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Item 2. Management’s Discussion and Analysis

2024-03-13 compared with 2023-12-20 · 130 added, 86 removed, 156 unchanged (58% of the section changed)

8 unchanged sentences

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.

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 2023 Form 10-K, filed with the United States Securities and Exchange Commission on October 11, 2023.

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.

We operate membership warehouses and e-commerce websites 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 categories will produce high sales volumes and rapid inventory turnover.

When combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities, these volumes and turnover enable us to operate profitably at significantly lower gross margins (net sales less merchandise costs) than most other retailers.

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The measure is intended as supplemental information and is not a substitute for net sales presented in accordance with U.S.

generally accepted accounting principles (U.S.

Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket).

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

inflation or deflation and changes in the cost of gasoline and associated competitive conditions.

The higher our comparable sales exclusive of these items, the more we can leverage our SG&A expenses, reducing them as a percentage of sales and enhancing profitability.

Generating comparable sales growth is foremost a question of making available to our members the right merchandise at the right prices, a skill that we believe we have repeatedly demonstrated over the long-term.

and inflation or deflation and changes in the cost of gasoline and associated competitive conditions.

The higher our comparable sales exclusive of these items, the more we can leverage our selling general and administrative (SG&A) expenses, reducing them as a percentage of sales and enhancing profitability.

Generating comparable sales growth is foremost a question of making available the right merchandise at the right prices, a skill that we believe we have repeatedly demonstrated over the long-term.

Another substantial factor in net sales growth is the health of the economies in which we do business, including the effects of inflation or deflation, especially the United States.

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Our investments in merchandise pricing may include reducing prices on merchandise to drive sales or meet competition and holding prices steady despite cost increases instead of passing the increases on to our members, all negatively impacting gross margin and gross margin as a percentage of net sales (gross margin percentage).

We believe our gasoline business enhances traffic in our warehouses, but it generally has a lower gross margin percentage and lower SG&A expense, relative to our non-gasoline businesses.

We believe our gasoline business enhances traffic in our warehouses;

it generally has a lower gross margin percentage and lower SG&A expense relative to our non-gasoline businesses.

A higher penetration of gasoline sales will generally lower our gross margin percentage.

Rapidly changing gasoline prices may significantly impact our near-term net sales growth.

Generally, rising gasoline prices benefit net sales growth which, given the higher sales base, negatively impacts our gross margin percentage but decreases our SG&A expenses as a percentage of net sales.

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As our warehouse base grows, available and desirable sites become more difficult to secure, and square footage growth becomes a comparatively less substantial component of growth.

The negative aspects of such growth, however, including lower initial operating profitability relative to existing warehouses and cannibalization of sales at existing warehouses when openings occur in existing markets, are continuing to decline in significance as they relate to the results of our total operations.

Negative aspects of such growth include lower initial operating profitability relative to existing warehouses and cannibalization of sales at existing warehouses when openings occur in existing markets.

Our rate of square footage growth is generally higher in foreign markets, due to the smaller base in those markets, and we expect that to continue.

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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 Executive memberships, 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 2024 and 2023 relate to the 12-week fiscal quarters ended November 26, 2023, and November 20, 2022.

References to the second quarter of 2024 and 2023 relate to the 12-week fiscal quarters ended February 18, 2024, and February 12, 2023.

References to the first half of 2024 and 2023 relate to the 24 weeks ended February 18, 2024, and February 12, 2023.

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

Highlights for the first quarter of 2024 versus 2023 include:

• Net sales increased 6% to $56,717, driven by a 4% increase in comparable sales and sales at 25 net new warehouses opened since the end of the first quarter of 2023;

Highlights for the second quarter of 2024 versus 2023 include:

• Net sales increased 6% to $57,331, driven by an increase in comparable sales and sales at 26 net new warehouses opened since the end of the second quarter of 2023;

• Membership fee revenue increased 8% to $1,111, driven by new member sign-ups, upgrades to Executive Membership, and a higher renewal rate;

• Gross margin percentage increased 43 basis points, driven primarily by our warehouse operations and other businesses and the absence of a charge of $93, $0.15 per diluted share, predominantly related to the discontinuation of our charter shipping activities, which was recorded in the first quarter of 2023;

• SG&A expenses as a percentage of net sales increased 25 basis points, primarily due to increased costs in warehouse operations and other businesses, including the impact of wage increases in March and September 2023;

• The provision for income taxes in the first quarter of 2024 was positively impacted by a benefit related to stock compensation of $44, $0.10 per diluted share, compared to $53, $0.12 per diluted share, in the first quarter of 2023;

• Gross margin percentage increased eight basis points, driven primarily by our warehouse ancillary and other businesses and core merchandise categories, partially offset by an increase in 2% rewards;

• SG&A expenses as a percentage of net sales increased three basis points, primarily due to increased costs in warehouse operations and other businesses, including the impact of wage increases in March and September 2023, partially offset by central operating costs;

• A quarterly cash dividend of $1.02 per share was declared on January 18, 2024, and paid on February 16, 2024.

On January 12, 2024, an aggregate payment of approximately $6,655 was made in connection with a special cash dividend of $15.00 per share, declared on December 13, 2023;

• Our effective tax rate was 22.1% and was positively impacted by a $94 benefit, or $0.21 per diluted share, related to the special cash dividend;

• Net income was $1,743, $3.92 per diluted share, compared to $1,466, $3.30 per diluted share in 2023.

• A quarterly cash dividend of $1.02 per share was declared on October 18, 2023, and paid on November 17, 2023;

• Subsequent to the end of the quarter, on December 13, 2023, the Board of Directors declared a special cash dividend of $15.00 per share, payable January 12, 2024.

RESULTS OF OPERATIONS

12 Weeks Ended

2023 November 20,

12 Weeks Ended 24 Weeks Ended

2024 February 12,

2023 February 18,

2024 February 12,

$ 57,331 $ 54,239 $ 114,048 $ 107,676

Changes in net sales:

4 % 7 % 4 % 9 %

Canada 8 % 4 % 8 % 4 %

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Changes in comparable sales (1) :

4 % 6 % 3 % 8 %

Canada 9 % 4 % 8 % 3 %

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Changes in comparable sales excluding the impact of changes in foreign-currency and gasoline prices (1) :

5 % 6 % 4 % 6 %

Canada 9 % 10 % 9 % 9 %

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E-commerce 18 % (9) % 12 % (6) %

Net sales increased $3,280 or 6%, during the first quarter of 2024.

The improvement was attributable to an increase in comparable sales of 4%, and sales at the 25 net new warehouses opened since the end of the first quarter of 2023.

Sales increased $2,921, or 7% in core merchandise categories, led by fresh foods and foods and sundries.

Sales in warehouse ancillary and other businesses increased $359, or 3%, led by pharmacy.

During the first quarter of 2024, l ower gasoline prices negatively impacted net sales by $341, 64 basis points, compared to 2023, with a 4% decrease in the average price per gallon.

_______________

(1) Comparable sales for the second quarter and first half of 2024 were calculated using comparable retail weeks.

Net sales increased $3,092 or 6%, and $6,372 or 6% during the second quarter and first half of 2024.

The improvement was attributable to an increase in comparable sales of 6% and 5% in the second quarter and first half of 2024, and sales at the 26 net new warehouses opened since the end of the second quarter of 2023.

Sales increased $2,645, or 6% and $5,566, or 6% in core merchandise categories during the second quarter and first half of 2024 , due to increases in all categories.

Sales in warehouse ancillary and other businesses increased $447 or 4%, and $806, or 4% during the second quarter and first half of 2024 , led by pharmacy.

During the second quarter of 2024, l ower gasoline prices negatively impacted net sales by $231, 43 basis points, compared to 2023, with a 3% decrease in the average price per gallon.

C hanges in foreign currencies relative to the U.S.

dollar positively impacted net sales by approximately $195, 36 basis points, compared to the first quarter of 2023, attributable to our Other International operations, partially offset by our Canadian operations.

dollar positively impacted net sales by approximately $94, 17 basis points, compared to the second quarter of 2023, attributable to our Canadian and Other International operations.

During the first half of 2024 , l ower gasoline prices negatively impacted net sales by $572, 53 basis points, compared to 2023, with a 4% decrease in the average price per gallon.

C hanges in foreign currencies relative to the U.S.

dollar positively impacted net sales by approximately $289, 27 basis points, compared to the second quarter of 2023, attributable to our Other International operations, partially offset by our Canadian operations.

Comparable Sales

Comparable sales increased 4% in the first quarter of 2024 and were positively impacted by increases in shopping frequency, partially offset by a slight decrease in average ticket.

Comparable sales increased 6% and 5% in the second quarter and first half of 2024 and were positively impacted by increased shopping frequen cy and a slightly higher average ticket.

Membership Fees

12 Weeks Ended

2023 November 20,

12 Weeks Ended 24 Weeks Ended

2024 February 12,

2023 February 18,

2024 February 12,

Membership fees $ 1,111 $ 1,027 $ 2,193 $ 2,027

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Total cardholders (000s) 132,000 123,000 — —

Membership fee revenue increased 8%, driven by new member sign-ups, upgrades to Executive Membership, and a higher renewal rate.

At the end of the first quarter of 2024, our renewal rates were 92.8% in the U.S.

Membership fee revenue increased 8% in both the second quarter and first half of 2024, driven by new member sign-ups, upgrades to Executive Membership, and a higher renewal rate.

At the end of the second quarter of 2024, our renewal rates were 92.9% in the U.S.

and Canada and 90.5% worldwide.

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We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period.

12 Weeks Ended

2023 November 20,

12 Weeks Ended 24 Weeks Ended

2024 February 12,

2023 February 18,

2024 February 12,

Net sales $ 57,331 $ 54,239 $ 114,048 $ 107,676

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10.80 % 10.72 % 10.92 % 10.67 %

Quarterly Results

Gross margin percentage increased eight basis points.

Excluding the impact of gasoline price deflation on net sales, gross margin percentage was 10.76%, an increase of four basis points.

The four basis-point increase was positively impacted by:

six basis points due to warehouse ancillary and other businesses, primarily e-commerce;

three basis points due to a LIFO benefit;

and two basis points due to core merchandise categories.

This increase was partially offset by seven basis points due to increased 2% rewards.

The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased 25 basis points.

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

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

Gross margin percentage 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), decreased in our U.S.

segment due to core merchandise categories and increased 2% rewards, partially offset by warehouse ancillary and other businesses and a LIFO benefit.

Gross margin increased in our Canadian segment, largely due to core merchandise categories.

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

Year-to-date Results

Gross margin percentage increased 25 basis points.

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The 19 basis-point increase was positively impacted by:

22 basis points related to our warehouse ancillary and other businesses, primarily gasoline and e-commerce;

17 basis points due to the absence of a charge related to the discontinuation of our charter shipping activities that was recorded in the first quarter of 2023;

and three basis points due to a LIFO benefit.

These were partially offset by:

three basis points due to core merchandise categories, predominantly fresh foods;

and three basis points due to increased 2% rewards.

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

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

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 across all segments.

segment performed similarly to the results above.

The increases in our Canadian and Other International segments were primarily due to increases in warehouse ancillary and other businesses and core merchandise categories.

All segments were negatively impacted by increased 2% rewards.

15 basis points due to warehouse ancillary and other business, primarily e-commerce;

nine basis points due to the absence of a charge related to the discontinuation of our charter shipping activities that was recorded in the first quarter of 2023;

and two basis points due to a LIFO benefit.

This increase was partially offset by five basis point s due to increased 2% rewards and two basis points due to core merchandise categories .

The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased 14 basis points.

The increase was primarily due to non-foods, partially offset by fresh foods.

Segment gross margin percentage increased in our U.S.

and Canadian segments.

segment performed similarly to the consolidated results above.

Our Canadian segment gross margin increased at a greater rate compared to our consolidated results, primarily due to increases in core merchandise categories, partially offset by increased 2% rewards.

Gross margin percentage was flat in our Other International segment, positively impacted by core merchandise categories, offset by increased 2% rewards.

Selling, General and Administrative Expenses

12 Weeks Ended

2023 November 20,

12 Weeks Ended 24 Weeks Ended

2024 February 12,

2023 February 18,

2024 February 12,

SG&A expenses $ 5,240 $ 4,940 $ 10,598 $ 9,857

SG&A expenses as a percentage of net sales 9.14 % 9.11 % 9.29 % 9.15 %

Quarterly Results

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

SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflation was 9.10%, a decrease of one basis point.

The comparison to last year was favorably impacted by five basis points due to central operating costs and four basis points due to lower stock compensation expense.

Warehouse operations and other businesses were higher by eight basis points, driven by our U.S.

operations, which included the impact of wage increases in March and September 2023.

SG&A expenses as a percentage of net sales were lower in our Canadian and Other International operations.

Year-to-date Results

SG&A expenses as a percentage of net sales increased 14 basis points.

SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflation was 9.25%, an increase of 10 basis points.

The comparison to last year was negatively impacted by 14 basis points in warehouse operations and other businesses which included the impact of wage increases in March and September 2023.

Stock compensation and preopening costs were each higher by two basis points, and central operating costs were higher by one basis point.

The comparison to last year was negatively impacted by 11 basis points in warehouse operations and other businesses, driven by our U.S.

operations, which included the impact of wage increases in March and September 2023.

Preopening costs were also higher by one basis point.

SG&A was positively impacted by two basis points due to central operating costs.

SG&A expenses as a percentage of net sales were lower in our Canadian and Other International operations.

Interest Expense

12 Weeks Ended

2023 November 20,

12 Weeks Ended 24 Weeks Ended

2024 February 12,

2023 February 18,

2024 February 12,

Interest expense $ 41 $ 34 $ 79 $ 68

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Interest Income and Other, Net

12 Weeks Ended

2023 November 20,

12 Weeks Ended 24 Weeks Ended

2024 February 12,

2023 February 18,

2024 February 12,

Interest income $ 147 $ 105 $ 301 $ 159

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Interest income and other, net $ 216 $ 114 $ 376 $ 167

The increase in interest income in the first quarter was due to higher global interest rates and higher average cash and investment balances.

The increase in interest income in the second quarter and first half of 2024 was due to higher global interest rates and higher average cash and investment balances, prior to the payment of the special cash dividend.

Foreign-currency transaction gains (losses), net, include 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.

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Provision for Income Taxes

12 Weeks Ended

2023 November 20,

12 Weeks Ended 24 Weeks Ended

2024 February 12,

2023 February 18,

2024 February 12,

Provision for income taxes $ 494 $ 517 $ 1,011 $ 923

Effective tax rate 22.1 % 26.1 % 23.3 % 24.6 %

The effective tax rate for the first quarter of 2024 was impacted by net discrete tax benefits of $40, primarily due to excess tax benefits related to stock compensation.

Excluding discrete net tax benefits, the tax rate was 26.4% for the first quarter of 2024.

The effective tax rate for the first quarter of 2023 was impacted by net discrete tax benefits of $56, primarily due to 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 half of 2024 was favorably impacted by net discrete tax benefits of $139.

This included $94 related to the portion of the special cash dividend payable through our 401(k) plan in the second quarter and $44 of excess tax benefits related to stock compensation in the first quarter.

Excluding discrete net tax benefits, the tax rate was 26.5%.

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 in the first quarter.

Excluding discrete net tax benefits, the tax rate was 26.1%.

LIQUIDITY AND CAPITAL RESOURCES

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24 Weeks Ended

2023 November 20,

2024 February 12,

Net cash provided by operating activities $ 5,382 $ 5,802

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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 $17,864 and $15,234 at November 26, 2023, and September 3, 2023.

Of these balances, unsettled credit and debit card receivables represented approximately $2,603 and $2,282 at November 26, 2023, and September 3, 2023.

Cash and cash equivalents and short-term investments were $10,321 and $15,234 at February 18, 2024, and September 3, 2023.

Of these balances, unsettled credit and debit card receivables represented approximately $2,069 and $2,282 at February 18, 2024, and September 3, 2023.

These receivables generally settle within four days.

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Cash Flows from Operating Activities

Net cash provided by operating activities totaled $4,651 in the first quarter of 2024, compared to $2,610 in the first quarter of 2023.

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

Cash flow used in operations generally consists of payments to merchandise suppliers, warehouse operating costs, including payroll and employee benefits, utilities, and credit and debit card processing fees.

Net cash provided by operating activities totaled $5,382 in the first half of 2024, compared to $5,802 in the first half of 2023.

Our cash flow provided by operations is primarily fr om net sales and membership fees.

Cash flow used in operations generally consists of payments to mercha ndise suppliers, warehouse operating costs, including payroll and employee benefits, utilities, and credit and debit card processing fees.

Cash used in operations also includes payments for income taxes.

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Cash Flows from Investing Activities

Net cash used in investing activities totaled $366 in the first quarter of 2024, compared to $1,057 in the first quarter of 2023, and is primarily related to capital expenditures.

Net cash used in investing activities totaled $1,752 in the first half of 2024, compared to $1,865 in the first half of 2023, 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 2024, we spent $1,040 on capital expenditures, and it is our current intention to spend approximately $4,400 to $4,600 during fiscal 2024.

In the first half of 2024, we spent $2,071 on capital expenditures, and it is our current intention to spend a total of approximately $4,400 to $4,600 during fiscal 2024.

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

We opened 10 new warehouses, including one relocation, in the

first quarter of 2024 and plan to open 23 additional new warehouses, including one relocation, in the remainder of fiscal 2024.

We opened 14 new warehouses, includ ing one relocation, in the first half of 2024 and plan to open 16 additional new warehouses, including one relocation, in the remainder of fiscal 2024.

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 $974 in the first quarter of 2024, compared to $863 in the first quarter of 2023.

Cash flow used in financing activities during the first quarter of 2024 was primarily related to the payment of dividends, withholding taxes on stock-based awards, and repurchases of common stock.

In November 2023, our Japanese subsidiary issued four Guaranteed Senior Notes totaling approximately $500 at fixed interest rates ranging from 1.400% to 2.120%.

A quarterly cash dividend of $1.02 per share was declared on October 18, 2023, payable to shareholders of record on November 3, 2023, which was paid on November 17, 2023.

Subsequent to the end of the quarter, on December 13, 2023, the Board of Directors declared a special cash dividend of $15.00 per share, payable January 12, 2024, to shareholders of record as of the close of business on December 28, 2023.

The aggregate amount of payments will be approximately $6.7 billion.

Net cash used in financing activities totaled $8,250 in the first half of 2024, compared to $1,215 in the first half of 2023.

Cash flow used in financing activities during the first half of 2024 was primarily related to the payment of dividends, repayments of short-term borrowings, and repurchases of common stock.

I n November 2023, the Company's Japan subsidiary issued four Guaranteed Senior Notes totaling approximately $500 at fixed interest rates ranging from 1.400% to 2.120%.

A quarterly cash dividend of $1.02 per share was declared on January 18, 2024, payable to shareholders of record on February 2, 2024, which was paid on February 16, 2024.

On January 12, 2024, an aggregate payment of approximately $6,655 was made in connection with a special cash dividend of $15.00 per share, declared on December 13, 2023.

Share Repurchase Program

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

During the first quarter of 2024 and 2023, we repurchased 288,000 and 285,000 shares of common stock, at an average price per share of $564.06 and $495.94, totaling approximately $162 and $141.

During the first half of 2024 and 2023, we repurchased 528,000 and 579,000 shares of common stock, at an average price per share of $609.51 and $492.06, totaling approximately $322 and $285.

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.

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

The remaining amount available to be purchased under our approved plan was $3,401 at the end of the first quarter.

The remaining amount available to be purchased under our approved plan was $3,241 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 26, 2023, we had borrowing capacity under these facilities of $1,245.

At February 18, 2024, we had borrowing capacity under these facilities of $1,237.

Our international operations maintain $748 of this capacity under bank credit facilities, of which $164 is guaranteed by the Company.

Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the consolidated balance sheets, were immaterial at the end of the first quarter of 2024 and at the end of fiscal 2023.

Short-term borrowings outstanding under the bank credit facilities, which are included in other current liabilities on the consolidated balance sheets, were immaterial at the end of the second quarter of 2024 and at the end of fiscal 2023.

The Company has letter of credit facilities, for commercial and standby letters of credit, totaling $210.

The outstanding commitments under these facilities at the end of the first quarter of 2024 totaled $188, 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 2024 totaled $184, 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.

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We base these on historical experience and on assumptions that we believe to be reasonable.

Our critical accounting policies are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report

on Form 10-K, for the fiscal year ended September 3, 2023.

Our critical accounting policies are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K, for the fiscal year ended September 3, 2023.

There have been no material changes to the critical accounting estimates previously disclosed in that Report.

Recent Accounting Pronouncements

See discussion of Recent Accounting Pronouncements in Note 1 to the condensed consolidated financial statements included in Part 1, Item 1 of this Report.

See discussion of Recent Accounting Pronouncements in Note 1 to the condensed consolidated financial statements included in Part I, Item 1 of this Report.

Item 3—Quantitative and Qualitative Disclosures about Market Risk

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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