What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-06-05 compared with 2025-03-13 · 83 added, 113 removed, 179 unchanged (52% of the section changed)

9 unchanged sentences

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 2024 Form 10-K, filed with the United States Securities and Exchange Commission on October 9, 2024.

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 MD&A in our fiscal year 2024 Form 10-K, filed with the Securities and Exchange Commission on October 9, 2024.

We operate membership warehouses and e-commerce sites 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.

3 unchanged sentences

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

E-commerce and

business center sales are allocated to the appropriate merchandise categories in the Net Sales discussion.

E-commerce and business center sales are allocated to the appropriate merchandise categories in the Net Sales

The 2% reward associated with Executive membership is allocated to the category in which the reward is generated (core merchandise categories, warehouse ancillary, and other businesses).

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Our net sales and gross margin are influenced in part by our merchandising and pricing strategies in response to cost increases.

Those strategies can include, but are not limited to, working with our suppliers to share in absorbing cost increases, earlier-than-usual purchasing and in greater volumes, as well as passing cost increases on to our members.

Those strategies can include, but are not limited to, working with our suppliers to share in absorbing cost increases, earlier-than-usual purchasing and in greater volumes, sourcing in the countries and regions where items are sold, as well as passing cost increases on to our members.

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, negatively impacting gross margin and gross margin as a percentage of net sales (gross margin percentage) in the near term.

Our e-commerce business, domestically and internationally, has a lower gross-margin percentage than our warehouse operations.

Government actions in various countries relating to tariffs affect 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.

Higher tariffs are more likely to adversely impact rather than improve our results.

We believe our gasoline business enhances traffic in our warehouses;

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A decline in gasoline prices has the inverse effect.

Government actions in various countries relating to tariffs, particularly China, Mexico, Canada and the United States, affect 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.

Higher tariffs are more likely to adversely impact rather than improve our results.

We also achieve net sales growth by opening new warehouses.

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

Our worldwide renewal rate may be adversely impacted by memberships in newer international markets and a higher penetration of memberships sold online, both of which typically renew at a lower rate.

Our worldwide renewal rate may be adversely impacted by memberships in newer international markets and a higher penetration of memberships sold online, including digital promotions, which typically renew at a lower rate.

Our financial performance depends heavily on controlling costs.

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

References to the second quarter of 2025 and 2024 relate to the 12-week fiscal quarters ended February 16, 2025, and February 18, 2024.

References to the first half of 2025 and 2024 relate to the 24 weeks ended February 16, 2025, and February 18, 2024.

References to the third quarter of 2025 and 2024 relate to the 12-week fiscal quarters ended May 11, 2025, and May 12, 2024.

References to the first thirty-six weeks of 2025 and 2024 relate to the 36 weeks ended May 11, 2025, and May 12, 2024.

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

Highlights for the second quarter of 2025 versus 2024 include:

• Net sales increased 9% to $62,530, driven by an increase in comparable sales and sales at 23 net new warehouses opened since the end of the second quarter of 2024;

Highlights for the third quarter of 2025 versus 2024 include:

• Net sales increased 8% to $61,965, driven by an increase in comparable sales and sales at 29 net new warehouses opened since the end of the third quarter of 2024;

• Membership fee revenue increased 10% to $1,240, primarily driven by new member sign-ups and membership fee increases;

• Gross margin percentage increased five basis points;

four basis points excluding the impact of gasoline price deflation on net sales;

• SG&A expenses as a percentage of net sales decreased eight basis points;

nine basis points excluding the impact of gasoline price deflation;

• Net income was $1,788, $4.02 per diluted share, compared to $1,743, $3.92 per diluted share in 2024;

• A quarterly cash dividend of $1.16 per share was declared on January 23, 2025, and paid on February 21, 2025.

• Gross margin percentage increased 41 basis points;

29 basis points excluding the impact of gasoline price deflation on net sales;

• SG&A expenses as a percentage of net sales increased 20 basis points;

11 basis points excluding the impact of gasoline price deflation;

• Net income increased to $1,903, $4.28 per diluted share, compared to $1,681, $3.78 per diluted share in 2024.

Foreign-exchange rates had a negative impact on net income of $35, $0.08 per diluted share;

• A quarterly cash dividend of $1.30 per share, a 12% increase, was declared on April 16, 2025, and paid on May 16, 2025.

RESULTS OF OPERATIONS

12 Weeks Ended 36 Weeks Ended

2025 February 18,

2024 February 16,

2025 February 18,

$ 61,965 $ 57,392 $ 185,480 $ 171,440

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_______________

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

Net sales increased $5,199 or 9%, and $9,467 or 8% during the second quarter and first half of 2025.

The improvement was attributable to an increase in comparable sales and sales at the 23 net new warehouses opened since the end of the second quarter of 2024.

Sales increased $4,786 or 10% and $9,119, or 10% in core merchandise categories during the second quarter and first half of 2025, increasing in all categories.

Sales in warehouse ancillary and other businesses increased $413 or 4%, and $348, or 2% during the second quarter and first half of 2025, led by pharmacy, partially offset by lower gasoline prices.

During the second quarter of 2025, lower gasoline prices negatively impacted net sales by $56, 10 basis points, compared to 2024, with a 3% decrease in the average price per gallon.

The volume of gasoline sold increased approximately 1% , positively impacting net sales by $51, or nine basis points.

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

dollar negatively impacted net sales by approximately $1,244, or 217 basis points, attributable to our Other International and Canadian operations.

During the first half of 2025 , l ower gasoline prices negatively impacted net sales by $964, 85 basis points, compared to 2024 , with an 8% decrease in the average price per gallon.

The volume of gasoline sold increased approximately 1%, positively impacting net sales by $132, or 12 basis points.

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

dollar negatively impacted net sales by approximately $1,408, or 123 basis points, attributable to our Other International and Canadian operations.

(1) Comparable sales for the third quarter and first thirty-six weeks of 2024 were calculated using comparable retail weeks.

Net sales increased $4,573 or 8%, and $14,040 or 8% during the third quarter and first thirty-six weeks of 2025.

The improvement was primarily attributable to an increase in comparable sales of $3,266 or 6% and $10,309 or 6% during the third quarter and first thirty-six weeks of 2025.

The remaining increase was driven by sales at the 29 net new warehouses opened since the end of the third quarter of 2024.

Sales increased $4,543 or 10% and $13,662 or 10% in core merchandise categories during the third quarter and first thirty-six weeks of 2025, increasing in all categories.

Sales in warehouse ancillary and other businesses were up slightly during the third quarter of 2025, and increased $378 or 1% during the first thirty-six weeks of 2025.

Lower gasoline prices negatively impacted net sales by $642, or 112 basis points, and $1,606, or 94 basis points, during the third quarter and first thirty-six weeks of 2025.

The average price per gallon decreased 9% and 8% during the third quarter and first thirty-six weeks of 2025.

The volume of gasoline sold increased approximately 1%, positively impacting net sales by $59, or ten basis points and $191, or 11 basis points during the third quarter and first thirty-six weeks of 2025.

Changes in foreign currencies relative to the U.S.

dollar attributable to our Other International and Canadian operations negatively impacted net sales by approximately $699, or 122 basis points, and approximately $2,107, or 123 basis points, during the third quarter and first thirty-six weeks of 2025.

Comparable Sales

Comparable sales increased 7% and 6% in the second quarter and first half of 2025 and were positively impacted by increased shopping frequen cy a nd a slightly higher average ticket.

Comparable sales increased 6% in the third quarter and first thirty-six weeks of 2025 and were positively impacted by increased shopping frequency of 5% and an average ticket increase of less than 1%.

Membership Fees

12 Weeks Ended 36 Weeks Ended

2025 February 18,

2024 February 16,

2025 February 18,

Membership fees $ 1,240 $ 1,123 $ 3,599 $ 3,316

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Total cardholders (000s) 142,800 133,900 — —

Membership fee revenue increased 7% and 8% in the second quarter and first half of 2025, primarily driven by new member sign-ups and the fee increase (discussed below).

Changes in foreign currencies relative to the U.S.

dollar negatively impacted membership fees by $22 and $23 in the second quarter and first half of 2025.

At the end of the second quarter of 2025, our renewal rates were 93.0% in the U.S.

Membership fee revenue increased 10% and 9% in the third quarter and first thirty-six weeks of 2025, primarily driven by new member sign-ups and membership fee increases.

At the end of the third quarter of 2025, our renewal rates were 92.7% in the U.S.

and Canada and 90.2% worldwide.

Our renewal rates were negatively impacted by sign-ups from a digital promotion in the fall of 2023 entering the renewal calculation this quarter and higher penetration of online sign-ups in recent years.

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

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

The recent membership fee increase contributed approximately 3% of membership fee revenue during the second quarter of 2025.

The fee increase contributed approximately 4% of membership fee revenue during the third quarter of 2025.

12 Weeks Ended 36 Weeks Ended

2025 February 18,

2024 February 16,

2025 February 18,

Net sales $ 61,965 $ 57,392 $ 185,480 $ 171,440

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Quarterly Results

Gross margin percentage increased five basis points.

Excluding the impact of gasoline price deflation on net sales, gross margin percentage was 10.84%, an increase of four basis points.

Gross margin percentage from w arehouse ancillary and other businesses was flat, primarily due to an increase in e-commerce, partially offset by a decrease in our gasoline business.

The LIFO impact was flat quarter over quarter.

Gross margin percentage increased 41 basis points.

Excluding the impact of gasoline price deflation on net sales, gross margin percentage increased to 11.13%, 29 basis points.

This increase was positively impacted by 27 basis points in our core merchandise categories, primarily in fresh foods and foods and sundries and 27 basis points in warehouse ancillary and other businesses, primarily gasoline and e-commerce.

Gross margin was negatively impacted by 23 basis points due to a LIFO charge for higher merchandise costs and two basis points for a one-time expense for increased employee vacation .

Changes in foreign currencies relative to the U.S.

dollar negatively impacted gross margin by approximately $135, compared to the second quarter of 2024, attributable to our Other International and Canadian operations.

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

The decrease was primarily due to increased supply chain costs to support higher inventory levels and certain mix changes in our non-food categories.

dollar negatively impacted gross margin by approximately $80, compared to the third quarter of 2024, attributable to our Other International and Canadian operations.

The gross margin in core merchandise categories, when expressed as a percentage of core merchandise sales (rather than total net sales), increased 36 basis points.

The increase was across all categories, most significantly fresh foods which benefited from sales leverage, higher productivity, and lower prices for certain commodities.

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), increased in our U.S.

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), increased in our U.S.

segment, which performed similarly to the consolidated results above.

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

Gross margin decreased in our Other International segment, primarily due to decreases in core merchandise categories.

Our Canadian segment gross margin percentage increased, primarily due to increases in core merchandise categories and warehouse ancillary and other businesses.

Gross margin increased in our Other International segment, primarily due to increases in warehouse ancillary and other businesses.

Year-to-date Results

Gross margin percentage increased 23 basis points.

Excluding the impact of gasoline price deflation on net sales, gross margin percentage was 10.98%, an increase of six basis points.

This increase was positively impacted by 14 basis points in our core merchandise categories, primarily due to our co-branded credit card program.

This increase was partially offset by eight basis points due to warehouse ancillary and other businesses, primarily gasoline, partially offset by e-commerce .

Excluding the impact of gasoline price deflation on net sales, gross margin percentage increased to 11.03%, 14 basis points.

This increase was positively impacted by 18 basis points in our core merchandise categories, primarily due to increases in our co-branded credit card program and fresh foods, and four basis points in warehouse ancillary and other businesses, primarily e-commerce, partially offset by gasoline.

Gross margin percentage was negatively impacted by eight basis points due to a LIFO charge.

Changes in foreign currencies relative to the U.S.

dollar negatively impacted gross margin by approximately $158, compared to the first half of 2024, attributable to our Other International and Canadian operations.

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

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

dollar negatively impacted gross margin by approximately $238, compared to the first thirty-six weeks of 2024, attributable to our Other International and Canadian operations.

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

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

Segment gross margin percentage increased in all segments.

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12 Weeks Ended 36 Weeks Ended

2025 February 18,

2024 February 16,

2025 February 18,

SG&A expenses $ 5,679 $ 5,145 $ 17,188 $ 15,743

1 unchanged sentence

Quarterly Results

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

SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflation was 9.05%, a decrease of nine basis points.

The comparison to last year was favorably impacted by eight basis points due to warehouse operations and other businesses, largely attributable to improved productivity.

Preopening costs were also lower by one basis point.

Central operating costs and stock compensation were flat.

Changes in foreign currencies relative to the U.S.

dollar decreased SG&A expenses by approximately $85 compared to the second quarter of 2024, attributable to our Other International and Canadian operations.

SG&A expenses as a percentage of net sales increased 20 basis points.

SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflation was 9.07%, an increase of 11 basis points.

The comparison to last year was negatively impacted by five basis points due to warehouse operations and other businesses, which included our investment in employee wages.

A one-time expense for increased employee vacation negatively impacted SG&A by five basis points.

Preopening and central operating costs were both higher by one basis point.

Stock compensation decreased by one basis point.

Year-to-date 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 9.25%, a decrease of four basis points.

The comparison to last year was favorably impacted by two basis points related to warehouse operations and other businesses, largely attributable to sales leverage and improved productivity.

Preopening costs were also lower by two basis points, and stock compensation was lower by one basis point.

SG&A was negatively impacted by one basis point due to central operating costs.

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

SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflation was 9.19%, an increase of one basis point.

Changes in foreign currencies relative to the U.S.

dollar decreased SG&A expenses by approximately $93 compared to the first half of 2024, attributable to our Other International and Canadian operations.

dollar decreased SG&A expenses by approximately $142 compared to the first thirty-six weeks of 2024, attributable to our Other International and Canadian operations.

Interest Expense

12 Weeks Ended 36 Weeks Ended

2025 February 18,

2024 February 16,

2025 February 18,

Interest expense $ 35 $ 41 $ 108 $ 120

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

The decrease in interest expense for the second quarter and first half of 2025 was primarily due to repayment of the 2.750% Senior Notes in May 2024.

The decrease in interest expense for the third quarter and first thirty-six weeks of 2025 was primarily due to repayment of the 2.750% Senior Notes in May 2024.

Interest Income and Other, Net

12 Weeks Ended 36 Weeks Ended

2025 February 18,

2024 February 16,

2025 February 18,

Interest income $ 95 $ 94 $ 300 $ 395

Foreign-currency transaction gains, net 23 31 66 34

Foreign-currency transaction gains (losses), net (17) 20 49 54

Other, net 7 14 25 55

Interest income and other, net $ 85 $ 128 $ 374 $ 504

The decrease in interest income in the second quarter and first half of 2025 was due to lower average cash and investment balances, following the special dividend in January 2024, and lower interest rates.

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

The decrease in interest income in the first thirty-six weeks of 2025 was due to lower interest rates, partially offset by higher cash balances.

Foreign-currency transaction gains (losses), net, include mark-to-market adjustments for forward foreign-exchange contracts and 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 September 1, 2024.

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12 Weeks Ended 36 Weeks Ended

2025 February 18,

2024 February 16,

2025 February 18,

Provision for income taxes $ 677 $ 603 $ 1,819 $ 1,614

Effective tax rate 26.2 % 26.4 % 24.9 % 24.4 %

The effective tax rate for the first half of 2025 was favorably impacted by discrete tax benefits of $100, primarily excess tax benefits related to stock compensation.

The effective tax rate for the first half of 2024 was favorably impacted by discrete tax benefits of $94 related to the portion of the special cash dividend payable through our 401(k) plan and $44 of excess tax benefits related to stock compensation.

The effective tax rate for the first thirty-six weeks of 2025 was favorably impacted by discrete tax benefits of $100 related to stock compensation.

The effective tax rate for the first thirty-six weeks of 2024 was favorably impacted by discrete tax benefits of $94 related to the portion of the special cash dividend payable through our 401(k) plan and $44 related to stock compensation.

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

36 Weeks Ended

2025 February 18,

Net cash provided by operating activities $ 9,468 $ 8,381

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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 $13,158 and $11,144 at February 16, 2025, and September 1, 2024.

Of these balances, unsettled credit and debit card receivables represented approximately $2,292 and $2,519 at February 16, 2025, and September 1, 2024.

Cash and cash equivalents and short-term investments were $14,850 and $11,144 at

May 11, 2025, and September 1, 2024.

Of these balances, unsettled credit and debit card receivables represented approximately $2,587 and $2,519 at May 11, 2025, and September 1, 2024.

These receivables generally settle within four days.

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

We believe that our cash and investment position and operating cash flow, with capacity under existing and available credit agreements, will be sufficient to meet our liquidity and capital requirements for the foreseeable future and our U.S.

current and projected asset position is sufficient to meet our U.S.

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Cash Flows from Operating Activities

Net cash provided by operating activities totaled $6,008 in the first half of 2025, compared to $5,382 in the first half of 2024.

Net cash provided by operating activities totaled $9,468 in the first thirty-six weeks of 2025, compared to $8,381 in the first thirty-six weeks of 2024.

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

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Cash Flows from Investing Activities

Net cash used in investing activities totaled $2,007 in the first half of 2025, compared to $1,752 in the first half of 2024, and is primarily related to capital expenditures.

Net cash used in investing activities totaled $3,343 in the first thirty-six weeks of 2025, compared to $2,706 in the first thirty-six weeks of 2024, 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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Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses, information systems and manufacturing and distribution facilities.

In the first half of 2025, we spent $2,401 on capital expenditures, and it is our current intention to spend a total of approximately $5,000 during fiscal 2025.

In the first thirty-six weeks of 2025, we spent $3,532 on capital expenditures, and it is our current intention to spend slightly over $5,000 during fiscal 2025.

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

We opened eight new warehouses, includ ing one relocation, in the first half of 2025 and plan to open 20 additional new warehouses, including two relocations, in the remainder of fiscal 2025.

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.

We opened 17 new warehouses, includ ing two relocations, in the first thirty-six weeks of 2025 and plan to open ten additional new warehouses, including one relocation, in the remainder of fiscal 2025.

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 $1,434 in the first half of 2025, compared to $8,250 in the first half of 2024.

Cash flow used in financing activities during the first half of 2025 was primarily related to the payment of dividends, repurchases of common stock, withholding taxes on stock-based awards, and repayments of short-term borrowings.

Net cash used in financing activities totaled $2,182 in the first thirty-six weeks of 2025, compared to $8,948 in the first thirty-six weeks of 2024.

Cash flow used in financing activities during the first thirty-six weeks of 2025 was primarily related to the payment of dividends, repayments of short-term borrowings, repurchases of common stock, and withholding taxes on stock-based awards.

Cash flow provided by financing activities included proceeds from short-term borrowings .

A quarterly cash dividend of $1.16 per share was declared on January 23, 2025, and paid on February 21, 2025.

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

In the first thirty-six weeks of 2024, cash flow used in financing was primarily due to the payment of a special dividend.

A quarterly cash dividend of $1.30 per share was declared on April 16, 2025, and paid on May 16, 2025.

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 half of 2025 and 2024, we repurchased 443,000 and 528,000 shares of common stock, at an average price per share of $932.03 and $609.51, totaling approximately $413 and $322.

During the first thirty-six weeks of 2025 and 2024, we repurchased 658,000 and 749,000 shares of common stock, at an average price per share of $946.64 and $646.07, totaling approximately $623 and $484.

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 $2,452 at the end of the second quarter.

The remaining amount available to be purchased under our approved plan was $2,242 at the end of the third quarter.

Bank Credit Facilities and Commercial Paper Programs

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

At February 16, 2025, we had borrowing capacity under these facilities of $1,176.

At May 11, 2025, we had borrowing capacity under these facilities of $1,176.

Our international operations maintain $681 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 second quarter of 2025 and at the end of 2024.

We have letter of credit facilities, for commercial and standby letters of credit, totaling $228.

The outstanding commitments under these facilities at the end of the second quarter of 2025 totaled $198, 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 third quarter of 2025 totaled $205, 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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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