Item 6. Selected Financial Data

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Item 6. Selected Financial Data

The following graph provides information concerning average sales per warehouse over a 10 year period.



		Average Sales Per Warehouse*
		(Sales In Millions)
Year Opened	# of Whses
2020	13																			$	132
2019	20																	$	129	$	138
2018	21															$	116	$	119	$	141
2017	26													$	121	$	142	$	158	$	176
2016	29											$	87	$	97	$	118	$	131	$	145
2015	23									$	83	$	85	$	94	$	112	$	122	$	136
2014	30							$	108	$	109	$	115	$	125	$	140	$	144	$	155
2013	26					$	99	$	109	$	113	$	116	$	124	$	137	$	144	$	158
2012	15			$	105	$	115	$	124	$	128	$	130	$	139	$	152	$	158	$	173
2011 & Before	592	$	146	$	156	$	164	$	171	$	171	$	170	$	176	$	189	$	196	$	206
Totals	795	$	146	$	155	$	160	$	164	$	162	$	159	$	163	$	176	$	182	$	192
		2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
		Fiscal Year
*First year sales annualized.
2012 and 2017 were 53-week fiscal years

The following table sets forth information concerning our consolidated financial condition, operating results, and key operating metrics. This information should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Item 7 of this Report, and our consolidated financial statements and notes thereto, included in Item 8 of this Report.

SELECTED FINANCIAL DATA

(dollars in millions, except per share data)


	Aug. 30, 2020			Sept. 1, 2019			Sept. 2, 2018			Sept. 3, 2017			Aug. 28, 2016
As of and for the year ended	(52 weeks)			(52 weeks)			(52 weeks)			(53 weeks)			(52 weeks)
RESULTS OF OPERATIONS
Net sales	$	163,220		$	149,351		$	138,434		$	126,172		$	116,073
Membership fees	3,541			3,352			3,142			2,853			2,646
Gross margin(1) as a percentage of net sales	11.20		%	11.02		%	11.04		%	11.33		%	11.35		%
Selling, general and administrative expenses as a percentage of net sales	10.01		%	10.04		%	10.02		%	10.26		%	10.40		%
Operating income	$	5,435		$	4,737		$	4,480		$	4,111		$	3,672
Net income attributable to Costco	4,002			3,659			3,134			2,679			2,350
Net income per diluted common share attributable to Costco	9.02			8.26			7.09			6.08			5.33
Cash dividends declared per common share	2.70			2.44			2.14			8.90			1.70
Changes in comparable sales(2)
United States	8		%	8		%	9		%	4		%	1		%
Canada	5		%	2		%	9		%	5		%	(3)		%
Other International	9		%	2		%	11		%	2		%	(3)		%
Total Company	8		%	6		%	9		%	4		%	0		%
Changes in Total Company comparable sales excluding the impact of changes in foreign currency and gasoline prices (3)	9		%	6		%	7		%	4		%	4		%
BALANCE SHEET DATA
Net property and equipment	$	21,807		$	20,890		$	19,681		$	18,161		$	17,043
Total assets	55,556			45,400			40,830			36,347			33,163
Long-term debt, excluding current portion	7,514			5,124			6,487			6,573			4,061
Costco stockholders’ equity	18,284			15,243			12,799			10,778			12,079
WAREHOUSE INFORMATION
Warehouses in Operation
Beginning of year	782			762			741			715			686
Opened	16			25			25			28			33
Closed due to relocation	(3)			(5)			(4)			(2)			(4)
End of year	795			782			762			741			715
MEMBERSHIP INFORMATION
Total paid members (000's) (4)	58,100			53,900			51,600			49,400			47,600
Total executive members (000's) (5)	22,600			20,800			19,300			18,500			17,400

(1)Net sales less merchandise costs.

(2)Includes net sales from warehouses and websites operating for more than one year. For 2017, the prior year includes the comparable 53 weeks.

(3)Excluding the impact of the revenue recognition standard for the year ended September 1, 2019.

(4)2020 includes an additional 1.3 million due to standardizing our membership count methodology globally to be consistent with the U.S. and Canada. See Item 1.

(5)Counts are included in total paid members

Item 7—Management's Discussion and Analysis of Financial Conditions and Results of Operations (amounts in millions, except per share, share, membership fee, and warehouse count data)

Overview

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 (food 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 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 (primarily impacting our U.S. and Canadian operations). 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, especially the 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, particularly China and the United States, 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 will be 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.

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 our U.S., Canada, and Other International operating segments (see Note 12 to the consolidated financial statements included in Item 8 of this Report). Certain countries in the Other International segment have relatively higher rates of square footage growth, lower wage and benefit costs as a percentage of country sales, less or no direct membership warehouse competition, and may lack an e-commerce business.

In discussions of our consolidated operating results, we refer to the impact of changes in foreign currencies relative to the U.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 into U.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 to August 31. References to 2020, 2019, and 2018 relate to the 52-week fiscal years ended August 30, 2020, September 1, 2019, and September 2, 2018, respectively. Certain percentages presented are calculated using actual results prior to rounding. Unless otherwise noted, references to net income relate to net income attributable to Costco.

For discussion related to the results of operations and changes in financial condition for 2019 compared to 2018 refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal year 2019 Form 10-K, which was filed with the United States Securities and Exchange Commission on October 11, 2019.

Highlights for 2020 included:

We opened 16 new warehouses, including 3 relocations: 9 new in the U.S., 3 new in our Other International segment, and 1 net new location in our Canadian segment, compared to 25 new warehouses, including 5 relocations in 2019;
Net sales increased 9% to $163,220 driven by a 8% increase in comparable sales and sales at new warehouses opened in 2019 and 2020;
Membership fee revenue increased 6% to $3,541, primarily due to membership sign-ups at existing and new warehouses;
Gross margin percentage increased 18 basis points, driven primarily by certain core merchandise categories, partially offset by certain ancillary and other businesses, which were negatively impacted by COVID-19 related closures or restrictions;
SG&A expenses as a percentage of net sales decreased three basis points primarily due to leveraging increased sales and partial reversal of a previous year tax assessment. These benefits were partially offset by incremental wage and sanitation costs as a result of COVID-19;
The effective tax rate in 2020 was 24.4% compared to 22.3% in 2019;
Net income increased 9% to $4,002, or $9.02 per diluted share compared to $3,659, or $8.26 per diluted share in 2019;
In February 2020, we acquired a 35% interest in Navitus Health Solutions, a pharmacy benefit manager. In March 2020, we acquired Innovel Solutions, a company that provides final-mile delivery, installation and white-glove capabilities for big and bulky products across the United States and Puerto Rico;
In April 2020, we issued $4,000 in aggregate principal amount of Senior Notes, some proceeds of which were used to repay $1,500 of Senior Notes; and
In April 2020, the Board of Directors approved an increase in the quarterly cash dividend from $0.65 to $0.70 per share.

COVID-19

On March 11, 2020, the World Health Organization announced that COVID-19 infections had become a pandemic, and shortly afterward the U.S. declared a National Emergency. The outbreak has led to widespread and continuing impacts on the global economy and is affecting many aspects of our business and the operations of others with which we do business. In our response to the pandemic and in an effort to protect our members and employees, we have taken several measures, as described in Item 1A Risk Factors, and their implications on our results of operations have impacted us across all our reportable segments to varying degrees. Throughout the pandemic our warehouses have largely remained open as a result of being deemed an “essential business” in most markets and resulted in strong sales increases in our food and sundries and fresh foods merchandise categories compared to pre-pandemic time periods. This growth in certain of our core business categories has led to improved gross margin and SG&A percentages as we leveraged these sales to achieve greater efficiency. Our e-commerce business has also benefited, as more members have shopped online during the pandemic. Conversely, we have experienced decreases in both the sales and profitability of many of our ancillary and other businesses due to temporary closures or limited demand. Additionally, we paid $564 in incremental wage and sanitation costs during 2020 related to COVID-19.

RESULTS OF OPERATIONS

Net Sales


	2020			2019			2018
Net Sales	$	163,220		$	149,351		$	138,434
Changes in net sales:
U.S.	9		%	9		%	9		%
Canada	5		%	3		%	10		%
Other International	13		%	5		%	14		%
Total Company	9		%	8		%	10		%
Changes in comparable sales:
U.S.	8		%	8		%	9		%
Canada	5		%	2		%	9		%
Other International	9		%	2		%	11		%
Total Company	8		%	6		%	9		%
Increases in comparable sales excluding the impact of changes in foreign currency and gasoline prices(1):
U.S.	9		%	6		%	7		%
Canada	7		%	5		%	4		%
Other International	11		%	6		%	7		%
Total Company	9		%	6		%	7		%

(1)Excluding the impact of the revenue recognition standard for the year ended September 1, 2019.

Net Sales

Net sales increased $13,869 or 9% during 2020, primarily due to an 8% increase in comparable sales and sales at new warehouses opened in 2019 and 2020. During the second half of 2020, we experienced a significant sales shift from certain of our ancillary and other businesses to our core merchandise categories, primarily food and sundries and fresh foods, as a result of COVID-19. This shift was largely driven by price deflation and lower volume in our gasoline business; temporary closures of most of our optical, hearing aid and photo departments; limited service in our food courts; and minimal demand in our travel business.

Changes in gasoline prices negatively impacted net sales by $1,504, or 101 basis points, compared to 2019, due to a 10% decrease in the average price per gallon. The volume of gasoline sold decreased approximately 4%, negatively impacting net sales by $699, or 47 basis points. Changes in foreign currencies relative to the U.S. dollar negatively impacted net sales by approximately $663, or 44 basis points, compared to 2019, attributable to our Canadian and Other International Operations.

Comparable Sales

Comparable sales increased 8% during 2020 and were positively impacted by increases in average ticket. While traffic increased slightly in 2020, it decreased in the second half of the year due to capacity restrictions and regulations related to COVID-19. There was an increase of 50% in e-commerce comparable sales in 2020, with an increase of 80% in the second half of the year.

Membership Fees


	2020			2019			2018
Membership fees	$	3,541		$	3,352		$	3,142
Membership fees increase	6		%	7		%	10		%
Membership fees as a percentage of net sales	2.17		%	2.24		%	2.27		%

The increase in membership fees was primarily due to membership sign-ups at existing and new warehouses. At the end of 2020, our member renewal rates were 91% in the U.S. and Canada 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.

Gross Margin


	2020			2019			2018
Net sales	$	163,220		$	149,351		$	138,434
Less merchandise costs	144,939			132,886			123,152
Gross margin	$	18,281		$	16,465		$	15,282
Gross margin percentage	11.20		%	11.02		%	11.04		%

The gross margin of our core merchandise categories (food and sundries, hardlines, softlines and fresh foods), when expressed as a percentage of core merchandise sales (rather than total net sales), increased 16 basis points, primarily due to increases in fresh foods and softlines, partially offset by a decrease in hardlines. This measure eliminates the impact of changes in sales penetration and gross margins from our warehouse ancillary and other businesses. Fresh foods gross margin increased as a result of efficiencies from increased sales, partially offset by operating losses from our poultry complex.

Total gross margin percentage increased 18 basis points compared to 2019. Excluding the impact of gasoline price deflation on net sales, gross margin percentage was 11.10%, an increase of eight basis points. This increase was primarily due to a 32 basis point increase in our core merchandise categories, predominantly fresh foods and food and sundries, partially offset by a decrease in softlines and hardlines. This increase was also positively impacted by our co-branded credit card program, which included an adjustment in 2019 to our estimate of breakage on rewards earned. These increases were partially offset by a decrease of 14 basis points in our warehouse ancillary and other businesses, predominantly certain ancillary businesses that were negatively impacted by COVID-19 related closures or restrictions. However, certain of our ancillary and other businesses, such as tire shop, gasoline and e-commerce businesses, did improve. Gross margin was also negatively impacted by incremental wage and sanitation costs related to COVID-19 of six basis points, a reserve for certain inventory of three basis points, and increased spending by members under the Executive Membership 2% reward program of one basis point. Changes in foreign currencies relative to the U.S. dollar negatively impacted gross margin by approximately $68 in 2020.

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), was impacted by increases in fresh foods and food and sundries and decreases in softlines and hardlines in each of our U.S., Canadian, and Other International segments. Each of our segments were also negatively impacted by the incremental wage and sanitation costs as a result of COVID-19. The segment gross margin percentage increased in our U.S. operations, predominantly in our core merchandise categories which includes the impact from our co-branded credit card program, as discussed above,

partially offset by certain ancillary businesses that were negatively impacted by COVID-19 related closures or restrictions. Our Canadian segment gross margin percentage decreased primarily due to certain of our warehouse ancillary and other businesses that were negatively impacted by COVID-19 related closures or restrictions. The segment gross margin percentage increased in our Other International operations primarily due to core merchandise categories, as discussed above, and was also positively impacted by certain warehouse ancillary and other businesses, predominantly e-commerce. These increases were partially offset by increased spending by members under the Executive Membership 2% reward program.

Selling, General and Administrative Expenses


	2020			2019			2018
SG&A expenses	$	16,332		$	14,994		$	13,876
SG&A expenses as a percentage of net sales	10.01		%	10.04		%	10.02		%

SG&A expenses as a percentage of net sales decreased three basis points compared to 2019. SG&A expenses as a percentage of net sales, excluding the impact of gasoline price deflation, was 9.91%, a decrease of 13 basis points. SG&A expenses were negatively impacted by approximately $456, or 28 basis points, due to incremental wage and sanitation costs as a result of COVID-19, and approximately $24 or one basis point due to costs associated with the acquisition of Innovel (see Note 2 to the consolidated financial statements). Operating costs related to warehouse operations and other businesses, which include e-commerce and travel, were lower by 26 basis points, primarily due to leveraging increased sales. SG&A expenses were also benefited by 13 basis points related to a product tax assessment charge in 2019 which was partially reversed in 2020. Stock compensation was lower by two basis points, and central operating costs were lower by one basis point. Our Canadian segment SG&A percentage was higher compared to 2019 due primarily to the incremental wage and sanitation costs related to COVID as outlined above. Changes in foreign currencies relative to the U.S. dollar positively impacted SG&A expenses by approximately $58.

Preopening


	2020		2019		2018
Preopening expenses	$	55	$	86	$	68
Warehouse openings, including relocations
United States	9		18		17
Canada	4		3		3
Other International	3		4		5
Total warehouse openings, including relocations	16		25		25

Preopening expenses include costs for startup operations 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 and facility openings, the timing of the opening relative to our year-end, whether a warehouse is owned or leased, and whether openings are in an existing, new, or international market. In 2020, operations commenced at our new poultry processing plant, and in 2019, we opened our first warehouse in China.

Interest Expense


			2020						2019						2018
Interest expense			$	160					$	150					$	159

Interest expense primarily relates to Senior Notes. In December 2019 and February 2020, we repaid $1,200 and $500 in total outstanding principal of the 1.700% and 1.750% Senior Notes, respectively. In

April 2020, we issued $4,000 in aggregate principal amount of long-term debt consisting of $1,250 of 1.375% Senior Notes due June 2027; $1,750 of 1.600% Senior Notes due April 2030; and $1,000 of 1.750% Senior Notes due April 2032. A portion of the proceeds was used to repay, prior to maturity, $1,000 and $500 of the 2.150% and 2.250% Senior Notes. For more information on our debt arrangements refer to Note 5 to the consolidated financial statements.

Interest Income and Other, Net


	2020		2019		2018
Interest income	$	89	$	126	$	75
Foreign-currency transaction gains, net	7		27		23
Other, net	(4)		25		23
Interest income and other, net	$	92	$	178	$	121

The decrease in interest income in 2020 was primarily due to lower interest rates in the U.S. and Canada, partially offset by higher average cash and investment balances. Foreign-currency transaction gains, net include the revaluation and settlement of monetary assets and liabilities and mark-to-market adjustments for forward foreign-exchange contracts by our Canadian and Other International operations. See Derivatives and Foreign Currency sections in Note 1 to the consolidated financial statements. Other, net was impacted by a $36 charge related to the repayment of certain Senior Notes, as discussed above and in Note 5.

Provision for Income Taxes


	2020			2019			2018
Provision for income taxes	$	1,308		$	1,061		$	1,263
Effective tax rate	24.4		%	22.3		%	28.4		%

The effective tax rate for 2020 included discrete net tax benefits of $81, including a benefit of $77 due to excess tax benefits from stock compensation. Excluding these benefits, the tax rate was 25.9% for 2020.

The effective tax rate for 2019 included discrete net tax benefits of $221, including a benefit of $59 due to excess tax benefits from stock compensation. This also included a tax benefit of $105 related to U.S. taxation of deemed foreign dividends, offset by losses of foreign tax credits, which impacted the effective tax rate. Excluding these benefits, the tax rate was 26.9% for 2019.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes our significant sources and uses of cash and cash equivalents:


	2020		2019		2018
Net cash provided by operating activities	$	8,861	$	6,356	$	5,774
Net cash used in investing activities	(3,891)		(2,865)		(2,947)
Net cash used in financing activities	(1,147)		(1,147)		(1,281)

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 $13,305 and $9,444 at the end of 2020 and 2019, respectively. Of these balances, unsettled credit and debit card receivables represented approximately $1,636 and $1,434 at the end of 2020 and 2019, respectively. These receivables generally settle within four days. Cash and cash equivalents were positively impacted by a change in exchange rates of $70 in 2020, and negatively impacted by $15 and $37 in 2019 and 2018, respectively.

Management believes that our cash position and operating cash flows will be sufficient to meet our liquidity and capital requirements for the foreseeable future. We believe that our U.S. current and projected asset position is sufficient to meet our U.S. liquidity requirements. We no longer consider earnings after 2017 of our non-U.S. consolidated subsidiaries to be indefinitely reinvested.

Cash Flows from Operating Activities

Net cash provided by operating activities totaled $8,861 in 2020, compared to $6,356 in 2019. 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 our 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, 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 $3,891 in 2020, compared to $2,865 in 2019, and primarily related to capital expenditures. In 2020, we acquired Innovel and a minority interest in Navitus. For more information see Notes 1 and 2 to the consolidated financial statements. Net cash flows from investing activities also includes maturities and purchases of short-term investments.

Capital Expenditures

Our primary requirement for capital is 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 2020, we spent $2,810 on capital expenditures, and it is our current intention to spend approximately $3,000 to $3,200 during fiscal 2021. These expenditures are expected to be financed with cash from operations, existing cash and cash equivalents, and short-term investments. We opened 16 new warehouses, including three relocations, in 2020, and plan to open approximately 23 additional new warehouses, including three relocations, in 2021. We have experienced delays in real estate and construction activities due to COVID-19. 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 or based on the current economic environment.

Cash Flows from Financing Activities

Net cash used in financing activities totaled $1,147 in both 2020 and 2019. In April 2020, we issued $4,000 in aggregate principal amount of Senior Notes as follows: $1,250 of 1.375% due June 2027; $1,750 of 1.600% due April 2030; and $1,000 of 1.750% due April 2032. A portion of the proceeds was used to repay, prior to maturity, the outstanding $1,000 and $500 principal balances on the 2.150% and 2.250% Senior Notes, respectively, at a redemption price plus accrued interest as specified in the Notes' agreements. The remaining funds are intended for general corporate purposes.

Financing activities also included $1,200 and $500 repayment of our 1.700% and 1.750% Senior Notes, respectively, payment of dividends, withholding taxes on stock-based awards, and repurchases of common stock.

Stock Repurchase Programs

During 2020 and 2019, we repurchased 643,000 and 1,097,000 shares of common stock, at average prices of $308.45 and $225.16, respectively, totaling approximately $198 and $247, respectively. These amounts may differ from the stock repurchase balances in the accompanying 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. Repurchased shares are retired, in accordance with the Washington

Business Corporation Act. The remaining amount available to be purchased under our approved plan was $3,745 at the end of 2020.

Dividends

Cash dividends declared in 2020 totaled $2.70 per share, as compared to $2.44 per share in 2019. Dividends totaling $1,479 were paid during 2020, of which $286 related to the dividend declared in August 2019. In April 2020, the Board of Directors increased our quarterly cash dividend from $0.65 to $0.70 per share. In July 2020, the Board of Directors declared a quarterly cash dividend in the amount of $0.70 per share, which was paid on August 14, 2020.

Bank Credit Facilities and Commercial Paper Programs

We maintain bank credit facilities for working capital and general corporate purposes. At August 30, 2020, we had borrowing capacity under these facilities of $967. Our international operations maintain $500 of the total borrowing capacity under bank credit facilities, of which $204 is guaranteed by the Company. There were no outstanding short-term borrowings under the bank credit facilities at the end of 2020 and 2019.

The Company has letter of credit facilities, for commercial and standby letters of credit, totaling $183. The outstanding commitments under these facilities at the end of 2020 totaled $166, 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.

Contractual Obligations

At August 30, 2020, our commitments to make future payments under contractual obligations were as follows:


	Payments Due by Fiscal Year
Contractual obligations	2021		2022 to 2023		2024 to 2025		2026 and thereafter		Total
Purchase obligations(1)	$	12,575	$	9	$	—	$	—	$	12,584
Long-term debt(2)	241		1,163		1,475		5,776		8,655
Operating leases (3) (4)	273		499		388		2,410		3,570
Construction and land obligations	979		35		—		—		1,014
Finance lease obligations(4)	61		128		197		742		1,128
Purchase obligations (equipment, services and other)(5)	674		205		72		187		1,138
Other(6)	60		36		28		108		232
Total	$	14,863	$	2,075	$	2,160	$	9,223	$	28,321

(1)Includes open purchase orders primarily related to merchandise and supplies.

(2)Includes contractual interest payments and excludes deferred issuance costs.

(3)Operating lease payments have not been reduced by future sublease income of $101.

(4)Includes amounts representing interest.

(5)Excludes certain services negotiated at the individual warehouse or regional level that are not significant and generally contain clauses allowing for cancellation without significant penalty.

(6)Includes asset retirement obligations and deferred compensation obligations. The amount excludes $25 of non-current unrecognized tax contingencies and $48 of other obligations due to uncertainty regarding the timing of future cash payments.

Off-Balance Sheet Arrangements

In the opinion of management, we have no off-balance sheet arrangements that have had or are reasonably likely to have a material current or future effect on our financial condition or financial statements.

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting principles (U.S. GAAP) requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on assumptions that we believe to be reasonable, and we continue to review and evaluate these estimates. For further information on significant accounting policies, see discussion in Note 1 to the consolidated financial statements included in Item 8 of this Report.

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 in certain instances to seek to limit exposures arising from very large losses. We use different risk management mechanisms, including a wholly-owned captive insurance subsidiary, and participate in a reinsurance program. Liabilities associated with the risks that we retain are not discounted and are estimated by using historical claims experience, demographic factors, severity factors, and other actuarial assumptions. The costs of claims are highly unpredictable and can fluctuate as a result of inflation rates, regulatory or legal changes, and unforeseen developments in claims over time. While we believe our estimates are reasonable and provide for a certain degree of coverage to account for these variables, actual claims and costs could differ significantly from recorded liabilities. Historically, adjustments to our estimates have not been material.

Recent Accounting Pronouncements

See Note 1 to the consolidated financial statements included in Item 8 of this Report for a detailed description of recent accounting pronouncements.

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