What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-03-10 compared with 2021-12-22 · 135 added, 90 removed, 159 unchanged (59% of the section changed)

6 unchanged sentences

Such forward-looking statements involve risks and uncertainties that may cause actual events, results, or performance to differ materially from those indicated by such statements.

These risks and uncertainties include, but are not limited to, domestic and international economic conditions, including exchange rates, inflation or deflation, the effects of competition and regulation, uncertainties in the financial markets, consumer and small-business spending patterns and debt levels, breaches of security or privacy of member or business information, conditions affecting the acquisition, development, ownership or use of real estate, capital spending, actions of vendors, rising costs associated with employees (generally including health-care costs), energy and certain commodities, geopolitical conditions (including tariffs), the ability to maintain effective internal control over financial reporting, regulatory and other impacts related to climate change, and COVID-19 related factors and challenges, including (among others) the duration of the pandemic, the unknown long-term economic impact, reduced member shopping due to illness, travel restrictions or financial hardship, shifts in demand for products, reduced workforces due to illness, quarantine, or government mandates, temporary store closures or operational limitations due to government mandates, or supply-chain disruptions, capacity constraints of third-party logistics suppliers, and other risks identified from time to time in the Company's public statements and reports filed with the Securities and Exchange Commission (SEC).

These risks and uncertainties include, but are not limited to, domestic and international economic conditions, including exchange rates, inflation or deflation, the effects of competition and regulation, uncertainties in the financial markets, consumer and small-business spending patterns and debt levels, breaches of security or privacy of member or business information, conditions affecting the acquisition, development, ownership or use of real estate, capital spending, actions of vendors, rising costs associated with employees (generally including health-care costs), energy and certain commodities, geopolitical conditions (including tariffs and the Ukraine conflict), the ability to maintain effective internal control over financial reporting, regulatory and other impacts related to climate change, and COVID-19 related factors and challenges, including (among others) the duration of the pandemic, the unknown long-term economic impact, reduced shopping due to illness, travel restrictions or financial hardship, shifts in demand for products, reduced workforces due to illness, quarantine, or government mandates, temporary store closures or operational limitations due to government mandates, or supply-chain disruptions, capacity constraints of third-party logistics suppliers, and other risks identified from time to time in the Company's public statements and reports filed with the Securities and Exchange Commission (SEC).

Forward-looking statements speak only as of the date they are made, and the Company does not undertake to update these statements, except as required by law.

5 unchanged sentences

We believe that the most important driver of our profitability is increasing net sales, particularly comparable sales growth.

Net sales includes our core merchandise categories (foods and sundries, non-foods, and fresh foods), warehouse ancillary (includes gasoline, pharmacy, optical, food court, hearing aids, and tire installation) and other businesses (includes e-commerce, business centers, travel and other).

We define comparable sales as net sales from warehouses open for more than one year, including remodels, relocations and expansions, and sales related to e-commerce websites operating for more than one year.

1 unchanged sentence

Sales comparisons can also be particularly influenced by certain factors that are beyond our control:

fluctuations in currency exchange rates (with respect to the consolidation of the results of our international operations);

fluctuations in currency exchange rates (with respect to our international operations);

and changes in the cost of gasoline and associated competitive conditions.

15 unchanged sentences

The degree of our exposure is dependent on (among other things) the type of goods, rates imposed, and timing of the tariffs.

Merchandise costs were impacted by inflation higher than what we have experienced in recent years.

Merchandise costs in the second quarter and first half of 2022 were impacted by inflation higher than what we have experienced in recent years.

The impact to our net sales and gross margin is influenced in part by our merchandising and pricing strategies in response to cost increases.

12 unchanged sentences

With respect to the compensation of our employees, our philosophy is not to seek to minimize their wages and benefits.

Rather, we believe that achieving our longer-term objectives of reducing employee turnover and enhancing employee satisfaction requires maintaining compensation levels that are better than the industry average for much of our workforce.

Rather, we believe that our longer-term objectives of reducing employee turnover and enhancing employee satisfaction require maintaining compensation levels that are better than the industry average for much of our workforce.

This may cause us, for example, to absorb costs that other employers might seek to pass through to their workforces.

1 unchanged sentence

Our operating model is generally the same across our U.S., Canadian, and Other International operating segments (see Note 9 to the condensed consolidated financial statements included in Part I, Item 1, of this Report).

Certain operations in the Other International segment have relatively higher rates of square footage growth, lower wage and benefit costs as a percentage of sales, less or no direct membership warehouse competition, or lack an e-commerce business.

In discussions of our consolidated operating results, we refer to the impact of changes in foreign currencies relative to the U.S.

4 unchanged sentences

Our fiscal year ends on the Sunday closest to August 31.

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

References to the second quarter of 2022 and 2021 relate to the 12-week fiscal quarters ended February 13, 2022, and February 14, 2021.

References to the first half of 2022 and 2021 relate to the 24 weeks ended February 13, 2022, and February 14, 2021.

Certain percentages presented are calculated using actual results prior to rounding.

Unless otherwise noted, references to net income relate to net income attributable to Costco.

Highlights for the first quarter of 2022 as compared to the first quarter of 2021 include:

• Net sales increased 17% to $49,417, driven by an increase in comparable sales of 15% and sales at 20 net new warehouses opened since the end of the first quarter of 2021;

• Membership fee revenue increased 10% to $946, driven by new member sign-ups, upgrades to Executive Membership, and an increase in our renewal rate as more members have transitioned to auto renew;

• Gross margin percentage decreased 49 basis points, driven primarily by our core merchandise categories;

Highlights for the second quarter of 2022 versus 2021 include:

• Net sales increased 16% to $50,937, driven by an increase in comparable sales of 14% and sales at 25 net new warehouses opened since the end of the second quarter of 2021;

• Membership fee revenue increased 10% to $967, driven by new member sign-ups, upgrades to Executive Membership, and an increase in our renewal rate;

• Gross margin percentage decreased 32 basis points, driven primarily by our core merchandise categories, partially offset by our warehouse ancillary and other businesses, primarily gasoline;

• SG&A expenses as a percentage of net sales decreased 94 basis points, primarily due to leveraging increased sales and ceasing of incremental wages related to COVID-19;

• The provision for income taxes in the first quarter of 2022 was positively impacted by a benefit related to stock compensation of $91, $0.21 per diluted share, compared to $75, $0.17 per diluted share, in the first quarter of 2021.

The first quarter of 2021 was also positively impacted by a benefit of $70, $0.16 per diluted share, in connection with the portion of the special dividend paid to 401(k) participants;

• Net income was $1,299, $2.92 per diluted share, compared to $951, $2.14 per diluted share in 2021;

• A quarterly cash dividend of $0.79 per share was paid on November 12, 2021.

The COVID-19 pandemic continues.

• On January 20, 2022 our board declared a quarterly cash dividend of $0.79 per share, which was paid on February 18, 2022;

• Subsequent to the end of the quarter, in mid-March we will be increasing various wages and benefits, consistent with the three-year cycle on which this has been done historically.

significant are increases of a minimum of fifty cents per hour for U.S.

and Canada wage scales.

Certain other bonuses and benefits will be increasing for many employees.

The estimated incremental annualized pre-tax costs of these increases, after considering our normal annual increases is approximately $275.

Further, an additional $85 will be recorded in the third fiscal quarter related to a one-time true-up to accrued benefits, related to these wage and benefit changes.

The COVID-19 pandemic continued to impact our business in the second quarter of 2022, albeit to a lesser extent.

COVID-related and other supply and logistics constraints have continued to adversely affect some merchandise categories and are expected to do so for the foreseeable future.

During the first quarter of fiscal 2021, we paid $212 incremental wages related to COVID-19, which ceased in February 2021.

Certain risks and uncertainties related to the pandemic and vaccine mandates are included in Risk Factors (Part II, Item 1A) of this Form 10-Q and in Part 1, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended August 29, 2021.

During the second quarter and first half of fiscal 2021, we paid $246 and $458 in incremental wages related to COVID-19, which ceased in February 2021.

RESULTS OF OPERATIONS

12 Weeks Ended

2021 November 22,

12 Weeks Ended 24 Weeks Ended

2022 February 14,

2021 February 13,

2022 February 14,

$ 50,937 $ 43,888 $ 100,354 $ 86,235

14 unchanged sentences

Total Company 11 % 13 % 11 % 15 %

Net sales increased $7,070 or 17% during the first quarter of 2022.

This improvement was attributable to an increase in comparable sales of 15% and sales at the 20 net new warehouses opened since the end of the first quarter of 2021.

While sales in all core merchandise categories increased, increases were strongest in non-foods, gasoline, and travel.

Merchandise costs continued to be impacted by inflation, slightly higher than what we experienced in the fourth quarter of fiscal 2021.

Higher gasoline prices positively impacted net sales by $1,843, or 435 basis points, compared to 2021, with a 49% increase in the average price per gallon.

Net sales increased $7,049 or 16%, and $14,119 or 16% during the second quarter and first half of 2022.

This improvement was attributable to an increase in comparable sales of 14% and 15% in the second quarter and first half of 2022, and sales at the 25 net new warehouses opened since the end of the second quarter of 2021.

While sales in all core merchandise categories and warehouse ancillary and other businesses increased, the rate of increase was strongest in our gasoline, business centers, and travel businesses.

Sales continued to be impacted by inflation, higher than what we experienced in the first quarter of fiscal 2022.

During the second quarter of 2022, higher gasoline prices positively impacted net sales by $1,713, or 390 basis points, compared to 2021, with a 44% increase in the average price per gallon.

The volume of gasoline sold increased approximately 25%, positively impacting net sales by $814, or 185 basis points.

Changes in foreign currencies relative to the U.S.

dollar positively impacted net sales by approximately $380, or 90 basis points, compared to the first quarter of 2021, primarily attributable to our Canadian operations.

dollar negatively impacted net sales by approximately $281, or 64 basis points, compared to the second quarter of 2021, primarily attributable to our Other International operations.

During the first half of 2022, higher gasoline prices positively impacted net sales by $3,559, or 413 basis points, compared to 2021, with a 46% increase in the average price per gallon.

The volume of gasoline sold increased approximately 26%, positively impacting net sales by $1,620, or 188 basis points.

Changes in foreign currencies relative to the U.S.

dollar positively impacted net sales by approximately $101, or 12 basis points, compared to the first half of 2021, primarily attributable to our Canadian operations, partially offset by our Other International operations.

Comparable Sales

Comparable sales increased 15% in the first quarter of 2022, and were positively impacted by increases in the average ticket and shopping frequency.

There was an increase of 14% in e-commerce comparable sales in the first quarter of 2022.

Comparable sales increased 14% and 15% in the second quarter and first half of 2022, and were positively impacted by increases in shopping frequency and the average ticket, which includes the effects of inflation and changes in foreign currency.

E-commerce comparable sales increased 13% in the second quarter and first half of 2022.

Membership Fees

12 Weeks Ended

2021 November 22,

12 Weeks Ended 24 Weeks Ended

2022 February 14,

2021 February 13,

2022 February 14,

Membership fees $ 967 $ 881 $ 1,913 $ 1,742

2 unchanged sentences

Total cardholders (000s) 114,800 108,300 — —

Membership fee revenues increased 10%, driven by sign-ups and upgrades to Executive Membership.

At the end of the first quarter of 2022, our member renewal rates were 92% in the U.S.

Membership fee revenues increased 10% in both the second quarter and first half of 2022, driven by sign-ups and upgrades to Executive Membership.

At the end of the second quarter of 2022, our member renewal rates were 92% in the U.S.

and Canada and 90% worldwide.

Renewal rates continue to benefit from more members auto renewing, as well as increased penetration of executive members, who on average renew at a higher rate.

Renewal rates continue to benefit from more members auto renewing, and increased penetration of executive members, who on average renew at a higher rate.

Our renewal rate, which excludes affiliates of Business members, is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date.

1 unchanged sentence

Our membership counts include active memberships as well as memberships that have not renewed within the 12 months prior to the reporting date.

12 Weeks Ended

2021 November 22,

12 Weeks Ended 24 Weeks Ended

2022 February 14,

2021 February 13,

2022 February 14,

Net sales $ 50,937 $ 43,888 $ 100,354 $ 86,235

3 unchanged sentences

10.64 % 10.96 % 10.85 % 11.25 %

Quarterly Results

The gross margin of core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), decreased 28 basis points.

The decrease was across all categories, most significantly in fresh foods.

This measure eliminates the impact of changes in sales penetration and gross margins from our warehouse ancillary and other businesses.

The decrease was primarily due to fresh foods and foods and sundries, partially offset by non-foods.

Total gross margin percentage decreased 49 basis points compared to the first quarter of 2021.

Excluding the impact of gasoline price inflation on net sales, gross margin percentage was 11.49%, a decrease of six basis points.

This was primarily due to a 26 basis-point decrease in core merchandise categories, predominantly foods and sundries and fresh foods.

Gross margin was also negatively impacted by three basis points due to a LIFO charge for higher merchandise costs and one basis-point due to increased 2% rewards.

Gross margin percentage was positively impacted by 12 basis points due to decreased incremental wages related to COVID-19, which ended on February 28, 2021.

Warehouse ancillary and other businesses increased 12 basis points, primarily due to our gasoline business and certain other ancillary businesses.

Total gross margin percentage decreased 32 basis points compared to the second quarter of 2021.

Excluding the impact of gasoline price inflation on net sales, gross margin percentage was 11.01%, an increase of five basis points.

This was primarily due to a 49 basis-point increase in warehouse ancillary and other businesses, predominantly gasoline.

Gross margin was also positively impacted by 14 basis points due to decreased incremental wages related to COVID-19, which ended February 28, 2021.

Gross margin was negatively impacted due to a 43 basis-point decrease in all core merchandise categories, predominantly fresh foods and foods and sundries, 14 basis points due to a LIFO charge for higher merchandise costs, and one basis-point due to increased 2% rewards.

Changes in foreign currencies relative to the U.S.

dollar negatively impacted gross margin by approximately $31, compared to the second quarter of 2021, primarily attributable to our Other International operations.

Gross margin on a segment basis, when expressed as a percentage of the segment's own sales and excluding the impact of changes in gasoline prices on net sales (segment gross margin percentage), increased in our U.S.

segment, due to warehouse ancillary and other businesses, partially offset by core

merchandise categories and the LIFO charge.

Gross margin percentage decreased in our Canadian segment, primarily due to decreases in core merchandise categories and warehouse ancillary and other businesses.

Gross margin percentage decreased in our Other International segment due to decreases in core merchandise categories and increased 2% rewards.

and Canadian segment, due to warehouse ancillary and other businesses and ceasing of incremental wages related to COVID-19, partially offset by core merchandise categories.

segment was also negatively impacted due to the LIFO charge.

Gross margin percentage decreased in our Other International segment due to decreases in core merchandise categories and increased 2% rewards, partially offset by warehouse ancillary and other businesses and ceasing of incremental wages related to COVID-19.

Year-to-date Results

The gross margin of core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), decreased 23 basis points.

The decrease was primarily due to fresh foods, and foods and sundries, partially offset by non-foods.

Total gross margin percentage decreased 40 basis points compared to the first half of 2021.

Excluding the impact of gasoline price inflation on net sales, gross margin percentage was flat as compared to the first half of 2021.

Warehouse ancillary and other businesses, predominantly gasoline, increased 31 basis points.

Gross margin was also positively impacted by 13 basis points due to ceasing of incremental wages related to COVID-19.

Gross margin was negatively impacted due to a 34 basis-point decrease in core merchandise categories, predominantly foods and sundries, and fresh foods.

Gross margin was also negatively impacted by nine basis points due to a LIFO charge for higher merchandise costs and one basis-point due to increased 2% rewards.

The segment gross margin percentage increased in our U.S.

segment and performed similarly to the quarterly results above.

Gross margin percentage decreased in our Canadian segment, primarily due to decreases in core merchandise categories partially offset by warehouse ancillary and other businesses.

Gross margin percentage decreased in our Other International segment due to decreases in core merchandise categories and increased 2% rewards, partially offset by increases in warehouse ancillary and other businesses.

All our segments benefited from the ceasing of incremental wages related to COVID-19.

Selling, General and Administrative Expenses

12 Weeks Ended

2021 November 22,

12 Weeks Ended 24 Weeks Ended

2022 February 14,

2021 February 13,

2022 February 14,

SG&A expenses $ 4,575 $ 4,351 $ 9,293 $ 8,671

SG&A expenses as a percentage of net sales 8.98 % 9.92 % 9.26 % 10.06 %

Quarterly Results

SG&A expenses as a percentage of net sales decreased 94 basis points.

SG&A expenses as a percentage of net sales excluding the impact of gasoline price inflation was 9.92%, a decrease of 28 basis points.

Warehouse operations and other businesses were lower by 11 basis points, largely attributable to payroll leveraging increased sales.

Central operating costs were lower by six basis points.

SG&A expenses were also lower by a net 13 basis points resulting from ceasing incremental COVID-19 wages, partially offset by a write-off of certain information technology assets.

Stock compensation and pre-opening expenses were each higher by one basis-point.

Excluding the impact of gasoline price inflation the decrease was 63 basis points.

Ceasing incremental COVID-19 wages reduced expenses by 42 basis points.

Central operating costs were lower by 10 basis points and warehouse operations and other businesses were lower by nine basis points, largely attributable to leveraging increased sales.

Stock compensation expense was lower by two basis points.

Changes in foreign currencies relative to the U.S.

dollar positively impacted SG&A expenses by approximately $25, compared to the first quarter of 2021, primarily attributable to our Canadian operations.

The first quarter of fiscal 2022 includes the permanent $1 increase for hourly employees in our warehouses and distribution channels that began in March 2021, and beginning in October 2021, the additional starting wage increase from $16 and $16.50 to $17 and $18.

dollar positively impacted SG&A expenses by approximately $23, compared to the second quarter of 2021, primarily attributable to our Other International operations.

Year-to-date Results

SG&A expenses as a percentage of net sales decreased 80 basis points compared to the first half of 2021.

Excluding the impact of gasoline price inflation the decrease was 46 basis points.

SG&A expenses were positively impacted by a net 28 basis points due to the ceasing of incremental wages related to COVID-19, partially offset by a write-off of certain information technology assets.

Warehouse operations and other businesses were lower by 10 basis points, largely attributable to payroll and benefits, primarily due to leveraging increased sales.

Central operating costs were lower by eight basis points.

Stock compensation expense was lower by one basis point.

Pre-opening expenses were higher by one basis point.

The first half of fiscal 2022 includes the permanent $1 increase for hourly employees in our warehouses and distribution channels that began in March 2021, and beginning in October 2021, the additional starting wage increase from $16 and $16.50 to $17 and $18.

Interest Expense

12 Weeks Ended

2021 November 22,

12 Weeks Ended 24 Weeks Ended

2022 February 14,

2021 February 13,

2022 February 14,

Interest expense $ 36 $ 40 $ 75 $ 79

Interest expense is primarily related to Senior Notes.

Interest expense decreased in the second quarter and first half of 2022 due to early repayment of the 2.300% Senior Notes on December 1, 2021.

Interest Income and Other, Net

12 Weeks Ended

2021 November 22,

12 Weeks Ended 24 Weeks Ended

2022 February 14,

2021 February 13,

2022 February 14,

Interest income $ 6 $ 11 $ 15 $ 21

Foreign-currency transaction gains, net 26 8

Foreign-currency transaction gains (losses), net 12 (1) 38 7

Other, net 7 9 14 20

Interest income and other, net $ 25 $ 19 $ 67 $ 48

Foreign-currency transaction gains, net include the revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations and mark-to-market adjustments for forward foreign-exchange contracts.

Interest income decreased in the second quarter and first half of 2022 due to lower interest rates, partially offset by higher average cash and investment balances.

Foreign-currency transaction gains (losses), net include the revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations and mark-to-market adjustments for forward foreign-exchange contracts.

See Derivatives and Foreign Currency sections in Item 8, Note 1 of our Annual Report on Form 10-K, for the fiscal year ended August 29, 2021.

Provision for Income Taxes

12 Weeks Ended

2021 November 22,

12 Weeks Ended 24 Weeks Ended

2022 February 14,

2021 February 13,

2022 February 14,

Provision for income taxes $ 481 $ 348 $ 832 $ 587

Effective tax rate 26.7 % 26.4 % 23.8 % 21.5 %

The effective tax rate was favorably impacted by net discrete tax benefits of $97.

This was primarily attributable to $91 of excess tax benefits related to stock compensation.

Excluding discrete net tax benefits, the tax rate was 26.4%.

The effective tax rate for the first quarter of 2021 was favorably impacted by net discrete tax benefits of $135.

This was primarily attributable to $75 of excess tax benefits related to stock compensation and $70 related to the special cash dividend paid through the 401(k) plan.

Excluding net discrete tax benefits, the tax rate was 26.3% for the first quarter of 2021.

The effective tax rate for the first half of 2022 was impacted by net discrete tax benefits of $91, which primarily related to the first quarter.

This included $91 of excess tax benefits related to stock compensation.

Excluding discrete net tax benefits, the tax rate was 26.4% for the first half of 2022.

The effective tax rate for the first half of 2021 was impacted by net discrete tax benefits of $136, which was primarily related to the first quarter.

This included $75 of excess tax benefits related to stock compensation and $70 related to the special cash dividend paid through the 401(k) plan.

Excluding net discrete tax benefits, the tax rate was 26.4% for the first half of 2021.

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

24 Weeks Ended

2021 November 22,

2022 February 14,

Net cash provided by operating activities $ 3,659 $ 2,685

2 unchanged sentences

Our primary sources of liquidity are cash flows generated from our operations, cash and cash equivalents, and short-term investments.

Cash and cash equivalents and short-term investments were $13,476 and $12,175 at November 21, 2021, and August 29, 2021.

Of these balances, unsettled credit and debit card receivables represented approximately $2,245 and $1,816 at November 21, 2021, and August 29, 2021.

Cash and cash equivalents and short-term investments were $12,296 and $12,175 at February 13, 2022, and August 29, 2021.

Of these balances, unsettled credit and debit card receivables represented approximately $1,993 and $1,816 at February 13, 2022, and August 29, 2021.

These receivables generally settle within four days.

2 unchanged sentences

Construction and land purchase obligations primarily relate to the development and opening of new and relocated warehouses, the majority of which (other than leases) are due in the next 12 months.

Management believes that our cash and investment position and operating cash flows as well as capacity under existing and available credit agreements will be sufficient to meet our liquidity and capital requirements for the foreseeable future.

Management believes that our cash and investment position and operating cash flows with capacity under existing and available credit agreements will be sufficient to meet our liquidity and capital requirements for the foreseeable future.

Management also believes that our U.S.

2 unchanged sentences

Cash Flows from Operating Activities

Net cash provided by operating activities totaled $3,258 in the first quarter of 2022, compared to $2,647 in the first quarter of 2021.

Net cash provided by operating activities totaled $3,659 in the first half of 2022, compared to $2,685 in the first half of 2021.

Our cash flow provided by operations is primarily derived from net sales and membership fees.

1 unchanged sentence

Cash used in operations also includes payments for income taxes.

Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts

payable) is impacted by several factors, including how fast inventory is sold, the strategic forward deployment of inventory to accelerate delivery times to our members, payment terms with our suppliers, and the amount of payables paid early to obtain discounts from our suppliers.

Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including how fast inventory is sold, the forward deployment of inventory to accelerate delivery times to our members, payment terms with our suppliers, and the amount paid early to obtain discounts from our suppliers.

Cash Flows from Investing Activities

Net cash used in investing activities totaled $912 in the first quarter of 2022, compared to $682 in the first quarter of 2021, and is primarily related to capital expenditures.

Net cash used in investing activities totaled $1,393 in the first half of 2022, compared to $1,037 in the first half of 2021, and is primarily related to capital expenditures.

Net cash from investing activities also includes purchases and maturities of short-term investments.

2 unchanged sentences

Capital is also required for information systems, manufacturing and distribution facilities, initial warehouse operations, and working capital.

In the first quarter of 2022, we spent $1,055 on capital expenditures, and it is our current intention to spend approximately $4,000 during fiscal year 2022.

In the first half of 2022, we spent $1,778 on capital expenditures, and it is our current intention to spend approximately $4,000 during fiscal year 2022.

These expenditures are expected to be financed with cash from operations, existing cash and cash equivalents, and short-term investments.

We opened nine new warehouses, including one relocation, in the first quarter of 2022 and plan to open 20 to 23 additional new warehouses, including up to four relocations, in the remainder of fiscal 2022.

We opened 14 new warehouses, including one relocation, in the first half of 2022 and plan to open 15 to 18 additional new warehouses, including up to three relocations, in the remainder of fiscal 2022.

There can be no assurance that current expectations will be realized and plans are subject to change upon changes in capital expenditure needs or the economic environment.

Cash Flows from Financing Activities

Net cash used in financing activities totaled $839 in the first quarter of 2022, compared to $700 in the first quarter of 2021.

Cash flow used in financing activities was primarily related to withholding taxes on stock-based awards, the payment of dividends, and repurchases of common stock.

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

On October 13, 2021, our Board declared a quarterly cash dividend of $0.79 per share payable to shareholders of record on October 29, 2021, which was paid on November 12, 2021.

Stock Repurchase Program

During the first quarter of 2022 and 2021, we repurchased 77,000 and 213,000 shares of common stock, at an average price per share of $455.08 and $359.45, totaling approximately $35 and $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 the end of a quarter.

Net cash used in financing activities totaled $1,667 in the first half of 2022, compared to $5,350 in the first half of 2021.

Cash flow used in financing activities was primarily related to repayments of our 2.300% Senior Notes, withholding taxes on stock-based awards, the payment of dividends, and repurchases of common stock.

In the first half of 2021, cash flow used in financing was primarily due to the payment of a special dividend.

On January 20, 2022, our Board declared a quarterly cash dividend of $0.79 per share payable to shareholders of record on February 4, 2022, which was paid on February 18, 2022.

Share Repurchase Program

During the first half of 2022 and 2021, we repurchased 236,000 and 521,000 shares of common stock, at an average price per share of $498.00 and $361.52, totaling approximately $118 and $189.

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

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

2 unchanged sentences

We maintain bank credit facilities for working capital and general corporate purposes.

At November 21, 2021, we had borrowing capacity under these facilities of $1,046.

At February 13, 2022, we had borrowing capacity under these facilities of $1,034.

Our international operations maintain $550 of the total borrowing capacity under bank credit facilities, of which $195 is guaranteed by the Company.

There were no outstanding short-term borrowings under the bank credit facilities at the end of the first quarter of 2022, and short-term borrowings were immaterial at the end of 2021.

Short-term borrowings outstanding under the bank credit facilities were immaterial at the end of the second quarter of 2022, and at the end of 2021.

The Company has letter of credit facilities, for commercial and standby letters of credit, totaling $229.

The outstanding commitments under these facilities at the end of the first quarter of 2022 totaled $200, most of which were standby letters of credit which do not expire or have expiration dates within one year.

The bank credit facilities have various expiration dates, most of which are within one year, and we generally

intend to renew these facilities.

The outstanding commitments under these facilities at the end of the second quarter of 2022 totaled $201, most of which were standby letters of credit which do not expire or have expiration dates within one year.

The bank credit facilities have various expiration dates, most of which are within one year, and we generally intend to renew these facilities.

The amount of borrowings available at any time under our bank credit facilities is reduced by the amount of standby and commercial letters of credit outstanding.

11 unchanged sentences

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 2. Management’s Discussion and Analysis