Discounted Cash Flow File

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Unlevered Free Cash Flow (mm)
Fiscal Year 2019A 2020A 2021A
Revenue 152,703 166,761 195,929
COGS 132,886 144,939 170,684
Gross Profit 19,817 21,822 25,245
Operating Expenses
Selling, General, Administrative 13,588 14,742 16,756
Total Operating Expenses 13,588 14,742 16,756
EBITDA 6,229 7,080 8,489
Depreciation & Amortization 1,492 1,645 1,781
Operating Profit (EBIT) 4,737 5,435 6,708
Operating Taxes 1,061 1,308 1,601
NOPAT (Net Operating Profit After Taxes) 3,676 4,127 5,107
(+) Depreciation & Amortization 1,492 1,645 1,781
(-) Capital Expenditures 2,701 5,350 3,568
(-) Change in NWC (691) (2,437) (1,378)
NWC (7,497) (9,934) (11,312)
Current Assets 14,041 14,815 17,330
Current Liabilitites 21,538 24,749 28,642
Unlevered Free Cash Flow 3,158 2,859 4,698

Assumptions
Fiscal Year 2019A 2020A 2021A
Revenue Growth 9.2% 17.5%

COGS % of Revenue 87.0% 86.9% 87.1%

SG&A % of Revenue 8.9% 8.8% 8.6%
Tax % of EBIT 22.4% 24.1% 23.9%
 2022E 2023E 2024E 2025E 2026E
215,522 237,074 258,411 276,500 290,324
187,541 206,296 224,862 240,602 252,633
27,981 30,779 33,549 35,897 37,692

18,887 20,776 22,646 24,231 25,443

18,887 20,776 22,646 24,231 25,443
9,093 10,003 10,903 11,666 12,249
1,996 2,144 2,304 2,475 2,659
7,097 7,858 8,599 9,191 9,590
1,490 1,650 1,806 1,930 2,014
5,607 6,208 6,793 7,261 7,576
1,996 2,144 2,304 2,475 2,659
3,957 4,252 4,568 4,907 5,272
(244) (1,156) (1,144) (970) (741)
(11,556) (12,712) (13,856) (14,826) (15,567)
19,467 21,414 23,341 24,975 26,224
31,023 34,126 37,197 39,801 41,791
3,890 5,256 5,673 5,799 5,705

2022E 2023E 2024E 2025E 2026E

10.0% 10.0% 9.0% 7.0% 5.0%

87.0% 87.0% 87.0% 87.0% 87.0%

8.8% 8.8% 8.8% 8.8% 8.8%
21.0% 21.0% 21.0% 21.0% 21.0%
Fixed Assets Schedule
Fiscal Year 2019A 2020A 2021A 2022E 2023E 2024E 2025E 2026E
Beginning PP&E 19,681 20,890 24,595 26,382 28,343 30,450 32,714 35,146
D&A 1,492 1,645 1,781 1,996 2,144 2,304 2,475 2,659
CapEx 2,701 5,350 3,568 3,957 4,252 4,568 4,907 5,272
Ending PP&E 20,890 24,595 26,382 28,343 30,450 32,714 35,146 37,759

Assumptions
Fiscal Year 2019A 2020A 2021A 2022E 2023E 2024E 2025E 2026E
D&A as a % of Beginning PP&E 7.6% 7.9% 7.2% 7.6% 7.6% 7.6% 7.6% 7.6%
CapEx as a % of Beginning PP&E 13.7% 25.6% 14.5% 15.0% 15.0% 15.0% 15.0% 15.0%
Net Working Capital
Fiscal Year 2018A 2019A 2020A 2021A 2022E 2023E 2024E 2025E
Accounts Receivables 1,669 1,535 1,550 1,803 2,173 2,391 2,606 2,788
Merchandise Inventory 11,040 11,395 12,242 14,215 16,088 17,697 19,290 20,640
Other Current Assets 321 1,111 1,023 1,312 1,206 1,326 1,445 1,547
Current Assets 13,030 14,041 14,815 17,330 19,467 21,414 23,341 24,975

Accounts Payable 11,237 11,679 14,172 16,278 17,455 19,200 20,928 22,393
Accrued Salaries and Benefits 2,994 3,176 3,605 4,090 4,550 5,005 5,455 5,837
Accrued Member Rewards 1,057 1,180 1,393 1,671 1,728 1,901 2,072 2,217
Deferred Membership Fees 1,624 1,711 1,851 2,042 2,381 2,620 2,855 3,055
Other Current Liabilities 2,924 3,792 3,728 4,561 4,910 5,401 5,887 6,299
Current Liabilities 19,836 21,538 24,749 28,642 31,023 34,126 37,197 39,801

Assumptions
Fiscal Year 2018A 2019A 2020A 2021A 2022E 2023E 2024E 2025E
Revenue 141,576 152,703 166,761 195,929 215,522 237,074 258,411 276,500
COGS 123,152 132,886 144,939 170,684 187,541 206,296 224,862 240,602

Days Sales Outstanding (DSO) 4.2 3.6 3.3 3.3 3.6 3.6 3.6 3.6
Days Inventory Outstanding (DIO) 32.3 30.9 30.4 30.0 30.9 30.9 30.9 30.9
Days Payable Outstanding (DPO) 32.8 31.6 35.2 34.3 33.5 33.5 33.5 33.5

Other Current Assets as a % of Revenue 0.2% 0.7% 0.6% 0.7% 0.6% 0.6% 0.6% 0.6%
Accrued Salaries as a % of Revenue 2.1% 2.1% 2.2% 2.1% 2.1% 2.1% 2.1% 2.1%
Accrued Member Rewards as a % of Revenue 0.7% 0.8% 0.8% 0.9% 0.8% 0.8% 0.8% 0.8%
Deferred Membership Fees as a % of Revenue 1.1% 1.1% 1.1% 1.0% 1.1% 1.1% 1.1% 1.1%
Other Current Liabilities as a % of Revenue 2.1% 2.5% 2.2% 2.3% 2.3% 2.3% 2.3% 2.3%
 2026E
2,928
21,672
1,624
26,224

23,513
6,129
2,328
3,208
6,614
41,791

2026E
290,324
252,633

3.6
30.9
33.5

0.6%
2.1%
0.8%
1.1%
2.3%
Unlevered Free Cash Flow (mm)
Fiscal Year 2019A 2020A 2021A 2022E
Unlevered Free Cash Flow 3,158 2,859 4,698 3,890

Projection Year 1
Present Value of Free Cash Flow 3,662

Implied Share Price Calculation Sensitivity Table

Sum of PV of FCF 21,827
Growth Rate 3% Growth Ra
WACC 6.2% 359.88 2.00%
Terminal Value 182,335 5.22%
PV of Terminal Value 134,831 5.72%

WACC
Enterprise Value 156,658 6.22%
(+) Cash 11,258 6.72%
(-) Debt 7,491 7.22%
(-) Minority Interest 514
Equity Value 159,911
Diluted Shares Outstanding (mm) 444.35
Implied Share Price 359.88
 2023E 2024E 2025E 2026E
5,256 5,673 5,799 5,705

2 3 4 5
4,659 4,734 4,555 4,218

Sensitivity Table

Growth Rate
2.50% 3% 3.50% 4.00%
 Weighted Average Cost of Capital (WACC)
Equity (mm) 214,560
Debt (mm) 7,491

Cost of Debt 2.3%

Tax Rate 21.0%
D/(D+E) 3.4%
After Tax Cost of Debt 1.8%

Risk Free Rate (10-Yr Treasury Yield) 3.1%

Expected Market Return 7.8%
Market Risk Premium 4.7%
Levered Beta 0.7
E/(D+E) 96.6%
Cost of Equity 6.4%

WACC 6.2%
Consolidated Statements Of Income - USD ($) shares in Thousands, $ in Millions
Sep. 01, 2019 Aug. 30, 2020
REVENUE
Total revenue $152,703 $166,761
OPERATING EXPENSES
Merchandise costs 132,886 144,939
Selling, general and administrative 13,502 14,687
Depreciation & Amortization 1,492 1,645
Preopening expenses 86 55
Operating Income 4,737 5,435
OTHER INCOME (EXPENSE)
Interest expense -150 -160
Interest income and other, net 178 92
INCOME BEFORE INCOME TAXES 4,765 5,367
Income Tax Expense (Benefit) 1,061 1,308
Net Income 3,704 4,059

Diluted (shares) 442,923 443,901

Merchandise Sales Revenue 149,351 163,220

Membership Fee Revenue 3,352 3,541
Aug. 29, 2021

$195,929

170,684
16,680
1,781
76
6,708

-171
143
6,680
1,601
5,079

444,346

192,052
3,877
Consolidated Balance Sheets - USD ($) $ in Millions
CURRENT ASSETS
Cash and cash equivalents
Short-term investments
Receivables, net
Merchandise inventories
Other current assets
Total current assets
OTHER ASSETS
Property and Equipment, net
Operating lease right-of-use assets
Other long-term assets
TOTAL ASSETS
CURRENT LIABILITIES
Accounts payable
Accrued salaries and benefits
Accrued member rewards
Deferred membership fees
Current portion of long-term debt
Other current liabilities
Total current liabilities
OTHER LIABILITIES
Long-term debt, excluding current portion
Long-term operating lease liabilities
Other long-term liabilities
Total liabilities
EQUITY
Preferred stock $.01 par value; 100,000,000 shares authorized; no shares issued and outstanding
Common Stock $.01 par value; 100,000,000 shares authorized; 441,825,000 and 441,255,000 shares issued and outstanding
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total Costco stockholders' equity
Noncontrolling interests
Total equity
TOTAL LIABILITIES AND EQUITY
Sep. 02, 2018 Sep. 01, 2019 Aug. 30, 2020 Aug. 29, 2021

6,055 8,384 12,277 11,258

1,204 1,060 1,028 917
1,669 1,535 1,550 1,803
11,040 11,395 12,242 14,215
321 1,111 1,023 1,312
20,289 23,485 28,120 29,505

19,681 20,890 21,807 23,492

0 2,788 2,890
860 1,025 2,841 3,381
40,830 45,400 55,556 59,268

11,237 11,679 14,172 16,278

2,994 3,176 3,605 4,090
1,057 1,180 1,393 1,671
1,624 1,711 1,851 2,042
90 1,699 95 799
2,924 3,792 3,728 4,561
19,926 23,237 24,844 29,441

6,487 5,124 7,514 6,692

0 2,558 2,642
1,314 1,455 1,935 2,415
27,727 29,816 36,851 41,190

0 0 0 0
4 4 4 4
6,107 6,417 6,698 7,031
-1,199 -1,436 -1,297 -1,137
7,887 10,258 12,879 11,666
12,799 15,243 18,284 17,564
304 341 421 514
13,103 15,584 18,705 18,078
40,830 45,400 55,556 59,268
Consolidated Statements Of Cash Flows - USD ($) $ in Millions

CASH FLOWS FROM OPERATING ACTIVITIES

Net income including noncontrolling interests
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization
Non-cash lease expense
Stock-based compensation
Other non-cash operating activities, net
Deferred income taxes
Changes in operating assets and liabilities:
Merchandise inventories
Accounts payable
Other operating assets and liabilities, net
Net Cash Provided by (Used in) Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments
Maturities and sales of short-term investments
Additions to property and equipment
Acquisitions
Other investing activities, net
Net Cash Provided by (Used in) Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES
Change in bank payments outstanding
Proceeds from short-term borrowings
Proceeds from issuance of long-term debt
Repayments of long-term debt
Tax withholdings on stock-based awards
Repurchases of common stock
Cash dividend payments
Other financing activities, net
Net Cash Provided by (Used in) Financing Activities
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
Net change in cash and cash equivalents
CASH AND CASH EQUIVALENTS BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid
Income taxes paid, net
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash dividend declared, but not yet paid
Sep. 01, 2019 Aug. 30, 2020 Aug. 29, 2021

3704 4059 5079

1492 1645 1781

0 194 286
595 619 665
9 42 85
147 104 59

-536 -791 -1892

322 2261 1838
623 728 1057
6356 8861 8958

-1094 -1626 -1331

1231 1678 1446
-2998 -2810 -3588
0 -1163 0
-4 30 -62
-2865 -3891 -3535

210 137 188

0 0 41
298 3992 0
-89 -3200 -94
-272 -330 -312
-247 -196 -496
-1038 -1479 -5748
-9 -71 -67
-1147 -1147 -6488
-15 70 46
2329 3893 -1019
6055 8384 12277
8384 12277 11258

141 124 149

1187 1052 1527

286 0 0