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Item 8. Financial Statements and Supplementary Data

2024-10-09 compared with 2023-10-11 · 176 added, 164 removed, 782 unchanged (30% of the section changed)

13 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Costco Wholesale Corporation and subsidiaries (the Company) as of September 3, 2023, and August 28, 2022, the related consolidated statements of income, comprehensive income, equity, and cash flows for the 53-week period ended September 3, 2023, and the 52-week periods ended August 28, 2022, and August 29, 2021, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 3, 2023, and August 28, 2022, and the results of its operations and its cash flows for each of the 53-week period ended September 3, 2023, and the 52-week periods ended August 28, 2022, and August 29, 2021, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Costco Wholesale Corporation and subsidiaries (the Company) as of September 1, 2024 and September 3, 2023, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the fiscal years in the three-year period ended September 1, 2024, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 1, 2024 and September 3, 2023, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended September 1, 2024, in conformity with U.S.

generally accepted accounting principles.

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 1, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 3, 2023, and August 28, 2022, the related consolidated statements of income, comprehensive income, equity, and cash flows for the 53-week period ended September 3, 2023, and the 52-week periods ended August 28, 2022, and August 29, 2021 , and the related notes (collectively, the consolidated financial statements), and our report dated October 10, 2023, expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 1, 2024 and September 3, 2023, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the fiscal years in the three-year period ended September 1, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated October 8, 2024 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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52 Weeks Ended 53 Weeks Ended 52 Weeks Ended

2023 August 28,

2024 September 3,

2023 August 28,

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Net income attributable to noncontrolling interests

— ( 71 ) ( 72 )

NET INCOME ATTRIBUTABLE TO COSTCO $ 7,367 $ 6,292 $ 5,844

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52 Weeks Ended 53 Weeks Ended 52 Weeks Ended

2023 August 28,

2024 September 3,

2023 August 28,

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(amounts in millions, except par value and share data)

2023 August 28,

2024 September 3,

CURRENT ASSETS

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Retained earnings 17,619 19,521

Total Costco stockholders’ equity 25,058 20,642

Noncontrolling interests — 5

TOTAL EQUITY 23,622 25,058

21 unchanged sentences

1,702 — ( 363 ) — — ( 363 ) — ( 363 )

Dividend to noncontrolling interest — — — — — — ( 208 ) ( 208 )

Acquisition of noncontrolling interest — — ( 499 ) ( 6 ) — ( 505 ) ( 337 ) ( 842 )

Repurchases of common stock

( 863 ) — ( 15 ) — ( 427 ) ( 442 ) — ( 442 )

Cash dividends declared — — — — ( 5,748 ) ( 5,748 ) — ( 5,748 )

Cash dividends declared and other — ( 2 ) 2 — ( 1,498 ) ( 1,498 ) — ( 1,498 )

BALANCE AT AUGUST 28, 2022 442,664 2 6,884 ( 1,829 ) 15,585 20,642 5 20,647

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1,470 — ( 303 ) — — ( 303 ) — ( 303 )

Dividend to noncontrolling interest — — — — — — ( 208 ) ( 208 )

Acquisition of noncontrolling interest — — ( 499 ) ( 6 ) — ( 505 ) ( 337 ) ( 842 )

Repurchases of common stock

1 unchanged sentence

Cash dividends declared and other — — 5 — ( 1,703 ) ( 1,698 ) ( 5 ) ( 1,703 )

BALANCE AT AUGUST 28, 2022 442,664 2 6,884 ( 1,829 ) 15,585 20,642 5 20,647

BALANCE AT SEPTEMBER 3, 2023 442,793 2 7,340 ( 1,805 ) 19,521 25,058 — 25,058

— — — — 7,367 7,367 — 7,367

7 unchanged sentences

( 1,004 ) — ( 18 ) — ( 680 ) ( 698 ) — ( 698 )

Cash dividends declared and other — — 5 — ( 1,703 ) ( 1,698 ) ( 5 ) ( 1,703 )

Cash dividends declared — — — — ( 8,589 ) ( 8,589 ) — ( 8,589 )

BALANCE AT SEPTEMBER 1, 2024 443,126 $ 2 $ 7,829 $ ( 1,828 ) $ 17,619 $ 23,622 $ — $ 23,622

4 unchanged sentences

52 Weeks Ended 53 Weeks Ended 52 Weeks Ended

2023 August 28,

2024 September 3,

2023 August 28,

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Repayments of long-term debt ( 1,077 ) ( 75 ) ( 800 )

Proceeds from issuance of long-term debt 498 — —

Tax withholdings on stock-based awards ( 315 ) ( 303 ) ( 363 )

1 unchanged sentence

Cash dividend payments ( 9,041 ) ( 1,251 ) ( 1,498 )

Financing lease payments ( 291 ) ( 176 ) ( 67 )

Financing lease payments and other financing activities, net ( 137 ) ( 291 ) ( 180 )

Dividend to noncontrolling interest — — ( 208 )

Acquisition of noncontrolling interest — — ( 842 )

Other financing activities, net — ( 4 ) 188

Net cash used in financing activities ( 10,764 ) ( 2,614 ) ( 4,283 )

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At September 1, 2024, Costco operated 890 warehouses worldwide:

591 in the United States (U.S.) located in 46 states, Washington, D.C., and Puerto Rico, 107 in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom (U.K.), 18 in Korea, 15 in Australia, 14 in Taiwan, five in China, four in Spain, two in France, and one each in Iceland, New Zealand, and Sweden.

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

614 in the United States (U.S.) located in 47 states, Washington, D.C., and Puerto Rico, 108 in Canada, 40 in Mexico, 35 in Japan, 29 in the U.K., 19 in Korea, 15 in Australia, 14 in Taiwan, seven in China, four in Spain, two in France, and one each in Iceland, New Zealand, and Sweden.

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

Basis of Presentation

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The Company operates on a 52/53-week fiscal year basis with the year ending on the Sunday closest to August 31.

References to 2024 and 2022 relate to the 52-week fiscal years ended September 1, 2024 and August 28, 2022.

References to 2023 relate to the 53-week fiscal year ended September 3, 2023.

References to 2022 and 2021 relate to the 52-week fiscal years ended August 28, 2022, and August 29, 2021.

Use of Estimates

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Short-term investments generally consist of debt securities (U.S.

Government and Agency Notes), with maturities at the date of purchase of three months to five years.

government and agency securities), with maturities at the date of purchase of three months to five years.

Investments with maturities beyond five

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Significant unobservable inputs that are not corroborated by market data.

The Company’s valuation techniques used to measure the fair value of money market mutual funds are based on quoted market prices, such as quoted net asset values published by the fund as supported in an active market.

The Company’s valuation techniques used to measure the fair value of money market mutual funds, which are included in cash and cash equivalents, are based on quoted market prices, such as quoted net asset values published by the fund as supported in an active market.

Valuation methodologies used to measure the fair value of all other non-derivative financial instruments are based on independent external valuation information.

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Discounts, premiums and debt issuance costs are amortized to interest expense over the term of the loan.

The estimated fair

value of the Company's long-term debt is based primarily on reported market values, recently completed market transactions, and estimates based upon interest rates, maturities, and credit.

The estimated fair value of the Company's long-term debt is based primarily on reported market values, recently completed market transactions, and estimates based upon interest rates, maturities, and credit.

Receivables, Net

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Other receivables primarily consist of amounts due from governmental entities, mostly tax-related items.

The valuation allowance related to receivables was not material to our consolidated financial statements at the end of 2023 and 2022.

The valuation allowance related to receivables was immaterial to the Company's consolidated financial statements at the end of 2024 and 2023.

Merchandise Inventories

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The Company records an adjustment each quarter, if necessary, for the projected annual effect of inflation or deflation, and these estimates are adjusted to actual results determined at year-end, after actual inflation or deflation rates and inventory levels have been determined.

An immaterial LIFO charge was recorded in 2023.

An immaterial LIFO benefit was recorded in 2024 and an immaterial charge was recorded in 2023.

Due to inflation in 2022, a $ 438 charge was recorded to merchandise costs to increase the cumulative LIFO valuation on merchandise inventories at August 28, 2022.

Canadian and Other International merchandise inventories are predominantly valued using the cost and retail inventory methods, respectively, using the first-in, first-out (FIFO) basis.

The Company provides for estimated inventory losses between physical inventory counts using estimates based on experience.

The Company initially provides for estimated inventory losses between physical inventory counts using estimates based on experience.

The provision is adjusted periodically to reflect physical inventory counts, which generally occur in the second and fourth fiscal quarters.

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During development, these costs are included in construction in progress.

To the extent that the assets become ready for their intended use, these costs are included in equipment and fixtures and amortized on a straight-line basis over their estimated useful lives.

extent that the assets become ready for their intended use, these costs are included in equipment and fixtures and amortized on a straight-line basis over estimated useful lives.

Repair and maintenance costs are expensed when incurred.

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Property and equipment, net $ 29,032 $ 26,684

The Company evaluates long-lived assets for impairment on an annual basis, when relocating or closing a facility, or when events or changes in circumstances may indicate the carrying amount of the asset group, generally an individual warehouse, may not be fully recoverable.

The Company evaluates long-lived assets for impairment on an annual basis, when relocating or closing a facility, or when events or changes in circumstances may indicate that the carrying amount of the asset group, generally an individual warehouse, may not be fully recoverable.

For asset groups held and used, including warehouses to be relocated, the carrying value of the asset group is considered recoverable when the estimated future undiscounted cash flows generated from the use and eventual disposition of the asset group exceed the respective carrying value.

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The Company estimates fair value by obtaining market appraisals from third party brokers or using other valuation techniques.

Impairment charges recognized in 2023 were immaterial.

In 2022 and 2021, the Company recognized write-offs of $ 118 and $ 84 for information technology assets which are reflected in SG&A.

Impairment charges recognized in 2024 and 2023 were immaterial.

In 2022, the Company recognized a write-off of $ 118 for information technology assets, which is reflected in SG&A.

The Company leases land, buildings, and/or equipment at warehouses and certain other office and distribution facilities.

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(b) purchase the property at the then-fair market value or purchase price stated in the agreement;

or (c) a right of first refusal in the event of a third-party offer.

or (d) a right of first offer if the landlord intends to sell.

Some leases include free-rent periods and step-rent provisions, which are recognized on a straight-line basis over the original term of the lease and any extension options that the Company is reasonably certain to exercise from the date the Company has control of the property.

Certain leases provide for periodic rent increases based on price indices or the greater of minimum guaranteed amounts or sales volume, which are recognized as variable lease payments.

Our leases do not contain any material residual value guarantees or material restrictive covenants.

The Company's leases do not contain any material residual value guarantees or material restrictive covenants.

The Company determines at inception whether a contract is or contains a lease.

Non-lease components and the lease components to which they relate are accounted for together as a single lease component for all asset classes.

The Company initially records right-of-use (ROU) assets and lease obligations for its finance and operating leases based on the discounted future minimum lease payments over the term.

The Company initially records right-of-use (ROU) assets and lease obligations for its

finance and operating leases based on the discounted future minimum lease payments over the term.

The lease term is defined as the noncancelable period of the lease plus any options to extend when it is reasonably certain that the Company will exercise the option.

8 unchanged sentences

These liabilities are accreted over time to the projected future value of the obligation.

The ARO assets are depreciated using the same depreciation method as the leasehold improvement assets and are included with buildings and improvements.

Estimated ARO liabilities associated with these leases are included in other liabilities in the accompanying consolidated balance sheet.

The ARO assets are depreciated using the same depreciation method as the leasehold improvement assets and are included in buildings and improvements.

Estimated ARO liabilities associated with these leases are included in other liabilities in the consolidated balance sheet.

Goodwill and Acquired Intangible Assets

9 unchanged sentences

Changes in currency translation — ( 1 ) 2 1

Balance at August 28, 2022 $ 953 $ 27 $ 13 $ 993

Balance at September 3, 2023 $ 953 $ 26 $ 15 $ 994

Changes in currency translation — — — —

Balance at September 1, 2024 $ 953 $ 26 $ 15 $ 994

Definite-lived intangible assets, which are not material, are included in other long-term assets on the consolidated balance sheets and are amortized on a straight-line basis over their estimated lives, which approximates the pattern of expected economic benefit.

Definite-lived intangible assets, which are immaterial, are included in other long-term assets on the consolidated balance sheets and are amortized on a straight-line basis over their estimated lives, which approximates the pattern of expected economic benefit.

Insurance/Self-insurance Liabilities

Claims for employee health-care benefits, workers’ compensation, general liability, property damage, directors’ and officers’ liability, vehicle liability, inventory loss, and other exposures are funded

predominantly through self-insurance.

Insurance coverage is maintained for certain risks to limit exposures arising from very large losses.

Insurance coverage is maintained for certain risks to limit exposures to very large losses.

The Company uses various risk management mechanisms, including a wholly-owned captive insurance subsidiary (the captive) and participates in a reinsurance program.

Liabilities associated with the risks that are retained by the Company are not discounted and are estimated using historical claims experience, demographic factors, severity factors, and other actuarial assumptions.

Liabilities associated with the risks that are retained by the Company are not discounted and are

estimated using historical claims experience, demographic factors, severity factors, and other actuarial assumptions.

The estimated accruals for these liabilities could be significantly affected if future occurrences, claims, or expenses differ from these assumptions and historical trends.

4 unchanged sentences

Income statement adjustments related to the reinsurance program and related impacts to the consolidated balance sheets are recognized as information becomes known.

In the event the Company leaves the reinsurance program, the Company retains its primary obligation to the policyholders for prior activity.

In the event the Company leaves the reinsurance program, the Company retains its primary obligation to the participants for prior activity.

The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business.

8 unchanged sentences

See Note 3 for information on the fair value of unsettled forward foreign-exchange contracts at the end of 2024 and 2023.

The unrealized gains or losses recognized in interest income and other, net in the accompanying consolidated statements of income relating to the net changes in the fair value of unsettled forward foreign-exchange contracts were immaterial in 2023, 2022 and 2021.

The unrealized gains or losses recognized in interest income and other, net in the consolidated statements of income relating to the net changes in the fair value of unsettled forward foreign-exchange contracts were immaterial in 2024, 2023 and 2022.

The Company is exposed to fluctuations in prices for energy, particularly electricity and natural gas, and other commodity products used in retail and manufacturing operations, which it seeks to partially mitigate through the use of fixed-price contracts for certain of its warehouses and other facilities, primarily in the U.S.

9 unchanged sentences

dollar cash and cash equivalents and the U.S.

dollar payables of consolidated subsidiaries revalued to their functional currency.

dollar payables of consolidated subsidiaries revalued to their

functional currency.

Also included are realized foreign-currency gains or losses from settlements of forward foreign-exchange contracts.

These items were $ 46 and $ 84 in 2023 and 2022 and immaterial in 2021.

These items were $ 64 , $ 46 and $ 84 in 2024, 2023, and 2022.

Revenue Recognition

5 unchanged sentences

The Company also provides expanded products and services through warehouse ancillary and other businesses.

The Company is the principal for the majority of its transactions and recognizes revenue on a gross basis.

The Company is the principal when it has control of the merchandise or service before it is transferred to the member.

The majority of revenue from merchandise sales is recognized at the point of sale.

3 unchanged sentences

Deferred sales are included in other current liabilities in the consolidated balance sheets.

The Company is the principal for the majority of its transactions and recognizes revenue on a gross basis.

The Company is the principal when it has control of the merchandise or service before it is transferred to the member, which generally is established when Costco is primarily responsible for merchandising decisions, pricing discretion, and maintains the relationship with the member, including assurance of member service and satisfaction.

The Company accounts for membership fee revenue, net of refunds, on a deferred basis, ratably over the one-year membership period.

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These programs are evidenced by agreements that are reflected in the carrying value of the inventory when earned or as the Company progresses towards earning the rebate or discount, and as a component of merchandise costs as the merchandise is sold.

Other vendor consideration is generally recorded as a reduction of merchandise costs upon completion of contractual milestones, terms of the related agreement, or by another systematic approach.

Other vendor consideration is generally recorded as a reduction of merchandise costs upon completion of contractual milestones, agreement terms or another systematic approach.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries, benefits and workers’ compensation costs for warehouse employees (other than fresh foods departments and certain ancillary businesses, which are reflected in merchandise costs) as well as all regional and home office employees, including buying personnel.

Selling, general and administrative expenses also include substantially all building and equipment depreciation, stock compensation expense, credit and debit card processing fees, utilities, preopening, as well as other operating costs incurred to support warehouse and e-commerce website operations.

Retirement Plans

4 unchanged sentences

The Company also has a defined contribution plan for employees in Canada and contributes a percentage of each employee's wages.

Certain subsidiaries in the Company's Other International operations have defined benefit and defined contribution plans, which are not material.

Certain subsidiaries in the Company's Other International operations have defined benefit and defined contribution plans, which are immaterial.

Amounts expensed under all plans were $ 963 , $ 914 , and $ 824 for 2024, 2023, and 2022, and are predominantly included in SG&A expenses in the consolidated statements of income.

4 unchanged sentences

Restricted Stock Units (RSUs) granted to employees and to non-employee directors generally vest over five years and three years and are subject to quarterly vesting in the event of retirement or voluntary termination.

Employees who attain at least 25 years of service with the Company receive shares under accelerated vesting provisions on the annual vesting date.

Employees who attain at least 25 years of service with the Company and non-employee directors with five or more years receive shares under accelerated vesting provisions.

Forfeitures are recognized as they occur.

Compensation expense for awards is predominantly recognized using the straight-line method over the requisite service period for the entire award.

The terms of the RSUs, including performance-based awards, provide for accelerated vesting for employees and non-employee directors who have attained 25 or more and five or more years of service with the Company, respectively.

The terms of the RSUs, including performance-based awards, provide for accelerated vesting for employees and non-employee directors.

Recipients are not entitled to vote or receive dividends on unvested and undelivered shares.

1 unchanged sentence

The cumulative amount of compensation cost recognized at any point in time equals at least the portion of the grant-date fair value of the award that is vested at that date.

The fair value of RSUs is calculated as the market value of the

common stock on the measurement date less the present value of the expected dividends forgone during the vesting period.

The fair value of RSUs is calculated as the market value of the common stock on the measurement date less the present value of the expected dividends forgone during the vesting period.

Stock-based compensation expense is predominantly included in SG&A expenses in the consolidated statements of income.

Certain stock-based compensation costs are capitalized or included in the cost of merchandise.

See Note 7 for additional information on the Company’s stock-based compensation plans.

See Note 7 for additional information.

The Company accounts for income taxes using the asset and liability method.

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See Note 6 for additional information.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, which is intended to improve reportable segment disclosure requirements, primarily about significant segment expenses.

The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

In December 2023, the FASB issued ASU 2023-09, which focuses on income tax disclosures by requiring public business entities, on an annual basis, to disclose specific categories in the rate reconciliation, provide information for reconciling items that meet a quantitative threshold, and certain information about income taxes paid.

The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied on a prospective basis.

Retrospective application is permitted.

The Company is evaluating both standards .

Note 2—Investments

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Total short-term investments $ 1,551 $ ( 17 ) $ 1,534

Gross unrecognized holding gains and losses on available-for-sale securities were not material for the years ended September 3, 2023, and August 28, 2022.

Gross unrecognized holding gains and losses on available-for-sale securities were immaterial for the years ended September 1, 2024, and September 3, 2023.

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

9 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The table below presents information regarding the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis and indicate the level within the hierarchy reflecting the valuation techniques utilized to determine such fair value.

The table below presents information regarding the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and indicate the level within the hierarchy reflecting the valuation techniques utilized to determine such fair value.

Investment in government and agency securities $ 688 $ 633

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

At September 3, 2023, and August 28, 2022, the Company did not hold any Level 1 or 3 financial assets or liabilities that were measured at fair value on a recurring basis.

At September 1, 2024, and September 3, 2023, the Company did not hold any Level 1 or 3 financial assets or liabilities that were measured at fair value on a recurring basis.

There were no transfers between levels during 2024 or 2023.

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

There were no material fair value adjustments to these items during 2024.

Please see Note 1 for additional information.

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

In May 2023, the Japanese subsidiary repaid $ 75 of its Guaranteed Senior Notes.

In 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 %.

Interest is payable semi-annually, and maturity dates range from November 7, 2033, to November 7, 2043.

In July 2024, the Japanese subsidiary repaid $ 77 of its Guaranteed Senior Notes.

On May 18, 2024, the Company paid the $ 1,000 outstanding principal balance and interest on the 2.750 % Senior Notes using cash and cash equivalents and short-term investments.

At the end of 2024 and 2023, the fair value of the Company's long-term debt, including the current portion, was approximately $ 5,412 and $ 5,738 .

1 unchanged sentence

2.750 % Senior Notes due May 2024

$ 1,000 $ 1,000

3.000 % Senior Notes due May 2027

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4.59 % 4.47 %

The components of lease expense, excluding short-term lease costs and sublease income (which were not material), were as follows:

The components of lease expense, excluding short-term lease costs and sublease income (which were immaterial), were as follows:

2024 2023 2022

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Operating lease assets obtained in exchange for new or modified leases 125 202 231

Financing lease assets obtained in exchange for new or modified leases 100 794 399

Finance lease assets obtained in exchange for new or modified leases 200 100 794

As of September 1, 2024, future minimum payments during the next five fiscal years and thereafter are as follows:

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_______________

(1) Operating lease payments have not been reduced by future sublease income of $ 83 .

(1) Operating lease payments have not been reduced by expected future sublease income of $ 98 .

(2) Excludes $ 1,080 of lease payments for leases that have been signed but not commenced.

Note 6—Equity

Cash dividends declared in 2023 totaled $ 3.84 per share, as compared to $ 3.38 in 2022.

Cash dividends declared in 2024 totaled $ 8,589 or $ 19.36 per share, as compared to $ 1,703 or $ 3.84 per share in 2023.

Dividends in 2024 included a special dividend of $ 15 per share, resulting in a payment of approximately $ 6,655 .

The Company's current quarterly dividend rate is $ 1.16 per share.

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These amounts may differ from repurchases of common stock in the consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of each fiscal year.

Purchases are made

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

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

Note 7—Stock-Based Compensation

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

As required by the 2019 Incentive Plan, in conjunction with the 2024 special dividend, the number of shares subject to outstanding RSUs was increased on the dividend record date to preserve their value.

They were adjusted by multiplying the number of outstanding shares by a factor of 1.018 , representing the ratio of the Nasdaq closing price of $ 674.62 on December 26, 2023, which was the last trading day immediately prior to the ex-dividend date, to the Nasdaq opening price of $ 662.70 on the ex-dividend date, December 27, 2023.

The outstanding RSUs increased by approximately 52,000 .

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

As further required by the 2019 Incentive Plan, the maximum number of shares issuable under the plan was proportionally adjusted, which resulted in an additional 128,000 RSU shares available to be granted.

Summary of Restricted Stock Unit Activity

At the end of 2023, 8,747,000 shares were available to be granted as RSUs, and the following awards were outstanding:

At the end of 2024, 7,278,000 shares were available to be granted as RSUs, and the following awards, adjusted for the effects of the special dividend, were outstanding:

• 2,677,000 time-based RSUs, which vest upon continued employment or service over specified periods of time;

• 176,000 performance-based RSUs, of which 135,000 were granted to executive officers subject to the determination of the attainment of performance targets for 2023.

This determination occurred in September 2023, at which time at least 33% of the units vested, as a result of the long service of all executive officers, with the exception of one executive officer who has less than 25 years of service.

• 122,000 performance-based RSUs, of which 95,000 were granted to executive officers subject to the determination of the attainment of performance targets for 2024, which occurred in September 2024.

At that time, depending upon long-service terms, at least 33% of the units vested.

The remaining awards vest upon continued employment over specified periods of time.

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Forfeited ( 80 ) 457.54

Special cash dividend 52 N/A

Outstanding at the end of 2024 2,799 $ 463.24

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Stock-based compensation expense, net $ 645 $ 611 $ 570

Note 8— Taxes

Income before income taxes is comprised of the following:

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Total $ 2,373 24.4 % $ 2,195 25.9 % $ 1,925 24.6 %

The Company recognized total net tax benefits of $ 62 , $ 130 and $ 163 in 2023, 2022 and 2021.

These include benefits of $ 54 , $ 94 and $ 75 , related to stock-based compensation.

During 2021, there was a net tax benefit of $ 70 related to the portion of the special dividend paid through the Company's 401(k) plan.

The Company's effective tax rate in 2024 included discrete tax benefits of $ 94 related to the portion of the special dividend payable through the Company's 401(k) plan, a net non-recurring tax benefit of $ 63 related to a transfer pricing settlement and certain true-ups of tax reserves, and $ 45 of excess tax benefits related to stock compensation.

In 2023 and 2022, tax benefits of $ 54 and $ 94 were recognized related to stock compensation.

The components of the deferred tax assets (liabilities) are as follows:

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Foreign branch deferreds ( 105 ) ( 87 )

Other ( 1 ) —

Total deferred tax liabilities ( 2,002 ) ( 1,989 )

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The Company generally no longer considers fiscal year earnings of non-U.S.

consolidated subsidiaries after 2017 to be indefinitely reinvested (other than China and Taiwan) and has recorded the estimated incremental foreign withholding taxes (net of available foreign tax credits) and state income taxes payable assuming a hypothetical repatriation to the U.S.

consolidated subsidiaries (other than China) indefinitely reinvested after 2023, in the case of Taiwan, and after 2017, in the case of all other subsidiaries, and has recorded the estimated incremental foreign withholding taxes (net of available foreign tax credits) and state income taxes payable assuming a hypothetical repatriation to the U.S.

The Company considers undistributed earnings of certain non-U.S.

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Gross decreases—tax positions in prior years — ( 11 )

Gross decreases—settlements — ( 12 )

Lapse of statute of limitations ( 2 ) ( 1 )

5 unchanged sentences

Accrued interest and penalties related to income tax matters are classified as a component of income tax expense.

Accrued interest and penalties recognized during 2023 and 2022, and accrued at the end of each respective period were not material.

Accrued interest and penalties recognized during 2024 and 2023, and accrued at the end of each respective period were immaterial.

The Company is currently under audit by several jurisdictions in the United States and abroad.

20 unchanged sentences

444,759 444,452 444,757

Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period.

Diluted earnings per share is calculated based on the dilutive effect of RSUs using the treasury stock method.

Note 10—Commitments and Contingencies

1 unchanged sentence

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

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

There may be losses in excess of amounts accrued.

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

reasonably estimable.

There may be actual losses in excess of amounts accrued.

The Company monitors those matters for developments that would affect the likelihood of a loss (taking into account where applicable indemnification arrangements concerning suppliers and insurers) and the accrued amount, if any, thereof, and adjusts the amount as appropriate.

The Company has recorded immaterial accruals with

respect to certain matters described below, in addition to other immaterial accruals for matters not described below.

The Company has recorded immaterial accruals with respect to certain matters described below, in addition to other immaterial accruals for matters not described below.

If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but monitors for developments that make the contingency both probable and reasonably estimable.

4 unchanged sentences

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

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

Costco Wholesale Corp.

2013-1-CV-248813;

Santa Clara Superior Court).

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

On April 26, 2023, the court entered a final judgment in favor of the Company.

The plaintiff appealed the judgment in June 2023.

In June 2022, a business center employee raised similar claims, alleging failure to provide seating to employees who work at membership refund desks in California warehouses and business centers.

Costco Wholesale Corp.

Alameda Superior Court).

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

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

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

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

Costco Wholesale Corp.

2:19-cv-03454;

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

In December 2019, the court issued an order denying class certification.

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

Settlement for an immaterial amount was agreed upon in February 2021.

Final court approval of the settlement was granted on May 3, 2022.

A proposed intervenor appealed the denial of her motion to intervene, and the appeal was dismissed on February 15, 2023.

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

Costco Wholesale Corp .

2:19-cv-01340;

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

In September 2021, the court granted the Company's motion for partial summary judgment and denied class certification.

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

Costco Wholesale Corp.

Sonoma County Superior Court).

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

The state court action has been stayed pending resolution of the federal action.

In September 2023 the parties reached an agreement in principle on a settlement for an immaterial amount.

In December 2020, a former employee filed suit against the Company asserting collective and class claims on behalf of non-exempt employees under the Fair Labor Standards Act and New York Labor Law for failure to pay for all hours worked, failure to pay certain non-exempt employees on a weekly basis, and failure to provide proper wage statements and notices.

The plaintiff also asserted individual retaliation claims.

Costco Wholesale Corp.

1:20-cv-06067;

Based on an agreement in principle concerning settlement of the matter, involving a proposed payment by the Company of an immaterial amount, the federal action has been dismissed.

In April 2022, Cappadora and a second plaintiff filed an action against the Company in New York state court, asserting the same class

claims asserted in the federal action under the New York Labor Law and seeking preliminary approval of the class settlement.

Cappadora and Sancho v.

Costco Wholesale Corp.

Nassau County Supreme Court).

Following final approval of the settlement, the case was dismissed on April 14, 2023.

In August 2021, a former employee filed a similar suit, asserting class claims on behalf of certain non-exempt employees under New York Labor Law for failure to pay on a weekly basis.

Costco Wholesale Corp.

2:21-cv-4814;

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

In August 2023, the parties reached an agreement in principle on a settlement for an immaterial amount.

In April 2022, a former employee filed a similar suit, asserting class claims on behalf of certain non-exempt employees under New York Labor Law, as well as under the Fair Labor Standards Act, for failure to pay on a weekly basis and failure to pay overtime.

Costco Wholesale Corp.

2:22-cv-02108;

The case was settled for an immaterial amount and was dismissed with prejudice in May 2023.

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

In November 2023, a former employee filed a class action against the Company alleging claims under California law for failure to pay minimum wage, failure to pay overtime, failure to provide meal and rest breaks, failure to provide accurate wage statements, failure to reimburse expenses, failure to pay wages when due, and failure to pay sick pay.

Martin Reyes v.

Costco Wholesale Corporation, Sacramento County Superior Court (Case No.

23cv011351), removed to federal court, Case No.

2:24-cv-00300 (E.D.

A second amended complaint was filed, which the Company has moved to dismiss.

In January 2024, the same plaintiff filed a related Private Attorneys General Act (PAGA) representative action, seeking civil penalties and asserting the same alleged underlying Labor Code violations and an additional suitable seating claim.

In May 2024, the plaintiff filed an amended PAGA complaint;

the Company has denied the material allegations of the complaint and filed a motion to stay the action.

In October 2023, current and former employees filed suit against the Company asserting collective and class claims on behalf of all “Junior Managers” under the Fair Labor Standards Act and New York Labor Law, for failure to pay overtime compensation and for inaccurate wage statements under New York law.

Costco Wholesale Corp.

2:23-cv-07904;

On September 27, 2022, the parties reached a settlement for an immaterial amount, which is subject to court approval.

On February 1, 2024, the Company served a motion to dismiss the inaccurate wage-statement claim.

On April 5, 2024, plaintiffs filed a motion for conditional certification under the Act, which the Company has opposed.

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

3 unchanged sentences

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

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

On September 7, 2021, the same plaintiff filed a separate representative action under the California Private Attorneys General Act, asserting the same Labor Code violations and seeking civil penalties and attorneys' fees.

The case has been stayed pending arbitration of the plaintiff's individual claims.

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

De Benning v.

Costco Wholesale Corp.

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

Sacramento Superior Court).

In April 2022, a settlement for an immaterial amount was agreed upon, subject to court approval.

Final approval of the settlement was granted on February 10, 2023.

In March 2022, an employee filed a class action against the Company alleging violations of the California Labor Code regarding the failure to:

pay wages, provide meal and rest periods, provide accurate wage statements, timely pay final wages, and reimburse business expenses.

Costco Wholesale Corp.

Los Angeles Superior Court).

In December 2022, the case was settled for an immaterial amount, and the case was dismissed.

In May 2022, an employee filed a PAGA action against the Company alleging claims under the California Labor Code regarding the payment of wages, meal and rest periods, the timeliness of wages and final wages, wage statements, accurate records and business expenses.

In May 2022, an employee filed an action under PAGA against the Company, alleging claims under the California Labor Code regarding the payment of wages, meal and rest periods, the timeliness of wages and final wages, wage statements, accurate records and business expenses.

Costco Wholesale Corp.

1 unchanged sentence

The Company filed an answer denying the allegations.

On October 31, 2023, a settlement was reached for an immaterial amount.

Preliminary approval of the settlement was given in July, and a hearing for final approval has been set for October.

In August 2024, an employee filed an action under PAGA against the Company, alleging claims for penalties for alleged violations of the California Labor Code regarding:

off-the-clock work, incorrect and untimely payment of wages, meal and rest periods, reimbursement of expenses, non-compliant wage statements, payment of final wages, incorrect rates for sick pay, meal and rest premiums and vacation

pay and reimbursement of expenses.

Costco (Case No.

CV-24-006198;

Stanislaus County Superior Court).

The Company has not yet responded to the complaint.

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

In re National Prescription Opiate Litigation (MDL No.

Included are cases filed against the Company by counties and cities in Michigan, New Jersey, Oregon, Virginia and South Carolina, a third-party payor in Ohio, and a hospital in Texas, class actions filed on behalf of infants born with opioid-related medical conditions in 40 states, and class actions and individual actions filed on behalf of individuals seeking to recover alleged

increased insurance costs associated with opioid abuse in 43 states and American Samoa.

Claims against the Company filed in federal court outside the MDL have been asserted by certain counties and cities in Florida and Georgia;

2 unchanged sentences

The Company is defending all of the pending matters.

Members of the Board of Directors, six corporate officers and the Company were defendants in a shareholder derivative action filed in June 2022 related to chicken welfare and alleged breaches of fiduciary duties.

Smith, et ano.

Vachris, et al., Superior Court of the State of Washington, County of King, No, 22-2-08937-7SEA.

The complaint sought from the individual defendants' damages, injunctive relief, costs, and attorneys' fees.

On March 28, 2023, the court granted the defendants' motion to dismiss the action.

The plaintiffs subsequently made a demand that the Board of Directors take various actions, including among other things, pursuing claims against directors and officers of the type asserted in the litigation.

A demand review committee of the Board has been appointed to make a recommendation to the Board as to the demand.

In February 2023, Go Green Norcal, LLC filed an arbitration demand against the Company.

The demand alleged a breach of a supply agreement and sought unspecified damages and cancellation of a loan from the Company.

In March 2023, the Company filed its answer, denying any breach by the Company, along with counterclaims against Go Green and an affiliate for breach of contract, negligent misrepresentation, and an accounting.

In August 2023 the plaintiff asserted that its damages exceed $ 70 million.

In October 2021 the Company received a notice that the Quebec Health Insurance Board had commenced an inquiry to determine whether the Company had given or received improper payments for drugs that are covered by the province's prescription drug program from drug wholesalers, generic drug manufacturers or the independent pharmacist who owns and operates the pharmacies located in the Company's Quebec locations.

The inquiry covers a period beginning January 1, 2017.

In August 2024 the Board made a demand of an immaterial amount.

The Company is a named defendant in four bodily injury actions relating to its sale of Real Water, an alkalized water previously sold at the Company and other retailers.

Costco Wholesale Corp.

et al., Case No.

A23-864391-B, District Court, Clark County, NV Wei, et al.

Costco Wholesale Corp.

A-22-856147-B, District Court, Clark County, NV Henry et al.

Costco Wholesale Corp.

et al., Case No.

A21844176-B, District Court, Clark County, NV Lampman et al.

Costco Wholesale Corp.

A-23-868638-C, District Court, Clark County, NV.

The plaintiffs allegedly sustained liver or other bodily damage as a result of consuming the product, and seek compensatory and punitive damages from all defendants, which include the manufacturer, distributors, testing equipment makers and retailers.

The Kaveh case is set for trial on March 17, 2025.

Wei and Henry have been consolidated with Brown.

AffinityLifestyles.com, Inc., et al., Case No.

A-21-831776-B, District Court, Clark County, NV.

The Company is not a named defendant in Brown.

Wei/Henry/Brown is set for trial starting October 7, 2024.

Between September 25, 2023, and October 31, 2023, five class action suits were filed against the Company alleging various privacy law violations stemming from pixel trackers on Costco.com:

Costco Wholesale Corp., Case No.

T23-1405, Contra Costa County Superior Court;

Costco Wholesale Corp., Case No.

2:23-cv-08808 (C.D.

Cal.), now consolidated with R.S.

Costco Wholesale Corp., Case No.

2:23-cv-01628 (W.D.

Groves, et ano.

Costco Wholesale Corp., Case No.

2:23-cv-01662 (W.D.

Wash.), and Castillo v.

Costco Wholesale Corp., under Case No.

2:34-cv-01548 (W.D.

The Castillo plaintiffs filed a consolidated complaint on January 26, 2024, which seeks damages, equitable relief and attorneys’ fees under various statutes, including the Washington Consumer Protection Act, Washington Privacy Act, Washington Uniform Health Care Information Act, Electronic Communications Privacy Act, California Invasion of Privacy Act, and California Confidentiality of Medical Information Act.

The consolidated complaint also alleges breach of implied contract, invasion of privacy, conversion, and unjust enrichment.

The Company filed a motion to dismiss the Castillo complaint on March 11, 2024.

In Birdwell, the Company filed a motion to dismiss and demurrer on January 22, 2024.

On May 5, 2024, the Birdwell Court granted the demurrer with leave to amend and requested additional briefing on whether the case should be stayed in favor of Castillo.

On May 16, 2024, the parties stipulated to stay Birdwell pending resolution of Castillo.

On January 2, and August 22, 2024, the Company received related civil investigative demands from the Washington Attorney General's Office.

On January 3, 2024, the Company received a related pre-litigation letter from the Los Angeles Office of the County Counsel.

The Company is in the process of responding to both agencies.

On June 20, 2024, a class action lawsuit was filed against the Company and Nice-Pak Products, Inc., alleging that Kirkland Signature Fragrance Free Baby Wipes contain 3.7 parts per billion of per-and polyfluoroalkyl substances.

The complaint alleges that the label claim that the wipes are “made with naturally derived ingredients” thus violates various state consumer protection and false advertising laws.

The complaint seeks unspecified damages, including punitive damages, as well as equitable relief and attorneys’ fees and costs.

The defendants filed a motion to dismiss on August 9, 2024.

Bullard, et ano., v.

Costco Wholesale Corp., et ano., No.

3:24-cv-03714 (N.D.

In January 2023 the Company received a Civil Investigative Demand from the U.S.

1 unchanged sentence

The government is conducting a False Claims Act investigation concerning whether the Company presented or caused to be presented to the federal government for payment false claims relating to prescription medications.

In May 2024 the Company received a Notice of Intent to File Administrative Complaint for Violations of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) from the U.S.

Environmental Protection Agency.

The EPA is seeking administrative fines for importation, sale and distribution of misbranded devices and unregistered products the government asserts are pesticides under FIFRA.

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

28 unchanged sentences

The following table summarizes net sales by merchandise category;

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

sales from e-commerce sites and business centers have been allocated to the applicable merchandise categories:

2024 2023 2022

9 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-K

Item 8. Financial Statements and Supplementary Data