What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-03-09 compared with 2022-12-29 · 126 added, 82 removed, 164 unchanged (56% 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 and the Ukraine conflict), the ability to maintain effective internal control over financial reporting, regulatory and other impacts related to climate change, COVID-19 related factors and challenges, 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, public-health related factors, and other risks identified from time to time in the Company's public statements and reports filed with the Securities and Exchange Commission.

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.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote understanding of the results of operations and financial condition.

MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q), as well as our consolidated financial statements, the accompanying Notes to Financial Statements, and the related Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal year 2022 Form 10-K, filed with the United States Securities and Exchange Commission (SEC) on October 5, 2022.

We operate membership warehouses and e-commerce websites based on the concept that offering our members low prices on a limited selection of nationally-branded and private-label products in a wide range of categories will produce high sales volumes and rapid inventory turnover.

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We do not focus in the short-term on maximizing prices charged, but instead seek to maintain what we believe is a perception among our members of our “pricing authority” – consistently providing the most competitive values.

Merchandise costs in the first quarter of 2023 was impacted by inflation higher than what we have experienced in recent years.

Merchandise costs in the second quarter of 2023 continued to be impacted by inflation.

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

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A decline in gasoline prices has the inverse effect.

Additionally, government actions in various countries, particularly China and the United States, have affected the costs of some of our merchandise.

Additionally, government actions in various countries relating to tariffs, particularly China and the United States, have affected the costs of some of our merchandise.

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

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This format is designed to reinforce member loyalty and provide continuing fee revenue.

The extent to

which we achieve growth in our membership base, increase the penetration of our Executive members, and sustain high renewal rates materially influences our profitability.

The extent to which we achieve growth in our membership base, increase the penetration of our Executive members, and sustain high renewal rates materially influences our profitability.

Our paid-membership growth rate may be adversely impacted when warehouse openings occur in existing markets as compared to new markets.

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

References to the first quarter of 2023 and 2022 relate to the 12-week fiscal quarters ended November 20, 2022, and November 21, 2021.

References to the second quarter of 2023 and 2022 relate to the 12-week fiscal quarters ended February 12, 2023, and February 13, 2022.

References to the first half of 2023 and 2022 relate to the 24 weeks ended February 12, 2023, and February 13, 2022.

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 2023 versus 2022 include:

• Net sales increased 8% to $53,437, driven by an increase in comparable sales of 7% and sales at 22 net new warehouses opened since the end of the first quarter of 2022;

• Membership fee revenue increased 6% to $1,000, driven by new member sign-ups, upgrades to Executive Membership, and an increase in our renewal rate;

• Gross margin percentage decreased 45 basis points, driven primarily by our core merchandise categories and a charge of $93, $0.15 per diluted share, predominantly related to downsizing our charter shipping activities.

This was partially offset by increases in warehouse ancillary and other businesses;

• SG&A expenses as a percentage of net sales decreased 35 basis points, primarily due to a write-off of information technology assets of $118, $0.20 per diluted share, recorded in the first quarter of 2022, and leveraging increased sales in the first quarter of 2023.

• The provision for income taxes in the first quarter of 2023 was positively impacted by a benefit related to stock compensation of $53, $0.12 per diluted share, compared to $91, $0.21 per diluted share, in the first quarter of 2022.

Highlights for the second quarter of 2023 versus 2022 include:

• Net sales increased 6% to $54,239, driven by an increase in comparable sales of 5% and sales at 20 net new warehouses opened since the end of the second quarter of 2022;

• Membership fee revenue increased 6% to $1,027, driven by new member sign-ups, upgrades to Executive Membership, and a higher renewal rate;

• Gross margin percentage increased eight basis points, driven primarily by a LIFO charge recorded in the second quarter of 2022.

This was partially offset by decreases in core merchandise categories;

• SG&A expenses as a percentage of net sales increased 13 basis points, primarily due to central operating costs;

• Net income was $1,466, $3.30 per diluted share, compared to $1,299, $2.92 per diluted share in 2022;

• On October 12, 2022, our Board declared a quarterly cash dividend of $0.90 per share, which was paid on November 10, 2022.

• A quarterly cash dividend of $0.90 per share was declared on January 19, 2023 and paid on February 17, 2023.

RESULTS OF OPERATIONS

12 Weeks Ended

2022 November 21,

12 Weeks Ended 24 Weeks Ended

2023 February 13,

2022 February 12,

2023 February 13,

$ 54,239 $ 50,937 $ 107,676 $ 100,354

5 unchanged sentences

Changes in comparable sales:

U.S 6 % 16 % 8 % 15 %

Canada 4 % 16 % 3 % 17 %

3 unchanged sentences

Changes in comparable sales excluding the impact of changes in foreign-currency and gasoline prices:

U.S 6 % 11 % 6 % 11 %

Canada 10 % 12 % 9 % 10 %

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E-commerce (9) % 13 % (6) % 13 %

Net sales increased $4,020 or 8% during the first quarter of 2023.

This improvement was attributable to an increase in comparable sales of 7% and sales at the 22 net new warehouses opened since the end of the first quarter of 2022.

Sales increased $2,033, or 5.1% in core merchandise categories, led by foods and sundries and fresh foods;

while non-foods decreased slightly.

Sales increased $1,987, or 21.5% in warehouse ancillary and other businesses, led by gasoline, business centers and travel businesses.

During the first quarter of 2023, higher gasoline prices positively impacted net sales by $1,216, 246 basis points, compared to 2022, with a 17% increase in the average price per gallon.

Net sales increased $3,302 or 6%, and $7,322 or 7% during the second quarter and first half of 2023.

This improvement was attributable to an increase in comparable sales of 5% and 6% in the second quarter and first half of 2023, and sales at the 20 net new warehouses opened since the end of the second quarter of 2022.

Sales increased $2,490, or 6% and $4,523, or 6% in core merchandise categories during the second quarter and first half of 2023, led by foods and sundries and fresh foods;

while non-foods decreased.

Sales increased $812, or 9% and $2,799, or 15% in warehouse ancillary and other businesses during the second quarter and first half of 2023, led by gasoline, pharmacy and travel.

During the second quarter of 2023, c hanges in foreign currencies relative to the U.S.

dollar negatively impacted net sales by approximately $937, 184 basis points, compared to the second quarter of 2022, attributable to our Canadian and Other International operations.

T he volume of gasoline sold increased approximately 9%, positively impacting net sales by $565, 111 basis points.

Changes in gasoline prices did not materially impact net sales for the current quarter.

During the first half of 2023, changes in foreign currencies relative to the U.S.

dollar negatively impacted net sales by approximately $2,471, 246 basis points, compared to the first half of 2022, attributable to our Canadian and Other International Operations.

Higher gasoline prices positively impacted net sales by $1,254, 125 basis points, compared to 2022, with a 9% increase in the average price per gallon.

The volume of gasoline sold increased approximately 10%, positively impacting net sales by $1,215, 121 basis points.

Changes in foreign currencies relative to the U.S.

dollar negatively impacted net sales by approximately $1,534, 310 basis points, compared to the first quarter of 2022, attributable to our Canadian and Other International operations.

Comparable Sales

Comparable sales increased 7% in the first quarter of 2023 and were positively impacted by increases in shopping frequency and the average ticket, which includes the effects of inflation and changes in foreign currency.

Comparable sales increased 5% and 6% in the second quarter and first half of 2023 and were positively impacted by increases in shopping frequency and the average ticket, which includes the effects of inflation and changes in foreign currency.

Membership Fees

12 Weeks Ended

2022 November 21,

12 Weeks Ended 24 Weeks Ended

2023 February 13,

2022 February 12,

2023 February 13,

Membership fees $ 1,027 $ 967 $ 2,027 $ 1,913

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Total cardholders (000s) 123,000 114,800 — —

Membership fee revenue increased 6% in the first quarter of 2023, driven by sign-ups, upgrades to Executive Membership, and an increase in our renewal rate.

Membership fee revenue increased 6% in both the second quarter and first half of 2023, driven by sign-ups, upgrades to Executive Membership, and a higher renewal rate.

Changes in foreign currencies relative to the U.S.

dollar negatively impacted membership fees by $32, compared to the first quarter of 2022.

At the end of the first quarter of 2023, our member renewal rates were 93% in the U.S.

dollar negatively impacted membership fees by $20 and $52 in the second quarter and first half of 2023.

At the end of the second quarter of 2023, our renewal rates were 92.6% in the U.S.

and Canada and 90.5% worldwide.

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

12 Weeks Ended

2022 November 21,

12 Weeks Ended 24 Weeks Ended

2023 February 13,

2022 February 12,

2023 February 13,

Net sales $ 54,239 $ 50,937 $ 107,676 $ 100,354

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10.72 % 10.64 % 10.67 % 10.85 %

Total gross margin percentage decreased 45 basis points compared to the first quarter of 2022.

Excluding the impact of gasoline price inflation on net sales, gross margin percentage was 10.85%, a decrease of 21 basis points.

This was primarily due to a 31 basis-point decrease in core merchandise categories, predominantly in non-foods and fresh foods, and an 18 basis-point charge, primarily related to downsizing our charter shipping activities.

Gross margin was also negatively impacted by five basis points due to increased 2% rewards.

Quarterly Results

Total gross margin percentage increased eight basis points compared to the second quarter of 2022.

Excluding the impact of gasoline price inflation on net sales, gross margin percentage was 10.73%, an increase of nine basis points.

This was driven primarily by a 14 basis-point increase due to a LIFO charge recorded in the second quarter of 2022.

Warehouse ancillary and other business also positively impacted gross margin by three basis points, predominantly gasoline, partially offset by e-commerce and pharmacy.

Core merchandise categories negatively impacted gross margin by six basis points, predominantly in non-foods and fresh foods, partially offset by foods and sundries.

Gross margin was negatively impacted by two basis points due to increased 2% rewards.

Changes in foreign currencies relative to the U.S.

dollar negatively impacted gross margin by approximately $91, compared to the second quarter of 2022, attributable to our Canadian and Other International operations.

The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), decreased 26 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.

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, largely due to the LIFO charge discussed above and an increase in our warehouse ancillary and other businesses, predominantly gasoline, partially offset by e-commerce.

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

Year-to-date Results

Total gross margin percentage decreased 18 basis points compared to the first half of 2022.

Excluding the impact of gasoline price inflation on net sales, gross margin percentage was 10.79%, a decrease of six basis points.

This was primarily due to an 18 basis-point decrease in core merchandise categories, predominantly in non-foods and fresh foods, partially offset by foods and sundries, and a nine basis-point charge primarily related to downsizing our charter shipping activities during the first quarter of 2023.

Gross margin was also negatively impacted by three basis points due to increased 2% rewards.

Warehouse ancillary and other businesses positively impacted gross margin by 16 basis points, predominantly gasoline, partially offset by e-commerce.

A smaller LIFO charge in the first quarter of 2023 compared to the first quarter of 2022 positively contributed three basis points.

A smaller LIFO charge in the first half of 2023 compared to the first half of 2022 positively contributed eight basis points.

Changes in foreign currencies relative to the U.S.

dollar negatively impacted gross margin by approximately $153, compared to the first quarter of 2022, attributable to our Canadian and Other International operations.

dollar negatively impacted gross margin by approximately $244, compared to the first half of 2022, attributable to our Canadian and Other International operations.

The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), decreased 29 basis points.

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

The decrease was primarily due to fresh foods and non-foods.

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

All segments were negatively impacted by decreases in core merchandise categories as described above and increased 2% rewards, partially offset by increases in warehouse ancillary and other businesses.

Gross margin in our U.S.

segment was also negatively impacted by the charge primarily related to the downsizing of our charter shipping activities, partially offset by a lower LIFO charge.

Segment gross margin percentage increased in our U.S.

segment, due to warehouse ancillary and other businesses and a smaller LIFO charge, partially offset by the charge related to downsizing our charter shipping activities and decreases in certain core merchandise categories, non-foods and fresh foods, partially offset by foods and sundries.

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

All segments were negatively impacted by increased 2% rewards.

Selling, General and Administrative Expenses

12 Weeks Ended

2022 November 21,

12 Weeks Ended 24 Weeks Ended

2023 February 13,

2022 February 12,

2023 February 13,

SG&A expenses $ 4,940 $ 4,575 $ 9,857 $ 9,293

SG&A expenses as a percentage of net sales 9.11 % 8.98 % 9.15 % 9.26 %

Quarterly Results

SG&A expenses as a percentage of net sales increased 13 basis points.

The effect of gasoline price inflation had no impact on SG&A expenses as a percentage of sales.

The comparison to last year was negatively impacted by nine basis points in central operating costs partially attributable to a charge related to a tax audit covering multiple years.

Warehouse operations and other businesses and stock compensation were both higher by two basis points.

Changes in foreign currencies relative to the U.S.

dollar decreased SG&A expenses by approximately $75 compared to the second quarter of 2022.

Year-to-date Results

SG&A expenses as a percentage of net sales decreased 11 basis points.

SG&A expenses as a percentage of net sales excluding the impact of gasoline price inflation was 9.42%, a decrease of 13 basis points.

SG&A expenses as a percentage of net sales excluding the impact of gasoline price inflation was flat compared to the first half of 2022.

The comparison to last year was favorably impacted by 12 basis points from a write-off of certain information technology assets in the prior year.

Stock compensation was also lower by one basis point.

Warehouse operations and other businesses were higher by nine basis points, largely attributable to the wage increases we instituted in 2022.

Central operating costs were higher by three basis points.

Warehouse operations and other businesses were higher by six basis points, largely attributable to the wage increases we instituted in 2022.

Central operating costs were also higher by six basis points.

Changes in foreign currencies relative to the U.S.

dollar decreased SG&A expenses by approximately $121 compared to the first quarter of 2022.

dollar decreased SG&A expenses by approximately $196 compared to the first half of 2022.

Interest Expense

12 Weeks Ended

2022 November 21,

12 Weeks Ended 24 Weeks Ended

2023 February 13,

2022 February 12,

2023 February 13,

Interest expense $ 34 $ 36 $ 68 $ 75

Interest expense is primarily related to Senior Notes and financing leases.

Interest expense decreased in the first quarter of 2023 due to repayment of the 2.300% Senior Notes on December 1, 2021.

The decrease in interest expense for the first half of 2023 was due to repayment of the 2.300% Senior Notes on December 1, 2021.

Interest Income and Other, Net

12 Weeks Ended

2022 November 21,

12 Weeks Ended 24 Weeks Ended

2023 February 13,

2022 February 12,

2023 February 13,

Interest income $ 105 $ 6 $ 159 $ 15

2 unchanged sentences

Interest income and other, net $ 114 $ 25 $ 167 $ 67

The increase in interest income in the first quarter of 2023 was primarily due to higher global interest rates.

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

The increase in interest income in the second quarter and first half of 2023 was due to higher global interest rates.

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

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 28, 2022.

Provision for Income Taxes

12 Weeks Ended

2022 November 21,

12 Weeks Ended 24 Weeks Ended

2023 February 13,

2022 February 12,

2023 February 13,

Provision for income taxes $ 517 $ 481 $ 923 $ 832

Effective tax rate 26.1 % 26.7 % 24.6 % 23.8 %

The effective tax rate for the first quarter of 2023 was impacted by net discrete tax benefits of $56, primarily attributable to $53 in excess tax benefits related to stock compensation.

Excluding discrete net tax benefits, the tax rate was 26.1% for the first quarter of 2023.

The effective tax rate for the first quarter of 2022 was impacted by net discrete tax benefits of $97, primarily attributable to $91 in excess tax benefits related to stock compensation.

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

The effective tax rate for the first half of 2023 was impacted by net discrete tax benefits of $57, primarily due to excess tax benefits related to stock compensation.

Excluding discrete net tax benefits, the tax rate was 26.1% for the first half of 2023.

The effective tax rate for the first half of 2022 was impacted by net discrete tax benefits of $91, primarily due to excess tax benefits related to stock compensation.

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

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

24 Weeks Ended

2022 November 21,

2023 February 13,

Net cash provided by operating activities $ 5,802 $ 3,659

1 unchanged sentence

Net cash used in financing activities (1,215) (1,667)

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

Cash and cash equivalents and short-term investments were $11,673 and $11,049 at November 20, 2022, and August 28, 2022.

Of these balances, unsettled credit and debit card receivables represented approximately $2,488 and $2,010 at November 20, 2022, and August 28, 2022.

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

Cash and cash equivalents and short-term investments were $13,705 and $11,049 at February 12, 2023, and August 28, 2022.

Of these balances, unsettled credit and debit card receivables represented approximately $2,083 and $2,010 at February 12, 2023, and August 28, 2022.

These receivables generally settle within four days.

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Cash Flows from Operating Activities

Net cash provided by operating activities totaled $2,610 in the first quarter of 2023, compared to $3,258 in the first quarter of 2022.

Net cash provided by operating activities totaled $5,802 in the first half of 2023, compared to $3,659 in the first half of 2022.

Our cash flow provided by operations is primarily 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 inventory turnover, the forward deployment of inventory to accelerate delivery times, payment terms with suppliers, and early payments to obtain discounts.

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

Cash Flows from Investing Activities

Net cash used in investing activities totaled $1,057 in the first quarter of 2023, compared to $912 in the first quarter of 2022, and is primarily related to capital expenditures.

Net cash used in investing activities totaled $1,865 in the first half of 2023, compared to $1,393 in the first half of 2022, and is primarily related to capital expenditures.

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

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

In the first quarter of 2023, we spent $1,057 on capital expenditures, and it is our current intention to spend approximately $3,800 to $4,000 during fiscal 2023.

In the first half of 2023, we spent $1,947 on capital expenditures, and it is our current intention to spend approximately $3,800 to $4,200 during fiscal 2023.

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

We opened eight new warehouses, including one relocation, in the first quarter of 2023 and plan to open 19 additional new warehouses, including two relocations, in the remainder of fiscal 2023.

We opened 12 new warehouses, including two relocations, in the first half of 2023 and plan to open 15 additional new warehouses, including one relocation, in the remainder of fiscal 2023.

There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs and the economic environment.

Cash Flows from Financing Activities

Net cash used in financing activities totaled $863 in the first quarter of 2023, compared to $839 in the first quarter of 2022.

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

On October 12, 2022, our Board declared a quarterly cash dividend of $0.90 per share, payable to shareholders of record on October 28, 2022, which was paid on November 10, 2022.

Net cash used in financing activities totaled $1,215 in the first half of 2023, compared to $1,667 in the first half of 2022.

Cash flow used in financing activities during the first half of 2023 was primarily related to the payment of dividends, withholding taxes on stock-based awards, and repurchases of common stock.

In the first half of 2022, cash flow used in financing activities was primarily due to the repayment of our 2.300% Senior Notes.

A quarterly cash dividend of $0.90 per share was declared on January 19, 2023, payable to shareholders of record on February 3, 2023, which was paid on February 17, 2023.

Share Repurchase Program

During the first quarter of 2023 and 2022, we repurchased 285,000 and 77,000 shares of common stock, at an average price per share of $495.94 and $455.08, totaling approximately $141 and $35.

These 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.

On January 19, 2023, the Board of Directors authorized a new share repurchase program in the amount of $4,000, which expires in January 2027.

During the first half of 2023 and 2022, we repurchased 579,000 and 236,000 shares of common stock, at an average price per share of $492.06 and $498.00, totaling approximately $285 and $118.

These amounts may differ from 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.

Repurchased shares are retired, in accordance with the Washington Business Corporation Act.

The remaining amount available to be purchased under our approved plan was $3,955 at the end of the second quarter.

Bank Credit Facilities and Commercial Paper Programs

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

At November 20, 2022, we had borrowing capacity under these facilities of $1,244.

At February 12, 2023, we had borrowing capacity under these facilities of $1,269.

Our international operations maintain $781 of this capacity under bank credit facilities, of which $177 is guaranteed by the Company.

Short-term borrowings outstanding under the bank credit facilities were $37 and $88 at the end of the first quarter of 2023 and at the end of fiscal 2022.

Short-term borrowings outstanding under the bank credit facilities were $45 and $88 at the end of the second quarter of 2023 and at the end of fiscal 2022.

The Company has letter of credit facilities, for commercial and standby letters of credit, totaling $231.

The outstanding commitments under these facilities at the end of the first quarter of 2023 totaled $187, most of which were standby letters of credit that do not expire or have expiration dates within one year.

The outstanding commitments under these facilities at the end of the second quarter of 2023 totaled $191, most of which were standby letters of credit that do not expire or have expiration dates within one year.

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

12 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