COSTCO WHOLESALE CORPORATION (amounts in millions, except per share, share, and warehouse count data) FORWARD-LOOKING STATEMENTS Certain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For these purposes, forward-looking statements are statements that address activities, events, conditions or developments that the Company expects or anticipates may occur in the future and may relate to such matters as net sales growth, changes in comparable sales, cannibalization of existing locations by new openings, price or fee changes, earnings performance, earnings per share, stock-based compensation expense, warehouse openings and closures, capital spending, the effect of adopting certain accounting standards, future financial reporting, financing, margins, return on invested capital, strategic direction, expense controls, membership renewal rates, shopping frequency, litigation, and the demand for our products and services. In some cases, forward-looking statements can be identified because they contain words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "likely," "may," "might," "plan," "potential," "predict," "project," "seek," "should," "target," "will," "would," or similar expressions and the negatives of those terms. Such forward-looking statements involve risks and uncertainties that may cause actual events, results, or performance to differ materially from those indicated by such statements. These risks and uncertainties include, but are not limited to, domestic and international economic conditions, including exchange rates, the effects of competition and regulation, uncertainties in the financial markets, consumer and small-business spending patterns and debt levels, breaches of security or privacy of member or business information, conditions affecting the acquisition, development, ownership or use of real estate, capital spending, actions of vendors, rising costs associated with employees (generally including health-care costs), energy and certain commodities, geopolitical conditions (including tariffs), the ability to maintain effective internal control over financial reporting, COVID-19 related factors and challenges, including among others, the duration of the pandemic, the unknown long-term economic impacts, reduced member shopping due to illness, travel restrictions or financial hardship, shifts in demand away from discretionary or higher-priced products, reduced workforce due to illness, quarantine, or government mandates, temporary store closures due to reduced workforces or government mandates, supply-chain disruptions, or capacity constraints of third-party logistics suppliers and other risks identified from time to time in the Company's public statements and reports filed with theSecurities and Exchange Commission (SEC). Forward-looking statements speak only as of the date they are made, and the Company does not undertake to update these statements, except as required by law. This management discussion should be read in conjunction with the management discussion included in our fiscal 2020 Annual Report on Form 10-K, previously filed with theSEC . OVERVIEW 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 merchandise 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. We believe that the most important driver of our profitability is increasing net sales, particularly comparable sales growth. Net sales includes our core merchandise categories (foods and sundries, hardlines, softlines, and fresh foods), warehouse ancillary and other businesses. We define comparable sales as net sales from warehouses open for more than one year, including remodels, relocations and expansions, and sales-related to e-commerce websites operating for more than one year. Comparable sales growth is achieved through increasing shopping frequency from new and existing members and the amount they spend on each visit (average ticket). Sales comparisons can also be particularly influenced 19
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by certain factors that are beyond our control: fluctuations in currency exchange rates (with respect to the consolidation of the results of our international operations); 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 certain of 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 to our members 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, especiallythe United States . Net sales growth and gross margins are also impacted by our competition, which is vigorous and widespread, across a wide range of global, national and regional wholesalers and retailers, including those with e-commerce operations. While we cannot control or reliably predict general economic health or changes in competition, we believe that we have been successful historically in adapting our business to these changes, such as through adjustments to our pricing and merchandise mix, including increasing the penetration of our private-label items and through online offerings. Our philosophy is to provide our members with quality goods and services at competitive prices. We do not focus in the short-term on maximizing prices charged, but instead seek to maintain what we believe is a perception among our members of our "pricing authority" on quality goods - consistently providing the most competitive values. 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 as a percentage of net sales (gross margin percentage). We believe our gasoline business draws members, but it generally has a lower gross margin percentage relative to our non-gasoline business. It also has lower SG&A expenses as a percent of net sales compared to our non-gasoline business. 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. A decline in gasoline prices has the inverse effect. Additionally, actions in various countries, particularlyChina ,the United States and theUnited Kingdom , have created uncertainty with respect to how tariffs will 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. The impact to our net sales and gross margin is influenced in part by our merchandising and pricing strategies in response to cost increases. While these potential impacts are uncertain, they could have an adverse impact on our results. We also achieve net sales growth by opening new warehouses. 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. Our rate of operating floor space square footage growth is generally higher in foreign markets, due to the smaller base in those markets, and we expect that to continue. Our e-commerce business growth, domestically and internationally, has also increased our sales but it generally has a lower gross margin percentage relative to our warehouse business. The membership format is an integral part of our business and has a significant effect on our profitability. 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. Our paid membership growth rate may be adversely impacted when warehouse openings occur in existing markets as compared to new markets. 20
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Our financial performance depends heavily on controlling costs. While we believe that we have achieved successes in this area, some significant costs are partially outside our control, particularly health care and utility expenses. With respect to the compensation of our employees, our philosophy is not to seek to minimize their wages and benefits. Rather, we believe that achieving our longer-term objectives of reducing employee turnover and enhancing employee satisfaction requires maintaining compensation levels that are better than the industry average for much of our workforce. This may cause us, for example, to absorb costs that other employers might seek to pass through to their workforces. Because our business operates on very low margins, modest changes in various items in the consolidated statements of income, particularly merchandise costs and selling, general and administrative expenses, can have substantial impacts on net income. Our operating model is generally the same across ourU.S. ,Canada , and Other International operating segments (see Note 11 to the condensed consolidated financial statements included in Part I, Item 1, of this Report). Certain operations in the Other International segment have relatively higher rates of square footage growth, lower wage and benefit costs as a percentage of sales, less or no direct membership warehouse competition, or lack an e-commerce business. In discussions of our consolidated operating results, we refer to the impact of changes in foreign currencies relative to theU.S. dollar, which are references to the differences between the foreign-exchange rates we use to convert the financial results of our international operations from local currencies intoU.S. dollars for financial reporting purposes. This impact of foreign-exchange rate changes is calculated based on the difference between the current period's currency exchange rates and that of the comparable prior period. The impact of changes in gasoline prices on net sales is calculated based on the difference between the current period's average price per gallon sold and that of the comparable prior period. Our fiscal year ends on the Sunday closest toAugust 31 . References to the third quarter of 2021 and 2020 relate to the 12-week fiscal quarters endedMay 9, 2021 , andMay 10, 2020 . References to the first thirty-six weeks of 2021 and 2020 relate to the 36 weeks endedMay 9, 2021 , andMay 10, 2020 . Certain percentages presented are calculated using actual results prior to rounding. Unless otherwise noted, references to net income relate to net income attributable toCostco . Highlights for the third quarter of 2021 as compared to the third quarter of 2020 include: •Net sales increased 22% to$44,376 , driven by an increase in comparable sales of 21% and sales at 22 net new warehouses opened since the end of the third quarter of 2020; •Membership fee revenue increased 11% to$901 , driven by signups at warehouses and online and upgrades to Executive Membership; •Gross margin percentage decreased 35 basis points, driven primarily by a shift in sales from our core merchandise categories to our ancillary and other businesses, partially offset by decreased incremental wages related to COVID-19, which ended onFebruary 28, 2021 ; •SG&A expenses as a percentage of net sales decreased 107 basis points, primarily due to leveraging increased sales and decreased incremental wages related to COVID-19; •OnApril 14, 2021 , our Board declared a quarterly cash dividend of$0.79 per share, which was paid onMay 14, 2021 ; and •Net income was$1,220 , or$2.75 per diluted share, compared to$838 , or$1.89 per diluted share in 2020. 21
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COVID-19
During the third quarter of 2021, our sales mix began returning to pre-pandemic levels. This included strong sales in hardlines and softlines, gasoline, and in many of our warehouse ancillary and other businesses, certain of which experienced closures or restrictions in the third quarter of 2020. COVID-related supply and logistics constraints have adversely affected some merchandise categories and are expected to do so for the foreseeable future. We paid$57 and$515 in incremental wages during the third quarter and first thirty-six weeks of 2021, respectively, related to COVID-19. The incremental wage and benefit costs associated with COVID-19, which began onMarch 1, 2020 and ended onFebruary 28, 2021 , totaled approximately$825 . Additionally, in certain areas where we do business inthe United States , governments have mandated or are considering mandating extra pay for classes of employees that include our employees, which will result in higher costs. RESULTS OF OPERATIONSNet Sales 12 Weeks Ended 36 Weeks Ended May 9, May 10, May 9, May 10, 2021 2020 2021 2020 Net Sales$ 44,376 $ 36,451 $ 130,611 $ 110,943 Changes in net sales: U.S 19 % 8 % 16 % 8 % Canada 34 % (1) % 22 % 4 % Other International 27 % 11 % 25 % 10 %Total Company 22 % 7 % 18 % 8 % Changes in comparable sales: U.S 18 % 6 % 15 % 7 % Canada 32 % (3) % 20 % 3 % Other International 23 % 6 % 21 % 6 %Total Company 21 % 5 % 16 % 6 % Changes in comparable sales excluding the impact of changes in foreign-currency and gasoline prices: U.S 15 % 8 % 15 % 7 % Canada 17 % 3 % 15 % 5 % Other International 13 % 12 % 16 % 8 %Total Company 15 % 8 % 15 % 7 % Net Sales Net sales increased$7,925 or 22%, and$19,668 or 18% during the third quarter and first thirty-six weeks of 2021, compared to the third quarter and first thirty-six weeks of 2020. This improvement was attributable to an increase in comparable sales of 21% and 16% in the third quarter and first thirty-six weeks of 2021, and sales at the 22 net new warehouses opened since the end of the third quarter of 2020. While sales in all core merchandise categories increased, sales increases were particularly stronger in hardlines and softlines, and in many of our warehouse ancillary and other businesses, predominantly our gasoline business. 22
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Changes in foreign currencies relative to theU.S. dollar positively impacted net sales by approximately$1,032 , or 283 basis points, compared to the third quarter of 2020, attributable to ourCanadian and Other International operations. Changes in gasoline prices positively impacted net sales in the third quarter by$984 , or 270 basis points, compared to 2020, due to a 32% increase in the average price per gallon. The volume of gasoline sold in the third quarter increased approximately 33%, positively impacting net sales by$820 , or 225 basis points. Changes in foreign currencies relative to theU.S. dollar positively impacted net sales by approximately$1,551 , or 140 basis points, compared to the first thirty-six weeks of 2020, attributable to ourCanadian and Other International operations. Changes in gasoline prices negatively impacted net sales in the first thirty-six weeks of 2021 by$309 , or 28 basis points, compared to 2020, due to a 2% decrease in the average price per gallon. The volume of gasoline sold in the first thirty-six weeks of 2021 increased approximately 2%, positively impacting net sales by$266 , or 24 basis points. Comparable Sales Comparable sales increased 21% and 16% in the third quarter and first thirty-six weeks of 2021, and were positively impacted by increases in shopping frequency and average ticket. There was an increase of 41% and 65% in e-commerce comparable sales in the third quarter and first thirty-six weeks of 2021. Certain merchandise categories were impacted by inflation, slightly higher than what we have experienced in recent years. Membership Fees 12 Weeks Ended 36 Weeks Ended May 9, May 10, May 9, May 10, 2021 2020 2021 2020 Membership fees$ 901 $ 815 $ 2,643 $ 2,435 Membership fees as a percentage of net sales 2.03 % 2.24 % 2.02 % 2.20 % Total paid members (000s) 60,600 55,800 - - Total cardholders (000s) 109,800 101,800 - - Membership fees increased 11% and 9% in the third quarter and first thirty-six weeks of 2021. Excluding the positive impact of changes in foreign currencies relative to theU.S. dollar, membership fees increased 8% and 7% for the third quarter and first thirty-six weeks of 2021, driven by signups at warehouses and online and upgrades to Executive Membership. At the end of the third quarter of 2021, our member renewal rates were 91% in theU.S. andCanada and 88% worldwide. Our renewal rate is a trailing calculation that captures renewals during the period seven to eighteen months prior to the reporting date. We account for membership fee revenue on a deferred basis, recognized ratably over the one-year membership period. Our membership counts include active memberships as well as memberships that have not renewed within the 12 months prior to the reporting date. In the fourth quarter of 2020, we standardized our membership count methodology globally to be consistent with theU.S. andCanada . If this standardization would have been done at the end of the third quarter of 2020, it would have resulted in an addition to the count of approximately 2.3 million total cardholders, of which 1.5 million were paid members. Membership fee income and the renewal rate calculations were not affected. 23
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Gross Margin
12 Weeks Ended 36 Weeks Ended
May 9, May 10, May 9, May 10,
2021 2020 2021 2020
Net sales $ 44,376 $ 36,451 $ 130,611 $ 110,943
Less merchandise costs 39,415 32,249 115,951 98,538
Gross margin $ 4,961 $ 4,202 $ 14,660 $ 12,405
Gross margin percentage 11.18 % 11.53 % 11.22 % 11.18 %
Quarterly Results
The gross margin of core merchandise categories, when expressed as a percentage
of core merchandise sales (rather than total net sales), increased 27 basis
points. This increase was predominantly in hardlines and softlines, partially
offset by fresh foods. This measure eliminates the impact of changes in sales
penetration and gross margins from our warehouse ancillary and other businesses.
Total gross margin percentage decreased 35 basis points compared to the third
quarter of 2020. Excluding the impact of gasoline price inflation on net sales,
gross margin percentage was 11.43%, a decrease of 10 basis points. This was
primarily due to a 29 basis point decrease in our core merchandise categories,
driven by changes in sales mix. Gross margin was also negatively impacted by two
basis points due to increased spending by our members under the Executive
Membership 2% reward program. Gross margin percentage was positively impacted by
nine basis points due to decreased incremental wages related to COVID-19, which
ended on February 28, 2021 , and five basis points related to a reserve for
certain inventory in 2020. Warehouse ancillary and other businesses increased
seven basis points, primarily due to improvement in certain ancillary
businesses, which had been negatively impacted by COVID-19 related closures or
restrictions in 2020, and e-commerce, partially offset by gasoline.
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), performed similarly to the consolidated
results above for our U.S. segment, except warehouse ancillary and other
businesses decreased primarily due to our gasoline business. Gross margin
percentage increased in our Canadian and Other International segments, primarily
due to increases in our warehouse ancillary and other businesses, core
merchandise categories and decreased incremental wages related to COVID-19,
partially offset by increased spending by members under the Executive Membership
2% reward program.
Year-to-date Results
The gross margin of core merchandise categories, when expressed as a percentage
of core merchandise sales, increased 52 basis points. This increase was across
all categories, most significantly in fresh foods where gross margins increased
primarily as a result of efficiencies from increased sales.
Total gross margin percentage increased four basis points compared to the first
thirty-six weeks of 2020. Excluding the impact of gasoline price deflation on
net sales, gross margin percentage was 11.20%, an increase of two basis points.
This was primarily due to an increase of 31 basis points in our core merchandise
categories, predominantly fresh foods and hardlines, and two basis points due to
a reserve for certain inventory in 2020. These increases were partially offset
by a 22 basis point decrease in warehouse ancillary and other businesses,
certain of which were negatively impacted by lower sales due to COVID-19,
predominantly our gasoline and travel businesses. The decreases in warehouse
ancillary and other businesses were partially offset by e-commerce. Gross margin
was also negatively impacted by incremental wages related to COVID-19 of six
basis points and increased spending by members under the Executive Membership 2%
reward program of three basis points.
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Gross margin percentage decreased in ourU.S. segment primarily due to warehouse ancillary and other businesses and incremental wages related to COVID-19, partially offset by increases in our core merchandise categories. OurCanadian and Other International segments increased primarily due to certain of our core merchandise categories and warehouse ancillary and other businesses. These increases were partially offset by the incremental wages and increased spending by executive members discussed above. Selling, General and Administrative Expenses 12 Weeks Ended 36 Weeks Ended May 9, May 10, May 9, May 10, 2021 2020 2021 2020 SG&A expenses$ 4,189 $ 3,830 $ 12,829 $ 11,305 SG&A expenses as a percentage of net sales 9.44 % 10.51 %
9.82 % 10.19 %
Quarterly Results SG&A expenses as a percentage of net sales decreased 107 basis points compared to the third quarter of 2020. SG&A expenses as a percentage of net sales excluding the impact of gasoline price inflation was 9.65%, a decrease of 86 basis points compared to the prior year. SG&A expenses were positively impacted by 56 basis points due to decreased incremental wages related to COVID-19, which ended onFebruary 28, 2021 , and sanitation costs. SG&A expenses were also positively impacted by 20 basis points in our warehouse operations and other businesses, largely attributable to payroll, primarily due to leveraging increased sales. SG&A expenses benefited five basis points from costs associated with the acquisition of Innovel in the third quarter of 2020, four basis points related to stock compensation expense, and one basis point related to central operating costs. EffectiveMarch 1, 2021 , we implemented permanent wage increases for hourly and most salaried warehouse employees. This increase was effective for 10 of the 12 weeks within the third quarter of 2021. The estimated annualized pre-tax cost of these permanent wage increases is approximately$400 . Year-to-date Results SG&A expenses as a percentage of net sales decreased 37 basis points compared to the first thirty-six weeks of 2020. SG&A expenses as a percentage of net sales excluding the impact of gasoline price deflation was 9.80%, a decrease of 39 basis points compared to the prior year. Warehouse operations and other businesses were lower by 38 basis points, largely attributable to payroll, primarily due to leveraging increased sales. Stock compensation expense was lower by four basis points and central operating costs were lower by three basis points. SG&A expenses also benefited two basis points from the Innovel acquisition costs discussed above. These decreases were partially offset by an increase of eight basis points due to incremental wages related to COVID-19. 25
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Preopening Expense
12 Weeks Ended 36 Weeks Ended
May 9, May 10, May 9, May 10,
2021 2020 2021 2020
Preopening expenses $ 10 $ 8 $ 41 $ 29
Warehouse openings, including relocations
United States 1 1 8 4
Canada 3 - 5 1
Other International 2 1 3 1
Total warehouse openings, including
relocations 6 2 16 6
Preopening expenses include startup costs related to new warehouses and
relocations, developments in new international markets, new manufacturing and
distribution facilities, and expansions at existing warehouses. Preopening
expenses vary due to the number of warehouse openings, the timing of the
openings relative to our quarter-end, whether the warehouse is owned or leased,
and whether the opening is in an existing, new or international market. For the
remainder of fiscal 2021, we expect to open seven warehouses.
Interest Expense
12 Weeks Ended 36 Weeks Ended
May 9, May 10, May 9, May 10,
2021 2020 2021 2020
Interest expense $ 40 $ 37 $ 119 $ 109 Interest expense is primarily related to Senior Notes. Interest Income and Other, Net
12 Weeks Ended 36 Weeks Ended
May 9, May 10, May 9, May 10,
2021 2020 2021 2020
Interest income $ 8 $ 10 $ 29 $ 72
Foreign-currency transaction gains, net 6 5 13 9
Other, net 13 6 33 20
Interest income and other, net $ 27 $ 21 $ 75 $ 101
Interest income decreased in the third quarter and first thirty-six weeks of
2021, due to lower interest rates, partially offset by higher average cash and
investment balances. Foreign-currency transaction gains, net include the
revaluation or settlement of monetary assets and liabilities by our Canadian and
Other International operations and mark-to-market adjustments for forward
foreign-exchange contracts. See Derivatives and Foreign Currency sections in
Item 8, Note 1 of our Annual Report on Form 10-K, for the fiscal year ended
August 30, 2020 .
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Provision for Income Taxes
12 Weeks Ended 36 Weeks Ended
May 9, May 10, May 9, May 10,
2021 2020 2021 2020
Provision for income taxes $ 417 $ 311 $ 1,004
Effective tax rate 25.2 % 26.7 % 22.9 % 24.1 %
The effective tax rate for the first thirty-six weeks of 2021 was favorably impacted by net discrete tax benefits of$157 , which primarily related to the first quarter. This included$75 of excess tax benefits related to stock compensation,$70 related to the portion of the special cash dividend payable through our 401(k) plan and$19 primarily related to a reduction in the valuation allowance against certain deferred tax assets. The effective tax rate for the first thirty-six weeks of 2020 was favorably impacted by net discrete tax benefits of$68 , primarily related to excess tax benefits from stock compensation. Excluding the discrete net tax benefits, the tax rate was 26.4% and 26.1% for the first thirty-six weeks of 2021 and 2020. LIQUIDITY AND CAPITAL RESOURCES The following table summarizes our significant sources and uses of cash and cash equivalents: 36 Weeks Ended May 9, May 10, 2021 2020 Net cash provided by operating activities$ 6,018 $ 4,619 Net cash used in investing activities (2,380) (2,950)
Net cash (used in) provided by financing activities (5,769) 771
Our primary sources of liquidity are cash flows generated from our operations, cash and cash equivalents, and short-term investments. Cash and cash equivalents and short-term investments were$11,126 and$13,305 atMay 9, 2021 , andAugust 30, 2020 . Of these balances, unsettled credit and debit card receivables represented approximately$1,896 and$1,636 atMay 9, 2021 , andAugust 30, 2020 . These receivables generally settle within four days. Management believes that our cash position and operating cash flows will be sufficient to meet our liquidity and capital requirements for the foreseeable future. Cash Flows from Operating Activities Net cash provided by operating activities totaled$6,018 in the first thirty-six weeks of 2021, compared to$4,619 in the first thirty-six weeks of 2020. Our cash flow provided by operations is primarily derived 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. Cash used in operations also includes payments for income taxes. Changes in our net investment in merchandise inventories (the difference between merchandise inventories and accounts payable) is impacted by several factors, including how fast inventory is sold, the strategic forward deployment of inventory to accelerate delivery times to our members, payment terms with our suppliers, and the amount of payables paid early to obtain discounts from our suppliers. Cash Flows from Investing Activities Net cash used in investing activities totaled$2,380 in the first thirty-six weeks of 2021, compared to$2,950 in the first thirty-six weeks of 2020, and is primarily related to capital expenditures. In the third quarter of 2021, we acquired a distribution facility for$345 to support our logistics and delivery activities. In the third quarter of 2020, we acquired Innovel (Costco Wholesale Logistics). See N ote 2 in the condensed consolidated financial statements. Net cash from investing activities also includes purchases and maturities of short-term investments. 27
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Capital Expenditure Plans Our primary requirements for capital are acquiring land, buildings, and equipment for new and remodeled warehouses. Capital is also required for information systems, manufacturing and distribution facilities, initial warehouse operations, and working capital. In the first thirty-six weeks of 2021, we spent$2,494 on capital expenditures. While COVID-19 has delayed certain construction projects, it is our current intention to spend between$3,300 and$3,500 during fiscal 2021. This increased from the second quarter of 2021 as a result of the distribution facility acquisition discussed above. We opened 16 new warehouses, including two relocations, in the first thirty-six weeks of 2021 and plan to open seven additional new warehouses in the remainder of fiscal 2021. There can be no assurance that current expectations will be realized; plans are subject to change upon further review of our capital expenditure needs. Cash Flows from Financing Activities Net cash used in financing activities totaled$5,769 in the first thirty-six weeks of 2021, compared to net cash provided of$771 in the first thirty-six weeks of 2020. Cash flow used in financing activities was primarily related to the payment of dividends, repurchases of common stock, and withholding taxes on stock-based awards. During the first thirty-six weeks of 2020, we issued$4,000 in aggregate principal amount of Senior Notes and we also repaid$1,700 of Senior Notes. Dividends OnApril 14, 2021 , our Board declared a quarterly cash dividend of$0.79 per share payable to shareholders of record onApril 30, 2021 , which was paid onMay 14, 2021 . Stock Repurchase Program During the first thirty-six weeks of 2021 and 2020, we repurchased 1,040,000 and 368,000 shares of common stock, at an average price per share of$353.87 and$298.53 , totaling approximately$368 and$110 . These amounts may differ from the stock repurchase balances in the accompanying condensed consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of a quarter. Purchases are made from time to time, as conditions warrant, in the open market or in block purchases, pursuant to plans under SEC Rule 10b5-1. Repurchased shares are retired, in accordance with the Washington Business Corporation Act. Bank Credit Facilities and Commercial Paper Programs We maintain bank credit facilities for working capital and general corporate purposes. AtMay 9, 2021 , we had borrowing capacity under these facilities of$1,059 . Our international operations maintain$583 of the borrowing capacity under bank credit facilities, of which$206 is guaranteed by the Company. Short-term borrowings outstanding under the bank credit facilities at the end of the third quarter of 2021 were immaterial, and there were none outstanding at the end of 2020. The Company has letter of credit facilities, for commercial and standby letters of credit, totaling$213 . The outstanding commitments under these facilities at the end of the third quarter of 2021 totaled$181 , most of which were standby letters of credit which do not expire or have expiration dates within one year. The bank credit facilities have various expiration dates, most of which are within one year, and we generally intend to renew these facilities. The amount of borrowings available at any time under our bank credit facilities is reduced by the amount of standby and commercial letters of credit outstanding. 28
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Contractual Obligations As of the date of this Report, there were no material changes to our contractual obligations outside the ordinary course of business since the end of our last fiscal year. Critical Accounting Estimates The preparation of our consolidated financial statements in accordance withU.S. GAAP requires that we make estimates and judgments. 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 endedAugust 30, 2020 . There have been no material changes to the critical accounting policies previously disclosed in that Report. Recent Accounting Pronouncements There have been no material changes in recently issued or adopted accounting standards from those disclosed in our Annual Report on Form 10-K, for the fiscal year endedAugust 30, 2020 . Item 3-Quantitative and Qualitative Disclosures about Market Risk Our direct exposure to financial market risk results from fluctuations in foreign-currency exchange rates and interest rates. There have been no material changes to our market risks as disclosed in our Annual Report on Form 10-K, for the fiscal year endedAugust 30, 2020 . Item 4-Controls and Procedures Evaluation of Disclosure Controls and Procedures Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of theSecurities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. The Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as ofMay 9, 2021 and, based on their evaluation, have concluded the disclosure controls and procedures were effective as of such date. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the third quarter of fiscal 2021 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 29
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