Operating income 1,099 271 293 1,663

12 Weeks Ended May 10, 2020

Total revenue $ 27,626 $ 4,722 $ 4,918 $ 37,266

Operating income 853 129 197 1,179

36 Weeks Ended May 9, 2021

12 Weeks Ended November 21, 2021

Total revenue $ 36,317 $ 7,121 $ 6,925 $ 50,363

Operating income 1,118 293 282 1,693

36 Weeks Ended May 10, 2020

12 Weeks Ended November 22, 2020

Total revenue $ 31,292 $ 6,011 $ 5,905 $ 43,208

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The following table summarizes net sales by merchandise category;

sales from e-commerce are allocated to the relevant categories:

12 Weeks Ended 36 Weeks Ended

sales from e-commerce websites and business centers have been allocated to their respective merchandise categories:

12 Weeks Ended

2021 November 22,

Foods and Sundries $ 19,563 $ 18,019

8,206 5,891 23,842 18,508

Non-Foods 14,162 12,384

Fresh Foods 6,439 5,863

4,693 2,806 15,164 11,607

Ancillary and other 7,630 5,270 19,998 19,173

Ancillary and Other Businesses 9,253 6,081

Total net sales

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements