| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
2023 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Delaware 9740 Scranton Road, San Diego, CA 92121 (Address of principal executive offices) (Zip Code) Title of each class Trading Symbol Name of each exchange on which registered Common Stock, $0.0001 par value PSMT NASDAQ Global Select Market Large accelerated filer Smaller reporting company Emerging growth company 2023. 2023 Forward-Looking Statements our stockholders. The number of warehouse clubs : Number of Number of Anticipated Warehouse Clubs Warehouse Clubs Warehouse in Operation as of in Operation as of Club Openings Country/Territory August 31, 2021 August 31, 2022 In Fiscal Year 2023 Colombia 8 9 1 Costa Rica 8 8 — Panama 7 7 — Dominican Republic 5 5 — Guatemala 4 5 — Trinidad 4 4 — Honduras 3 3 — El Salvador 2 2 1 Nicaragua 2 2 — Jamaica 1 2 — Aruba 1 1 — Barbados 1 1 — U.S. Virgin Islands 1 1 — Totals 47 50 2 Merchandising our competitors. base. Worldwide Sourcing. Approximately II.Increase Membership capital. lower the construction and equipment costs for our warehouse clubs. $32. Our Competition engagement for all our team members. Each month we facilitate a wide range of activities in the countries in which we operate, including celebrations of birthdays and work anniversaries, volunteering, employee appreciation, and health and wellness events, and recreational opportunities such as football (soccer) games and 5K runs. We also send company-wide communications to celebrate events that recognize diversity and cultural heritage and educate team members about the history and significance of these events. Historically, our merchandising businesses have experienced holiday retail seasonality in their markets. In addition to seasonal fluctuations, our operating results fluctuate quarter-to-quarter as a result of economic and political events in markets that we serve, the timing of holidays, weather, the timing of shipments, product mix, and currency effects on the cost of U.S.-sourced products which may make these products more or less expensive in local currencies and therefore more or less affordable. Because of such fluctuations, the results of operations of any quarter are not indicative of the results that may be achieved for a full fiscal year or any future quarter. In addition, there can be no assurance that our future results will be consistent with past results or the projections of securities analysts. Negative economic conditions created or exacerbated by warehouse clubs. currency rate changes, inflation and other economic factors on our operations. Our financial performance is dependent on international operations, which exposes us to various risks. Our sales could be adversely affected if one or more major international online retailers were to enter our markets or if other competitors were to offer a superior online experience. markets. Moreover, each country in which we operate has different governmental rules and regulations regarding the importation of foreign products. Changes to the rules and regulations governing the importation of merchandise may result in additional delays, costs or barriers in our deliveries of products to our warehouse clubs or may affect the type of products we select to import. In addition, only a limited number of transportation companies service our regions. The inability or failure of one or more key transportation companies to provide transportation services to us, any collusion among the transportation companies regarding shipping prices or terms, changes in the regulations that govern shipping tariffs or the importation of products, or any other disruption to our ability to import our merchandise could have a material adverse effect on our business and results of operations. sold. We might not identify in a timely manner or effectively respond to changes in consumer preferences for merchandise, which could adversely affect our relationship with Members, demand for our products and market share. We are subject to risks associated with our dependence on third-party suppliers and service providers, and we have no assurances of continued supply, pricing or access to new merchandise. We rely extensively on computer systems to process transactions, summarize results and manage our business. Failure to adequately maintain our systems risk, as remote work continues even post COVID-19. We or our third-party service providers may be unable to anticipate one or more of the rapidly evolving and increasingly sophisticated means by which computer hackers, cyber terrorists and others may attempt to defeat our security measures or those of our third-party service providers and breach our or our third-party service providers' information systems. Cyber threats are rapidly evolving and are becoming increasingly sophisticated. As cyber threats evolve and become more difficult to detect and successfully defend against, one or more hackers, cyber terrorists or others might defeat our security measures or those of our third-party service providers and obtain the personal information of Members, employees and vendors that we hold or to which our third-party service providers have access, and we or our third-party service providers may not discover any security breach and loss of information for a significant period of time after the security breach occurs. We or one of our third-party service providers also may be subject to a ransomware or cyber-extortion attack, which could significantly disrupt our operations. In the enterprise context, ransomware attacks involve restricting access to computer systems or vital data until a ransom is paid. Error or malfeasance by our employees and consultants, faulty password management or other irregularities may result in a defeat of our or our third-party service providers’ security measures and breach our or our third-party service providers’ information systems (whether digital or otherwise). Failure to attract and retain qualified employees could materially adversely affect our financial performance. Legal and Compliance Risks Financial and Accounting Risks address this situation. Changes in accounting standards and assumptions, projections, estimates and judgments by management related to complex accounting matters could significantly affect our financial condition and results of operations. Own land Lease land Location and building and/or building COLOMBIA SEGMENT Colombia(1) 8 1 CENTRAL AMERICA SEGMENT Panama 5 2 Guatemala 3 2 Costa Rica 8 — El Salvador(1) 2 — Honduras 2 1 Nicaragua 2 — CARIBBEAN SEGMENT Dominican Republic 5 — Aruba — 1 Barbados 1 — Trinidad 3 1 U.S. Virgin Islands — 1 Jamaica 2 — Total 41 9 (1) We are currently constructing and plan to open a warehouse club in Escuintla, Guatemala on November 30, 2023. We have entered into a lease for the land on which we are constructing the warehouse club. For instance, we've recently entered into a lease agreement to relocate our Miraflores, Guatemala club, for which the current lease was due to expire on December 31, 2025, to a new location adjacent to the current club location. We expect to relocate our Miraflores club to this new location during fiscal year 2025. We expect minimal impact to the continuity of our operations for this club. Refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 9 – Commitments and Contingencies” for additional details on our Miraflores club relocation. This number does not include beneficial owners whose shares were held in street name. Dates Stock Price From To High Low 2022 FISCAL QUARTERS First Quarter 9/1/2021 11/30/2021 $ 86.16 $ 70.10 Second Quarter 12/1/2021 2/28/2022 76.13 66.77 Third Quarter 3/1/2022 5/31/2022 88.30 69.53 Fourth Quarter 6/1/2022 8/31/2022 $ 74.74 $ 63.14 2021 FISCAL QUARTERS First Quarter 9/1/2020 11/30/2020 $ 82.63 $ 63.26 Second Quarter 12/1/2020 2/28/2021 103.07 81.89 Third Quarter 3/1/2021 5/31/2021 99.72 83.70 Fourth Quarter 6/1/2021 8/31/2021 $ 94.13 $ 79.56 Securities Act of 1933, as amended (the "Securities Act") in reliance upon Section 4(a)(2) of the Securities Act as transactions not involving any public offering. The recipients of the securities in each of these transactions are accredited investors, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about the Company. Resale of these shares by the holders has since been registered under the Securities Act. First Payment Second Payment Declared Amount Record Date Amount Record Date Amount 2/3/2022 $ 0.86 2/15/2022 2/28/2022 $ 0.43 8/15/2022 8/31/2022 $ 0.43 2/4/2021 $ 0.70 2/15/2021 2/26/2021 $ 0.35 8/15/2021 8/31/2021 $ 0.35 2/6/2020 $ 0.70 2/15/2020 2/28/2020 $ 0.35 8/15/2020 8/31/2020 $ 0.35 Repurchase of Equity Securities activity for the fiscal year 2023 (dollars in thousands, except per share data): (c) (d) (a) Total Number of Maximum Number Total (b) Shares Purchased of Shares That May Number of Average as Part of Publicly Yet Be Purchased Shares Price Paid Publicly Announced Under the Period Purchased Per Share Plans or Programs Plans or Programs September 1, 2021 - September 30, 2021 — $ — — N/A October 1, 2021 - October 31, 2021 31,437 77.12 — N/A November 1, 2021 - November 30, 2021 114 72.65 — N/A December 1, 2021 - December 31, 2021 — — — N/A January 1, 2022 - January 31, 2022 19,140 70.58 — N/A February 2, 2022 - February 28, 2022 — — — N/A March 1, 2022 - March 31, 2022 2,505 77.13 — N/A April 1, 2022 - April 30, 2022 239 80.34 — N/A May 1, 2022 - May 31, 2022 — — — N/A June 1, 2022 - June 30, 2022 — — — N/A July 1, 2022 - July 31, 2022 3,036 65.90 — N/A August 1, 2022 - August 31, 2022 31,944 64.57 — N/A Total 88,415 $ 70.79 — N/A Overall economic trends, foreign currency exchange volatility, and other factors impacting the business Periodically, we experience a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity) operate. Financial highlights for the fourth quarter of fiscal year Adjusted net income attributable to PriceSmart for the fourth quarter of fiscal year 2023 was $20.4 million, or an adjusted $0.65 per diluted share, inclusive of a negative impact of $0.30 per diluted share for costs related to the reserve for the AMT settlement, compared to adjusted net income of $23.3 million, or $0.75 per diluted share, in the comparable prior year period. Adjusted Net Income and Adjusted Net Income per Diluted Share 2022 2022: Years Ended August 31, 2022 August 31, 2021 Amount % of net Increase from prior year Change Amount % of net Central America $ 2,336,500 59.2 % $ 271,947 13.2 % $ 2,064,553 59.6 % Caribbean 1,139,323 28.9 150,855 15.3 988,468 28.5 Colombia 468,994 11.9 56,573 13.7 412,421 11.9 Net merchandise sales $ 3,944,817 100.0 % $ 479,375 13.8 % $ 3,465,442 100.0 % May 2023. Net merchandise sales in our Colombia segment effects of foreign currency translation. Impact of foreign currency is the effect of currency fluctuations on our net merchandise sales. Currency exchange rate fluctuations for the Years Ended August 31, 2022 Amount % change Central America $ (48,135) (2.3) % Caribbean 6,680 0.7 Colombia (37,185) (9.0) Net merchandise sales $ (78,640) (2.3) % 2022: Years Ended August 31, 2022 2021 Foods & Sundries 49 % 50 % Fresh Foods 29 29 Hardlines 11 12 Softlines 6 5 Other Business 5 4 Net Merchandise Sales 100 % 100 % Comparable Merchandise Sales . Fifty-Three Weeks Ended Fifty-Two Weeks Ended September 4, 2022 August 29, 2021 % Increase % Increase Central America 10.4 % 8.8 % Caribbean 12.7 1.4 Colombia 4.5 2.4 Consolidated comparable net merchandise sales 10.4 % 5.8 % Our Dominican Republic market continued its strong performance in the growth. effects of foreign currency translation. Impact of foreign currency is the effect of currency fluctuations on our comparable net merchandise sales. The following Impact of Currency Exchange Rate Fluctuations for the Fifty-Three Weeks Ended September 4, 2022 Amount % change Central America $ (49,133) (2.4) % Caribbean 7,645 0.7 Colombia (34,696) (8.4) Consolidated comparable net merchandise sales $ (76,184) (2.2) % Overall, the mix of currency fluctuations within our markets had an 3, 2023. periods last year. Years Ended August 31, August 31, 2022 2021 Amount Increase from prior year % Change Membership Amount Membership income - Central America $ 36,009 $ 2,860 8.6 % 1.5 % $ 33,149 Membership income - Caribbean 16,345 947 6.2 1.4 15,398 Membership income - Colombia 8,533 1,050 14.0 1.8 7,483 Membership income - Total $ 60,887 $ 4,857 8.7 % 1.5 % $ 56,030 Number of accounts - Central America 951,829 47,252 5.2 % 904,577 Number of accounts - Caribbean 453,697 23,948 5.6 429,749 Number of accounts - Colombia 357,265 21,156 6.3 336,109 Number of accounts - Total 1,762,791 92,356 5.5 % 1,670,435 membership fees charged to Members. Our trailing twelve-month renewal rate was Years Ended August 31, 2022 August 31, 2021 Amount Increase (decrease) from prior year % Change Amount Non-merchandise revenue $ 3,307 $ (43,569) (92.9) % $ 46,876 Miscellaneous income 9,397 2,350 33.3 7,047 Rental income 2,468 (488) (16.5) 2,956 Other revenue $ 15,172 $ (41,707) (73.3) % $ 56,879 2022 See Part II. “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Years Ended Results of Operations Consolidated August 31, 2022 August 31, 2021 Net merchandise sales Net merchandise sales $ 3,944,817 $ 3,465,442 Total gross margin $ 604,755 $ 552,953 Total gross margin percentage 15.3 % 16.0 % Revenues Total revenues $ 4,066,093 $ 3,619,871 Percentage change from prior period 12.3 % 8.7 % Comparable net merchandise sales Total comparable net merchandise sales increase 10.4 % 5.8 % Total revenue margin Total revenue margin $ 681,148 $ 644,533 Total revenue margin percentage 16.8 % 17.8 % Selling, general and administrative Selling, general and administrative $ 514,082 $ 486,513 Selling, general and administrative percentage of total revenues 12.6 % 13.4 % Years Ended Results of Operations Consolidated August 31, 2022 % of Total August 31, 2021 % of Total Operating income- by segment Central America $ 171,119 4.2 % $ 151,933 4.2 % Caribbean 79,022 1.9 74,769 2.1 Colombia 22,526 0.6 21,932 0.6 United States 23,364 0.6 12,687 0.4 Reconciling items (1) (128,965) (3.2) (103,301) (2.9) Operating income - Total $ 167,066 4.1 % $ 158,020 4.4 % Warehouse clubs Warehouse clubs at period end 50 47 Warehouse club sales square feet at period end 2,484 2,336 (1)The reconciling items reflect the amount eliminated disclosed: Years Ended August 31, 2022 % of Total August 31, 2021 % of Total Selling, general and administrative detail: Warehouse club and other operations $ 378,161 9.3 % $ 359,221 9.9 % General and administrative 133,185 3.3 125,416 3.5 Pre-opening expenses 1,471 - 849 - Loss on disposal of assets 1,265 - 1,027 - Total Selling, general and administrative $ 514,082 12.6 % $ 486,513 13.4 % the increase. Selling, general, and administrative expenses consist of warehouse club and other operations, general and administrative expenses, separation costs associated with the Chief Executive Officer departure, pre-opening expenses, asset impairment and closure costs, reserve for settlement of AMT, and loss (gain) on disposal of assets. In total, Colombian peso. diluted earnings per share was negatively impacted by $0.30. Twelve Months Ended August 31, August 31, 2022 2021 Amount Change Amount Interest expense on loans $ 7,640 $ 1,804 $ 5,836 Interest expense related to hedging activity 3,234 (421) 3,655 Less: Capitalized interest (1,263) 1,018 (2,281) Net interest expense $ 9,611 $ 2,401 $ 7,210 Net interest expense reflects borrowings by PriceSmart, Inc. and our wholly owned foreign subsidiaries to finance new land acquisition and construction for new warehouse clubs and distribution centers, warehouse club expansions, Years Ended August 31, August 31, 2022 2021 Amount Decrease Amount Other expense, net $ (3,235) $ 2,368 $ (5,603) Monetary assets and liabilities denominated in currencies other than the functional currency of the respective entity (primarily U.S. dollars) are revalued to the functional currency using the exchange rate on the balance sheet date. These foreign exchange transaction Years Ended August 31, August 31, 2022 2021 Amount Change Amount Current tax expense $ 55,158 $ 2,336 $ 52,822 Net deferred tax benefit (3,300) 553 (3,853) Provision for income taxes $ 51,858 $ 2,889 $ 48,969 Effective tax rate 33.2 % 33.3 % impact. Income (Loss) Other Comprehensive Loss Years Ended August 31, August 31, 2022 2021 Amount Change From Prior Year % Change Amount Other comprehensive loss $ (13,078) $ (7,390) (129.9) % $ (5,688) LIQUIDITY AND CAPITAL RESOURCES borrowings, and any repayments. when appropriate. August 31, August 31, 2022 2021 Amounts held by foreign subsidiaries $ 203,952 $ 160,808 Amounts held domestically 47,421 54,671 Total cash and cash equivalents, including restricted cash $ 251,373 $ 215,479 August 31, August 31, 2022 2021 Amounts held by foreign subsidiaries $ 11,160 $ 50,233 Amounts held domestically — — Total short-term investments $ 11,160 $ 50,233 or domestically. Years Ended August 31, August 31, 2022 2021 Change Net cash provided by operating activities $ 121,829 $ 127,166 $ (5,337) Net cash used in investing activities (74,756) (116,721) 41,965 Net cash used in financing activities (12,209) (95,137) 82,928 Effect of exchange rates 1,030 (3,600) 4,630 Net increase (decrease) in cash and cash equivalents $ 35,894 $ (88,292) $ 124,186 Our cash flows are summarized as follows (in thousands): 2022. year-ago. First Payment Second Payment Declared Amount Record Date Amount Record Date Amount 2/3/2022 $ 0.86 2/15/2022 2/28/2022 $ 0.43 8/15/2022 8/31/2022 $ 0.43 2/4/2021 $ 0.70 2/15/2021 2/26/2021 $ 0.35 8/15/2021 8/31/2021 $ 0.35 2/6/2020 $ 0.70 2/15/2020 2/28/2020 $ 0.35 8/15/2020 8/31/2020 $ 0.35 Related to Employee Stock Awards The Company expects this practice going forward. The following table summarizes the 2021: Years Ended August 31, August 31, August 31, 2022 2021 2020 Shares repurchased 88,415 62,282 56,503 Cost of repurchase of shares (in thousands) $ 6,259 $ 5,542 $ 3,651 We accrue an amount for our estimate of probable additional income tax liability. In certain cases, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has 50% or less likelihood of being sustained. This requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. When facts and circumstances change, we reassess these probabilities and record any changes in the consolidated financial statements as appropriate. There were no material changes in our uncertain income tax positions for the period ended on August 31, Our policy for classification and presentation of VAT receivables, income tax receivables and other tax receivables is as follows: 2023. Annual maturities of long-term debt and derivatives are as follow (in thousands): Twelve Months Ended August 31, (Amounts in thousands) 2023 2024 2025 2026 2027 Thereafter Total Long-Term Debt (Unhedged): Long-term debt with fixed interest rate $ 9,173 $ 10,269 $ 10,386 $ 7,245 $ 2,734 $ 6,000 $ 45,807 (1) Weighted-average interest rate 7.20 % 7.20 % 7.10 % 7.10 % 7.10 % 7.00 % 7.20 % Long-term debt with variable interest rate $ 24,542 $ 8,519 $ 23,138 $ 8,251 $ 27,014 $ — $ 91,464 Weighted-average interest rate 6.00 % 5.60 % 5.50 % 4.30 % 3.70 % — % 5.40 % Total long-term debt $ 33,715 $ 18,788 $ 33,524 $ 15,496 $ 29,748 $ 6,000 $ 137,271 (1) Derivatives: Interest Rate Swaps: Variable to fixed interest $ 9,900 $ 1,275 $ 1,275 $ 1,275 $ 26,244 $ — $ 39,969 (2) Weighted-average pay rate 5.69 % 3.65 % 3.65 % 3.65 % 3.65 % — % 4.15 % Weighted-average receive rate 5.04 % 4.26 % 4.26 % 4.26 % 4.26 % — % 4.46 % Cross-Currency Interest Rate Swaps: Variable to fixed interest $ 10,754 $ 3,329 $ 19,770 $ — $ — — $ 33,853 (2) Weighted-average pay rate 9.18 % 7.92 % 7.92 % — % — % — % 8.32 % Weighted-average receive rate 5.74 % 5.14 % 5.20 % — % — % — % 5.36 % Long-Term Debt Payments with Fixed Interest or Subject to Financial Derivatives: Long-term debt with fixed interest rate or with variable to fixed interest rate swaps $ 29,827 $ 14,873 $ 31,431 $ 8,520 $ 28,978 $ 6,000 $ 119,629 Portion of long-term debt with fixed interest rate or with variable to fixed interest rate swaps 88.5 % 79.2 % 93.8 % 55.0 % 97.4 % 100.0 % 87.1 % Portion of long-term debt with variable interest rates and no swaps 11.5 % 20.8 % 6.2 % 45.0 % 2.6 % — % 12.9 % (1)The Company has disclosed the future annual maturities of long-term debt, for which it has entered into cross-currency interest rate swaps by using the derivative obligation as of August 31, Foreign currencies in most of the countries where we operate have historically devalued against the U.S. dollar and are expected to continue to devalue. The following tables summarize by country, for those countries with functional currencies other than the U.S. dollar, the weakening of the countries' currency against the U.S. dollar (devaluation) or the strengthening of their currencies (revaluation): Revaluation/(Devaluation) Twelve Months Ended August 31, 2022 2021 % Change % Change Colombia (15.58) % (1.24) % Costa Rica (5.25) (4.63) Dominican Republic 6.87 2.51 Guatemala (0.11) — Honduras (2.37) 2.51 Jamaica 0.40 (2.12) Nicaragua (2.00) (2.25) Trinidad 0.67 % (0.45) % Overall weighted negative currency movement Losses based on change in U.S. dollar denominated and other foreign denominated cash, cash equivalents and restricted cash balances Gains based on change in U.S. dollar denominated inter-company balances Gains based on change in U.S. dollar denominated other asset/liability balances Net Loss(1) 5% $ (4,380) $ 682 $ 2,099 $ (1,599) 10% $ (8,760) $ 1,365 $ 4,197 $ (3,198) 20% $ (17,519) $ 2,730 $ 8,394 $ (6,395) (1)Amounts are before consideration of income taxes. Information about the financial impact of foreign currency exchange rate fluctuations for the twelve months ended August 31, 2023. Overall weighted negative currency movement Other comprehensive loss on the decline in local currency denominated cash and cash equivalents and restricted cash (in thousands) Other comprehensive gain on the decline in foreign currency denominated debt obligations (in thousands) Other comprehensive loss on the decline in all other foreign currency denominated current assets net of current liabilities (in thousands) Other comprehensive loss on the decline in all other foreign currency denominated long-term assets net of long-term liabilities (in thousands) 5% $ 2,678 $ (3,684) $ 5,152 $ 28,910 10% $ 5,356 $ (7,368) $ 10,305 $ 57,820 20% $ 10,713 $ (14,736) $ 20,610 $ 115,639 In addition, we are exposed to foreign currency exchange rate fluctuations associated with our U.S. dollar-denominated debt obligations that we hedge. We hedge a portion of the currency risk inherent in the interest and principal payments associated with this debt through the use of cross-currency interest rate swaps. The terms of these swap agreements are commensurate with the underlying debt obligations. The aggregate fair value of these swaps was in a net asset position of approximately $2.3 million at August 31, 2023 and approximately $12.9 million at August 31, (c)Changes in internal control over financial reporting. Report of Independent Registered Public Accounting Firm Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections PART IV Inline XBRL Instance 101.SCH Inline XBRL Taxonomy Extension Schema 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase 101.LAB Inline XBRL Taxonomy Extension Label Linkbase 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). * Filed herewith as an exhibit. (1)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 1997 filed with the Commission on November 26, 1997. Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on December 9, 2022. SCHEDULE II Balance at Charged to Balance at Beginning Costs and End of of Period Expenses Deductions Period Allowance for doubtful accounts: Year ended August 31, 2020 $ 144 $ 155 $ (152) $ 147 Year ended August 31, 2021 $ 147 $ 93 $ (146) $ 94 Year ended August 31, 2022 $ 94 $ 89 $ (80) $ 103 SIGNATURES PRICESMART, INC. Date: October By: /s/ Robert E. Price Date: October By: /s/ MICHAEL L. MCCLEARY Michael L. McCleary POWER OF ATTORNEY Signature Title Date /s/ Interim Chief Executive Officer and October /s/ MICHAEL L. MCCLEARY Executive Vice President and Chief Financial Officer October Michael L. McCleary /s/ DAVID R. SNYDER Vice October David R. Snyder /s/ SHERRY S. BAHRAMBEYGUI Director October Jeffrey R. Fisher /s/ GORDON H. HANSON Director October Gordon H. Hanson /s/ BEATRIZ V. INFANTE Director October Beatriz V. Infante /s/ LEON C. JANKS Director October Leon C. Janks /s/ PATRICIA MÁRQUEZ Director October Patricia /s/ DAVID N. PRICE Director October David N. Price /s/ EDGAR ZURCHER Director October Edgar Zurcher PRICESMART, INC. Page Report of Description of the Matter assets or measurement of other tax contingencies. 30, 2023 August 31, 2022 2021 ASSETS Current Assets: Cash and cash equivalents $ 237,710 $ 202,060 Short-term restricted cash 3,013 3,647 Short-term investments 11,160 50,233 Receivables, net of allowance for doubtful accounts of $103 as of August 31, 2022 and $94 as of August 31, 2021, respectively 13,391 12,359 Merchandise inventories 464,411 389,711 Prepaid expenses and other current assets (includes $2,761 and $0 as of August 31, 2022 and August 31, 2021, respectively, for the fair value of derivative instruments) 43,894 39,194 Total current assets 773,579 697,204 Long-term restricted cash 10,650 9,772 Property and equipment, net 757,241 730,204 Operating lease right-of-use assets, net 111,810 123,655 Goodwill 43,303 45,095 Other intangibles, net 765 7,762 Deferred tax assets 28,355 24,225 Other non-current assets (includes $11,884 and $2,464 as of August 31, 2022 and August 31, 2021, respectively, for the fair value of derivative instruments) 72,163 57,329 Investment in unconsolidated affiliates 10,534 10,544 Total Assets $ 1,808,400 $ 1,705,790 LIABILITIES AND EQUITY Current Liabilities: Short-term borrowings $ 10,608 $ — Accounts payable 408,407 388,791 Accrued salaries and benefits 44,097 41,896 Deferred income 29,228 26,898 Income taxes payable 7,243 8,310 Other accrued expenses and other current liabilities (includes $82 and $0 as of August 31, 2022 and August 31, 2021, respectively, for the fair value of derivative instruments) 38,667 39,736 Operating lease liabilities, current portion 7,491 8,526 Long-term debt, current portion 33,715 19,395 Total current liabilities 579,456 533,552 Deferred tax liability 2,165 1,568 Long-term income taxes payable, net of current portion 5,215 4,160 Long-term operating lease liabilities 118,496 129,256 Long-term debt, net of current portion 103,556 110,110 Other long-term liabilities (includes $0 and $3,010 for the fair value of derivative instruments and $8,440 and $7,380 for post-employment plans as of August 31, 2022 and August 31, 2021, respectively) 8,439 10,930 Total Liabilities 817,327 789,576 See accompanying notes. Stockholders' Equity: Common stock $0.0001 par value, 45,000,000 shares authorized; 31,697,590 and 31,467,971 shares issued and 30,904,826 and 30,755,308 shares outstanding (net of treasury shares) as of August 31, 2022 and August 31, 2021, respectively 3 3 Additional paid-in capital 481,406 465,015 Accumulated other comprehensive loss (195,586) (182,508) Retained earnings 736,894 658,919 Less: treasury stock at cost, 792,764 shares as of August 31, 2022 and 712,663 shares as of August 31, 2021 (31,644) (26,084) Total stockholders' equity attributable to PriceSmart, Inc. stockholders 991,073 915,345 Noncontrolling interest in consolidated subsidiaries — 869 Total stockholders' equity 991,073 916,214 Total Liabilities and Equity $ 1,808,400 $ 1,705,790 CONSOLIDATED STATEMENTS OF INCOME Years Ended August 31, 2022 2021 2020 Revenues: Net merchandise sales $ 3,944,817 $ 3,465,442 $ 3,191,762 Export sales 45,217 41,520 34,374 Membership income 60,887 56,030 54,501 Other revenue and income 15,172 56,879 48,551 Total revenues 4,066,093 3,619,871 3,329,188 Operating expenses: Cost of goods sold: Net merchandise sales 3,340,062 2,912,489 2,723,942 Export sales 43,074 39,513 32,676 Non-merchandise 1,809 23,336 18,160 Selling, general and administrative: Warehouse club and other operations 378,161 359,221 323,178 General and administrative 133,185 125,416 106,776 Pre-opening expenses 1,471 849 1,545 Loss on disposal of assets 1,265 1,027 443 Total operating expenses 3,899,027 3,461,851 3,206,720 Operating income 167,066 158,020 122,468 Other expense: Interest income 2,201 1,979 2,031 Interest expense (9,611) (7,210) (7,625) Other expense, net (3,235) (5,603) (834) Total other expense (10,645) (10,834) (6,428) Income before provision for income taxes and 156,421 147,186 116,040 Provision for income taxes (51,858) (48,969) (37,764) Loss of unconsolidated affiliates (10) (58) (95) Net income 104,553 98,159 78,181 Less: net income attributable to noncontrolling interest (19) (196) (72) Net income attributable to PriceSmart, Inc. $ 104,534 $ 97,963 $ 78,109 Net income attributable to PriceSmart, Inc. per share available for distribution: Basic $ 3.38 $ 3.18 $ 2.55 Diluted $ 3.38 $ 3.18 $ 2.55 Shares used in per share computations: Basic 30,591 30,403 30,259 Diluted 30,600 30,403 30,259 Dividends per share $ 0.86 $ 0.70 $ 0.70 PRICESMART, INC. Years Ended August 31, 2022 2021 2020 Net income $ 104,553 $ 98,159 $ 78,181 Less: net income attributable to noncontrolling interest (19) (196) (72) Net income attributable to PriceSmart, Inc. $ 104,534 $ 97,963 $ 78,109 Other Comprehensive Income, net of tax: Foreign currency translation adjustments (1) (19,034) (7,837) (29,413) Defined benefit pension plan: Net loss arising during period (341) (230) (79) Amortization of prior service cost and actuarial gains included in net periodic pensions cost 127 127 93 Total defined benefit pension plan (214) (103) 14 Derivative instruments: (2) Unrealized losses on change in derivative obligations (4,021) (140) (490) Unrealized gains/(losses) on change in 10,191 2,392 (5,313) Amounts reclassified from accumulated other comprehensive income to other expense, net for settlement of derivatives — — 2,721 Total derivative instruments 6,170 2,252 (3,082) Other comprehensive loss (13,078) (5,688) (32,481) Comprehensive income 91,456 92,275 45,628 Less: comprehensive income attributable to noncontrolling interest 3 117 114 Comprehensive income attributable to PriceSmart, Inc. stockholders $ 91,453 $ 92,158 $ 45,514 (1)Translation adjustments arising in translating the financial statements of a foreign entity have no effect on the income taxes of that foreign entity. They may, however, affect: (a) the amount, measured in the parent entity's reporting currency, of withholding taxes assessed on dividends paid to the parent entity and (b) the amount of taxes assessed on the parent entity by the government of its country. The Company has determined that the reinvestment of earnings of its foreign subsidiaries are PRICESMART, INC. Total Accumulated Stockholders' Additional Other Equity Common Stock Paid-in Comprehensive Retained Treasury Stock Attributable to Noncontrolling Total Shares Amount Capital Loss Earnings Shares Amount PriceSmart, Inc. Interest Equity Balance at August 31, 2019 31,461 $ 3 $ 454,570 $ (144,339) $ 525,804 924 $ (38,687) $ 797,351 $ 928 $ 798,279 Purchase of treasury stock — — — — — 57 (3,651) (3,651) — (3,651) Issuance of treasury stock (234) — (13,932) — — (234) 13,932 — — — Issuance of restricted stock award 222 — — — — — — — — — Forfeiture of restricted stock awards (31) — — — — — — — — — Stock-based compensation — — 13,817 — — — — 13,817 — 13,817 Dividend paid to stockholders — — — — (21,426) — — (21,426) (101) (21,527) Net income — — — — 78,109 — — 78,109 72 78,181 Other comprehensive income (loss) — — — (32,481) — — — (32,481) 114 (32,367) Balance at August 31, 2020 31,418 $ 3 $ 454,455 $ (176,820) $ 582,487 747 $ (28,406) $ 831,719 $ 1,013 $ 832,732 Purchase of treasury stock — — — — — 62 (5,542) $ (5,542) — (5,542) Issuance of treasury stock (96) — (7,864) — — (96) 7,864 — — — Issuance of restricted stock award 154 — — — — — — — — — Forfeiture of restricted stock awards (8) — — — — — — — — — Stock-based compensation — — 18,424 — — — — 18,424 — 18,424 Dividend paid to stockholders — — — — (21,531) — — (21,531) (457) (21,988) Net income — — — — 97,963 — — 97,963 196 98,159 Other comprehensive income (loss) — — — (5,688) — — — (5,688) 117 (5,571) Balance at August 31, 2021 31,468 $ 3 $ 465,015 $ (182,508) $ 658,919 713 $ (26,084) $ 915,345 $ 869 $ 916,214 Purchase of treasury stock — — — — — 88 (6,259) (6,259) — (6,259) Issuance of treasury stock (8) — (699) — — (8) 699 — — — Issuance of restricted stock award 247 — — — — — — — — — Forfeiture of restricted stock awards (9) — — — — — — — — — Stock-based compensation — — 16,803 — — — — 16,803 — 16,803 Dividend paid to stockholders — — — — (26,559) — — (26,559) — (26,559) Net income — — — — 104,534 — — 104,534 19 104,553 Other comprehensive income (loss) — — — (13,078) — — — (13,078) 3 (13,075) Sale of Aeropost stock — — 287 — — — — 287 (891) (604) Balance at August 31, 2022 31,698 $ 3 $ 481,406 $ (195,586) $ 736,894 793 $ (31,644) $ 991,073 $ — $ 991,073 PRICESMART, INC. Years Ended August 31, 2022 2021 2020 Operating Activities: Net income $ 104,553 $ 98,159 $ 78,181 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 67,868 64,983 61,225 Allowance for doubtful accounts 63 (53) 3 Loss on sale of property and equipment 1,265 1,027 443 Deferred income taxes (3,300) (3,853) (3,405) Equity in losses of unconsolidated affiliates 10 58 95 Stock-based compensation 16,803 18,424 13,817 Change in operating assets and liabilities: Receivables, prepaid expenses and other current assets, non-current assets, accrued salaries and benefits, deferred membership income and other accruals (13,785) 13,097 (3,040) Merchandise inventories (74,706) (80,202) 21,764 Accounts payable 23,058 15,526 90,185 Net cash provided by operating activities 121,829 127,166 259,268 Investing Activities: Additions to property and equipment (120,660) (113,174) (100,320) Purchases of short-term investments (22,469) (69,460) (49,629) Proceeds from settlements of short-term investments 61,733 65,528 20,182 Purchases of long-term investments — (1,478) (1,485) Proceeds from settlements of long-term investments 1,488 1,478 — Proceeds from disposal of property and equipment 193 385 40 Proceeds from the disposal of Aeropost, net of divested cash 4,959 — — Net cash used in investing activities (74,756) (116,721) (131,212) Financing Activities: Proceeds from long-term bank borrowings 30,633 17,565 57,882 Repayment of long-term bank borrowings (22,697) (19,993) (15,164) Proceeds from short-term bank borrowings 23,829 — 271,014 Repayment of short-term bank borrowings (11,156) (64,983) (212,919) Cash dividend payments (26,559) (21,988) (21,527) Purchase of treasury stock for tax withholding on stock compensation (6,259) (5,542) (3,651) Other financing activities — (196) (72) Net cash used in financing activities (12,209) (95,137) 75,563 Effect of exchange rate changes on cash and cash equivalents and restricted cash 1,030 (3,600) (6,084) Net increase (decrease) in cash, cash equivalents 35,894 (88,292) 197,535 Cash, cash equivalents and restricted cash at beginning of period 215,479 303,771 106,236 Cash, cash equivalents and restricted cash at end of period $ 251,373 $ 215,479 $ 303,771 Supplemental disclosure of noncash investing activities: Capital expenditures accrued, but not yet paid $ 3,129 $ 3,497 $ 10,563 Cash paid during the period for: Interest $ 9,392 $ 7,774 $ 6,877 Income taxes $ 67,143 $ 58,571 $ 50,814 The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same amounts shown in the statement of cash flows: Years Ended August 31, 2022 2021 2020 Cash and cash equivalents $ 237,710 $ 202,060 $ 299,481 Short-term restricted cash 3,013 3,647 185 Long-term restricted cash 10,650 9,772 4,105 Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 251,373 $ 215,479 $ 303,771 The Company's ownership interest in real estate development joint ventures the Company has recorded under the equity method as of August 31, Real Estate Development Joint Ventures Countries Ownership Basis of GolfPark Plaza, S.A. Panama 50.0% Price Plaza Alajuela PPA, S.A. Costa Rica 50.0% (1)Joint venture interests are recorded as investment in unconsolidated affiliates on the consolidated balance sheets. August 31, August 31, 2022 2021 Short-term restricted cash $ 3,013 $ 3,647 Long-term restricted cash 10,650 9,772 Total restricted cash(1) $ 13,663 $ 13,419 (1)Restricted cash consists Goodwill – Receivables consist primarily of credit card receivables and receivables from vendors and are stated net of allowances for credit losses. The Twelve Months Ended August 31, Amount 2023 $ 765 Total $ 765 Tax Receivables – The Company pays Value Added Tax (“VAT”) or similar taxes, income taxes, and other taxes within the normal course of business in most of the countries in which it operates related to the procurement of merchandise and/or services the Company acquires and/or on sales and taxable income. VAT is a form of indirect tax applied to the value added at each stage of production (primary, manufacturing, wholesale and retail). This tax is similar to, but operates somewhat differently than, sales tax paid in the United States. The Company generally collects VAT from its Members upon sale of goods and services and pays VAT to its vendors upon purchase of goods and services. Periodically, the Company submits VAT reports to governmental agencies and reconciles the VAT paid and VAT received. The net overpaid VAT may be refunded or applied to subsequent returns, and the net underpaid VAT must be remitted to the government. With respect to income taxes paid, if the estimated income taxes paid or withheld exceed the actual income tax due this creates an income tax receivable. In most countries where the Company operates, the governments have implemented additional collection procedures, such as requiring credit card processors to remit a portion of sales processed via credit and debit cards directly to the government as advance payments of VAT and/or income tax. This collection mechanism generally leaves the Company with net VAT and/or income tax receivables, forcing the Company to process significant refund claims on a recurring basis.These refund or offset processes can take anywhere from several months to several years to complete. Additionally, we are occasionally required to make payments for tax assessments that we are appealing, because we believe it is more likely than not we will ultimately prevail. In one of the countries with a significant VAT receivable balance, the Company received unfavorable rulings at the supreme court level of that country denying a portion of the Company’s appeals for refund of over-withholdings of VAT. After evaluating the merits of the Company’s arguments, the court’s decision, and probability that the other related refund appeals would receive the same judgment, the Company concluded that a total of $2.3 million of related VAT receivables would not be recoverable and this amount was written-off in the third quarter of fiscal year 2023. These charges were recorded in the Warehouse club and other expenses line item under the Selling, general and administrative caption within the consolidated statements of income. August 31, August 31, 2022 2021 Prepaid expenses and other current assets $ 3,890 $ 3,173 Other non-current assets 32,460 28,437 Total amount of VAT receivables reported $ 36,350 $ 31,610 August 31, August 31, 2022 2021 Prepaid expenses and other current assets $ 12,077 $ 11,491 Other non-current assets 19,985 18,872 Total amount of income tax receivables reported $ 32,062 $ 30,363 Merchandise Inventories – Merchandise inventories, which include merchandise for resale, are valued at the lower of cost (average cost) or net realizable value. The Company provides for estimated inventory losses and obsolescence based on a percentage of sales. The provision is adjusted every reporting period to reflect the trend of actual physical inventory and cycle count results. In addition, the Company may be required to take markdowns below the carrying cost of certain inventory to expedite the sale of such merchandise. down to their fair market value. The disclosure of fair value of certain financial assets and liabilities recorded at cost is as follows: August 31, 2022 August 31, 2021 Carrying Fair Carrying Fair Value(1) Long-term debt, including current portion $ 137,271 136,479 129,505 119,646 (1)The Company has disclosed the fair value of long-term debt, including debt for which it has entered into cross-currency interest rate swaps, using the derivative obligation as of August 31, The Company did not change valuation techniques utilized in the fair value measurement of assets and liabilities presented on the Company’s consolidated balance sheets from previous practice during the reporting period. The Company seeks to manage counterparty risk associated with these contracts by limiting transactions to counterparties with which the Company has an established banking relationship. There can be no assurance, however, that this practice effectively mitigates counterparty risk. Vendor consideration consists primarily of volume rebates, time-limited product promotions, cooperative marketing efforts, digital advertising, slotting fees, demonstration reimbursements and prompt payment discounts. Volume rebates and time-limited promotions are recognized on a systematic and rational allocation of the cash consideration as the Company progresses toward earning the rebate, provided the amounts to be earned are probable and reasonably estimable. Cooperative marketing efforts and digital advertising are related to consideration received by the Company from vendors for non-distinct online advertising services on the Company’s website and social media platforms. Slotting fees are related to consideration received by the Company from vendors for preferential "end cap" placement of the vendor's products within the warehouse club. Demonstration reimbursements are related to consideration received by the Company from vendors for the in-club promotion of the vendors' products. The Company records the reduction in cost of goods sold on a transactional basis for these programs. On a quarterly basis, the Company calculates the amount of rebates recorded in cost of goods sold that relates to inventory on hand and this amount is reclassified as a reduction to inventory, if significant. Prompt payment discounts are taken in substantially all cases and therefore are applied directly to reduce the acquisition cost of the related inventory, with the resulting effect recorded to cost of goods sold when the inventory is sold. – The Company periodically evaluates its long-lived assets for indicators of impairment. Management's judgments are based on market and operational conditions at the time of the evaluation and can include management's best estimate of future business activity. These periodic evaluations could cause management to conclude that impairment factors exist, requiring an adjustment of these assets to their then-current fair value. Future business conditions and/or activity could differ materially from the projections made by management causing the need for additional impairment charges. In the fourth quarter of fiscal year 2023, the Company recorded a $5.7 million charge primarily related to remeasurement of the assets of our Trinidad sustainable packaging plant to their estimated fair value upon our decision to seek to sell the plant. We planned to use the plant to increase efficiencies by eliminating intermediaries in packaging and labeling and manufacturing some of our packaging materials using compostable or recyclable inputs. However, we found that achieving economic feasibility proved challenging. Therefore, we decided to refocus our efforts on our core competencies as a retailer and redeploy plant assets we could use in our club business and seek a buyer for the remainder. The assets were written down to their estimated fair value less costs to sell and are presented within the Prepaid expenses and other current assets line within the Consolidated Balance Sheets. The impairment charges are recorded within the Asset impairment and closure costs line item within the Consolidated Statements of Income and are recorded in the Company's Caribbean segment. We believe the sale of the assets held for sale is probable within one year. Years Ended August 31, 2022 2021 2020 Effect on other comprehensive loss due to foreign currency restatement $ (19,034) $ (7,837) $ (29,413) Years Ended August 31, 2022 2021 2020 Currency Loss $ (7,414) $ (5,395) $ (1,370) Income Taxes – The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized. – The Company is subject to tax examinations for value added, sales-based, payroll and other non-income taxes and the Company is subject to ongoing examinations in various jurisdictions. In certain cases, the Company has received assessments and judgments from the respective tax authorities in connection with these examinations. Unless otherwise indicated, the Company considers based on its interpretation and application of complex tax laws, that a material liability is not probable or the possible losses or range of possible losses associated with these cases are immaterial; however, if decided adversely to the Company, could result in a liability material to the Company's consolidated financial statements. In certain countries, the Company is required to pay taxes based on a percentage of sales (Alternative Minimum Tax or "AMT") if the percentage of sales method results in a higher amount of tax payable than the amount payable based on taxable income at the statutory income tax rate. The portion of taxes based on a percentage of sales that is greater than the amount based on taxable income at the statutory income tax rate, are recorded in the Warehouse club and other expenses line item under the Selling, general and administrative caption within the consolidated statements of income. NOTE 3 – REVENUE RECOGNITION Co-branded Credit Card Points Reward Programs. Most of the Company’s subsidiaries have points reward programs related to co-branded credit cards. These points reward programs provide incremental points that can be used at a future time to acquire merchandise within the Company’s warehouse clubs. This results in two performance obligations, the first performance obligation being the initial sale of the merchandise or services purchased with the co-branded credit card and the second performance obligation being the future use of the points rewards to purchase merchandise or services. As a result, upon the initial sale, the Company allocates the transaction price to each performance obligation with the amount allocated to the future use points rewards recorded as a contract liability within other accrued expenses and other current liabilities on the consolidated balance sheet. The portion of the selling price allocated to the reward points is recognized as Net merchandise sales when the points are used or when the points expire. The Company reviews on an annual basis expired points rewards outstanding, and the expired rewards are recognized as Net merchandise sales on the consolidated statements of income within markets where the co-branded credit card agreement allows for such treatment. Policy Elections Contract Liabilities August 31, 2022 August 31, 2021 Deferred membership income $ 28,000 $ 25,951 Other contract performance liabilities $ 10,473 $ 7,871 Years Ended August 31, August 31, August 31, Foods & Sundries $ 1,947,734 $ 1,736,509 $ 1,656,682 Fresh Foods 1,145,920 1,003,694 912,325 Hardlines 443,311 409,644 345,051 Softlines 227,371 175,505 147,085 Other Business 180,481 140,090 130,619 Net Merchandise Sales $ 3,944,817 $ 3,465,442 $ 3,191,762 NOTE 4 – PROPERTY AND EQUIPMENT August 31, August 31, 2022 2021 Land $ 224,278 $ 216,703 Building and improvements 592,749 533,802 Fixtures and equipment 343,859 315,391 Construction in progress 42,602 68,835 Total property and equipment, historical cost 1,203,488 1,134,731 Less: accumulated depreciation (446,247) (404,527) Property and equipment, net $ 757,241 $ 730,204 Years Ended August 31, 2022 2021 2020 Depreciation expense, Property and equipment $ 66,255 $ 62,579 $ 58,815 Amortization expense, Intangible assets 1,613 2,404 2,410 Total depreciation and amortization expense $ 67,868 $ 64,983 $ 61,225 Balance as of August 31, August 31, 2022 2021 Total interest capitalized $ 12,934 $ 13,175 Years Ended August 31, 2022 2021 2020 Interest capitalized $ 1,263 $ 2,282 $ 2,190 A summary of asset disposal activity for fiscal years 2023, 2022 Historical Accumulated Proceeds from disposal Loss recognized Fiscal Year 2022 $ 12,785 $ 11,327 $ 193 $ (1,265) Fiscal Year 2021 $ 10,946 $ 9,534 $ 385 $ (1,027) Fiscal Year 2020 $ 5,115 $ 4,640 $ 32 $ (443) Years Ended August 31, 2022 2021 2020 Net income attributable to PriceSmart, Inc. $ 104,534 $ 97,963 $ 78,109 Less: Allocation of income to unvested stockholders (1,245) (1,282) (842) Net income attributable to PriceSmart, Inc. available for distribution $ 103,289 $ 96,681 $ 77,267 Basic weighted average shares outstanding 30,591 30,403 30,259 Add dilutive effect of performance stock units (two-class method) 9 — — Diluted average shares outstanding 30,600 30,403 30,259 Basic net income per share $ 3.38 $ 3.18 $ 2.55 Diluted net income per share $ 3.38 $ 3.18 $ 2.55 First Payment Second Payment Declared Amount Record Date Amount Record Date Amount 2/3/2022 $ 0.86 2/15/2022 2/28/2022 $ 0.43 8/15/2022 8/31/2022 $ 0.43 2/4/2021 $ 0.70 2/15/2021 2/26/2021 $ 0.35 8/15/2021 8/31/2021 $ 0.35 2/6/2020 $ 0.70 2/15/2020 2/28/2020 $ 0.35 8/15/2020 8/31/2020 $ 0.35 The Company anticipates the ongoing payment of semi-annual dividends in subsequent periods, although the actual declaration of future dividends, if any, the amount of such dividends, and the establishment of record and payment dates is subject to final determination by the Board of Directors at its discretion after its review of the Company’s financial performance and anticipated capital requirements, taking into account the Attributable to Noncontrolling PriceSmart Interests Total Ending balance, August 31, 2019 $ (144,339) $ 20 $ (144,319) Foreign currency translation adjustments (29,413) 114 (29,299) Defined benefit pension plans (1) (79) — (79) Derivative Instruments (2) (5,803) — (5,803) Amounts reclassified from accumulated other comprehensive loss 2,814 — 2,814 Ending balance, August 31, 2020 $ (176,820) $ 134 $ (176,686) Foreign currency translation adjustments (7,837) 117 (7,720) Defined benefit pension plans (1) (230) — (230) Derivative Instruments (2) 2,252 — 2,252 Amounts reclassified from accumulated other comprehensive loss 127 — 127 Ending balance, August 31, 2021 $ (182,508) $ 251 $ (182,257) Foreign currency translation adjustments (19,034) 3 (19,031) Defined benefit pension plans (1) (341) — (341) Derivative Instruments (2) 6,170 — 6,170 Amounts reclassified from accumulated other comprehensive loss 127 — 127 Sale of Aeropost — (254) (254) Ending balance, August 31, 2022 $ (195,586) $ — $ (195,586) (1)Amounts reclassified from accumulated other comprehensive Retained Earnings Not Available for Distribution August 31, August 31, 2022 2021 Retained earnings not available for distribution $ 8,648 $ 8,022 year 2021. Other Long-Term Accumulated Other Operating Expenses August 31, Year Ended August 31, 2022 2021 2022 2021 2022 2021 2020 Start of period $ (2,298) $ (1,805) $ 897 $ 747 $ — $ — $ — Service cost (205) (184) — — 315 229 177 Interest cost (129) (104) — — 129 104 101 Prior service cost (including amortization) — — (36) (55) 36 55 55 Actuarial gains/(losses) (344) (205) 344 205 92 72 38 Totals $ (2,976) $ (2,298) $ 1,205 $ 897 (1) $ 572 $ 460 $ 371 (1)The Company has recorded a deferred tax asset of The valuation assumptions used to calculate the liability for the defined benefit plans differ based on the country where the plan applies. These assumptions are summarized as follows: Year Ended August 31, Valuation Assumptions: 2022 2021 Discount rate 3.5% to 6.4% 3.5% to 7.5% Future salary escalation 3.0% to 4.5% 3.0% to 4.0% Percentage of employees assumed to withdraw from Company without a benefit (“turnover”) 6.7% to 15.0% 8.3% to 15.0% Percentage of employees assumed to withdraw from Company with a benefit (“disability”) 0.5% to 6.6% 0.5% to 6.6% Accrued Salaries Other Long-Term Restricted Cash Held (1) Operating Expenses Years Ended August 31, 2022 2021 2022 2021 2022 2021 2022 2021 2020 Other Post Employment Plans $ 522 $ 544 $ 4,567 $ 4,352 $ 4,382 $ 3,909 $ 1,423 $ 1,447 $ 1,250 (1)With some locations, local statutes require the applicable Company subsidiary to deposit cash in its own name with designated fund managers. The funds earn interest, which the Company recognizes as interest income. NOTE 8 – STOCK BASED COMPENSATION Shares available to grant Shares authorized for issuance as of August 31, 2022 August 31, August 31, (including shares originally authorized for issuance under prior plans) 2022 2021 2013 Plan 1,567,923 549,319 705,924 Years Ended August 31, 2022 2021 2020 Restricted stock awards $ 9,378 $ 11,010 $ 8,747 Restricted stock units 3,519 3,939 3,011 Performance-based restricted stock units 3,906 3,475 2,059 Stock-based compensation expense $ 16,803 $ 18,424 $ 13,817 Balance as of August 31, August 31, August 31, 2022 2021 2020 Remaining unrecognized compensation cost (in thousands) $ 18,478 $ 16,349 $ 21,720 Weighted average period of time over which this cost will be recognized (years) 2 2 3 Years Ended August 31, 2022 2021 2020 Excess tax benefit (deficiency) on stock-based compensation (in thousands) $ (2,259) $ (778) $ (936) Restricted stock awards, restricted stock units, and performance-based restricted stock units activity for the twelve-months ended August 31, 2023, 2022 Years Ended August 31, August 31, August 31, 2022 2021 2020 Grants outstanding at beginning of period 375,622 415,869 362,826 Granted 261,204 166,160 266,759 Forfeited (16,184) (12,436) (43,198) Vested (258,820) (193,971) (170,518) Grants outstanding at end of period 361,822 375,622 415,869 2021: Years Ended August 31, August 31, August 31, 2022 2021 2020 RSAs, RSUs, and PSUs granted $ 76.85 $ 79.02 $ 64.57 RSAs, RSUs, and PSUs vested $ 72.69 $ 70.03 $ 72.82 RSAs, RSUs, and PSUs forfeited $ 69.70 $ 70.56 $ 76.81 Years Ended August 31, August 31, August 31, 2022 2021 2020 Total fair market value of restricted stock awards and units vested (in thousands) $ 18,422 $ 17,478 $ 10,914 as part of the Company's stock-based compensation programs: Years Ended August 31, August 31, August 31, 2022 2021 2020 Shares repurchased 88,415 62,282 56,503 Cost of repurchase of shares (in thousands) $ 6,259 $ 5,542 $ 3,651 Years Ended August 31, August 31, August 31, 2022 2021 2020 Reissued treasury shares 8,314 96,400 234,370 As part of these reviews, a taxing authority may disagree with In the fourth quarter of fiscal year 2023, we recorded a $7.2 million charge to settle an AMT payment dispute in one of the aforementioned countries. Of this amount, $1.0 million is a reserve recorded against an income tax receivable for one of the tax years for which we sought a refund and the remaining $6.2 million is an accrual for the unpaid years of the dispute in which the Company made tax payments using the original computation based on taxable income. Additionally, as part of the settlement, the Company agreed to pay AMT on a go-forward basis and accrued $2.0 million for fiscal year 2023. Other Commitments From time to time, the Company has entered into general land purchase and land purchase option agreements. The Company’s land purchase agreements are typically subject to various conditions, including, but not limited to, the ability to obtain necessary governmental permits or approvals. A deposit under an agreement is typically returned to the Company if all permits or approvals are not obtained. Generally, the Company has the right to cancel any of its agreements to purchase land without cause by forfeiture of some or all of the deposits it has made pursuant to the agreement. As of August 31, Lastly, the Company has one lease option agreement for one additional warehouse club. NOTE 10 – INCOME TAXES Years Ended August 31, 2022 2021 2020 United States $ 55,667 $ 33,818 $ 24,771 Foreign 100,754 113,368 91,269 Income from continuing operations before provision for income taxes and loss of unconsolidated affiliates $ 156,421 $ 147,186 $ 116,040 Years Ended August 31, 2022 2021 2020 Current: U.S. tax expense $ 20,824 $ 16,904 $ 10,046 Foreign tax expense 34,334 35,918 31,122 Total $ 55,158 $ 52,822 $ 41,168 Deferred: U.S. tax benefit $ (11,894) $ (10,212) $ (5,945) U.S. valuation allowance change 11,823 9,777 5,570 Foreign tax benefit (3,259) (3,125) (3,157) Foreign valuation allowance change 30 (293) 128 Total $ (3,300) $ (3,853) $ (3,404) Provision for income taxes $ 51,858 $ 48,969 $ 37,764 Years Ended August 31, 2022 2021 2020 Federal tax provision at statutory rates 21.0 % 21.0 % 21.0 % State taxes, net of federal benefit 0.2 0.1 0.1 Differences in foreign tax rates 7.1 6.9 9.7 Permanent items and other adjustments (2.6) (2.2) (4.4) Increase in valuation allowance 7.5 7.5 6.1 Provision for income taxes 33.2 % 33.3 % 32.5 % Significant components of the Company’s deferred tax assets as of August 31, August 31, 2022 2021 Deferred tax assets: U.S. net operating loss carryforward $ — $ 2,866 Foreign tax credits 32,322 22,420 Deferred compensation 1,782 2,334 U.S. timing differences 7,746 3,759 Foreign net operating losses 5,026 5,051 Foreign timing differences: Accrued expenses and other timing differences 9,937 7,636 Depreciation and amortization 13,019 10,498 Deferred income 7,749 6,422 Gross deferred tax assets 77,581 60,986 U.S. deferred tax liabilities (depreciation and other timing differences) (2,273) (4,083) Foreign deferred tax liabilities netted against deferred tax assets (8,697) (5,753) U.S. valuation allowance (33,824) (22,523) Foreign valuation allowance (4,432) (4,402) Net deferred tax assets $ 28,355 $ 24,225 closure costs. Years Ended August 31, 2022 2021 2020 Balance at beginning of fiscal year $ 3,911 $ 4,573 $ 6,490 Gross increase - tax positions in prior period 264 135 464 Gross decrease - tax positions in prior period — (306) — Additions based on tax positions related to the current year 1,356 333 186 Expiration of the statute of limitations for the assessment of taxes (490) (824) (2,567) Balance at end of fiscal year $ 5,041 $ 3,911 $ 4,573 The Company recognizes interest and/or penalties related to unrecognized tax benefits in income tax expense. As of August 31, $600,000. Tax Jurisdiction Fiscal Years Subject to Audit U.S. federal 2005, 2007, California (U.S.) (state return) 2005 and Florida (U.S.) (state return) 2011* to 2018*, Aruba 2018 to the present Costa Rica 2011 to 2012, 2015 to 2016, Colombia Dominican Republic 2011 to 2012, 2016, 2020 to the present 2012 to 2013, 2019 to the present 2017 to the present 2019 to the present U.S. Virgin Islands 2001 to the present Spain Chile NOTE 11 – DEBT Facilities Used Total Amount Short-term Letters of Facilities Weighted average of Facilities Borrowings Credit Available interest rate August 31, 2022 - Committed $ 75,000 — 73 74,927 — % August 31, 2022 - Uncommitted 91,000 10,608 — 80,392 5.3 August 31, 2022 - Total $ 166,000 $ 10,608 $ 73 $ 155,319 5.3 % August 31, 2021 - Committed $ 40,000 — 97 39,903 — % August 31, 2021 - Uncommitted 91,000 — — 91,000 — August 31, 2021 - Total $ 131,000 $ — $ 97 $ 130,903 — % 2023: (Amounts in thousands) Current Long-term Total Balances as of August 31, 2020 $ 19,437 $ 112,610 $ 132,047 (1) Proceeds from long-term debt received during the period: Trinidad subsidiary 2,736 14,829 17,565 Repayments of long-term debt: (5,168) (14,825) (19,993) Reclassifications of long-term debt due in the next 12 months 2,368 (2,368) — Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar (3) 22 (136) (114) Balances as of August 31, 2021 19,395 110,110 129,505 (2) Proceeds from long-term debt received during the period: Guatemala subsidiary — 4,204 4,204 Trinidad subsidiary 4,924 21,505 26,429 Total proceeds from long-term debt received during the period 4,924 25,709 30,633 Repayments of long-term debt: (8,110) (14,587) (22,697) Reclassifications of long-term debt due in the next 12 months 17,618 (17,618) — Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar (3) (112) (58) (170) Balances as of August 31, 2022 $ 33,715 $ 103,556 $ 137,271 (4) (1)The carrying amount The following table provides a summary of the long-term loans entered into by the Company: August 31, August 31, 2022 2021 Loans entered into by the Company's subsidiaries for which the subsidiary has entered into a cross-currency interest rate swap with non-cash assets and/or cash or cash equivalents assigned as collateral and with/without established debt covenants $ 33,853 $ 38,531 Loans entered into by the Company's subsidiaries for which the subsidiary has entered into an interest rate swap with non-cash assets and/or cash or cash equivalents assigned as collateral and with/without established debt covenants 39,969 42,744 Unswapped loans entered into by the Company's subsidiaries with non-cash assets and/or cash or cash equivalents assigned as collateral and with/without established debt covenants 63,449 48,230 Total long-term debt 137,271 129,505 Less: current portion 33,715 19,395 Long-term debt, net of current portion $ 103,556 $ 110,110 subsidiaries, and offset by payments on its long-term debt. Twelve Months Ended August 31, Amount 2023 $ 33,715 2024 18,788 2025 33,524 2026 15,496 2027 29,748 Thereafter 6,000 Total $ 137,271 ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the reasonably certain lease term. The operating lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option or if an economic penalty may be incurred if the option is not exercised. The initial lease term of the Company’s operating leases range from two Years Ended August 31, 2022 2021 Operating lease cost $ 15,632 $ 17,724 Short-term lease cost 49 167 Variable lease cost 4,376 4,410 Sublease income (180) (891) Total lease costs $ 19,877 $ 21,410 Years Ended August 31, 2022 2021 Weighted average remaining lease term in years 18.3 18.3 Weighted average discount rate percentage 6.7% 6.7% Years Ended August 31, 2022 2021 Operating cash flows paid for operating leases $ 14,885 $ 16,420 Leased Years Ended August 31, Locations 2023 $ 14,936 2024 14,040 2025 14,012 2026 12,508 2027 10,314 Thereafter 161,563 Total future lease payments 227,373 Less imputed interest (101,386) Total operating lease liabilities $ 125,987 The following table summarizes agreements for which the Company has recorded cash flow hedge accounting Entity Date Derivative Derivative Initial Bank Floating Leg Fixed Rate Settlement Effective Colombia subsidiary 3-May-22 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 10,000,000 PriceSmart, Inc. 3.00% 9.04 % 3rd day of each May, August, November and February, beginning on August 3, 2022 May 3, 2022 - Colombia subsidiary 17-Nov-21 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 10,000,000 PriceSmart, Inc. 3.00% 8.40 % 17th day of each February, May, August, and November, beginning on February 17, 2022 November 17, 2021 - Colombia subsidiary 3-Dec-19 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 7,875,000 Citibank, N.A. Variable rate 3-month Libor plus 2.45% 7.87 % 3rd day of each December, March, June, and September, beginning on March 3, 2020 December 3, 2019 - Colombia subsidiary 27-Nov-19 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 25,000,000 Citibank, N.A. Variable rate 3-month Libor plus 2.45% 7.93 % 27th day of each November, February, May and August beginning February 27, 2020 November 27, 2019 - Colombia subsidiary 24-Sep-19 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 12,500,000 PriceSmart, Inc. Variable rate 3-month Libor plus 2.50% 7.09 % 24th day of each December, March, June and September beginning December 24, 2019 September 24, 2019 - Panama subsidiary 25-Jun-18 Bank of Nova Scotia ("Scotiabank") Interest rate swap $ 14,625,000 Bank of Nova Scotia Variable rate 3-month Libor plus 3.0% 5.99 % 23rd day of each month beginning on July 23, 2018 June 25, 2018 - Honduras subsidiary 26-Feb-18 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 13,500,000 Citibank, N.A. Variable rate 3-month Libor plus 3.00% 9.75 % 29th day of May, August, November and February beginning May 29, 2018 February 26, 2018 - PriceSmart, Inc. 7-Nov-16 MUFG Union Bank, N.A. ("Union Bank") Interest rate swap $ 35,700,000 Union Bank Variable rate 1-month Libor plus 1.7% 3.65 % 1st day of each month beginning on April 1, 2017 March 1, 2017 - Income Statement Classification Interest Cost of Total Interest expense for the year ended August 31, 2022 $ 2,577 $ 3,234 $ 5,811 Interest expense for the year ended August 31, 2021 $ 2,619 $ 3,655 $ 6,274 Interest expense for the year ended August 31, 2020 $ 4,045 $ 2,416 $ 6,461 (1)This amount is representative of the interest expense recognized on the underlying hedged transactions. The total notional balance of the Company’s pay-fixed/receive-variable interest rate swaps and cross-currency interest rate swaps was as follows (in thousands): Notional Amount as of August 31, August 31, 2022 2021 Union Bank $ 31,344 $ 32,619 Citibank N.A. 66,353 51,032 Scotiabank 8,625 10,125 Total $ 106,322 $ 93,776 August 31, 2022 August 31, 2021 Balance Sheet Fair Net Tax Net Fair Net Tax Net Cross-currency interest rate swaps Other current assets $ 2,736 $ (348) $ 2,388 $ — $ — $ — Cross-currency interest rate swaps Other non-current assets 10,289 (4,559) 5,730 2,464 (741) 1,723 Cross-currency interest rate swaps Other current liabilities (82) 25 (57) — — — Interest rate swaps Other non-current assets 1,596 (6) 1,590 — — — Interest rate swaps Other long-term liabilities — — — (2,305) 535 (1,770) Cross-currency interest rate swaps Other long-term liabilities — — — (705) 212 (493) Net fair value of derivatives designated as hedging instruments $ 14,539 $ (4,888) $ 9,651 $ (546) $ 6 $ (540) The following table summarizes the non-deliverable forward foreign exchange contracts that are open as of August 31, 2021. Years, Ended August 31 Income Statement Classification 2022 2021 2020 Other expense, net $ — $ — $ (912) Relationship with Golf Park Plaza, S.A.: Golf Park Plaza, S.A. is a real estate joint venture located in Panama, entered by the Company in 2008 (see Note 15 - Unconsolidated Affiliate). On December 12, 2013, the Company entered into a lease agreement for approximately 17,976 square feet (1,670 square meters) of land with Golf Park Plaza, S.A. upon which the Company constructed its central offices in Panama. The lease term is for 15 years with three options to renew for five years each at the Company's discretion. On July 14, 2017, the Company entered into a lease agreement for approximately 2,992 square feet (278 square meters) of a building with Golf Park Plaza, S.A. for warehouse storage space. The agreement was recently renewed for an additional five years during fiscal year 2022. Combined, the Company recognized $140,000 in rent expense for the fiscal year ended August 31, 2023, $149,000 in rent expense for the fiscal year ended August 31, 2022, and $149,800 in rent expense for 2021. Entity % Initial Additional Net Income (Loss) Inception to Date Company’s Commitment Company's GolfPark Plaza, S.A. 50 % $ 4,616 $ 2,402 $ (72) $ 6,946 $ 99 $ 7,045 Price Plaza Alajuela PPA, S.A. 50 % 2,193 1,236 159 3,588 785 4,373 Total $ 6,809 $ 3,638 $ 87 $ 10,534 $ 884 $ 11,418 (1)The parties intend to seek alternate financing for the project, which could reduce the amount of investments each party would be required to provide. The parties may mutually agree on changes to the project, which could increase or decrease the amount of contributions each party is required to provide. The summarized financial information of the unconsolidated affiliates is as follows (in thousands): August 31, August 31, 2022 2021 Current assets $ 1,839 $ 1,728 Noncurrent assets $ 10,109 $ 10,253 Current liabilities $ 175 $ 151 Noncurrent liabilities $ 8 $ 8 Years Ended August 31, 2022 2021 2020 PriceSmart’s share of the net loss of unconsolidated affiliates $ (10) $ (58) $ (95) The following tables summarize by segment certain revenues, operating costs and balance sheet items (in thousands): United Central Caribbean Colombia Operations Reconciling Total Year Ended August 31, 2022 Revenue from external customers $ 48,716 $ 2,382,163 $ 1,156,607 $ 478,607 $ — $ 4,066,093 Intersegment revenues 1,492,648 22,119 5,857 3,600 (1,524,224) — Depreciation, Property and equipment 4,719 34,155 17,061 10,320 — 66,255 Amortization, Intangibles 1,613 — — — — 1,613 Operating income (loss) 23,364 171,119 79,022 22,526 (128,965) 167,066 Interest income from external sources 147 1,115 863 76 — 2,201 Interest income from intersegment sources 1,789 1,954 255 — (3,998) — Interest expense from external sources 1,225 3,107 2,163 3,116 — 9,611 Interest expense from intersegment sources 27 1,187 1,821 899 (3,934) — Provision for income taxes 19,629 23,396 8,106 727 — 51,858 Net income attributable to PriceSmart, Inc. 8,292 144,159 62,799 18,268 (128,984) 104,534 Long-lived assets (other than deferred tax assets) 70,978 498,204 218,021 175,194 — 962,397 Intangibles, net 765 — — — — 765 Goodwill 8,981 24,250 10,072 — — 43,303 Investment in unconsolidated affiliates — 10,534 — — — 10,534 Total assets 230,411 867,898 474,411 235,680 — 1,808,400 Capital expenditures, net 5,119 46,959 36,610 33,654 — 122,342 Year Ended August 31, 2021 Revenue from external customers $ 88,397 $ 2,105,856 $ 1,004,793 $ 420,825 $ — $ 3,619,871 Intersegment revenues 1,280,236 17,861 5,087 3,869 (1,307,053) — Depreciation, Property and equipment 6,970 31,319 15,432 8,858 — 62,579 Amortization, Intangibles 2,404 — — — — 2,404 Operating income (loss) 12,687 151,933 74,769 21,932 (103,301) 158,020 Interest income from external sources 13 878 985 103 — 1,979 Interest income from intersegment sources 2,130 2,393 483 — (5,006) — Interest expense from external sources 1,606 2,831 427 2,346 — 7,210 Interest expense from intersegment sources 34 1,286 2,647 298 (4,265) — Provision for income taxes 15,919 22,661 8,006 2,383 — 48,969 Net income (loss) attributable to PriceSmart, Inc. (4,777) 127,879 61,025 17,333 (103,497) 97,963 Long-lived assets (other than deferred tax assets) 79,404 490,099 197,030 164,970 — 931,503 Intangibles, net 7,762 — — — — 7,762 Goodwill 10,695 24,332 10,068 — — 45,095 Investment in unconsolidated affiliates — 10,544 — — — 10,544 Total assets 246,896 795,940 434,428 228,526 — 1,705,790 Capital expenditures, net 9,061 45,524 23,342 28,181 — 106,108 Year Ended August 31, 2020 Revenue from external customers $ 73,703 $ 1,895,857 $ 993,657 $ 365,971 $ — $ 3,329,188 Intersegment revenues 1,148,004 16,524 4,909 2,723 (1,172,160) — Depreciation, Property and equipment 6,888 29,312 15,441 7,174 — 58,815 Amortization, Intangibles 2,410 — — — — 2,410 Operating income (loss) 3,873 125,351 57,217 18,071 (82,044) 122,468 Interest income from external sources 7 612 749 663 — 2,031 Interest income from intersegment sources 2,065 2,566 431 — (5,062) — Interest expense from external sources 1,890 3,425 310 2,000 — 7,625 Interest expense from intersegment sources 39 1,547 2,258 561 (4,405) — Provision for income taxes 10,106 20,001 6,416 1,241 — 37,764 Net income (loss) attributable to PriceSmart, Inc. (7,578) 103,697 50,553 13,554 (82,117) 78,109 Long-lived assets (other than deferred tax assets) 81,008 475,744 177,166 146,862 — 880,780 Intangibles, net 10,166 — — — — 10,166 Goodwill 10,696 24,418 10,092 — — 45,206 Investment in unconsolidated affiliates — 10,602 — — — 10,602 Total assets 272,190 741,523 395,244 247,868 — 1,656,825 Capital expenditures, net 6,072 48,150 14,460 35,565 — 104,247 (1)Management considers its club in the U.S. Virgin Islands to be part of its Caribbean operations. NOTE 17 – SUBSEQUENT EVENTS2022¨☐Delaware33-062853033-0628530 þ No oo No þþ No oþ No ooo¨oþo No þ$1,822,456,943$1,818,035,453 based on the last reported sale price of $72.23$69.72 per share on the NASDAQ Global Select Market on February 28, 2022.2022,2023, 30,904,82630,161,886 shares of Common Stock were outstanding.3, 20231, 2024 are incorporated by reference into Part III of this Form 10-K.PRICPRICESMART, INC.ESMART, INC.AugustAUGUST 31, 2022"we""our") anticipated future revenues and earnings, adequacy of future cash flows, omni-channel initiatives, proposed warehouse club openings, the Company's performance relative to competitors and related matters. These forward-looking statements include, but are not limited to, statements containing the words “expect,” “believe,” “will,” “may,” “should,” “project,” “estimate,” “anticipated,” “scheduled,” “intend,” and like expressions, and the negative thereof. These statements are subject to risks and uncertainties that could cause actual results to differ materially including, but not limited to the risks detailed in this Annual Report on Form 10-K under the heading Part I. “Item 1A. Risk Factors.” Forward-looking statements are only as of the date they are made, and we do not undertake to update these statements, except as required by law. In addition, these risks are not the only risks that the Company faces. The Company could also be affected by additional factors that apply to all companies operating globally and in the U.S., as well as other risks that are not presently known to the Company or that the Company currently considers to be immaterial.PARTItemexistswas founded in 1996 by Sol and Robert Price, the creators of Price Club, the original warehouse club operator. The mission of PriceSmart is to improveoperate its warehouse club business, in Central America, the livesCaribbean and businesses of our Members, our employees and our communities by reliably and consistently providing quality goods and valuable servicesColombia, at the lowest possible prices. We believe that lower prices on products and services drive sales volume, which increases the Company’s buying leverage, which in turn leadsoperating standards as good as, or superior to, better pricing that we can then offer to our Members, validating the value of the annual membership fee.PriceSmart beganwarehouse club operations in 1996the United States.San Diego, California, with the intent to bring our U.S. style membership shopping warehouse club concept to emerging and developing countries. We currently operate 50 warehouse clubsoperation in Central America, the Caribbean and Colombia. In all 13 markets, our Members are able to engagePriceSmart currently operates 52 warehouse clubs and we believe it has become one of the most respected and trusted brands in the region. With nearly 2 million membership accounts and more than 3 million cardholders, PriceSmart is an essential part of the shopping experience for consumers and small businesses in PriceSmart’s markets.us on social mediathe balance of merchandise sourced throughout the world. Product selection includes basic consumable merchandise for consumers and shop on our e-commerce platform, PriceSmart.com.businesses, Member experience is our top priority. We rigorously limit the number of SKU’s in order to drive volume and leverage purchasing power for the benefit of our Members. Our curated selection offers a combination of specialty items that are imported and/or unique to our markets, locally and regionally sourced goods, essential goods, direct-from-farm fresh produce and private label consumer products under the brand “Member’s Selection®”. Our Member’s Selectionprivate label merchandise and unique consumable and non-consumable products that are often not otherwise available in its markets.® offering allows usmaintain key quality items at lower pricesour Members and provides the opportunity to reduce supply chain risks. Weoffers both home delivery and curbside pickup. PriceSmart is also offer prepared foods and fresh-baked goods. Most merchandise is available for online ordering through PriceSmart.com and for delivery or contactless curbside pickup through our Click & Go™ service. We also offer Wellness programs such as Optical, Pharmacy and Audiology. Our clubs typically feature food courts and tire centers and services. We are also amaking significant provider of goods to small businesses in our markets that benefit from larger pack sizes and lower pricing. We strive to continually enhance the value of our membership such that the value of the goods and services purchased and received by the Member far exceeds the annual cost of the membership.Our warehouse clubs range in sales floor size from approximately 30,000 to 60,000 square feet. Our larger clubs are typically located in and around densely populated major cities that include a large penetration of consumers with significant disposable income. Our smaller clubs tend to be in areas with less population density, but where there are significant opportunities to serve the population and supply and support businesses. We also have smaller format clubs in urban areas where it is difficult to secure sufficient real estate at a reasonable cost.We strategically investinvestments in technology to both improve the online shopping experience for its Members and to enhance Member experienceoperating efficiencies in its supply chain and convenience. the back office.technology allows us to access valuable data that supports our ability to increase efficiencies and gain important insights about our Members’ purchasing habits. We now provide digital membership and auto-renewal for the convenience of our Members.Our logistics and distribution infrastructure is key to maximizing efficiencies. We continually review and upgrade our logistics and distribution systems in an attempt to capture efficiencies asoperating our business growsat the highest standards, providing outstanding jobs for our employees and being good stewards of the communities in sales volume,which we operate, result in geography and through activity generated by e-commerce. We utilize regional distribution centers in the U.S. and Costa Rica as well as several local distribution centers to distribute merchandise efficiently and to create flexibility to mitigate the risk of supply-chain disruption. We also seek to capture efficiencies by using specialized distribution centersPriceSmart being a good investment for produce and centralized production for categories such as bakery and meat processing.Purchasing land and constructing warehouse clubs is generally our largest ongoing capital investment. Securing land for warehouse club locations is challenging in several of our markets because suitable sites at economically feasible prices are difficult to find. We believe ownership of our real estate in many of our markets provides several advantages, including lower operating expenses, flexibility to expand or otherwise enhance our buildings, long-term control over the use of the property and potential increase of value in future years. Although we prefer to own real estate, we sometimes lease our real estate when leasing provides the best available opportunity.Our warehouse clubs currently operate in emerging markets that historically have had higher growth rates and lower warehouse club market penetration than the U.S. market. In locations where we operate, we do not currently face direct competition from U.S. membership warehouse club operators. However, we do face competition from various local and international retail formats such as hypermarkets, supermarkets, cash and carry outlets, hard discounters, home improvement centers, electronic retailers, specialty stores, convenience stores, traditional wholesale distribution and online sales. in operation for each country or territory were as follows:followsCountry/Territory Number of
Warehouse Clubs
in Operation as of August 31, 2022Number of
Warehouse Clubs
in Operation as of August 31, 2023Anticipated Warehouse Club Openings in Calendar Year 2023 Anticipated Warehouse Club Openings in Calendar Year 2024 Colombia 9 9 1 — Costa Rica 8 8 — — Panama 7 7 — — Dominican Republic 5 5 — — Guatemala 5 5 1 — Trinidad 4 4 — — Honduras 3 3 — — El Salvador 2 3 — 1 Nicaragua 2 2 — — Jamaica 2 2 — — Aruba 1 1 — — Barbados 1 1 — — U.S. Virgin Islands 1 1 — — Totals 50 51 2 1 We are currently constructingsmaller formatnew warehouse club in Medellín, Colombia, bringing the Hacienda San Andrés areatotal number of warehouse clubs in operation by the Company to 52. We have recently leased land and have plans to open our sixth warehouse club in Guatemala, located in Escuintla, approximately 40 miles south of the nearest club in the capital of Guatemala City. The club is being built on a five-acre property and is anticipated to open on November 30, 2023. We have also purchased land and plan to open our fourth warehouse club in El Salvador, located in Santa Ana, approximately 40 miles west from the nearest club in the capital of San Miguel, El Salvador, approximately 100 miles east of the capital city San Salvador, whichSalvador. The club is being built on a five-acre property and is anticipated to open in the spring of 2023. It will be our third club in El Salvador. In addition, we are proceeding with the construction of a smaller format warehouse club in the affluent El Poblado area of Medellín, Colombia. We expect to open this warehouse club, which will be our second club in Medellín and the Company’s tenth warehouse club in Colombia, in the summer of 2023.early 2024. Once these two new clubs are open, we will operate 5254 warehouse clubs.Part unique value proposition is making available to our retail and business Members a curated selection of high quality merchandise and services sourced within our region and from around the world, and valuable services, withat lower marginsprices than traditional retail stores.•Foods & Sundries consistsConsumables, consisting primarily of our grocery,groceries, cleaning supplies, and health &and beauty and canned foods products and constitutedaids, representing approximately 49% 50% of our net merchandise sales for fiscal 2022.sales;•Fresh Foods, consists primarily of ourincluding meat, produce, deli, seafood and poultry, products and constitutedrepresenting approximately 29% of our net merchandise sales for fiscal 2022.sales;•Hardlines, consists primarily of ourincluding electronics, large and small appliances, automotive, hardware, sporting goods, and toyseasonal products, and constitutedrepresenting approximately 11%of net merchandise sales for fiscal 2022.Softlines consists primarily of apparel, domestics and furniture products and constituted approximately 6% of our net merchandise sales for fiscal 2022.sales;•Other Business consists primarilySoftlines, including clothing, domestics and home furnishing products, representing approximately 5% of our food service, bakery, wellness (optical, pharmacy, and audiology) and tire center constituted approximately 5% of net merchandise sales for fiscal 2022.sales;Across various categories, we offer excitingFood service and unique seasonalbakery, representing approximately 4% of our net merchandise sales; androtational programs that offer unique value throughout the year.pharmacy, representing approximately 1% of our net merchandise sales.our suppliers to ourPriceSmart Members at a lower expense ratio than our competitors. We strive to achieve efficiencies in product distribution by minimizing the labor required to stock and display merchandise, limiting non-payroll operating expenses and maintaining low occupancy costs. For example, we offer a limited number of stock keeping units (SKUs) with large pack sizes, which allows us to keep shelves stocked with less labor cost than competitors that offer a greater number of SKUs. More recently, we also have opened distribution centers in certain of our high-volume markets to improve efficiency and in-stock rate, reduce lead times on high volume products, and mitigate risks of supply chain disruption. Our focus on driving downlowering operating costs allows us to offersupports better value and lower prices tofor our Members, which we believe helps generate Member loyalty and renewals, which in turn leads to increased sales.model in and of itself provides a competitive advantage. Our membership representsMembership targets a desirable demographic concentration with strong purchasing power in our markets. The datapower. Data we can access about our membership baseMembers not only provides better connectivity with our Members, but also enables us to identify and pursue additional opportunities to provide value for our Members. Membership has been a basic operating characteristic in the warehouse club industry, beginning over 4647 years ago at Price Club, the first membership warehouse club.club business. We believe membership promotes Member loyalty, and membership fees contribute to our ability to operate our business on lower margins than conventional retailers and wholesalers. Membership fees were equal to approximately 1.5% of net merchandise sales and 36.1%35.8% of operating income in fiscal year 2022.2023. Our Members can sign up for and renew their memberships online, which gives us another valuable digital touch point with them.has beenis the expansion of our Wellness programs,wellness services, which include our Optical, Pharmacyoptical, pharmacy and Audiologyaudiology departments. As of August 31, 2022,2023, we had 47 Optical49 optical locations, open, with eight Pharmacy10 pharmacies and five Audiology24 audiology locations open. We expect to continue ourthe rollout of Audiologyaudiology to a majority of our clubs and markets in fiscal year 2023.2024. In addition, we plan to increase our Pharmacythe number of pharmacy locations by expanding this service to all the clubs in our Panama market.and Guatemala. We believe that untapped opportunities exist to further enhance the value of our membership further in various areas. We continue to explore opportunities to provide our Members with products and services that are particularly attractive to our unique membership base while expanding current programs such as our co-branded credit card.BusinessBusiness Members. Our product selection, larger pack sizes, and low prices appeal to both business and retail consumers. Our businessBusiness Members include a broad cross section of businesses such as restaurants, institutions including schools, and other businesses that purchase products for resale or useand supplies used in their operations.businesses. These business Members represent a significant source of sales and profit and provide purchasing volume that gives us better prices from our suppliers.
49% 48.5% of our sales come from merchandise sourced in the U.S., Asia and Europe. One of the primary advantages we have compared to most of our local competitors is our United States-based buying team that sources merchandise from suppliers in the U.S. and around the world. Our buyers identify and purchase new and exciting items, including our own “Member’s Selection®” private label products. Many of these branded products are available only at PriceSmart in the markets in which we operate.over fortyalmost 50 years, following the founding of Price Club in 1976. The world of merchandising has evolved during this period, particularly with respect to how technology impacts operational efficiencies and how consumers shop. We are leveraging technological innovations we have developed to enhance our worldwide sourcing of products and make themthese products available in our developing and emerging countries in a manner that meets current consumer preferences. We operate effectively in multiple markets, many of which are relatively small, with different legal requirements, local buying opportunities, cultural norms, distribution and logistical challenges and Member preferences that require us to source the correct mix of local versusand imported merchandise. We believe that our future success is highly dependent on our capacity to continue to adapt and innovate to meet the needs of our current and future Members. We expectplan to expand our omni-channel offering to include additional services such as drop-ship and the creation of a digital business-to-business application. We also have developed better inbound and outbound online communication channels, and we are using data analytics to better understand our Members’ evolving preferences.TeamTeam.. Sherry S. Bahrambeygui is PriceSmart’s Robert E. Price has served as PriceSmart's Interim Chief Executive Officer. She has led several new transformational initiatives that have allowed us to retain the key benefits of our business model, while expanding capabilities that generate new ways of approaching our business, including an omni-channel platformOfficer since February 2023 and adoption and application of new technology and data analytics to drive growth. She has been instrumental to the evolutionChairman of the Board of Directors of the Company since its spin-off from Price Enterprises, Inc. in 1997. He served as Executive Chairman from October 2018 to February 2020. Mr. Price has served as Chief Executive Officer and President of the Company at various times during the Company’s governancehistory, including as Chief Executive Officer from April 2006 until July 2010. Mr. Price was a founder of The Price Company, which operated the Price Club, and other strategic initiatives for the past ten years, firstserved as its Chief Executive Officer and a member of its board of directors from the time of The Price Company’s founding in 1976.BoardChief Operating Officer in May 2022 and our President in December 2022. He previously served as the Company’s Executive Vice President – Operations since February 2010. Before that office, Mr. Hildebrandt held various management positions with the Company dating back to 1997. Mr. Hildebrandt was a Senior Operations Manager of DirectorsPrice/Costco from 1994 through 1996 and then as CEO and Board member since 2018. served in various management roles for The Price Company beginning in 1979.Ms. Bahrambeygui and Mr. McCleary,these executives, many other members of our management team have extensive career experience in the warehouse club business, including some who learned the warehouse club business from their time at Price Club. Their experience and knowledge represent a key strength and competitive advantage for our company. We also have retained key executives from when we acquired Aeropost in March 2018 who are experienced in developing online technology and marketing for e-commerce and who have assisted us in increasing our digital interaction with Members. We continue making investments in talent to support our technology development and other administrative functions. In March 2022, John D. Hildebrandt was appointed Acting Chief Operating Officer, and in May 2022, became the Chief Operating OfficerCompany. Strategy•Expand Real Estate Footprint withInvest in Remodeling Current PriceSmart Clubs, Adding New ClubsPriceSmart Locations and Opening More Distribution FacilitiesCenters•Increase Membership Value•Drive Incremental Sales via PriceSmart.com and Enhanced Online, Digital and Technological CapabilitiesExpand Real Estate FootprintInvest in Remodeling Current PriceSmart Clubs, Adding New PriceSmart Locations and Opening More Distribution Centers. We believe that one of the quickest and most effective ways to increase sales and profitability is to increase the size of our existing warehouse clubs and the number of parking spaces at our high-volume locations. For instance, we are currently remodeling our clubs in San Pedro Sula, Honduras, Santiago, Dominican Republic, and Port of Spain, Trinidad and Tobago. We are also currently expanding one of our clubs in San Salvador, El Salvador. We've recently entered into a lease agreement to relocate and extend our lease life for our Miraflores club, which is our highest selling location in Guatemala. The new warehouse will have increased sales floor square footage and a greater number of parking spaces, along with New Clubs and Distribution Facilities.covered parking for our Members. We continue to seekpursue opportunities to expandadd new warehouse clubs in our geographic footprint for brick-and-mortarexisting markets and to assess opportunities in new markets. In September 2023, we opened a new warehouse clubs. Weclub in Medellín, Colombia. On November 30, 2023, we plan to open aour sixth warehouse club in El Salvador locatedGuatemala in the city of San Miguel in the spring of 2023 and anotherEscuintla. Additionally, we have plans to open a new warehouse club in Medellín, ColombiaSanta Ana, El Salvador, in early 2024. Our distribution network currently consists of major distribution centers in Miami and Costa Rica, complemented by varying distribution facilities in other markets. Based on our experience with the summerCosta Rica distribution center, we believe that investing in similar distribution centers in other major markets will play a strategic role in a variety of 2023. We continueways. In addition to actively pursue club growthmajor distribution centers, PriceSmart has been investing in produce distribution centers, which enable us to purchase, process and package produce we purchase directly from farms in our markets and to evaluate opportunities in new markets. Our growth strategy, as it pertains to real estate, includes physical distribution centers of various types to support the flow of merchandise from the supplier to the Member, be it sales generated from the clubs or through PriceSmart.com. Also, the need for supply chain optionality in today’s world has proven essential. Therefore, we plan to make appropriate investments in our distribution network to maximize efficiencies, minimize supply chain disruption, maximize the efficient use of limited space in our warehouse clubs, and to provide optimal support for a growing e-commerce business. In addition to our distribution center in Miami, Florida, we also operate a regional distribution center in Costa Rica and are actively considering others. During fiscal 2022 we doubled our network of Produce Distribution Centers from two to four and are currently developing plans for two more. In some cases, these facilities also provide the opportunity to capture efficiencies by centralizing certain production activities, suchwell as bakery, meat processing, packaging, and labeling.imported produce.Value.Value. We are seeking to attract more Members and retain our current Members by expanding the benefits of being a Member of PriceSmart through sales, services, and convenience.PriceSmart. As benefits grow and the value of being a PriceSmart Member increases, adjustments to the membership fee may be warranted. A larger membership base and higher membership fee contribute to the bottom line of the business.business and can be reinvested in providing better pricing to our Members. We focus on growth of our membership base, Member renewal rates and spend per Member as part of how we determinedetermining how Members see our value. By adding more benefits that Members can only obtain with us, we expect to seebelieve we can achieve growth in the number of Members, which drives Membership income and Merchandise sales. Recent examples of enhancements we have made to the value of membership include: additional services, such as the ability for all of our Members to transact on PriceSmart.com; Click & Go™ curbside pickup and delivery service in all of our clubs; and the implementation and expansion of our Well-being initiative, which offers Opticaloptical services with free eye exams for the Memberour Members and additional members of their families and deeplylower prices on discounted eyeglass frames; Audiologyframes, audiology services with free hearing exams and deeply discounted hearing aids;aids, and, Pharmacy, which provides a significant convenience toin some of our Members.markets, pharmacies. Another way we enhance Membership value is through our private label offering, “Member’s Selection®,“Member’s Selection®” a brand whichthat is available only to PriceSmart Members. We believe the “Member’s Selection®Selection®” brand carries goodwill and is recognized in our markets for value. Private label products also provides usprovide the opportunity to source quality items locally when appropriate.locally. Select local sourcing has multiple benefits, including support of local communities in which we operate by enhancing business activity and creating direct and indirect jobs, mitigation of foreign currency exchange risk, and reduced supply chain exposure. These initiatives offer additional benefits and services for our Members, whether they choose to shop on-line, in-club, or both. In fiscal year 2022,2023, our private label sales penetration grew by 12%,represented 26.3% of total merchandise sales, up from 22.1% of the total merchandising sales in fiscal year 2021 to 24.7% infor fiscal year 2022, and we plan to continue to invest in the development of additional private label products under the “Member’s Selection®“Member’s Selection®” brand.Drive IncrementalIncrease Sales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities. We recognize the growing expectation of consumers in our markets for convenience. As a result, we continue to improve the functionality and content of PriceSmart.com and to expand our product offerings available online. We also build and apply technological tools to continue to learn more about and strengthen our relationships with each of our Members. Using data analytics, we believe we have been able to provide our Members with enhancements to the membership experience. PriceSmart.com and these tools provideprovides the opportunity for us to continually strengthen and expand the scope of our relationship with each Member and offer incremental products and services in the future. Our PriceSmart.com offering provides data that informs us regarding the potential viability of new clubs in new areas and offers us options to serve and expand into new markets without the need for a traditional brick & mortar club location. We also invest in technology to capture operational efficiencies and enhance our decision-making for the increasingly dynamic environmentenvironments in which we are in.we do business.Since our inception, webegun to routerouted more of our products from international, regional and local suppliers to regional and local distribution centers in order to improve in-stocks, and reduce inventory weeks of supply, andreduce logistics costs and theimprove working capital requirements of the business, all with the goal of giving better prices to our Members.building is designedfacility distributes both dry and refrigerated products primarily to receive, storePriceSmart clubs in Costa Rica and ship dry, refrigerated, and frozenalso ships some products to other clubs in Central America. This regionalWe anticipate that our Costa Rica distribution center has the capacity to shipwill also be fulfilling online orders for our Members, especially higher ticket products, such as major appliances and online products directlyappliances. Recently, we leased an approximately 120,000 square foot building in Panama City, Panama that will serve as a distribution center for our warehouse clubs in Panama. This distribution center will operate in a similar way to our distribution center in Costa Rica. Our management team is engaged in a comprehensive study for improving our distribution infrastructure, to better serve our Members, or to convenient pick-up locations, includinglower the net landed cost of our clubs. We are considering other strategic locations for distribution centers to drivemerchandise, enhance operating efficiencies and expand omni-channel offerings.Since the start of the COVID-19 pandemic, we have encountered numerous supply-chain challenges, including but not limited to, container shortages, port backlogs, and reduced trucking and shipping availability. Our expanded network of distribution centers has allowed for more alternative routings of shipments, increased throughput, and flexibility to be able to more effectively mitigate these challenges. Refer to Part II. “Item 7. Management’s Discussion & Analysis – Factors Affecting Our Business” for further discussion regarding these challenges and our efforts to mitigate them.Lastly, as part of our efforts to source additional high quality and healthy fresh products, and expand on our Direct Farm Program, we operate four produce distribution centers. We believe that our Direct Farm Program reduces expenses, waste and prices and allows us to offer higher quality items, while simultaneously supporting local farmers and industry. Our produce distribution centers allow us to get high-quality produce from farm-to-table quicker and more efficiently. We expect to continue to expand this program and are developing plans to build two additional produce distribution centers in more of our markets.Operating EfficiencyAs with distribution efficiency operating efficiency is a key tenet of our business model. We are constantly seeking to improve operating efficiencies, by investing in technology and by centralizing back-office capabilities and facilities for processing and producing products, such as meat and bakery.OurPriceSmart's Membership Policyisas of August 31, 2023 was approximately $35 (excluding sales tax). In Colombia, we raised the Diamond Membership fee to 100,000132,000 COP (excluding sales tax) in January 2022,2023, yielding a current Membership price of approximately $23.$75 (excluding sales$75 (excluding tax). The Platinum Membership provides Members with a 2% rebate on most items, up to an annual maximum of $500. Platinum Members can apply this rebate to future purchases at the warehouse club at the end of the annual membership period. The rebate is issued annually to Platinum Members on March 1 and expires August 31. Any rebate amount not redeemed by August 31 is recognized as breakage revenue.opt forchoose auto-renewal online.$28.0$31.1 million and $26.0$28.0 million as of August 31, 20222023 and August 31, 2021,2022, respectively. Our membership agreements provide that if our Members cancel their membership in the first 60 days, they will receive a full refund. After the initial 60 day period, Members may receive a refund for the prorated share of their remaining membership fee if they so request.suppliers and other similar measures.suppliers. There can be no assurance, however, that we will be successful in protecting our proprietary rights. While we believe that our trademarks, copyrights and other proprietary know how have significant value, changing technology and the competitive marketplace make our future success dependent principally upon our employees’ technical competence and creative skills for continuing innovation.We have noted that certain retailers within our markets are making investments in upgrading their locations and/or experimenting with different formats. These actions may result in increased competition within our markets. Further, itIt is possible that additional U.S. warehouse club operators may decide to enter our markets and compete more directly with us in a similar warehouse club format. We also face competition from online retailers, such as Amazon.com, Inc. and Mercado Libre in Colombia, and last-mile delivery services that serve our markets, and we expect that this type of competition will grow and intensify in the future. We also face competition from wholesale trade companies.2022,2023, we had approximately 10,60011,000 employees. Approximately 96% of our employees were employed outside of the United States, and about 1,800 employees were represented by labor unions.competitiveexcellent wages, above minimum wage in each region, as well as comprehensive benefit programs, which generally include life and health insurance and post-employment savings plans.Wealsoseektoidentifyopportunitiestosupportlocalbusinessesandcommunities,withthegoalofimproving the quality of life in the countries where we operate.We believe our investment in the education, training and Learningof our employees contributesis a key focus for PriceSmart, and we strive to the overall success of our business.provide opportunities for each team member to learn and grow. We believe a focus on talent development leads to long-serving, loyal employees, which improves efficiencies in operations, thus resulting in higher quality service to our Members. We provideIn fiscal year 2023, we held more than 2,700 corporate talent development learning opportunities for our employees through varioussessions, which included general leadership training as well as women-specific leadership training, in addition to courses including instructor-led internalon emotional intelligence and external programs. motivating employees. In addition, we offer a robust range of courses in technical and language skills, as well as instruction in wellness and valuable “life tools” such as the principles of managing personal or household finances, raising resilient children, and how to maintain healthy boundaries and a good work-life balance.HealthSafetyCOVID-19 pandemic brought unprecedented challengesactivities we facilitate do more than bring employees together. They create platforms for celebrating our diversity, enriching our experiences, and fueling our shared journey toward success. In addition to our business, communities, Members and employees. During the initial period of the pandemic, we prioritized the safety and well-being of our employees and Members by following applicable local and national government regulations at each of our warehouse clubs, offices, and distribution center locations. We implemented enhanced cleaning and sanitizing protocols and provided personal protective equipment to our employees, conducted contact tracing, preventative quarantining and implemented paid leave. We reinforced the education of our employees on safety, best practices of good hygiene, as well the encouraging topromoting knowledge sharing, they empower our employees to receive vaccinations as they became available. We had reserve teams of employees who did not overlap with each other so that they might step in as needed allowing those who were sick to take time off. We also had provided employee transportationgrow personally and meals to offer them a safeprofessionally, fostering an inclusive environment where we celebrate unique perspectives and reliable means to work. As the pandemic has evolved, we began pulling back on many of these activities. However, we will continue to monitor the evolution of the pandemic and related workforce trends, best practices and government regulations.strengthen our organizational culture.Seasonality and Quarterly Fluctuations20222023 at the internet address http://materials.proxyvote.com/741511 as soon as reasonably practicable after electronically filing such material with or furnishing it to the SEC.ItemItem 1A. Risk FactorsThe global novel coronavirus COVID-19 pandemic had and may continue to have an adverse effect our business, results of operations, financial condition, and liquidity.In addition to measures, we took voluntarily, the government authorities in our markets have taken actions to mitigate the spread of COVID-19, including travel restrictions, border closings, restrictions on public gatherings, stay-at-home orders and other quarantine and isolation measures. They also imposed business limitations such as mandatory temporary closures, required reduced operating hours, restrictions on segments of the population permitted to shop on particular days, customer occupancy limits and restrictions on sales of “non-essential” merchandise. Many of these policies and restrictions resulted in limiting access for our Members and adversely impacted our club operations. While all the limitations have been lifted in our markets, they could be re-imposed in the event of a resurgence of infections or if future mutations, variants or related strains of the virus become prevalent.Our business depends heavily on the uninterrupted operation of our distribution facilities located in Miami, Florida and San Jose, Costa Rica, our warehouse clubs located in Colombia, Central America and the Caribbean, and our headquarters and buying operations in San Diego, California. The operation of all of our facilities is highly dependent on our employees who staff these locations, and the coronavirus could directly threaten the health of our employees. Additionally, to protect our employees, we have trained our in-club and distribution center employees about and enforced social distancing. During much of the pandemic, most of our employees who could do so worked remotely. However, we are currently in the process of implementing a return to office plan, whereby employees work part of the week from home and the other part from a Company office. Management believes this hybrid approach allows for the continued safety of our workforce while also having the benefit of maintaining an engaging work environment and work life balance. Managing through this transition back to the office will be important to the continued success of our Company. Finally, we continue to identify alternative distribution channels in the case of closure of one or more of our distribution facilities or upstream and downstream disruption to our supply chain. Events such as these complicate and/or threaten the way we execute and the performance of our business and could have a material adverse effect or our business and operating results.Operating during the COVID-19 pandemic increased our costs of operations. Among other things, we provided personal protective equipment to our employees, employed additional cleaning and sanitizing procedures at our warehouse clubs and distribution facilities. As the pandemic has evolved and COVID-19 restrictions have decreased, we believe we will still incur some costs depending on future outbreaks or resurgences.In addition, as a result of COVID-19 and the measures designed to contain the spread of the virus, we faced and may again face delays or difficulty sourcing products, which could negatively affect our business and financial results. Certain of our suppliers had their manufacturing operations disrupted by the coronavirus outbreak, and even where goods have been completed, they had been subject to weeks-long shipping delays. If our third-party suppliers’ operations are curtailed, again, or transportation systems are disrupted, we may need to seek alternate sources of supply, which may be more expensive. If the production and distribution closures were to resume for an extended period of time, the impact on our supply chain could have a material adverse effect on our results of operations and cash flows.COVID-19,inflation, and higher interest rates and inflation could adversely impact our business in various respects.andor result in slower inventory turnover and greater markdowns of inventory, or otherwise materially adversely affect our operating results. Any prolonged outbreak of the coronavirus could resultinventory.the imposition of quarantines or closures of retailer locations, office spaces, manufacturing facilities, travel and transportation restrictions and/or import and export restrictions, any of which could contribute to a general slowdown in the global economy and the economies of the markets in which we operate. Increasing interest rates, inflation, higher fuel prices and other factors also could adversely affect the economies of the countries where we operate.economic conditions. A significant decline in the economies of the countries in which our warehouse clubs are located may lead to decreased sales and profitability,adversely affect our operating results. Economic conditions such as contraction in the financial market, increased governmental ownership or regulation of the economy, higher interest rates, andhigh rates of inflation or deflation, higher fuel prices, increased barriers to entry such as higher tariffs and taxes. The economictaxes, and other macroeconomic factors that affect our operations alsoconsumer spending may adversely affect the operations of our suppliers, which can result in an increase in the cost to usdemand for and prices of the goodsproducts we sell toin our Members or, in more extreme cases, in certain suppliers not producing goods in the volume typically available for sale to us.us for sale.Employment lawsus.regulationsbenefits costs, shipping rates, freight costs, fuel costs, utilities and other store occupancy costs, may reduce our profitability. We seek to adjust our product sales pricing, operate more efficiently, and increase our comparable store net sales to offset inflation, currency rate changes, changes in tax rates or in the countriesmethods used to calculate or collect taxes on our sales or income and other factors that can increase costs. We might not be able to adjust prices, operate more efficiently or increase our comparable store net sales in which we operate may limitthe future to a great enough extent to offset increased costs. Inflationary pressures in general and significant foreign currency devaluation such as in our Colombian market affected our ability to effect a reduction in force to reduce our labor expenses in line with declining revenues. In someadjust prices during most of fiscal year 2023. Please see Part II. “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K for further discussion of the countries in which we operate, before we could effect a reduction in force, we would need to negotiate with labor unions, demonstrate evidence of hardship or force majeure or obtain prior government approval, which may not be given in a timely manner or at all.•changes in, and inconsistent enforcement of, laws and regulations, including those related to tariffs and taxes;•the imposition of foreign and domestic governmental controls, including expropriation risks;•natural disasters;•trade restrictions, including import-export quotas and general restrictions on importation;•difficulty and costs associated with international sales and the administration of an international merchandising business;•crime and security concerns whichthat can adversely affect the economies of the countries in which we operate and which require us to incur additional costs to provide additional security at our warehouse clubs;•political instability, such as the protests and civil unrest in Colombia in 2022 and 2021, in Honduras and Nicaragua in 2019, and a general strike in Costa Rica in 2018;•product registration, permitting and regulatory compliance;•volatility in foreign currency exchange rates;•general economic and business conditions;•interruption of our supply chain.2019, respectively;2019; Costa Rica also had a general strike against tax reform measures that significantly impeded regular economic activity in 2018. Events
COVID-19 has accelerated the growth of online sales in our markets due to government-imposed restrictions on shopping and changes in consumer preferences. While major international online retailers have not established a significant penetration in any of our markets, yet, Amazon.com, Inc. continues to expand its online marketplace and make additional investments to bolster its presence in the countries where we operate.Colombia. Also, it is possible that Amazon.com, Inc. or smaller regional companies will increase the penetration of online shopping in the rest of our markets, especially given the importance of e-commerce during the COVID-19 pandemic.omnichannel experience. We currently offer our Click & Go™ online shopping,omni-channel experience through PriceSmart.com, which includes both curbside pickup and delivery are available in all markets. Operating an e-commerce platform and fulfilmentfulfillment of online orders is a complex undertaking, and there is no guarantee that the resources we have applied to this effort will result in increased revenues or improved operating performance. If we do not maintain a successful and relevant omni-channel experience for our Members, our ability to compete and our results of operations could be adversely affected.•substantial lead times needed between the procurement and delivery of product,products, thus complicating merchandising and inventory controls;•the possible loss of productproducts due to theft or potential damage to, or destruction of, ships or containers delivering goods;•product markdowns due to the prohibitive cost of returning merchandise upon importation;•product registration, tariffs, customs and shipping regulation issues in the locations we ship to and from;•ocean freight and duty costs; and•possible governmental restrictions on the importation of merchandise.requiresrequire the transmission of information associated with cashless payments. As we offer new payment options to our Members, we may be subject to additional rules, regulations and compliance requirements, along with the risk of higher fraud losses. For certain payment methods, we pay interchange and other related card acceptance fees, along with additional transaction processing fees. We rely on third parties to provide secure and reliable payment transaction processing services, including the processing of credit and debit cards, and it could disrupt our business if these companies become unwilling or unable to provide these services to us. We are also subject to payment card association and network operating rules, including data security rules, certification requirements and rules governing electronic funds transfers, which could change over time. If we fail to comply with these rules or transaction processing requirements, we may not be able to accept certain payment methods. In addition, if our internal systems are breached or compromised, we may be liable for banks’ compromised card re-issuance costs, we may be subject to fines and higher transaction fees and lose our ability to accept credit and/or debit card payments from our Members, and our business and operating results could be adversely affected. Failures or disruptions in data communication and transfer services also could significantly impact our ability to transact payments to vendors and process credit and debit card transactions. Lastly, we or our customers may experience “spoofing” transactions, particularly with respect to wire transfers, which could cause us to make payments to impostor vendors or result in our not receiving timely payment from customers for merchandise we have sold.subsidiariesmarkets (Trinidad, Barbados and Panama). A work stoppage or other limitation on operations from union or other labor-related matters could occur for any number of reasons, including as a result of disputes under existing collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements. A lengthy work stoppage or significant limitation on operations could have a substantial adverse effect on our financial condition and results of operation.2022,2023, we had 5051 warehouse clubs in operation, located in 12 countries and one U.S. territory (nine in Colombia,Colombia; eight in Costa Rica and; seven in Panama;Panama; five in the Dominican Republic and Guatemala; four in Trinidad;Trinidad; three in Honduras;Honduras and El Salvador; two each in El Salvador, JamaicaNicaragua and Nicaragua;Jamaica; and one each in Aruba, Barbados and the United States Virgin Islands). We will need to continually evaluate the adequacy of our existing infrastructure, systems and procedures, financial controls, operating controls, inventory, and safety controls and make upgrades from time to time. Moreover, we will be required to continually analyze the sufficiency of our inventory distribution channels and systems and may require additional or expanded facilities in order to support our operations. We may not adequately anticipate all the changing demands that will be imposed on these systems. Any failure of our systems or our inability to effectively update our internal systems or procedures as required could have a material adverse effect on our business, financial condition and results of operations.Click & Go™PriceSmart.com curbside pickup and delivery service, and other ongoing investments, we are increasing our investments in e-commerce, technology and other customer initiatives. The success of our e-commerce initiative continues to depend in large measure on our ability to build and deliver a seamless shopping experience across the physical and digital retail channels. If we fail to successfully implement our e-commerce initiative, our market position, net sales and financial performance could be adversely affected. In addition, a greater concentration of e-commerce sales could result in a reduction in the amount of traffic in our warehouse clubs, which would, in turn, reduce the opportunities for cross-club sales of merchandise that such traffic creates and could reduce our sales within our clubs, materially adversely affecting the financial performance of the physical retail side of our operations. In addition, our investments in e-commerce and technology initiatives will adversely impact our short-term financial performance, and our failure to realize the benefits of these investments may adversely impact our financial performance over the longer term.Our profitability is vulnerable to cost increases.Future increases in costs, such as the cost of merchandise, wage and benefits costs, shipping rates, freight costs, fuel costs, utilities and other store occupancy costs, may reduce our profitability. We seek to adjust our product sales pricing, operate more efficiently, and increase our comparable store net sales to offset inflation, currency rate changes, changes in tax rates or in the methods used to calculate or collect taxes on our sales or income and other factors that can increase costs. We might not be able to adjust prices, operate more efficiently or increase our comparable store net sales in the future to a great enough extent to offset increased costs. In the first half of fiscal year 2022, we experienced significant increases in freight costs for our merchandise sourced overseas due to the global shortage of shipping containers and supply chain disruptions. Please see Part II. “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K for further discussion of the effect of currency rate changes, inflation and other economic factors on our operations. club sales, diminish Member trust, reduce Member renewal rates and impair our ability to add new Members. A failure to maintain and enhance our reputation also could lead to loss of new opportunities or employee retention and recruiting difficulties. Negative incidents, such as a data breach or product recall, can quickly erode trust and confidence, particularly if they result in adverse publicity, governmental investigations or litigation. In particular, the propagation of negative publicity on social media, whether merited or not, can have a damaging effect on our business in one or more markets. In addition, we sell many products under our private label “Member’s Selection®” brand. If we do not maintain consistent product quality of our “Member’s Selection®” products, which generally carry higher margins than national brand products carried in our warehouse clubs, our net warehouse sales and gross margin results could be adversely affected and Member loyalty could be harmed. Also, accidents or personal injuries that sometimes occur in our facilities, such as a Member slipping and falling or product falling from a rack, could result in negative publicity or otherwise damage the Company's reputation.andor disruptions inof our systems could harm our business and adversely affect our results of operations.is increasedincreases when system changes are undertaken. Targeting the wrong opportunities, failing to make the right investments, or making an investment commitment significantly above or below our needs could result in the loss of our competitive position and adversely impact our financial condition and results of operations. Additionally, the potential problems and interruptions associated with implementing technology initiatives could disrupt or reduce the efficiency of our operations in the short term. These initiatives might not provide the anticipated benefits or may provide them on a delayed schedule or at a higher cost.Several years ago, we began evaluating options to replace our existing Enterprise Resource Planning (ERP) system. However, For example, we have intentionally deferredbegun migrating to a new point-of-sale system, Elera™, a Toshiba product, and if we are not able to successfully implement this project as originally contemplatedproduct, or experience significant delays, it may jeopardize our operations or result in order to more holistically assess our overall IT landscape and strategy. additional costs.which will require usand we plan to migrate to more industry-standard technologies. DuringSeveral years ago, we began evaluating options to replace our ERP system. However, we intentionally deferred this project as originally contemplated in order to more thoroughly assess our overall IT landscape. We have decided that the last three years, we have been updating critical enterprise systems inrisk, cost, and implementation cycle time of a way that separates our e-commerce, logistics, reporting, membership and costing systems from our datedholistic ERP system in an effort to simplify the migrationwas not a sound strategy. We have instead turned our focus to a new ERP systemcoordinated program of upgrading packaged applications and minimize disruptions. As we have separated and updated these new systems, we have soughtreplacing in-house applications with packaged applications designed to improve functionalityour capabilities with less risk, and reliability, while simultaneously reducingin less time. Upgrades planned and expected to start in fiscal year 2024 include a packaged forecast and replenishment system (RELEX) for buying and upgrades to our dependencypackaged WMS (Warehouse Management System) and TMS (Transportation Management System) for logistics. We believe these upgrades plus several projects begun in fiscal year 2023, such as our point-of-sale system replacement and e-commerce replacement, will modernize our key revenue-generating systems and reduce risk of disruption. However, if we are not successful in this strategy we might be required to operate with obsolete technology and will be subject to risks of system disruption, which would put us at a disadvantage relative to our competitors.legacy software, includinginternal support. These initiatives might not provide the anticipated benefits, may provide them on a delayed schedule or at a higher cost or may cause disruptions in our current ERP system. Nevertheless, these updates and a transition to a new ERP system will require a significant investment by us, and any failure by us to effectively design, implement and transition to new systems may adversely affect operations, Member satisfaction or sales.business.company,Company, Members, employees and vendors, could damage our reputation with them, could disrupt our operations, could cause us to incur substantial additional costs and to become subject to litigation and could materially adversely affect our operating results.due to the COVID-19 pandemic has also increased cybersecurity risk.also retained the individuals formerly employed by Aeropost who we believed would best support PriceSmart’s objectives. We could incur unforeseen expenses or other issues in connection with the separation of these businesses. In addition, we and the buyer of the legacy casillero and marketplace businesses have agreed to indemnify each other for any breach of representations and warranties we made to one another in the purchase agreement.On August 5, 2022, PriceSmart received notice Pursuant to these indemnification obligations, during fiscal year 2023, we wrote off approximately $700,000 of accounts receivable from Click USA Inc. and Aeropost Inc.to fully settle claims from Aeropost’s acquiror alleging that PriceSmart hadwe breached certain provisions of a Stock Purchase Agreement between PriceSmart and Click USA, Inc. dated October 1, 2021, concerning the sale of Aeropost, Inc. to Click USA Inc. In this notice, Click USA Inc. and Aeropost, Inc. allege that PriceSmart made inaccurate or incomplete representations and warranties relating to Aeropost, Inc.’s cyber securityregarding cybersecurity matters and the condition of its IT systems in connection with the sale. Click USA Inc. and Aeropost, Inc. further asserted that, in or around April 2022, Aeropost, Inc. suffered cyberattacks, and they seek to hold PriceSmart liable for some amount of damages due to alleged losses directly relating to the cyber-attacks as well as due to possible third-party claims as a result of the cyber-attacks. The notice suggested that aggregate losses attributable to these losses and future claims could exceed $3,000,000. Per the express terms of the agreement, the maximum amount of all losses for which PriceSmart may be liable for claims arising out of allegations concerning the above-referenced representations and warranties is $4,000,000. PriceSmart intends to vigorously defend itself and, as such, we have concluded that a loss related to this matter is not probable and any potential loss is not reasonably estimable; therefore, we have not accrued a liability for this matter.Membersmembers of our senior management and other key operations, merchandising and administrative personnel, and the loss of any such persons could have a material adverse effect on our business. We must attract, develop and retain a growing number of qualified employees, while controlling related labor costs and maintaining our core values. We compete with other retail and non-retail businesses for these employees and invest significant resources in training and motivating them. There is no assurance that we will be able to adequately attract, develop and retain highly qualified employees in the future or to execute management transitions when members of the Company’s senior leadership retire or otherwise leave the Company, which could have a material adverse effect on our business, financial condition and results of operations. We do not maintain life or disability insurance for our key executives.ratherif the resulting tax were greater than the tax payable based on a percentage of income. As a result, the Company has made and may continue to make income tax payments substantially in excess of those it would expect to pay based on taxable income, and the rules that allow the Company to obtain refunds or to offset payments that are substantially in excess of taxes payable based on taxable income are unclear or complex. We, In the meantime, we are taking other actions to recover excess taxes paid or withheld and to limit further increases in these receivables, including the possibility that we might choose in one of the jurisdictions to make income tax payments using the original computation based on a percentage of taxable income in advance of a favorable court ruling.We file federal and state tax returns in the United States and various other tax returns in foreign jurisdictions. The preparation of these tax returns requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions, which affects the amount of tax we pay. We, in consultation with our tax advisors, base our tax returns on interpretations that we believe to be reasonable under the prevailing circumstances. However, our tax returns are subject to routine reviews by the various taxing authorities in the jurisdictions in which we file our returns. As part of these reviews, a taxing authority may disagree with respect to the interpretations we used to calculate our tax liability and therefore require us to pay additional taxes.16.5%15.9% of our voting stock as of August 31, 2022,2023, which may make it difficult to complete some corporate transactions without their support and may impede a change in control.16.5%15.9% of our outstanding shares of common stock. Of this amount, approximately 74.8%73.1% (i.e., 12.3%11.6% of our total outstanding shares) is held by charitable entities. As a result of their beneficial ownership, these stockholders have the ability to significantly affect the outcome of all matters submitted to our stockholders for approval, including the election of directors. In addition, this ownership could discourage the acquisition of our common stock by potential investors and could have an anti- takeover effect, possibly depressing the trading price of our common stock.2022,2023, we had a total of 5051 warehouse clubs operating in 12 foreign countries and one U.S. territory, 40 of which operate under currencies other than the U.S. dollar. For fiscal year 2022,2023, approximately 78.0%78.8% of our net merchandise sales were in foreign currencies. We may enter into additional foreign countries in the future or open additional locations in existing countries, which may increase the percentage of net merchandise sales denominated in foreign currencies.ratesrates.2015, 2020, and 2022)fiscal 2023), the demand for, sales of, and salesprofitability of those products could be negatively impacted.has beenwas the case in Trinidad in fiscal years 2017, 2020, and 2021, which led us to reduce shipments from the U.S. to Trinidad to amounts that our Trinidad subsidiary could pay for using the amount of tradeabletradable currency that could be sourced in that market, resulting in lost sales.Assales during that fiscal year. Our balance as of August 31, 2022, our Trinidad subsidiary had2023 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars of approximately $25.0was $18.2 million, a decrease of $27.9$82.3 million from August 31, 2021, when these same balances were approximately $52.9 million. Thethe peak of $100.5 million as of November 30, 2020. However, as the Trinidad central bank strictly manages the exchange rate of the Trinidad dollar with the U.S. dollar. Whiledollar and affects the Trinidad government has publicly stated it has no intention to devalue the Trinidad dollar, it couldlevel of U.S. Dollar liquidity in the future decidemarket through its interventions, we are subject to devalue the currency to improve market liquidity, resultingcontinued challenges in a devaluation in the U.S. dollar value of these cash and investments balances. If, for example, a hypothetical 20% devaluation of the Trinidad dollar were to occur, the value ofconverting our Trinidad dollar cash and investments position, measured indollars to U.S. dollars, would decrease by approximately $5.0 million, with a corresponding increase in Accumulated other comprehensive loss reflected on our consolidated balance sheet. Separate fromas well as being exposed to the Trinidad dollar denominated cash and investments balances described above, asrisk of August 31, 2022, we had a U.S. dollar denominated monetary asset position of approximately $80.3 million in Trinidad (net of U.S. dollar denominated liabilities), which would produce a gain from a potential devaluation of Trinidad dollars. If, for example, a hypothetical 20% devaluationthe currency.Trinidad dollar occurred,Honduran Central Bank began limiting the net effect on other income (expense), net on our consolidated statementavailability and controlling the allocation of operations of revaluing these U.S. dollar denominated net monetary assets would be an approximate $16.1 million gain. While we may pay premiums or enter into financial transactions at a discount from the official government rate to convert our Trinidad dollars into U.S. dollars wefor the conversion from Honduran lempiras to U.S. dollars. As of August 31, 2023, our Honduran subsidiary had approximately $19.6 million of cash and cash equivalents denominated in lempiras, which cannot be readily converted to U.S. dollars for general use within the official exchange rate published by the Central Bank of TrinidadCompany. We are actively working with our banking partners and Tobagogovernment authorities to measure the U.S. dollar equivalent of Trinidad dollar-based revenues, expenses, assets and liabilities and the Trinidad dollar equivalent of U.S. dollar-based monetary assets and liabilities for financial reporting purposes, as there are no other reliable references available to translate or remeasure our revenues, expenses, assets and liabilities.20222023 was $32.4$32.5 million. Due to the mix of foreign currency exchange rate fluctuations during fiscal 2022,year 2023, the impact to the consolidated statements of income of revaluing this liability was immaterial.Item
ItemItem 2. Properties2022,2023, PriceSmart operated 5051 membership warehouse clubs, as detailed below:Location Own land
and buildingLease land
and/or buildingCOLOMBIA SEGMENT 8 1 CENTRAL AMERICA SEGMENT Costa Rica 8 — 3 — 3 2 Honduras 2 1 Nicaragua 2 — Panama 5 2 CARIBBEAN SEGMENT Aruba — 1 Barbados 1 — Dominican Republic 5 — Jamaica 2 — Trinidad 3 1 USVI — 1 Total 42 9 WeIn September 2023, we opened a warehouse club in Medellín, Colombia and are currently constructing and plan to open a warehouse clubsclub in San Miguel,Santa Ana, El Salvador in Spring 2023 and in Medellín, Colombia in the summer of 2023.early 2024. We own the land for each and expect to own each of the buildings upon its completion.2022,2023, sales floors of the Company’s warehouse club buildings occupied a total of approximately 2,484,1262,524,276 square feet, of which 430,588 square feet were on leased property.Contingencies ”Contingencies” for additional information regarding our legal proceedings.ItemItem 4. Mine Safety Disclosures
PARTPART IIItem21, 2022,25, 2023, there were approximately 24,689385 holders of record of the common stock. Dates Stock Price From To High Low 2023 FISCAL QUARTERS 2023 FISCAL QUARTERS First Quarter First Quarter 9/1/2022 11/30/2022 $ 73.76 $ 56.29 Second Quarter Second Quarter 12/1/2022 2/28/2023 75.92 60.01 Third Quarter Third Quarter 3/1/2023 5/31/2023 79.55 66.54 Fourth Quarter Fourth Quarter 6/1/2023 8/31/2023 82.63 69.08 2022 FISCAL QUARTERS First Quarter 9/1/2021 11/30/2021 $ 86.16 $ 70.10 Second Quarter 12/1/2021 2/28/2022 76.13 66.77 Third Quarter 3/1/2022 5/31/2022 88.30 69.53 Fourth Quarter 6/1/2022 8/31/2022 74.74 63.14 Thereno salesissued from the pool of unregisteredshares available for issuance under the Company’s Amended and Restated 2013 Equity Incentive Award Plan, as amended. The securities duringwere exempt from registration under the fiscal year ended August 31, 2022.
Date
Paid
Date
PaidDeclared Amount First Payment Second Payment Declared Record
DateDate
PaidAmount Record
DateDate
PaidAmount 2/3/2023 $ 0.92 2/16/2023 2/28/2023 $ 0.46 8/15/2023 8/31/2023 $ 0.46 2/3/2022 $ 0.86 2/15/2022 2/28/2022 $ 0.43 8/15/2022 8/31/2022 $ 0.43 2/4/2021 $ 0.70 2/15/2021 2/26/2021 $ 0.35 8/15/2021 8/31/2021 $ 0.35 all relevant factors, including, but not limited to, the uncertainty surrounding the ongoing effects of the COVID-19 pandemicuncertain macroeconomic conditions on our results of operations and cash flows.As set forth Additionally, we announced in July 2023 that the table below, duringBoard of Directors authorized a program to repurchase up to $75 million of our common stock. Subsequent to our fiscal year 2022,that ended on August 31, 2023, we successfully completed the Company repurchasedshare repurchase program. We purchased a total of 88,415approximately 1,007,000 shares of our common stock under the program. The repurchases were made on the open market pursuant to a trading plan established pursuant to Rule 10(b)5-1 under the Securities Exchange Act of 1934, as amended, which permits common stock to be repurchased at a time that we might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions. We do not expect to continue repurchases or adopt a new repurchase plan at this time. However, the Board of Directors could choose to commence another program in the indicated months. These werefuture, at its discretion, after its review of the only repurchases of equity securities made by the Company during fiscal 2022. Company’s financial performance and anticipated capital requirements.Company does not have afollowing table sets forth information on our common stock repurchase program.Period September 1, 2022 - September 30, 2022 — $ — — — October 1, 2022 - October 31, 2022 20,621 63.05 — — November 1, 2022 - November 30, 2022 — — — — December 1, 2022 - December 31, 2022 — — — — January 1, 2023 - January 31, 2023 20,329 71.42 — — February 1, 2023 - February 28, 2023 40,895 75.00 — — March 1, 2023 - March 31, 2023 774 70.15 — — April 1, 2023 - April 30, 2023 526 74.90 — — May 1, 2023 - May 31, 2023 1,094 73.52 — — June 1, 2023 - June 30, 2023 — — — — July 1, 2023 - July 31, 2023 2,650 78.61 — — August 1, 2023 - August 31, 2023 84,639 78.71 71,530 $ 69,382 Total 171,528 $ 74.99 71,530 Item
ItemItem 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This Annual Report on Form 10-K contains forward-looking statements concerning PriceSmart, Inc.'s ("PriceSmart", the "Company" or "we") anticipated future revenues and earnings, adequacy5051 warehouse clubs in 12 countries and one U.S. territory (nine in Colombia; eight in Costa Rica; seven in Panama; five in the Dominican Republic and Guatemala; four in Trinidad; three each in in Honduras and; El Salvador, two each in El Salvador, Nicaragua and Jamaica; and one each in Aruba, Barbados and the United States Virgin Islands). We opened our El Poblado club located in Medellin, Colombia on September 1, 2023. It is the Company's tenth warehouse club in that market bringing the Company's total warehouse club count to 52. The Company also plans to open newour sixth warehouse clubsclub in San Miguel,Guatemala, located in Escuintla, approximately 40 miles south of the nearest club in the capital of Guatemala City. The Escuintla club is being built on a five-acre property and is anticipated to open on November 30, 2023. We have also purchased land and plan to open our fourth warehouse club in El Salvador, located in Santa Ana, approximately 40 miles west from the nearest club in the springcapital of 2023San Salvador. The club is being built on a five-acre property and is anticipated to open in Medellearly 2024. Once íthesen, Colombia in the summer of 2023. Once these twonew clubs are open, the Companywe will operate 5254 warehouse clubs. Our corporate headquarters, U.S. buying operations and regional distribution centers are located primarily in the United States. Our operating segments are the United States, Central America, the Caribbean and Colombia. All intercompany balances and transactions have been eliminated in consolidation.high qualityhigh-quality merchandise sourced from around the world and valuable services at compelling prices in safe U.S. style clubs and through PriceSmart.com. We prioritize the well-being and safety of our Members and employees. We provide good jobs, fair wages and benefits and the opportunities for advancement. We strive to treat our suppliers right and empower them when we can.can, including both our regional suppliers and those from around the world. We conduct ourselves in a socially responsible manner as we endeavor to improve the quality of the lives of our Members and their businesses, while respecting the environment and the laws of all the countries in which we operate. TheWe also believe in facilitating philanthropic contributions to communities in which we do business. We charge Members an annual membership fee that enables us to operate our business with lower margins than traditional retail stores. As we continue to invest in technological capabilities, we are increasing our tools to drive sales and operational efficiencies. We believe we are well positioned to blend the excitement and appeal of our brick-and-mortar business with the convenience and additional benefits of online shopping and services and, meanwhile, enhance Member experience and engagement.We continue to encounter operational challenges directly or indirectly related to the COVID-19 pandemic, including increased supply chain pressures, inflation, and foreign currency fluctuations relative to the U.S. dollar. COVID-19 may continue to affect consumer purchasing behavior as it continues to evolve and may affect our ability to meet unanticipated shifts in consumer demand and could give rise to additional operating costs that could have other potential long-term impacts on our financial condition and results of operations. For additional information, refer to the risk factors discussed in Part I. “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended August 31, 2022.However, the COVID pandemic also has presented us opportunities to improve how we do business, how we serve our Members and how we treat our employees. In response to the pandemic, we:Increased our focus on expanding local sourcing and near-shoring of goods that we offer,Expedited our efforts to engage with Members online, including the launch of PriceSmart.com, andHighlighted the importance of employee well-being and accelerated our decision to ensure health coverage for all employees in our Company. We also are establishing flexible schedules and hybrid work environments for office employees in order to maximize efficiencies and provide opportunity for balance in our employees’ lives. policies and social conditions; local demographic characteristics (such as population growth); the number of years we have operated in a particular market; and the level of retail and wholesale competition in that market. The economies of many of our markets are dependent on foreign trade, tourism, and foreign direct investments. Uncertain economic conditions and slowdown in global economic growth and investment may impact the economies in our markets, causing significant declines in GDP and employment and devaluations of local currencies against the U.S. dollar. most of fiscal year 2022,2023, inflation in all of our markets and devaluations of local currencies, especially in Colombia for part of the environment we operated in was characterized by global supply chain disruption, high fuel and freight costs, inflation,year, created significant foreignheadwinds. However, some markets, especially Costa Rica, benefited from currency appreciation which helped offset the currency devaluations we experienced in other countries. Substantial product cost increases due to inflation or commodity price increases have and less predictable consumer behaviorcould continue to impact our financial results and purchasing patterns due, in part,could lead to reduced sales, fewer units sold, and/or margin pressure. Events directly or indirectly related to the COVID pandemic’s impact on consumer lifestyles.novel coronavirus outbreak (COVID-19) have resulted in market and supply-chain disruptions. These factors have increased the complexity of managing our inventory flow and business. We saw several factors pressuring supply chains, including raw material shortages, limited manufacturer capacity, factory labor shortages, container shortages, port delays, and truck and driver shortages. However, in the fourth quarter ofbusiness; however, during fiscal year 2022,2023, we saw a gradual improvement in shipping costs and a general improvement in on-time shipments fromtransit days and a reduction in freight rates of our Asia vendors. Despite the issues we experienced for most of the year, we had strong sales growth.shipping containers. We are working to hold down and/or mitigate the price increases passed on to our Members while maintaining the right inventory mix to grow sales. One key mitigating factor has been our expanded network of distribution centers, which has facilitated alternative routings of shipments,shipping routes, increased throughput, and provided flexibility to more effectively mitigate these challenges.In late fiscal year 2021, we made investments in inventory based on anticipated demand and worked with our local vendors to source alternative products in order to reduce out-of-stocks on high demand items that were impacted by these disruptions or that were affected by electronic part shortages. However, rapidly changing consumer preferences, long lead times, and supply chain disruptions led to inventory build up in somechallenges and risks more effectively.2022,year 2023, approximately 78.0%78.8% of our net merchandise sales were in currencies other than the U.S. dollar. Of those sales, 48.6%48.4% consisted of sales of products we purchased in U.S. dollars.us limited upside for sales growth given their overall market size.civilroadblocks were set up in Guatemala in October 2023 due to election results, limiting access to certain of our warehouse clubs. In addition, roadblocks also arose in Panama in October 2023 disrupting traffic to our clubs throughout most of the market as a reaction to an agreement between the Panamanian government and a mining company. Civil unrest in Colombia in response to tax reform and austerity measures paralyzed significant portions of the country’s infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal year 2021. Nicaragua and Honduras experienced anti-government protests in 2019; Costa Rica also had a general strike against tax reform measures that significantly impeded regular economic activity in 2018.thesesimilar natural disasters could adversely impact our overall sales, costs and profit performance in the future.
, particularly in Trinidad.. This can and has impeded our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products and to otherwise redeploy these funds in our Company. This illiquidity also increases our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar. DuringFor instance, during fiscal year 2021, we experienced significant limitations on our ability to convert Trinidad dollars to U.S. dollars or other tradeabletradable currencies.As Our balance as of August 31, 2022, our Trinidad subsidiary had2023 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars of approximately $25.0was $18.2 million, a decrease of $27.9 million from August 31, 2021 when these same balances were approximately $52.9 million and a decrease of $75.5$82.3 million from the peak of $100.5 million as of November 30, 2020. TheHowever, as the Trinidad central bank strictly manages the exchange rate of the Trinidad dollar with the U.S. dollar. Whiledollar and affects the Trinidad government has publicly stated it has no intention to devalue the Trinidad dollar, it couldlevel of U.S. Dollar liquidity in the future decidemarket through its interventions, we are subject to devalue the currency to improve market liquidity, resulting in a devaluation in the U.S. dollar value of these cash and investments balances.In March 2022 the International Monetary Fund updated prior calculations and estimated that the Trinidad dollar was over-valued between approximately 11.6% and 20.4%. If, for example, a hypothetical 20% devaluation of the Trinidad dollar were to occur, the value of our Trinidad dollar cash and investments position, measured in U.S. dollars, would decrease by approximately $5.0 million, with a corresponding increase in Accumulated other comprehensive loss reflected on our consolidated balance sheet. Separate from the Trinidad dollar denominated cash and investments balances described above, as of August 31, 2022, we had a U.S. dollar, Euro, and Canadian dollar denominated monetary asset position (net of U.S. dollar, Euro, and Canadian dollar denominated liabilities) of approximately $80.3 million in Trinidad, which would produce a gain from a potential devaluation of Trinidad dollars. If, for example, a hypothetical 20% devaluation of the Trinidad dollar occurred, the net effect on Other income (expense), net on our consolidated statement of operations of revaluing these U.S. dollar denominated net monetary assets would be an approximately $16.1 million gain. While we may pay premiums or enter into financial transactions at a discount from the official government rate to convert our Trinidad dollars into U.S. dollars, we use the official exchange rate published by the Central Bank of Trinidad and Tobago to measure the U.S. dollar equivalent of Trinidad dollar-based revenues, expenses, assets and liabilities and the Trinidad dollar equivalent of U.S. dollar-based monetary assets and liabilities for financial reporting purposes, as there are no other reliable references available to translate or remeasure our revenues, expenses, assets and liabilities.While our balance of Trinidad dollars has been reduced significantly in fiscal 2022, we have not yet converted all of our Trinidad dollars into U.S. dollars. In response to these liquiditycontinued challenges in Trinidad, we have been taking multiple actions, including but not limited to: raising sales prices on imported goods in Trinidad due to increased costs of conversion ofconverting our Trinidad dollars to U.S. dollars, as well as being exposed to the risk of a potential devaluation of the currency.risks associated with continued illiquidity, shifting to local sourcescontrolling the allocation of goods where appropriate, and entering into financing arrangements such as the loan we obtained in December 2021 whereby we received $25 million in U.S. dollars for the conversion from Honduran lempiras to U.S. dollars. As of August 31, 2023, our Honduran subsidiary had approximately $19.6 million of cash and will repaycash equivalents denominated in lempiras, which cannot be readily converted to U.S. dollars for general use within the balanceCompany.We are actively working with our banking partners and government authorities to address this situation.Trinidad dollars (using a conversion rate fixed upon initial disbursement) over the four-year lifeshipment of, and the loan. Additionally, we significantly limited shipmentsrisks inherent in the importation of, goods frommerchandise to our warehouse clubs. One of those difficulties is possible governmental restrictions on the U.S. to Trinidad during mostimportation of fiscal 2021 due tomerchandise. In late May 2023, disputes with Nicaraguan customs and tax authorities resulted in delays in the illiquidityissuance of our importation clearance, and general delays in the Trinidad dollar and further reduced our shipmentscustoms inspection process. While this situation has occurred frequently in the last quarterfew years, we generally have been able to plan around these import blockages and resume within a manner of fiscal 2021 because ofdays. However, the government-imposed restrictions on sales of non-essential items during that period driven by the pandemic. We no longer limitmost recent delay in obtaining importation clearance, resulted in us being unable to import merchandise into Nicaragua for several weeks in June. While at this time our U.S imports; however,tax clearances and imports seem to have returned to a more normal cadence, we continue to seek sourcing opportunitiesmonitor this situation closely and are working with local vendors and we areofficials to seek continuity of imports into Nicaragua as well as the other jurisdictions in the process of opening a package manufacturing plant in Trinidad in fiscal year 2023, which we expect will improve our ability to source more tradable foreign currencies by exporting products to our other markets.20222023 included:•Total revenues increased 12.3%9.5% over the comparable prior year period.•Net merchandise sales increased 13.6%10.0% over the comparable prior year period. We ended the quarter with 5051 warehouse clubs compared to 4750 warehouse clubs at the end of the fourth quarter of fiscal year 2021. Foreign currency exchange rate fluctuations impacted net2022. Net merchandise sales negatively by 2.9% versus- constant currency increased 6.4% over the same three-month period in thecomparable prior year.year period.•Comparable net merchandise sales (that is, sales in the 4750 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 1413 weeks ended September 4, 20223, 2023 increased 9.2%8.8%. Foreign currency exchange rate fluctuations impacted comparableComparable net merchandise sales negatively by 2.7%- constant currency for the 13 weeks ended September 3, 2023 increased 5.2%.•Membership income for the fourth quarter of fiscal year 20222023 increased 6.7%10.6% to $15.6$17.2 million over the comparable prior year period.•Total gross margins (net merchandise sales less associated cost of goods sold) increased 11.1%10.6% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 15.5%15.6%, a decreasean increase of 4010 basis points (0.4%)or 0.1% from the same period in the prior year.•Selling, general and administrative expenses increased $25.2 million or 18.8% compared to the fourth quarter of fiscal year 2022, primarily due to $9.2 million of costs associated with the reserve for the AMT settlement and $5.7 million of asset impairment and closure costs as well as higher compensation, depreciation, and professional fees.20222023 was $39.0$32.1 million, an increasea decrease of 20.0%17.5%, or $6.5$6.9 million, compared to the fourth quarter of fiscal year 2021.2022, primarily due to costs associated with the reserve for the AMT settlement and asset impairment and closure costs.•We recorded a $1.3$1.5 million net currency loss from currency transactionsin total other expense, net in the fourth quarter of fiscal year 20222023 compared to a $1.4$3.5 million net currency loss in total other expense, net in the same period last year.year primarily due to an increase in interest income of $3.0 million, comparatively, because of significantly more investments of surplus cash at higher yields, and partially offset by an increase in other expense of $1.0 million, primarily due to an increase in total foreign currency transaction losses.•Our effective tax rate decreasedincreased in the fourth quarter of fiscal year 20222023 to 34.2%49.9% from 35.5%34.2% in the fourth quarter of fiscal year 2021.2022. The decreaseincrease in the effective tax rate isversus the prior year was primarily relatedattributable to the favorablecomparably unfavorable impact of 11.6% due to the AMT settlement and 5.4% unfavorable impact from changes in income tax liabilities from uncertain tax positions.asset impairment and related closure costs.20222023 was $15.4 million, or $0.49 per diluted share, inclusive of a negative impact of $0.30 per diluted share for costs related to the reserve for the AMT settlement and $0.18 per diluted share of asset impairment and closure costs, compared to $23.3 million, or $0.75 per diluted share, compared to $19.5 million, or $0.63 per diluted share, in the fourth quarter of fiscal year 2021.2022.20222023 included:•Total revenues increased 12.3%8.5% over the comparable prior year.year period.•Net merchandise sales increased 13.8%9.0% over the comparable prior year.year period. We ended the year with 5051 warehouse clubs compared to 4750 warehouse clubs at the end of fiscal year 2021. Foreign currency exchange rate fluctuations impacted net2022. Net merchandise sales negatively by 2.3%.- constant currency increased 8.3% over the comparable prior year period.•Comparable net merchandise sales (that is, sales in the 4750 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 5352 weeks ended September 4, 20223, 2023 increased 10.4% compared to7.1%. Comparable net merchandise sales - constant currency for the 5352 weeks ended September 5, 2021. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by 2.2%3, 2023 increased 6.3%.•Membership income for fiscal year 2022 increased 8.7%8.5% to $60.9$66.0 million.Trailing 12 month membership renewal rate was 88.9%.•Total gross margins (net merchandise sales less associated cost of goods sold) increased 9.4%12.2% over the prior year,prior-year period, and merchandise gross profits as a percent of net merchandise sales were 15.3%15.8%, a decreasean increase of 7050 basis points (0.7%)or 0.5% from the same period in the prior year.•Selling, general and administrative expenses increased $60.7 million or 11.8% compared to fiscal year 2022. We incurred $7.7 million of CEO departure-related costs, $9.2 million of costs related to the reserve for the AMT settlement, and $5.7 million of asset impairment and closure costs in the current-year period.for fiscal year 2022 was $167.1$184.5 million, an increase of 5.7%10.4%, or $9.1$17.4 million, compared to fiscal year 2021.2022, primarily due to costs associated with the reserve for the AMT settlement and asset impairment and closure costs.•We recorded a $7.4 million net currency loss from currency transactions in the current year compared to a $5.4$15.3 million net loss in total other expense, net in fiscal year 2023 compared to a $10.6 million net loss in total other expense, net in the prior year.same period last year primarily due to an increase of $10.9 million of other expense, which is primarily foreign currency transaction losses, partially offset by an increase of $7.7 million in interest income comparatively.•The effective tax rate for fiscal year 20222023 was 33.2%35.4% as compared to the effective tax rate for fiscal year 20212022 of 33.3%33.2%. The decreaseincrease is primarily driven by the effectcomparably unfavorable impact of the change in foreign currency valuewrite-offs of VAT receivables, Aeropost write-offs and asset impairment and related adjustments.closure costs of 2.2% and a 1.8% unfavorable impact due to the AMT settlement. This was partially offset by a greater portion of income falling into lower tax jurisdictions which resulted in a 2.0% favorable impact.•Net income attributable to PriceSmart for fiscal year 20222023 was $109.2 million, or $3.50 per diluted share, inclusive of a negative impact of $0.30 per diluted share for costs related to the reserve for the AMT settlement and $0.18 per diluted share of asset impairment and closure costs, compared to $104.5 million, or $3.38 per diluted share, in the comparable prior year period.$98.0adjusted net income of $103.1 million, or $3.18an adjusted $3.33 per diluted share, in the comparable prior year period.
Three Months Ended Years Ended August 31,
2023August 31,
2022August 31,
2023August 31,
2022Net income attributable to PriceSmart as reported $ 15,381 $ 23,304 $ 109,205 $ 104,534 Adjustments: — — 7,747 — — — — (2,736) — — 2,786 — — — 2,309 — 5,658 — 5,658 — (948) — (948) — 266 — (284) 1,280 Adjusted net income attributable to PriceSmart $ 20,357 $ 23,304 $ 126,473 $ 103,078 Net income attributable to PriceSmart per diluted share $ 0.49 $ 0.75 $ 3.50 $ 3.38 Separation costs associated with Chief Executive Officer departure — — 0.23 — Gain on sale of Aeropost subsidiary — — — (0.05) Aeropost-related write-offs — — 0.09 — VAT receivable write-off — — 0.08 — Asset impairment and closure costs 0.18 — 0.18 — Gain on acquisition of building (0.02) — (0.02) — Adjusted net income attributable to PriceSmart per diluted share $ 0.65 $ 0.75 $ 4.06 $ 3.33 Three Months Ended Years Ended August 31,
2023August 31,
2022August 31,
2023August 31,
2022Net income attributable to PriceSmart as reported $ 15,381 $ 23,304 $ 109,205 $ 104,534 Adjustments: Interest expense 2,710 2,787 11,020 9,611 Provision for income taxes 15,304 12,129 59,951 51,858 Depreciation and amortization 19,434 17,610 72,698 67,868 Interest income (3,611) (661) (9,871) (2,201) 2,361 1,402 14,156 3,235 — — 7,747 — — — 2,786 — — — 2,309 — 5,658 — 5,658 — Adjusted EBITDA $ 57,237 $ 56,571 $ 275,659 $ 234,905 20222023 to 202120222023 and 20212022 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report. For a comparison of the fiscal years ended August 31, 20212022 and 2020,2021, please see Part II. “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 20212022 filed with the SEC on October 21, 2021.31, 2022. Unless otherwise noted, all tables present U.S. dollar amounts in thousands. Certain percentages presented are calculated using actual results prior to rounding. Our operations consist of four reportable segments: Central America, the Caribbean, Colombia and the United States. The Company’s reportable segments are based on management’s organization of these locations into operating segments by general geographic location, which are used by management and the Company's chief operating decision maker in setting up management lines of responsibility, providing support services, and making operational decisions and assessments of financial performance. Segment amounts are presented after converting to U.S. dollars and consolidating eliminations. From time to time, we revise the measurement of each segment's operating income, including certain corporate overhead allocations, and other measures as determined by the information regularly reviewed by our chief operating decision maker. When we do so, the previous period amounts and balances are reclassified to conform to the current period's presentation. club sales in the reportable segments in which we operate and the percentage growth in net merchandise sales by segment during fiscal years 20222023 and 2021.Years Ended August 31, 2023 August 31, 2022
sales
salesAmount % of net
salesIncrease/ (Decrease) from prior year Change Amount % of net
salesCentral America $ 2,620,002 60.9 % $ 283,502 12.1 % $ 2,336,500 59.2 % Caribbean 1,250,700 29.1 111,377 9.8 1,139,323 28.9 Colombia 430,004 10.0 (38,990) (8.3) 468,994 11.9 Net merchandise sales $ 4,300,706 100.0 % $ 355,889 9.0 % $ 3,944,817 100.0 % 13.8%9.0% for fiscal year 20222023 compared to fiscal year 2021,2022, driven by a 10.4%3.6% increase in transactions and a 3.1%5.2% increase in average ticket. Transactions represent the total number of visits our Members make to our warehouse clubs plusresulting in a sale and the total number of Click & Go™PriceSmart.com curbside pickup and delivery service transactions. Average ticket represents the amount our Members spend on each visit or Click & Go™PriceSmart.com order. We had 5051 clubs in operation as of August 31, 20222023 compared to 4750 clubs as of August 31, 2021.2022.13.2%12.1% during fiscal year 2022.2023. This increase had a 780720 basis point (7.8%(7.2%) positive impact on total net merchandise sales growth. All markets within this segment showed increasedhad positive net merchandise sales growth for the twelve-month period ended August 31, 2022.2023. We added one new club to the segment when compared to the comparable prior-year period. We opened our fifththird warehouse club in GuatemalaEl Salvador in October 2021.15.3%9.8% during fiscal year 2022.2023. This increase had a 440280 basis point (4.4%(2.8%) positive impact on total net merchandise sales growth. All of our markets in this segment had positive net merchandise sales growth. Sales for Trinidad were particularly strong for the twelve months ended August 31, 2022 because sales in the comparable fiscal second and third quarters of 2021 were adversely impacted by COVID-19 closures, government prohibitions on sales of most non-foods and non-essential items, and our decision to reduce imported merchandise due to the U.S. dollar liquidity challenges, which improved in the last three quarters of fiscal 2022. Refer to “Management’s Discussion & Analysis – Factors Affecting Our Business” for more information regarding the impact on us of the illiquidity of the Trinidad dollar. We added one new club to the segment when compared to the comparable prior-year period. We opened our second warehouse club in Jamaica in April 2022.increased 13.7%decreased 8.3% during fiscal year 2022.2023. This increasedecrease had a 160100 basis point (1.6%(1.0%) positivenegative impact on total net merchandise sales growth. The primary driver of the increaseddecreased sales for the year was due to the additional club added tosignificant devaluation of the segment whenColombian peso during the first three quarters of fiscal year 2023. During the fourth quarter of fiscal year 2023, the Colombian peso appreciated compared to the comparable prior year period. We opened our ninth warehouse club in Colombia in November 2021. For the three months ended August 31, 2022,period and net merchandise sales growth slowed to 7.6% as measuredgrew 2.1% in U.S. dollarsthe fourth quarter of fiscal year 2023 compared to the same quarterperiod in the prior year, as currency exchange rate fluctuations impacted sales negatively by 11.3%. Net merchandise sales growth decreased further to 1.8% in September 2022 (fiscal 2023) as measured in U.S. dollars compared to the same month in the prior year, as currency exchange rate fluctuations impacted sales negatively by 14.1% in Septemberyear.as athe percentage ofchange from the twelve-month period ended August 31, 2023. When we use the term "net merchandise sales - constant currency", it means that we have translated current year net merchandise sales forat prior year monthly average exchanges rates. Net merchandise sales - constant currency results exclude the year ended August 31, 2022.Net Merchandise Sales Net Merchandise Sales - Constant Currency Impact of Foreign Currency Exchange Net Merchandise Sales Growth/ (Decline) Net Merchandise Sales - Constant Currency Growth % Impact of Foreign Currency Exchange Central America $ 2,620,002 $ 2,534,980 $ 85,022 12.1 % 8.5 % 3.6 % Caribbean 1,250,700 1,245,517 5,183 9.8 9.3 0.5 Colombia 430,004 492,581 (62,577) (8.3) 5.0 (13.3) Consolidated total Consolidated total $ 4,300,706 $ 4,273,078 $ 27,628 9.0 % 8.3 % 0.7 % $78.6$27.6 million, or 23070 basis point (2.3%(0.7%), negative positive impact on net merchandise sales for the twelve-months ended August 31, 2022.2023.$48.1$85.0 million, or 230360 basis point (2.3%(3.6%), negativepositive impact on net merchandise sales in our Central America segment for the twelve months ended August 31, 2022.2023. These currency fluctuations contributed approximately 140220 basis points (1.4%(2.2%) of negativepositive impact on total net merchandise sales for fiscal year 2022.2023. The Costa Rica Colócolón depreciatedappreciated significantly against the dollar as compared to the same period a year ago, which was a significant contributing factor to the unfavorablefavorable currency fluctuations in this segment.$6.7$5.2 million, or 7050 basis point (0.7%(0.5%), positive impact on net merchandise sales in our Caribbean segment for the twelve months ended August 31, 2022.2023. These currency fluctuations contributed approximately 2010 basis points (0.2%(0.1%) of positive impact on total net merchandise sales growth for the current fiscal year period. The positive impact was primarily driven by the appreciation of the Dominican Republic market experienced currency appreciation whenpeso as compared to the same periodsperiod last year.$37.2$62.6 million, or 9001,330 basis point (9.0%(13.3%), negative impact on net merchandise sales in our Colombia segment for the twelve months ended August 31, 2022.2023. These currency fluctuations contributed approximately 110160 basis points (1.1%(1.6%) of negative impact on total net merchandise sales for the current fiscal year period.20222023 and 2021.Years Ended August 31, 2023 2022 Foods & Sundries 50 % 49 % Fresh Foods 29 29 Hardlines 11 11 Softlines 5 6 Other Business 5 5 Net Merchandise Sales 100 % 100 % and Hardlines each decreasedincreased approximately 1%, while Softlines and Other Business each increaseddecreased approximately 1% between fiscal year 20222023 and 2021.2022. Shifts in consumer preferences and in-club traffic increases as a result of the lessening of COVID-19 restrictions contributed to the changes in category mix.
1/2½ calendar months before its results for the current period were compared with its results for the prior period.period. As a result, sales related to twoone of our warehouse clubs opened during calendarfiscal year 2021 and one opened in April 2022 2023 will not be used in the calculation of comparable sales until they have been open for at least 13 ½ months. Therefore, comparable net merchandise sales includes 47include 50 warehouse clubs for the fifty-threefifty-two week period ended September 4, 2022.3, 2023fifty-three-weekfifty-two week period ended September 3, 2023, compared to the same fifty-two week period of the prior year and the fifty-three week period ended September 4, 2022 compared to the same fifty-three-weekfifty-three week period of the prior year andyear:the fifty-two-week period August 29, 2021 compared to the fifty-two-week period of the prior year.% Increase/(Decrease)
in Comparable
Net Merchandise SalesFifty-Two Weeks Ended Fifty-Three Weeks Ended
in comparable
net merchandise sales
in comparable
net merchandise salesSeptember 3, 2023 September 4, 2022 Central America 10.9 % 10.4 % Caribbean 5.9 12.7 Colombia (9.2) 4.5 Consolidated comparable net merchandise sales 7.1 % 10.4 % 53-weekfifty-two week period ended September 4, 20223, 2023 increased 10.4%7.1%.10.4%10.9% for the 53-weekfifty-two week period ended September 4, 2022 compared to3, 2023. The positive comparable net merchandise sales growth for our Central America segment contributed approximately 650 basis points (6.5%) of positive impact in total comparable merchandise sales.53-week periodfifty-two weeks ended September 5, 2021. This increase3, 2023, strong performance in our largest market, Costa Rica, contributed approximately 620340 basis points (6.2%(3.4%) of the increase inpositive impact on total comparable net merchandise sales.For During the 53 weeks ended September 4, 2022, strong performance inyear, Costa Rica experienced significant appreciation of the Costa Rica colón versus the comparable prior year period, which positively affected comparable net merchandise sales. The relatively smaller markets of Honduras, Guatemala, Nicaragua, Honduras, and El Salvador, along with our second largest market, Panama, contributed approximately 510310 basis points (5.1%(3.1%) of positive impact on the segment’stotal comparable net merchandise sales. This increase was combined with a 110 basis point (1.1%) positive impact on the segment’s comparable net merchandise sales from our largest market, Costa Rica. During the year, Costa Rica experienced foreign currency exchange headwinds, with the Costa Rica Colón devaluing versus the comparable prior year period.Comparable net merchandise sales in our12.7%5.9% for the 53-weekfifty-two week period ended September 4, 2022.3, 2023. This increase contributed approximately 370170 basis points (3.7%(1.7%) of positive impact in total comparable net merchandise sales.53-weekfifty-two week period, partially due to foreign currency exchange appreciation, with 19.6% of comparable sales growth. Trinidad also contributed strong12.4% comparable net merchandise sales growth, with 12.4% increase for the 53-week period.increased 4.5%decreased 9.2% for the 53-weekfifty-two week period ended September 4, 2022.3, 2023. This increasedecrease contributed approximately 50110 basis points (0.5%(1.1%) of negative impact to the increase in total comparable net merchandise sales. The year-to-date increasedecrease is primarily due to year-over-year improvements inthe foreign currency devaluation.growth due to- constant currency", it means that we have translated current year comparable net merchandise sales at prior year monthly average exchanges rates. Comparable net merchandise sales - constant currency results exclude the comparably improved COVID-19 situation.table illustratestables illustrate the comparable net merchandise sales - constant currency percentage growth and the impact that changes in foreign currency exchange rates had on our comparable net merchandise sales in dollars and as a percentage of comparable net merchandise salesgrowth for the 53-weekfifty-two week period ended September 4, 2022.
Fifty-Two Weeks Ended September 3, 2023 Comparable Net Merchandise Sales Growth/ (Decline) Comparable Net Merchandise Sales - Constant Currency Growth % Impact of Foreign Currency Exchange Central America 10.9 % 7.3 % 3.6 % Caribbean 5.9 5.5 0.4 Colombia (9.2) 3.9 (13.1) Consolidated comparable net merchandise sales 7.1 % 6.3 % 0.8 % approximately $76.2 million, or 22080 basis point (2.2%(0.8%), negative positive impact on comparable net merchandise sales for the 53-weekfifty-two week period ended September 4, 2022.140240 basis points (1.4%(2.4%) of the negativepositive impact on total comparable net merchandise sales for the 53-weekfifty-two week period ended September 4, 2022. This is primarily the result of significant devaluation in the3, 2023. Our Costa Rica Colón againstmarket was the U.S. dollarmain contributor as the market experienced currency appreciation when compared to the same period a year ago.2010 basis points (0.2%(0.1%) of positive impact on total comparable net merchandise sales for the 53-weekfifty-two week period ended September 4, 2022.3, 2023. Our Dominican Republic market experienced currency appreciation while Jamaica market experienced currency devaluation when compared to the same period last year.100170 basis points (1.0%(1.7%) of negative impact on total comparable net merchandise sales for the 53-weekfifty-two week period ended September 4, 2022.3, 2023. This reflects the devaluation of the Colombia peso throughout fiscal year 2023 when compared to the same period a year ago.
income % to
net merchandise
club salesYears Ended August 31,
2023August 31,
2022Amount % of Total Operating Income Increase/ (Decrease) from prior year % Change Amount % of Total Operating Income Membership income - Central America $ 39,707 $ 3,698 10.3 % 1.5 % $ 36,009 Membership income - Caribbean 17,635 1,290 7.9 1.4 16,345 Membership income - Colombia 8,706 173 2.0 2.0 8,533 Membership income - Total $ 66,048 35.8 % $ 5,161 8.5 % 1.5 % $ 60,887 36.4 % Number of accounts - Central America 1,005,609 53,780 5.7 % 951,829 Number of accounts - Caribbean 467,661 13,964 3.1 453,697 Number of accounts - Colombia 334,345 (22,920) (6.4) 357,265 Number of accounts - Total 1,807,615 44,824 2.5 % 1,762,791 2022year 2023 was 5.5%2.5% higher than the prior year period. Membership income increased 8.7%8.5% compared to the comparable prior-year period.across all operatingin our Central America, Caribbean, and Colombia segments in the twelve months ended August 31, 2022.2023. The consolidated increase in membership income is primarily due to an increasingincrease in the membership base since the start of fiscalcomparable prior year 2022.period. Since August 31, 2021, all2022, our Central America and Caribbean segments have increased their membership base while our Colombia segment has faced a decline in its membership base. Inflation and significant foreign currency devaluation have adversely impacted our Members in that market. Despite the decline in membership base, our Colombia had the largestsegment saw an increase in membership baseincome due to an increase in fiscal year 2022 with 6.3% growth, followed by the Caribbean with a 5.6% increase and Central America with a 5.2% increase. In fiscal year 2022, we opened a new club in each of Colombia, the Caribbean, and Central America.ourthe Platinum Membership program in all locations where PriceSmart operates. The annual fee for a Platinum Membership in most markets is approximately $75. The Platinum Membership program provides Members with a 2% rebate on most items, up to an annual maximum of $500. We record the 2% rebate as a reduction on net merchandise sales at the time of the sales transaction. Platinum Membership accounts were 7.4%are 8.9% of our total membership base as of August 31, 2022,2023, an increase from 6.2%7.4% as of August 31, 2021.2022. Platinum Members tend to have higher renewal rates than our Diamond Members. For fiscal year 2023, our auto-renewal process accounted for approximately 6.9% of our total membership renewals.88.9%86.9% and 89.6%88.9% for the periods ended August 31, 20222023 and August 31, 2021,2022, respectively. Approximately 13% and 16% primarily of non-merchandise revenue from freight and handling fees generated from the marketplace and casillero operations we sold in October 2021, income from theour interest-generating portfolio offrom our co-branded credit cards, and rental income from operating leases where the Company is the lessor.Years Ended August 31, 2023 August 31, 2022 Amount Increase/ (Decrease) from prior year % Change Amount Non-merchandise revenue $ — $ (3,307) (100.0) % $ 3,307 Miscellaneous income 11,173 1,776 18.9 9,397 Rental income 2,174 (294) (11.9) 2,468 Other revenue $ 13,347 $ (1,825) (12.0) % $ 15,172 20222023 to 202120222023 was the sale of our Aeropost subsidiary and its marketplace and casillero operations on October 1, 2021. This was partially offset by an increase in Miscellaneous revenue due to an increase in incentive fee revenue on our co-branded credit cards. For additional information on the results of the disposition, refer to “Index to Consolidated Financial Statements: Notes to Consolidated Financial Statements, Note 2 – Summary of Significant Accounting Policies.” This decrease was partially offset by an increase from our interest-generating portfolio from our co-branded credit cards for the year ended August 31, 2022.Years Ended Results of Operations Consolidated August 31, 2023 August 31, 2022 (Amounts in thousands, except percentages and number of warehouse clubs) Net merchandise sales Net merchandise sales $ 4,300,706 $ 3,944,817 Total gross margin $ 678,352 $ 604,755 Total gross margin percentage 15.8% 15.3% Revenues Total revenues $ 4,411,842 $ 4,066,093 Percentage change from comparable period 8.5% 12.3% Comparable net merchandise sales Total comparable net merchandise sales increase 7.1% 10.4% Total revenue margin Total revenue margin $ 759,331 $ 681,148 Total revenue margin percentage 17.2% 16.8% Selling, general and administrative Selling, general and administrative $ 574,815 $ 514,082 Selling, general and administrative percentage of total revenues 13.0% 12.6% Operational data $ 275,659 $ 234,905 Warehouse clubs at period end 51 50 Warehouse club sales floor square feet at period end 2,524 2,484 Consolidated(Amounts in thousands, except percentages— Non - GAAP Financial Measures” for the definition of Adjusted EBITDA and number of warehouse clubs)a reconciliation to GAAP net income attributable to PriceSmart as reported.Years Ended Results of Operations Consolidated August 31,
2023August 31,
2022Operating income- by segment Central America $ 191,721 4.3 % $ 171,119 4.2 % Caribbean 87,223 2.0 79,022 1.9 Colombia 15,467 0.4 22,526 0.6 United States 29,844 0.7 23,364 0.6 (139,739) (3.2) (128,965) (3.2) Operating income - Total $ 184,516 4.2 % $ 167,066 4.1 %
Revenue
Revenueonupon consolidation of intersegment transactions.disclosed.Years Ended
Revenue
RevenueAugust 31, 2023 August 31, 2022 Selling, general and administrative detail: Warehouse club and other operations $ 417,272 9.4 % $ 378,161 9.3 % General and administrative 134,783 3.1 133,185 3.3 Reserve for AMT settlement Reserve for AMT settlement 7,179 0.2 — — Separation costs associated with Chief Executive Officer departure Separation costs associated with Chief Executive Officer departure 7,747 0.2 — — Pre-opening expenses 1,432 — 1,471 — Asset impairment and closure costs Asset impairment and closure costs 5,658 0.1 — — Loss on disposal of assets 744 — 1,265 — Total Selling, general and administrative $ 574,815 13.0 % $ 514,082 12.6 % 2022,2023 was 15.3%15.8%, 7050 basis points (0.7%(0.5%) lowerhigher than the comparable prior year period. This decreaseperiod, respectively. Approximately 30 basis points (0.3%) of this increase was primarily due to increasedlower markdowns versuswhen compared to the comparable prior fiscal year period and a reduction in the premium we applied to our sales prices to offset our COVID-related operating costs. During 2021, while experiencing strong sales and projecting high demand for our long-lead time merchandise, we were also noting increases in costs of merchandise.period. We proceeded to purchase merchandise at higher-than-normal volumes to secure good pricing and in-stock positions. That, combined with higher-than-normal freight and fuel costs, subsequent COVID-related Asia port closures and other supply-chain disruptions hampered the expected cadence of inventory flow, resulting in, among other things, seasonal merchandise arriving too late for the applicable season. We also did not attain the levels of sales we projected for certain non-food categories. As a result, we took significantly higher than usualsignificant markdowns in the third quarter of fiscal year 2022 when we had excessive amounts of slow-moving inventory because of changing consumer preferences as Members began to resume buying patterns similar to our pre-pandemic sales mix. In addition, supply chain disruptions and incurred approximately 40 basis points (0.4%) of margin compressionshipping delays in the fourth quarterprior-year period led to our having excess out-of-season merchandise that we chose to liquidate to free up sales floor space for the holiday season last year. Our food service and bakery margins increased in fiscal year 2023 compared to the prior year fourth quarter asperiod contributing another 30 basis points (0.3%) to the increase and our freight and handling costs decreased during fiscal year 2023 which contributed an additional 10 basis points (0.1%) to the increase. This was partially offset by our elimination of a COVID premium we continuedincluded in the price of merchandise we sold and services we provided, contributing negative 20 basis points (0.2%) to sell through pockets of excess merchandise.decreased 100increased 40 basis points (1.0%(0.4%) for the twelve months ended August 31, 2022,2023 compared to the prior-year period, which is primarily the result of the sale on October 1, 2021 of our casillero and marketplace business, which had higher revenue margins than our core operations, along with the lower total gross margin percentageas a percent of 70net merchandise sales of 50 basis points (0.7%(0.5%).selling,Selling, general and administrative expenses increased by $27.6$60.7 million or 5.7% year-over-year but decreasedcompared to the prior year and increased 40 basis points (0.4%) to 13.0% of total revenue for fiscal year 2023 compared to 12.6% of total revenues for fiscal year 2022 comparedoffset, in part, by our Interim Chief Executive Officer's election not to 13.4%receive compensation.2021.Warehouse club and other operations expenses decreased2023 compared to 9.3% of total revenues for fiscal year 2022, compared to 9.9% for fiscal year 2021, primarily due to the elimination for most of fiscal year 2022 of operating expenses associated with our casillero and marketplace business due to the sale of Aeropost on October 1, 2021. The 50Costa Rica market which increased 20 basis point savings resulting from the Aeropost sale was supplemented by reduced warehouse club and other operations expensespoints (0.2%) as a percentage of revenue inyear over year due to the appreciation of the Costa Rica colón, and partially offset by our Costa RicaColombia market which decreased 10 basis points (0.1%) primarilyas a percentage of revenue year over year due to higher sales volumes driving favorable leverage in expenses and the devaluation of the Costa Rica Colón.3.3%3.1% of total revenues for the current year compared to 3.5%3.3% for the prior fiscal year. The 20 basis point (0.2%) decrease is primarily due to a 50 basis point (0.50%) decrease from the reduction inleveraging of general and administrative expenses duewhile revenues increased in fiscal year 2023 compared to the prior year.Aeropost. This decrease was partially offsetour Trinidad sustainable packaging plant to their estimated fair value upon our decision to seek to sell the plant. We planned to use the plant to increase efficiencies by eliminating intermediaries in packaging and labeling and manufacturing some of our packaging materials using compostable or recyclable inputs. However, we found that achieving economic feasibility for this business proved challenging. Therefore, we decided to refocus our efforts on our core competencies as a 30 basis point (0.30%) increase fromretailer and redeploy assets we could use in our continued investmentsclub business and seek a buyer for the remainder.supportsettle litigation regarding several AMT cases in one of our technology development, talent acquisition, and employee development. Given our strategic initiatives,markets where the application of complex tax laws are subject to interpretation. In that country, we intendhad challenged AMT rules requiring us to continue to invest at comparable levels aspay taxes based on a percentage of sales if the percentage of sales method resulted in a higher amount of tax payable than the amount payable based on taxable income at the statutory rate. Of this amount, $1.0 million relates to our write-off of an income tax receivable we had recorded with respect to taxes we previously paid on the percentage of sales basis in one tax year and for which we had sought a refund that we now no longer expect to receive. We will make a payment of $6.2 million to resolve amounts due for tax years in which we made tax payments using the original computation based on taxable income rather than the percentage of sales method. As part of the settlement, going forward we will pay the higher of the minimum tax or the amount based on taxable income at the statutory rate. As a result, we have accrued an additional $2.0 million of AMT for fiscal year 2023. For the three and twelve-months ended August 31, 2023, net income attributable to PriceSmart was negatively impacted by $9.2 million in total revenue, or at higher levels under appropriate circumstances, especially in talent and technology, to enhance our competence and support our three drivers of growth.20222023 increased to $167.1$184.5 million (4.1%(4.2% of total revenue) compared to $158.0$167.1 million (4.4%(4.1% of total revenue) for the same period last year. This reflectsOperating income was impacted negatively by $9.2 million (0.2% of total revenue) for costs related to the decreasereserve for the AMT settlement and $5.7 million (0.1% of total revenue) of asset impairment and closure costs.total revenue margin of 100 basis points (1.0%), partially offset by an 80 basis point (0.8%) increasefixed income securities and deposits held with financial institutions. The interest income is derived from the interest payments received on these assets, which serve to enhance our overall financial returns.Years Ended August 31,
2023August 31,
2022Amount Change Amount Interest income $ 9,871 $ 7,670 $ 2,201 leveraging of selling, general and administrative expenses overan increase in investments at higher yields when compared to the comparable prior-year periodprior year period..Years Ended August 31,
2023August 31,
2022Amount Change Amount Interest expense on loans $ 11,898 $ 4,258 $ 7,640 Interest expense related to hedging activity 1,205 (2,029) 3,234 Less: Capitalized interest (2,083) (820) (1,263) Net interest expense $ 11,020 $ 1,409 $ 9,611 and distribution centers, the capital requirements of warehouse club and other operations, and ongoing working capital requirements.2022, 2023, primarily due to the increase inhigher interest rates on short-term borrowings and higher long-term borrowings in our Trinidad market to facilitate conversion of Trinidad dollars to US dollars and a decrease in capitalized interest from fewer construction projectsoutstanding when compared to the comparable prior year.year period. In addition, the Company had less interest expense related to hedging activity because of fewer outstanding swaps for the twelve-month period ended August 31, 2023.
from
prior yearYears Ended August 31,
2023August 31,
2022Amount Change Amount Other expense, net $ (14,156) $ (10,921) $ (3,235) gains gains/(losses) are recorded as currency gains or losses. Additionally, gains or losses from transactions denominated in currencies other than the functional currency of the respective entity also generate currency gains or losses.20222023 the primary driver of Other expense, net was higherincluded $8.5 million of losses due to revaluation of monetary assets and liabilities (primarily U.S. dollars) in several of our markets. Of those amounts, Costa Rica contributed a $3.5 million revaluation loss, due to the impact of the appreciation of the Costa Rican Colón on our U.S. dollar monetary net assets in Costa Rica. In addition, we incurred transaction costs in some of $7.4our countries with liquidity issues of $7.6 million during the twelve months ended August 31, 2023, associated with increased spreads and converting Trinidad dollarsthe local currencies into available tradeabletradable currencies such as euros or Canadian dollars, before converting them to U.S. dollars. These expenses were partially offset by a gain of $2.7 million associated with the sale of our Aeropost subsidiary on October 1, 2021.Years Ended August 31,
2023August 31,
2022Amount Change Amount Current tax expense $ 63,243 $ 8,085 $ 55,158 Net deferred tax benefit (3,292) 8 (3,300) Provision for income taxes $ 59,951 $ 8,093 $ 51,858 Effective tax rate 35.4 % 33.2 % 2022,year 2023, the effective tax rate was 33.2%35.4% compared to 33.3%33.2% for fiscal year 2021.2022. The decrease inincrease is primarily driven by the effective rate versus the prior year was primarily attributablecomparably unfavorable impact of write-offs of VAT receivables, Aeropost write-offs and asset impairment and related closure costs of 2.2% and a 1.8% unfavorable impact due to the comparablyAMT settlement. This was partially offset by a greater portion of income falling into lower tax jurisdictions which resulted in a 2.0% favorable impact of 0.4% resulting from the effect of the change in foreign currency value and related adjustments.Loss20222023 and 20212022 resulted primarily from foreign currency translation adjustments related to the assets and liabilities and the translation of the statements of income related to revenue, costs and expenses of our subsidiaries whose functional currency is not the U.S. dollar. When the functional currency in our international subsidiaries is the local currency and not U.S. dollars, the assets and liabilities of such subsidiaries are translated to U.S. dollars at the exchange rate on the balance sheet date, and revenue, costs and expenses are translated at average rates of exchange in effect during the period. The corresponding translation gains and losses are recorded as a component of accumulated other comprehensive income or loss. These adjustments will not affect net income until the sale or liquidation of the underlying investment. The reported other comprehensive income or loss reflects the unrealized increase or decrease in the value in U.S. dollars of the net assets of the subsidiaries as of the date of the balance sheet, which will vary from period to period as exchange rates fluctuate.Years Ended August 31,
2023August 31,
2022Amount Change From Prior Year % Change Amount Other Comprehensive Income (Loss) $ 31,594 $ 44,672 341.6 % $ (13,078) Our otherlossincome for fiscal year 2023 of approximately $13.1$31.6 million for fiscal 2022 resultedwas primarily fromthe result of the comprehensive lossgain of approximately $19.0$33.7 million from foreign currency translation adjustments along with approximately $1.7 million related to assetsunrealized losses on changes in the fair value of accrued pension obligations and liabilities and$0.5 million related to unrealized losses on changes in the translation of revenue, costs and expenses on the statements of incomefair value of our subsidiaries whose functional currency is not the U.S. dollar.derivative obligations. During fiscal 2022,year 2023, the largest translation adjustments were related to the appreciation of the local currency against the U.S. dollar of our Costa Rica and Colombia subsidiaries, partially offset by the devaluation of the local currencies against the U.S. dollar for our Colombia and Costa Rica subsidiaries, partially offset by the translation adjustment for the appreciation of the local currency against the U.S. dollar of our Dominican Republic subsidiary. These losses were offset by approximately $6.2 million related to unrealized gains on changes in the value of our derivative obligations.operationsoperations. We also have returned cash to stockholders through a semiannual dividend and to pay dividends onby repurchasing shares of our common stock.stock pursuant to the stock repurchase program we commenced in the fourth quarter of fiscal year 2023 and completed in the first quarter of fiscal year 2024. We evaluate our funding requirements on a regular basis to cover any shortfall in our ability to generate sufficient cash from operations to meet our capital requirements. We may consider funding alternatives to provide additional liquidity if necessary. Refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 11 - Debt” for additional information regarding our drawdownamounts outstanding on our short-term facilities and our long-term borrowings.taxes. We have no plans at this timetaxes for certain jurisdictions. If we decide to repatriate cash through the payment of cash dividends by our foreign subsidiaries to our domestic operations, we will accrue taxes if and therefore, have not accrued taxes that would be due from repatriation.August 31,
2023August 31,
2022Amounts held by foreign subsidiaries $ 139,050 $ 203,952 Amounts held domestically 113,152 47,421 Total cash and cash equivalents, including restricted cash $ 252,202 $ 251,373 August 31,
2023August 31,
2022Amounts held by foreign subsidiaries $ 74,294 $ 11,160 Amounts held domestically 16,787 — Total short-term investments $ 91,081 $ 11,160 and domestically, while there were $1.5 million as of August 31, 2021.tradeabletradable currencies. We are working with our banks in Trinidad and government officials to convert all of our Trinidad dollars into tradeabletradable currencies. During the third quarter of fiscal year 2023, the Honduran Central Bank began limiting the availability and controlling the allocation of U.S. dollars for the conversion from Honduran lempiras to U.S. dollars.We are actively working with our banking partners and government authorities to address this situation. We have and continue to take additional actions in this respect. Refer to “Management’s Discussion & Analysis – Factors Affecting Our Business” for our quantitative analysis and discussion.The following table summarizes our significant sources and uses of cash and cash equivalents:Years Ended August 31,
2023August 31,
2022Change Net cash provided by operating activities $ 257,331 $ 121,829 $ 135,502 Net cash used in investing activities (222,082) (74,756) (147,326) Net cash used in financing activities (41,055) (12,209) (28,846) Effect of exchange rates 6,635 1,030 5,605 Net increase (decrease) in cash, cash equivalents $ 829 $ 35,894 $ (35,065) $121.8$257.3 million and $127.2$121.8 million for the twelve months ended August 31, 20222023 and 2021,2022, respectively. The decreaseincrease in net cash provided by operating activities is primarily the result of a net positive change in working capital generated from changes in our merchandise inventory and accounts payable positions, which contributed $84.9 million, and net a positive change in our other various operating assets and liabilities. Specifically, changes in our various current and non-currentoperating assets and current liabilities resulted in a$17.6 million cash provided for fiscal year 2023 compared to $13.8 million use of cash for fiscal year 2022 compared to $13.1 million of cash provided by changes in the same accounts infor fiscal year 2021. Most of these changes in fiscal year 2022 resulted from increases in deferred tax assets and the year-over-year in accrued payroll during the twelve months ended August 31, 2022 compared to the prior year. The net changes in operating assets and liabilities were partially offset by an increase in net income for the twelve months ended August 31, 2022 over the prior-year period and favorable changes in merchandise inventories and accounts payable. Inventory was $464.4 million as of August 31, 2022, compared with $389.7 million at August 31, 2021. The increase in the inventory balance compared to the prior fiscal year is the result of three additional clubs, carrying higher than normal safety stock as a precaution against supply chain disruption and inflationary pressure on material inputs.$74.8$222.1 million and $116.7$74.8 million, respectively, for the years ended August 31, 20222023 and August 31, 2021.2022. The decreaseincrease is primarily the result of a decreasean increase in purchases of certificates of deposits compared to the same twelve-month period a year-ago, primarily due to our being able to source more U.S. dollars in Trinidad. Refer to “Management’s Discussion and Analysis – Factors Affecting Our Business” for additional discussion ofyear-ago. Additionally, the current U.S. dollar illiquidity we are experiencing in that market. The decrease was partially offset byincrease included higher property and equipment expenditures compared to the same twelve-month period a year-ago to support growth of our real estate footprint.$12.2$41.1 million and $95.1$12.2 million for the twelve months ended August 31, 2023 and 2022, and 2021, respectively. OurWe use cash flows used forprovided by financing activities are used primarily to repay long-term and short-term borrowings use to fund our working capital needs, our warehouse club and distribution center acquisitions and expansions, and investments in technology to support our omni-channel initiatives. The $82.9$28.8 million decreaseincrease in cash used in financing activities is primarily due to lowerthe result of a net repaymentsdecrease of proceeds from short-term debtborrowings compared to the same twelve-month period a year-ago, when we were repaying short-term facilities accessed at the early stages of the COVID-19 pandemic and obtaining additional financing (primarily the $25 million loan in Trinidad to address U.S. dollar liquidity challenges in that market).2021 and 20202021 (amounts are per share):First Payment Second Payment
Date
Paid
Date
PaidDeclared Amount Record
DateDate
PaidAmount Record
DateDate
PaidAmount 2/3/2023 2/3/2023 $ 0.92 2/16/2023 2/28/2023 $ 0.46 8/15/2023 8/31/2023 $ 0.46 2/3/2022 $ 0.86 2/15/2022 2/28/2022 $ 0.43 8/15/2022 8/31/2022 $ 0.43 2/4/2021 $ 0.70 2/15/2021 2/26/2021 $ 0.35 8/15/2021 8/31/2021 $ 0.35 Equity SecuritiesCommon Stock and Reissuance of Treasury Shareswithand apply the funds usedproceeds to pay the employees' minimum statutory tax withholding requirements related to the vesting of restricted stock awards. We do not have a stock repurchase program.sharesequity securities repurchased as part of the Company's stock-based compensation programs during fiscal years 2023, 2022 2021 and 2020:Years Ended August 31,
2023August 31,
2022August 31,
2021Shares repurchased 99,998 88,415 62,282 Cost of repurchase of shares (in thousands) $ 7,245 $ 6,259 $ 5,542 8,3006,333 treasury shares as part of our stock-based compensation programs during fiscal year 2023, 8,300 treasury shares during fiscal year 2022 and 96,400 treasury shares during fiscal year 20212021.234,400 treasury shares during fiscal 2020. anticipated capital requirements.Years Ended August 31,
2023August 31,
2022Number of common shares acquired 71,530 — Average price per common share acquired $ 78.54 $ — Total cost of common share acquired $ 5,618 $ — business acquisitions, contingencies and litigation, income taxes, value added taxes, and long-lived assets. We base our estimates on historical experience and on other assumptions that management believes to be reasonable under the present circumstances. Using different estimates could have a material impact on our financial condition and results of operations.2022,2023, we evaluated our deferred tax assets and liabilities and determined that a valuation allowance was necessary for certain deferred tax asset balances, primarily because of the existence of significant negative objective evidence, such as the fact that certain subsidiaries are in a cumulative loss position for the past three years, indicating that certain net operating loss carry-forward periods are not sufficient to realize the related deferred tax assets. We also specifically considered whether foreign tax credit balances could be utilized in the foreseeable future in light of current and future U.S. tax liabilities. We have historically applied foreign tax credits, generated from taxes withheld on certain payments PriceSmart receives from our foreign subsidiaries, to reduce U.S. income tax liabilities. However, as an incidental result of U.S. tax reform, following the reduction of the U.S. corporate income tax rate from 35% to 21%, we expect foreign tax credits generated to exceed U.S. income tax liability for the foreseeable future. Therefore, for the twelve-month period ended August 31, 20222023 and August 31, 2021,2022, we have recorded valuation allowances of $11.8$12.6 million and $11.4$11.8 million against our foreign tax credits, respectively.2022.2023.there have been changes in the method of computing minimum income tax payments, under which the governments have sought torules require the Company to pay taxes based on a percentage of sales ratherif the resulting tax were greater than taxable income.the tax payable based on a percentage of income (AMT). As a result, we have made and may continue to make income taxthe Company is making AMT payments substantially in excess of those weit would expect to pay based on taxable income. The Company had income tax receivables of $10.7 million and $11.0 million as of August 31, 20222023 and August 31, 2021,2022, respectively, and deferred tax assets of $3.5$3.7 million and $3.3$3.5 million as of August 31, 20222023 and August 31, 2021,2022, respectively, in these countries. Similarly, we have not placed any recoverability allowances on tax receivables that arise from payments we are required to make originating from tax assessments that we are appealing, as we believe it is more likely than not that we will ultimately prevail in the related appeals. There can be no assurance, however, that the Company will be successful in recovering all tax receivables or deferred tax assets.
•Short-term VAT and Income tax receivables, recorded as Prepaid expenses and Otherother current assets: This classification is used for any countries where our subsidiary has generally demonstrated the ability to recover the VAT or income tax receivable within one year. We also classify as short-term any approved refunds or credit notes to the extent that we expect to receive the refund or use the credit notes within one year.•Long-term VAT and Income tax receivables, recorded as Other non-current assets: This classification is used for amounts not approved for refund or credit in countries where our subsidiary has not demonstrated the ability to obtain refunds within one year and/or for amounts which are subject to outstanding disputes. An allowance is provided against VAT and income tax receivable balances in dispute when we do not expect to eventually prevail in our recovery of such balances. We do not currently have any allowances provided against VAT and income tax receivables.•the asset's inability to continue to generate income from operations and positive cash flow in future periods;•loss of legal ownership or title to the asset;•significant changes in its strategic business objectives and utilization of the asset(s); and•the impact of significant negative industry or economic trends.2022year 2023 related to the loss of legal ownership or title to assets; significant changes in the Company's strategic business objectives or utilization of assets; or the impact of significant negative industry or economic trends. Loss on disposal of assets recorded during the years reported resulted from improvements to operations and normal preventive maintenance.GoodwillGoodwill is not amortized, but is evaluated for impairment annually or whenever events or changes in circumstances indicate that the value of a certain asset may be impaired. Generally, this evaluation begins with a qualitative assessment to determine whether a quantitative impairment test is necessary. If we determine, after performing an assessment based on the qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, or that a fair value of the reporting unit substantially in excess of the carrying amount cannot be assured, then a quantitative impairment test would be performed. The quantitative test for impairment requires management to make judgments relating to future cash flows, growth rates and economic and market conditions. These evaluations are based on determining the fair value of a reporting unit or asset using a valuation method such as discounted cash flow or a relative, market-based approach. Historically, our reporting units have generated sufficient returns to recover the cost of our goodwill. Because of the nature of the factors used in these tests, if different conditions occur in future periods, future operating results could be materially impacted. For approximately $43.3 million of certain acquired goodwill, the fair value was greater than the carrying value; however, any deterioration in the fair value may result in an impairment charge. ItemItem 7A. Quantitative and Qualitative Disclosures about Market Risk For a discussionaccounting policieshedges and the financial impact thereof for derivative instruments and further disclosures, refer tothe twelve-month period ended August 31, 2023 is disclosed in Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 13 - Derivative Instruments and Hedging Activities.”2022.Twelve Months Ended August 31,
(Amounts in thousands)2024 2025 2026 2027 2028 Thereafter Total Long-Term Debt (Unhedged): Long-term debt with fixed interest rate $ 12,869 $ 13,263 $ 10,199 $ 6,944 $ 17,512 $ 14,186 $ 74,973 (1) Weighted-average interest rate 6.50 % 6.50 % 6.50 % 6.20 % 6.20 % 6.60 % 6.40 % Long-term debt with variable interest rate $ 7,324 $ 22,888 $ 8,251 $ 26,244 $ — $ — $ 64,707 Weighted-average interest rate 6.00 % 6.00 % 4.90 % 3.70 % — % — % 5.40 % Total long-term debt $ 20,193 $ 36,151 $ 18,450 $ 33,188 $ 17,512 $ 14,186 $ 139,680 (1) Derivatives: Interest Rate Swaps: Variable to fixed interest $ 1,275 $ 1,275 $ 1,275 $ 26,244 $ — $ — $ 30,069 (2) Weighted-average pay rate 3.65 % 3.65 % 3.65 % 3.65 % — % — % 3.65 % Weighted-average receive rate 7.02 % 7.02 % 7.02 % 7.02 % — % — % 7.02 % Cross-Currency Interest Rate Swaps: Variable to fixed interest $ 3,329 $ 19,770 $ — $ — $ — $ — $ 23,099 (2) Weighted-average pay rate 7.92 % 7.92 % — % — % — % — % 7.92 % Weighted-average receive rate 7.80 % 7.79 % — % — % — % — % 7.79 % Long-Term Debt Payments with Fixed Interest or Subject to Financial Derivatives: Long-term debt with fixed interest rate or with variable to fixed interest rate swaps $ 17,473 $ 34,308 $ 11,474 $ 33,188 $ 17,512 $ 14,186 $ 128,141 Portion of long-term debt with fixed interest rate or with variable to fixed interest rate swaps 86.5 % 94.9 % 62.2 % 100.0 % 100.0 % 100.0 % 91.7 % Portion of long-term debt with variable interest rates and no swaps 13.5 % 5.1 % 37.8 % — % — % — % 8.3 % 20222023 to estimate the future commitments. Therefore, the total annual commitments reflects these obligations, including the effect of the cross-currency interest rate swaps on the total-long term debt as disclosed on the consolidated balance sheet.2022,2023, we had a total of 5051 consolidated warehouse clubs operating in 12 foreign countries and one U.S. territory, 40 of which operate under currencies other than the U.S. dollar. Approximately 48.6%48.4% of our net merchandise sales are comprised of products we purchased in U.S. dollars that were sold in countries whose currencies were other than the U.S. dollar. Approximately 78.0%78.8% of our net merchandise sales are in markets whose functional currency is other than the U.S. dollar. We may enter into additional foreign countries in the future or open additional locations in existing countries, which may increase the percentage of net merchandise sales denominated in foreign currencies.Country Country Revaluation/(Devaluation)
Twelve Months Ended August 31,2023 2022 % Change % Change Colombia 7.15 % (15.58) % Costa Rica 18.30 (5.25) Dominican Republic (7.06) 6.87 Guatemala (1.72) (0.11) Honduras (0.48) (2.37) Jamaica (2.29) 0.40 Nicaragua (1.42) (2.00) Trinidad (0.09) % 0.67 % Costa RicaBarbados, Honduras and Guatemala; we have cross-currency interest rate swaps in Colombia and Honduras;Colombia; and we have interest rate swaps in Panama and in the United States. Turbulence in the currency markets can have a significant impact on the value of the foreign currencies within the countries in which we operate. We report the gains or losses associated with the revaluation of these monetary assets and liabilities on our consolidated statements of income under the heading “Other income (expense), net.” Future volatility and uncertainties regarding the currencies in the countries that we operate in could have a material impact on our operations in future periods. However, there is no way to accurately forecast how currencies may trade in the future and, as a result, we cannot accurately project the impact of the change in rates on our future demand for imported products, reported sales, or financial results.20222023 was $32.4$32.5 million. Due to the mix of foreign currency exchange rate fluctuations during fiscal 2022,year 2023, the impact to the consolidated statements of income of revaluing this liability was immaterial.20222023 (in thousands) including the new lease-related monetary liabilities described above:Overall weighted negative currency
movementLosses based on change in U.S. dollar denominated and
other foreign denominated
cash, cash equivalents and
restricted cash balancesGains based on change in U.S. dollar denominated
inter-company balancesGains based on change in U.S. dollar denominated
other asset/liability balances5% $ (2,477) $ 1,201 $ 508 $ (768) 10% $ (4,955) $ 2,402 $ 1,016 $ (1,537) 20% $ (9,909) $ 4,803 $ 2,031 $ (3,075) 20222023 is disclosed in Part II. “Item 7. Management’s Discussion and Analysis – Other Expense, net.”Nicaragua,Costa Rica, and Costa RicaNicaragua subsidiaries, with balances of $80.3$35.7 million, $23.2$35.5 million, and $13.3$30.3 million, respectively, as of August 31, 2022.2023. Examples where we have significant U.S. dollar net liability positions subjecting us to exchange rate losses if the local currency weakens against the U.S. dollar are our Honduras, Guatemala, and Dominican Republic subsidiaries, with balances of $37.8$26.3 million, $22.5$24.8 million, and $15.9$12.1 million, respectively, as of August 31, 2022.2022:2023:Overall weighted negative currency
movementOther comprehensive loss on the decline in local
currency denominated cash and cash equivalents
and restricted cash (in thousands)Other comprehensive gain on the decline in
foreign currency denominated debt
obligations (in thousands)Other comprehensive loss on the decline in all
other foreign currency denominated current
assets net of current liabilities (in thousands)Other comprehensive loss on the decline in all
other foreign currency denominated long-term
assets net of long-term liabilities (in thousands)5% $ 3,078 $ (4,904) $ 5,772 $ 31,741 10% $ 6,156 $ (9,807) $ 11,544 $ 63,482 20% $ 12,313 $ (19,614) $ 23,089 $ 126,965 2022 and approximately $1.8 million at August 31, 2021.2022. A hypothetical 10% increase in the currency exchange rates underlying these swaps from the market rates at August 31, 20222023 would have resulted in a further increase in the value of the swaps of approximately $1.4$3.3 million. Conversely, a hypothetical 10% decrease in the currency exchange rates underlying these swaps from the market rates at August 31, 20222023 would have resulted in a net decrease in the value of the swaps of approximately of $3.1$4.1 million.Occasionally,From time to time, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products.products and to otherwise redeploy these funds in our Company. Since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradeabletradable currencies. We are working with our banks in Trinidad to source tradeabletradable currencies. We expectDuring the illiquid market conditions in Trinidadthird quarter of fiscal year 2023, the Honduran Central Bank began limiting the availability and controlling the allocation of U.S. dollars for the conversion from Honduran lempiras to continue. U.S. dollars.We are actively working with our banking partners and government authorities to address this situation. Refer to Part II. “Item 7. Management’s Discussion & Analysis – Factors Affecting Our Business” and “Item 7. Management’s Discussion & Analysis – Liquidity: Financial Position and Cash Flow” for our quantitative analysis and discussion.ItemItem 8. Financial Statements and Supplementary DataItemItem2022,2023, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). These disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by the Company in its periodic reports with the SEC is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that the information is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. The design of any disclosure controls and procedures also is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.2022,2023, the end of its most recent fiscal year.2022,2023, as stated in their report which is included herein.20222023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.2022,2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, PriceSmart, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of August 31, 2022,2023, based on the COSO criteria.20222023 and 2021,2022, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended August 31, 20222023, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated October 31, 2022,30, 2023 expressed an unqualified opinion thereon.31, 202230, 2023Item 9B. Other InformationNone.PARTIteminvestor/corporate-governance.governance/governance-documents. PriceSmart intends to disclose on its website future amendments to, or waivers from, certain provisions of its code of conduct within four business days following the date of such amendment or waiver., San Diego, CA, Auditor Firm ID: 42.PART IVItemItem 15. Exhibits and Financial Statement Schedules101.INS DocumentDocument.DocumentDocument.DocumentDocument.DocumentDocument.DocumentDocument.DocumentDocument.***Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K.#These certifications are being furnished solely to accompany this Report pursuant to 18 U.S.C. 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of PriceSmart, Inc. whether made before or after the date hereof, regardless of any general incorporation language in such filing.Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2014 filed with the Commission on July 10, 2014.(10)Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended August 31, 2014 filed with the(11)(10)Incorporated by reference to the Company’s Form 8-K Filed with the Commission on July 17, 2015.(12)(11)Incorporated by reference to the Company’s Form 8-K filed with the Commission on September 2, 2015.(13)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2015 filed with the Commission on January 7, 2016.(14)(12)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2016 filed with the Commission on October 27, 2016.(15)(13)Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2016 filed with the Commission on January 5, 2017.(16)(14)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2017 filed with the Commission on April 6, 2017.(17)(15)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2017 filed with the Commission on October 26, 2017.(18)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2018 filed with the Commission on April 5, 2018.(19)(16)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2018 filed with the Commission on October 25, 2018.(20)Incorporated by reference to the Company’s Form 8-K/A filed with the Commission on March 7, 2019.(21)(17)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2019 filed with the Commission on October 29, 2019.(23)(19)Incorporated by reference to the Company’s Form 8-K filed with the Commission on April 7, 2020.(24)(20)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2020 filed with the Commission on April 8, 2020.(25)(21)Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended August 31, 2020 filed with the SEC on October 30, 2020.(26)(23)Incorporated by reference to the Company’s Quarterly Report on Form 10-K for the year ended August 31, 2021 filed with the Commission on October 21, 2021.(27)(24)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2021 filed with(28)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on February 28, 2022.(29)(25)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2022 filed with the Commission on April 7, 2022.(30)(26)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2022 filed with the Commission on July 11, 2022.Balance at
Beginning
of PeriodCharged to
Costs and
ExpensesDeductions Balance at
End of
PeriodAllowance for doubtful accounts: Year ended August 31, 2021 $ 147 $ 93 $ (146) $ 94 Year ended August 31, 2022 $ 94 $ 89 $ (80) $ 103 Year ended August 31, 2023 Year ended August 31, 2023 $ 103 $ 42 $ (78) $ 67 SIGNATURES31, 202230, 2023SHERRY S. BAHRAMBEYGUIROBERT E. PRICESherry S. Bahrambeygui
Interim Chief Executive Officer
(Principal Executive Officer)31, 202230, 2023
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Sherry S. BahrambeyguiRobert E. Price and Michael L. McCleary, and each of them singly, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agents full power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof.SHERRY S. BAHRAMBEYGUIROBERT E. PRICEDirector(PrincipalChairman of the Board (Principal Executive Officer)31, 202230, 2023Sherry S. BahrambeyguiRobert E. Price
(Principal(Principal Financial Officer and
31, 202230, 2023/s/ ROBERT E. PRICEChairman of the BoardOctober 31, 2022Robert E. PriceChairChairman and Lead Independent Director31, 202230, 2023Director October 30, 2023 Sherry S. Bahrambeygui /s/ JEFFREY R. FISHER 31, 202230, 202331, 202230, 202331, 202230, 202331, 202230, 202331, 202230, 2023MáMárquez31, 202230, 202331, 202230, 2023/s/ JOHN D. THELAN Director October 30, 2023 John D. Thelan (PCAOB ID: 42)42)F-2F-2F-4F-4F-6F-5F-7F-6F-8F-7F-9F-8F-11F-10
IndependentIndependent Registered Public Accounting Firm20222023 and 2021,2022, the related consolidated statements of income, comprehensiveincome, equity and cash flows for each of the three years in the period ended August 31, 20222023, and the related notes and financial statement schedule listed in the Index at Item 15(a), (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at August 31, 20222023 and 2021,2022, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2022,2023, in conformity with U.S. generally accepted accounting principles.2022,2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated October 31, 202230, 2023 expressed an unqualified opinion thereon.F-Tax receivables and contingencies 2022,2023, the Company had $6.3$6.3 million accrued for potential income and other tax liabilities and had income tax and VAT receivables of $32.1$36.9 million and $36.4$38.8 million, respectively.How We Addressed the
Matter in Our Auditassets.31, 2022F-PRICESMART,PRICESMART, INC.August 31, 2023 2022 ASSETS Current Assets: Cash and cash equivalents $ 239,984 $ 237,710 Short-term restricted cash 2,865 3,013 Short-term investments 91,081 11,160 Receivables, net of allowance for doubtful accounts of $67 as of August 31, 2023 and $103 as of August 31, 2022, respectively 17,904 13,391 Merchandise inventories 471,407 464,411 Prepaid expenses and other current assets (includes $0 and $2,761 as of August 31, 2023 and August 31, 2022, respectively, for the fair value of derivative instruments) 53,866 43,894 Total current assets 877,107 773,579 Long-term restricted cash 9,353 10,650 Property and equipment, net 850,328 757,241 Operating lease right-of-use assets, net 114,201 111,810 Goodwill 43,110 43,303 Deferred tax assets 32,039 28,355 Other non-current assets (includes $7,817 and $11,884 as of August 31, 2023 and August 31, 2022, respectively, for the fair value of derivative instruments) 68,991 72,928 Investment in unconsolidated affiliates 10,479 10,534 Total Assets $ 2,005,608 $ 1,808,400 LIABILITIES AND EQUITY Current Liabilities: Short-term borrowings $ 8,679 $ 10,608 Accounts payable 453,229 408,407 Accrued salaries and benefits 45,441 44,097 Deferred income 32,613 29,228 Income taxes payable 9,428 7,243 Other accrued expenses and other current liabilities (includes $1,913 and $82 as of August 31, 2023 and August 31, 2022, respectively, for the fair value of derivative instruments) 57,273 38,667 Operating lease liabilities, current portion 7,621 7,491 Long-term debt, current portion 20,193 33,715 Total current liabilities 634,477 579,456 Deferred tax liability 1,936 2,165 Long-term income taxes payable, net of current portion 5,045 5,215 Long-term operating lease liabilities 122,195 118,496 Long-term debt, net of current portion 119,487 103,556 Other long-term liabilities (includes $3,321 and $0 for the fair value of derivative instruments and $12,105 and $8,440 for post-employment plans as of August 31, 2023 and August 31, 2022, respectively) 15,425 8,439 Total Liabilities 898,565 817,327 Stockholders' Equity: Common stock $0.0001 par value, 45,000,000 shares authorized; 31,934,900 and 31,697,590 shares issued and 30,976,941 and 30,904,826 shares outstanding (net of treasury shares) as of August 31, 2023 and August 31, 2022, respectively 3 3 Additional paid-in capital 497,434 481,406 Accumulated other comprehensive loss (163,992) (195,586) Retained earnings 817,559 736,894 Less: treasury stock at cost, 957,959 shares as of August 31, 2023 and 792,764 shares as of August 31, 2022 (43,961) (31,644) Total Stockholders' Equity 1,107,043 991,073 Total Liabilities and Equity $ 2,005,608 $ 1,808,400 F-See accompanying notes.PRICESMART, INC.Years Ended August 31, 2023 2022 2021 Revenues: Net merchandise sales $ 4,300,706 $ 3,944,817 $ 3,465,442 Export sales 31,741 45,217 41,520 Membership income 66,048 60,887 56,030 Other revenue and income 13,347 15,172 56,879 Total revenues 4,411,842 4,066,093 3,619,871 Operating expenses: Cost of goods sold: Net merchandise sales 3,622,354 3,340,062 2,912,489 Export sales 30,157 43,074 39,513 Non-merchandise — 1,809 23,336 Selling, general and administrative: Warehouse club and other operations 417,272 378,161 359,221 General and administrative 134,783 133,185 125,416 Reserve for AMT settlement Reserve for AMT settlement 7,179 — — Separation costs associated with Chief Executive Officer departure Separation costs associated with Chief Executive Officer departure 7,747 — — Pre-opening expenses 1,432 1,471 849 Asset impairment and closure costs Asset impairment and closure costs 5,658 — — Loss on disposal of assets 744 1,265 1,027 Total operating expenses 4,227,326 3,899,027 3,461,851 Operating income 184,516 167,066 158,020 Other expense: Interest income 9,871 2,201 1,979 Interest expense (11,020) (9,611) (7,210) Other expense, net (14,156) (3,235) (5,603) Total other expense (15,305) (10,645) (10,834)
loss of unconsolidated affiliatesIncome before provision for income taxes and loss of unconsolidated affiliates Income before provision for income taxes and loss of unconsolidated affiliates 169,211 156,421 147,186 Provision for income taxes (59,951) (51,858) (48,969) Loss of unconsolidated affiliates (55) (10) (58) Net income 109,205 104,553 98,159 Less: net income attributable to noncontrolling interest — (19) (196) Net income attributable to PriceSmart, Inc. $ 109,205 $ 104,534 $ 97,963 Net income attributable to PriceSmart, Inc. per share available for distribution: Basic $ 3.51 $ 3.38 $ 3.18 Diluted $ 3.50 $ 3.38 $ 3.18 Shares used in per share computations: Basic 30,763 30,591 30,403 Diluted 30,786 30,600 30,403 Dividends per share $ 0.92 $ 0.86 $ 0.70 F-Years Ended August 31, 2023 2022 2021 Net income $ 109,205 $ 104,553 $ 98,159 Less: net income attributable to noncontrolling interest — (19) (196) Net income attributable to PriceSmart, Inc. $ 109,205 $ 104,534 $ 97,963 Other Comprehensive Income, net of tax: 33,708 (19,034) (7,837) Defined benefit pension plan: Net loss arising during period (1,819) (341) (230) Amortization of prior service cost and actuarial gains included in net periodic pensions cost 148 127 127 Total defined benefit pension plan (1,671) (214) (103) Unrealized gains (losses) on change in derivative obligations 6,000 (4,021) (140) Unrealized gains (losses) on change in fair value of interest rate swaps (9,177) 10,191 2,392 Amounts reclassified from accumulated other comprehensive income to other expense, net for settlement of derivatives 2,734 — — Total derivative instruments (443) 6,170 2,252 Other comprehensive income (loss) 31,594 (13,078) (5,688) Comprehensive income 140,799 91,456 92,275 Less: comprehensive income attributable to noncontrolling interest — 3 117 Comprehensive income attributable to PriceSmart, Inc. $ 140,799 $ 91,453 $ 92,158
fair value of interest rate swapsindefinitepermanently reinvested for any jurisdiction where distribution from a foreign affiliate would cause additional tax cost because of the long-term nature of the Company's foreign investment plans. Therefore, deferred taxes are not provided for on translation adjustments related to non-remitted earnings of the Company's foreign subsidiaries.F-Common Stock Additional
Paid-in
CapitalAccumulated Other Comprehensive Loss Retained
EarningsTreasury Stock Total
Stockholders'
Equity
Attributable to
PriceSmart, Inc.Non-controlling
InterestTotal
EquityShares Amount Shares Amount Balance at August 31, 2020 31,418 $ 3 $ 454,455 $ (176,820) $ 582,487 747 $ (28,406) $ 831,719 $ 1,013 $ 832,732 Purchase of treasury stock — — — — — 62 (5,542) (5,542) — (5,542) Issuance of treasury stock (96) — (7,864) — — (96) 7,864 — — — Issuance of restricted stock award 154 — — — — — — — — — Forfeiture of restricted stock awards (8) — — — — — — — — — Stock-based compensation — — 18,424 — — — — 18,424 — 18,424 Dividend paid to stockholders — — — — (21,531) — — (21,531) (457) (21,988) Net income — — — — 97,963 — — 97,963 196 98,159 Other comprehensive income (loss) — — — (5,688) — — — (5,688) 117 (5,571) Balance at August 31, 2021 31,468 $ 3 $ 465,015 $ (182,508) $ 658,919 713 $ (26,084) $ 915,345 $ 869 $ 916,214 Purchase of treasury stock — — — — — 88 (6,259) (6,259) — (6,259) Issuance of treasury stock (8) — (699) — — (8) 699 — — — Issuance of restricted stock award 247 — — — — — — — — — Forfeiture of restricted stock awards (9) — — — — — — — — — Stock-based compensation — — 16,803 — — — — 16,803 — 16,803 Dividend paid to stockholders — — — — (26,559) — — (26,559) — (26,559) Net income — — — — 104,534 — — 104,534 19 104,553 Other comprehensive income (loss) — — — (13,078) — — — (13,078) 3 (13,075) Sale of Aeropost stock — — 287 — — — — 287 (891) (604) Balance at August 31, 2022 31,698 $ 3 $ 481,406 $ (195,586) $ 736,894 793 $ (31,644) $ 991,073 $ — $ 991,073 Purchase of treasury stock Purchase of treasury stock — — — — — 172 (12,863) (12,863) — (12,863) Issuance of treasury stock Issuance of treasury stock (7) — (546) — — (7) 546 — — — Issuance of restricted stock award Issuance of restricted stock award 319 — — — — — — — — — Forfeiture of restricted stock awards Forfeiture of restricted stock awards (75) — — — — — — — — — Stock-based compensation Stock-based compensation — — 16,574 — — — — 16,574 — 16,574 Dividend paid to stockholders Dividend paid to stockholders — — — — (28,540) — — (28,540) — (28,540) Net income Net income — — — — 109,205 — — 109,205 — 109,205 Other Comprehensive Income Other Comprehensive Income — — — 31,594 — — — 31,594 — 31,594 Balance at August 31, 2023 Balance at August 31, 2023 31,935 $ 3 $ 497,434 $ (163,992) $ 817,559 958 $ (43,961) $ 1,107,043 $ — $ 1,107,043 F-Years Ended August 31, 2023 2022 2021 Operating Activities: Net income $ 109,205 $ 104,553 $ 98,159 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 72,698 67,868 64,983 Allowance for doubtful accounts (36) 63 (53) Reserve for AMT settlement 7,179 — — Asset impairment and closure costs 5,658 — — Loss on sale of property and equipment 744 1,265 1,027 Deferred income taxes (5,583) (3,300) (3,853) Equity in losses of unconsolidated affiliates 55 10 58 Stock-based compensation 16,574 16,803 18,424 Change in operating assets and liabilities: Receivables, prepaid expenses and other current assets, non-current assets, accrued salaries and benefits, deferred membership income and other accruals 17,589 (13,785) 13,097 Merchandise inventories (10,173) (74,706) (80,202) Accounts payable 43,421 23,058 15,526 Net cash provided by operating activities 257,331 121,829 127,166 Investing Activities: Additions to property and equipment (142,511) (120,660) (113,174) Purchases of short-term investments (138,784) (22,469) (69,460) Proceeds from settlements of short-term investments 58,852 61,733 65,528 Purchases of long-term investments — — (1,478) Proceeds from settlements of long-term investments — 1,488 1,478 Proceeds from disposal of property and equipment 361 193 385 Proceeds from the disposal of Aeropost, net of divested cash — 4,959 — Net cash used in investing activities (222,082) (74,756) (116,721) Financing Activities: Proceeds from long-term bank borrowings 38,713 30,633 17,565 Repayment of long-term bank borrowings (35,984) (22,697) (19,993) Proceeds from short-term bank borrowings 848 23,829 — Repayment of short-term bank borrowings (3,229) (11,156) (64,983) Cash dividend payments (28,540) (26,559) (21,988) Purchase of treasury stock (12,863) (6,259) (5,542) Other financing activities — — (196) Net cash used in financing activities (41,055) (12,209) (95,137) Effect of exchange rate changes on cash and cash equivalents and restricted cash 6,635 1,030 (3,600) Net increase (decrease) in cash, cash equivalents 829 35,894 (88,292) Cash, cash equivalents and restricted cash at beginning of period 251,373 215,479 303,771 Cash, cash equivalents and restricted cash at end of period $ 252,202 $ 251,373 $ 215,479 Supplemental disclosure of noncash investing activities: Capital expenditures accrued, but not yet paid $ 4,530 $ 3,129 $ 3,497 Cash paid during the period for: Interest $ 10,558 $ 9,392 $ 7,774 Income taxes $ 77,925 $ 67,143 $ 58,571 F-Years Ended August 31, 2023 2022 2021 Cash and cash equivalents $ 239,984 $ 237,710 $ 202,060 Short-term restricted cash 2,865 3,013 3,647 Long-term restricted cash 9,353 10,650 9,772 Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 252,202 $ 251,373 $ 215,479 F-COMPANYCOMPANY OVERVIEW AND BASIS OF PRESENTATION"we"“our”) business consists primarily of international membership shopping warehouse clubs similar to, but typically smaller in size than, warehouse clubs in the United States. As of August 31, 2022,2023, the Company had 5051 warehouse clubs in operation in 12 countries and one U.S. territory (nine in Colombia; eight in Costa Rica; seven in Panama; five in the Dominican Republicand Guatemala,Guatemala; four in Trinidad; three each in El Salvador and Honduras; two each in El Salvador, Jamaica and Nicaragua; and one each in Aruba, Barbados, and the United States Virgin Islands), of which the Company owns 100% of the corresponding legal entities (see Note 2 - Summary of Significant Accounting Policies). TheIn September 2023, we opened a new warehouse club in Medellín, Colombia, bringing the total number of warehouse clubs in operation by the Company to 52. In addition, the Company plans to open a warehouse club in San Miguel, El Salvador in the spring ofEscuintla, Guatemala on November 30, 2023 and a warehouse club in Medellín, ColombiaSanta Ana, El Salvador in the summer of 2023.early 2024. Once these two new clubs are open, the Company will operate 5254 warehouse clubs. Our operating segments are the United States, Central America, the Caribbean, and Colombia.Expand Real Estate Footprint withInvest in Remodeling Current PriceSmart Clubs, Adding New ClubsPriceSmart Locations and Opening More Distribution FacilitiesCenters;Drive IncrementalIncrease Sales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities.noncontrollingnon-controlling interests. The Company reports noncontrollingnon-controlling interests in consolidated entities as a component of equity separate from the Company’s equity. The consolidated financial statements also include the Company's investment in, and the Company's share of the income (loss) of, joint ventures recorded under the equity method. All significant inter-company accounts and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the SEC and reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to fairly present the financial position, results of operations and cash flows for the periods presented.
20222023 are listed below:Presentation50.0%50.0%Disposals, Acquisitions and Related Items – From March 2018 through September 2021, we operated a cross border package forwarding (casillero) and online marketplace business under the “Aeropost” banner in 38 countries in Latin America and the Caribbean. PriceSmart acquired Aeropost in 2018 to leverage Aeropost’s technology and its management’s experience in developing software and systems for e-commerce and logistics to advance PriceSmart’s development of an omni-channel shopping experience for its Members. In October 2021, PriceSmart sold the legacy casillero and marketplace operations, which were not core to our main objectives. PriceSmart retained key Aeropost personnel and technology in the transaction, with which we believe we can continue to grow our omni-channel business. This technology and talent have helped us combine our brick-and-mortar operations with online capabilities, supported by a more sophisticated distribution system. These online capabilities and the enhanced distribution system provide us with the potential to expand our geographic coverage, reach more Members in more ways, increase efficiencies, reduce costs and provide Members with greater value.The Company disposed of its entire ownership in Aeropost to an unrelated third party. However, as part of the consideration of the sale, Aeropost will provide $2.0 million of logistical services to the Company as needed for 36 months. The Company recorded a pre-tax gain from the sale of Aeropost of $2.7 million in the first quarter of fiscal year 2022 in other income (expense), net in the consolidated statements of income. The changes in restricted cash are disclosed within the consolidated statement of cash flows based on the nature of the restriction. The following table summarizes the restricted cash reported by the Company (in thousands):August 31,
2023August 31,
2022Short-term restricted cash $ 2,865 $ 3,013 Long-term restricted cash 9,353 10,650 $ 12,218 $ 13,663 mainly of cash deposits held within banking institutions in compliance with federal regulatory requirements in Costa Rica and Panama. In addition, the Company is required to maintain a certificate of deposit and/or security deposits of Trinidad dollars, of approximately $8.4 million, as measured in U.S.U.S dollars, of approximately $6.4 million with a few of its lenders as compensating balances for several U.S. dollar and euro denominated loans payable over several years. TheseThe certificates of deposit will be reduced annually commensurate with the loan balances. and Other Intangibles, net – Goodwill and other intangibles totaled $44.1 $43.1 million as of August 31, 20222023 and $52.9$43.3 million as of August 31, 2021.2022. The Company reviews reported goodwill and other intangibles at the reporting unit level for impairment. The Company tests goodwill for impairment at least annually or when events or changes in circumstances indicate that it is more likely than not that the asset is impaired. In connection with the Aeropost disposal, we retained the intellectual property associated with our PriceSmart.com business. However, in conjunction with this disposal, we wrote off $1.7 million20222023 are as follows (in thousands):Amount Goodwill at August 31, 2022 $ 43,303 Foreign currency exchange rate changes (193) Goodwill at August 31, 2023 $ 43,110 Amount Other intangibles at August 31, 2022 $ 765 Amortization (765) Net other intangibles at August 31, 2023 $ — Total goodwill and other intangibles, net August 31, 2023 $ 43,110 AmountGoodwill at August 31, 2021$45,095Goodwill written off(1,714)Foreign currency exchange rate changes(78)Goodwill at August 31, 2022$43,303AmountOther intangibles at August 31, 2021$7,762Trade Name written off(4,375)Development Technology written off(1,009)Amortization(1,613)Net other intangibles at August 31, 2022$765Total goodwill and other intangibles, net at August 31, 2022$44,068table below shows our estimated amortizationdetermination of intangiblesthe allowance for fiscal year 2023 (in thousands):credit losses is based on the Company’s assessment of collectability along with the consideration of current and expected market conditions that could impact collectability.there have been changes inwhere the method of computingCompany operates, minimum income tax payments, under which the governments have sought torules require the Company to pay taxes based on a percentage of sales ratherif the resulting tax were greater than taxable income.the tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). As a result, the Company has made and may continue to make income taxis making AMT payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $10.7 million and $11.0 million and deferred tax assets of $3.7 million and $3.5 million as of August 31, 2023 and August 31, 2022, respectively, in these countries.complex. Thecomplex, the Company had incomehas not placed any type of allowance on the recoverability of these tax receivables of $11.0 million as of August 31, 2022 and August 31, 2021, respectively, and deferredreceivables. Deferred tax assets or amounts that may be deemed under-paid, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests and appeals of $3.5 million and $3.3 million as of August 31, 2022 and August 31, 2021, respectively, in these countries.rules.F-•Short-term VAT and Income tax receivables, recorded as Prepaid expenses and other current assets: This classification is used for any countries where the Company’s subsidiary has generally demonstrated the ability to recover the VAT or income tax receivable within one year. The Company also classifies as short-term any approved refunds or credit notes to the extent that the Company expects to receive the refund or use the credit notes within one year.•Long-term VAT and Income tax receivables, recorded as Other non-current assets: This classification is used for amounts not approved for refund or credit in countries where the Company’s subsidiary has not demonstrated the ability to obtain refunds within one year and/or for amounts which are subject to outstanding disputes. An allowance is provided against VAT and income tax receivable balances in dispute when the Company does not expect to eventually prevail in its recovery. The Company does not currently have any allowances provided against VAT and income tax receivables.August 31,
2023August 31,
2022Prepaid expenses and other current assets $ 2,774 $ 3,890 Other non-current assets 36,060 32,460 Total amount of VAT receivables reported $ 38,834 $ 36,350 incomeIncome tax receivables reported by the Company (in thousands):August 31,
2023August 31,
2022Prepaid expenses and other current assets $ 17,749 $ 12,077 Other non-current assets 19,176 19,985 Total amount of income tax receivables reported $ 36,925 $ 32,062 TheThe Company does not combine lease and non-lease components.this lease expense is incurred. The Company’s variable lease payments generally relate to amounts the Company pays for additional contingent rent based on a contractually stipulated percentage of sales.WhenIf the Company determines that an award is forfeited,unlikely to vest, any previously recorded expense is then reversed.correspondingaccrued dividend equivalents are paid on the PSUs.2022,2023, the Company reissued approximately 8,3006,333 treasury shares.nonfinancialnon-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring or nonrecurring basis. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated, knowledgeable and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to settle the liability with the creditor.The Company has established three-tier fair value hierarchy which prioritizes thethat categorizes inputs to valuation techniques used in measuringto measure and revaluingrevalue fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company was not required to revalue any assets or liabilities utilizing Level 1 or Level 3 inputs at the balance sheet dates. The Company's Level 2 assets and liabilities revalued at the balance sheet dates, on a recurring basis, consisted of cash flow hedges (interest rate swaps and cross-currency interest rate swaps) and forward foreign exchange contracts. In addition, the Company utilizes Level 2 inputs in determining the fair value of long-term debt. The Company did not make any significant transfers in and out of Level 1 and Level 2 fair value tiers during the periods reported on herein.For the periods reported, noDuring fiscal year 2023, we recorded impairment charges of such non-financial$4.8 million to mark our available-for-sale assets was recorded.Incomeincome tax receivables: The carrying value approximates fair value due to the short maturity of these accounts.20222023 and August 31, 20212022 is as follows (in thousands):August 31, 2023 August 31, 2022 Carrying
ValueCarrying
ValueLong-term debt, including current portion $ 139,680 $ 133,150 $ 137,271 $ 136,479
Value
Value(1)
Value20222023 to estimate the fair value of long-term debt, which includes the effects that the cross-currency interest rate swaps have had on the fair value of long-term debt.DerivativesDerivative Instruments and Hedging Activities – The Company uses derivative financial instruments for hedging and non-trading purposes to manage its exposure to changes in interest and currency exchange rates. In using derivative financial instruments for the purpose of hedging the Company’s exposure to interest and currency exchange rate risks, the contractual terms of a hedged instrument closely mirror those of the hedged item providingand are intended to provide a high degree of risk reduction and correlation. Contracts that are effective at meeting the risk reduction and correlation criteria (effective hedge) are recorded using hedge accounting. If a derivative financial instrument is an effective hedge, changes in the fair value of the instrument will be reported in accumulated other comprehensive loss until the hedged item completes its contractual term. Instruments that do not meet the criteria for hedge accounting, or contracts for which the Company has not elected hedge accounting, are valued at fair value with unrealized gains or losses reported in earnings during the period of the change.20222023 and August 31, 2021.2022.Gain Contingencies and Recoveries – A gain contingency is an existing condition, situation, or set of circumstances involving uncertainty as to a possible gain that will ultimately be resolved when one or more future events occur or fail to occur. During the ordinary course of our business, gain contingencies arise when we have the opportunity to recover costs or damages we incur from insurance carriers or other third parties. Anticipated proceeds in excess of the amount of loss recognized are considered contingent gains. Anticipated proceeds in excess of a loss recognized in the financial statements are not recognized until all contingencies related to the collectability, timing and amount are realizable.For the Company includes the costs of external and internal shipping, handling and other direct costs incurred to provide delivery, insurance and customs processing services in cost of goods sold - non-merchandise.are comprisedconsist primarily of expenses associated with operating warehouse clubs and packagefreight forwarding operations. These costs include payroll and related costs, including separation costs associated with the Chief Executive Officer departure, utilities, consumable supplies, repair and maintenance, rent expense, building and equipment depreciation, bank, credit card processing fees, and amortization of intangibles. Also included in selling, general and administrative expenses are the payroll and related costs for the Company’s U.S. and regional management and purchasing centers.2021 and 2020:2021:Years Ended August 31, 2023 2022 2021 Effects on other comprehensive income (loss) due to foreign currency restatement $ 33,708 $ (19,034) $ (7,837) Years Ended August 31, 2023 2022 2021 Currency loss $ (15,396) $ (7,414) $ (5,395) FASB ASC 740 ASU 2019-12—Income Taxes (Topic 740): Simplifying the Accounting for Income TaxesIn December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. ASU No. 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The ASU is effective for annual periods beginning after December 15, 2020. Early adoption is permitted. The Company adopted ASU No. 2019-12 on September 1, 2021, the first quarter of fiscal year 2022. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. other new accounting standards that had a material impact on the Company’s consolidated financial statements during the twelve-month period ended August 31, 2022,2023, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of August 31, 20222023 that the Company expects to have a material impact on its consolidated financial statements.
F-•Identify the contract with the customer;•Identity the performance obligation(s);•Determine the transaction price;•Allocate the transaction price to each performance obligation if multiple obligations exist; and•Recognize the revenue as the performance obligations are satisfied.customerscustomers..OurOur membership policy allows for Members to cancel their membership in the first 60 days and receive a full refund. After the 60 day60-day period, membership refunds are prorated over the remaining term of the membership. The Company has significant experience with membership refund patterns and expects membership refunds will not be material. Therefore, nono refund reserve was required for the periods presented. Membership fee revenue is included in membership income in the Company's consolidated statements of income. The deferred membership fee is included in deferred income in the Company's consolidated balance sheets.thirteen countries.markets. The annual fee for a Platinum Membership is approximately $75. The Platinum Membership provides Members with a 2% rebate on most items, up to an annual maximum of $500. The rebate is issued annually to Platinum Members on March 1 and expires August 31. Platinum Members can apply this rebate to future purchases at the warehouse club during the redemption period. The Company records this 2% rebate as a reduction of revenue at the time of the sales transaction. Accordingly, the Company has reduced net merchandisewarehouse sales and has accrued a liability within other accrued expenses and other current liabilities, platinum rewards. The Company has determined that breakage revenue is 5% of the awards issued; therefore, it records 95% of the Platinum Membership liability at the time of sale. Annually, the Company reviews for expired unused rebates outstanding, and the expired unused rebates are recognized as “Other revenue and income” on the consolidated statements of income.
F-2022,2023, there were no revenue transactions that required significant judgement.
F-•Taxes - The Company excludes from the transaction price any taxes collected from customers that are remitted to taxing authorities.•Shipping and Handling Charges - Charges that are incurred after the customer obtains control of goods are deemed costs required to complete our performance obligation. Therefore, the Company considers the act of shipping after the customer obtains control of goods to not be a separate performance obligation. These shipping and handling costs are classified as “Costs of goods sold” in the consolidated statements of income because they are incurred to fulfill a revenue obligation.•Time Value of Money - The Company's payment terms are less than one year from the transfer of goods. Therefore, the Company does not adjust promised amounts of consideration for the effects of the time value of money.thatand are included in deferred income and other accrued expenses and other current liabilities in the Company’s consolidated balance sheets. The following table provides these contract balances from transactions with customers as of the dates listed (in thousands):Contract Liabilities August 31,
2023August 31,
2022Deferred membership income $ 31,079 $ 28,000 Other contract performance liabilities $ 12,347 $ 10,473
2022
2021
2020
Years Ended August 31,
2023August 31,
2022August 31,
2021Foods & Sundries $ 2,148,584 $ 1,947,734 $ 1,736,509 Fresh Foods 1,262,132 1,145,920 1,003,694 Hardlines 454,207 443,311 409,644 Softlines 230,950 227,371 175,505 Other Business 204,833 180,481 140,090 Net Merchandise Sales $ 4,300,706 $ 3,944,817 $ 3,465,442 F-August 31,
2023August 31,
2022Land $ 238,374 $ 224,278 Building and improvements 650,060 592,749 Fixtures and equipment 385,100 343,859 Construction in progress 99,545 42,602 Total property and equipment, historical cost 1,373,079 1,203,488 Less: accumulated depreciation (522,751) (446,247) Property and equipment, net $ 850,328 $ 757,241 Years Ended August 31, 2023 2022 2021 Depreciation expense, Property and equipment $ 71,933 $ 66,255 $ 62,579 Amortization expense, Intangible assets 765 1,613 2,404 Total depreciation and amortization expense $ 72,698 $ 67,868 $ 64,983 Balance as of August 31,
2023August 31,
2022Total interest capitalized $ 15,426 $ 12,934 Years Ended August 31, 2023 2022 2021 Interest capitalized $ 2,083 $ 1,263 $ 2,282 2021 and 20202021 is as follows (in thousands):Historical
CostAccumulated
DepreciationProceeds from
disposalLoss
recognized
Cost
DepreciationFiscal Year 2023 Fiscal Year 2023 $ 11,484 $ 10,379 $ 361 $ (744) Fiscal Year 2022 $ 12,785 $ 11,327 $ 193 $ (1,265) Fiscal Year 2021 $ 10,946 $ 9,534 $ 385 $ (1,027) and $1.2 million and $2.3 million, respectively, as of August 31, 2021 of liabilities related to the acquisition and/or construction of property and equipment.2021 and 20202021 (in thousands, except per share amounts):
Years Ended August 31, 2023 2022 2021 Net income attributable to PriceSmart, Inc. $ 109,205 $ 104,534 $ 97,963 Less: Allocation of income to unvested stockholders (1,311) (1,245) (1,282) Net income attributable to PriceSmart, Inc. available for distribution $ 107,894 $ 103,289 $ 96,681 Basic weighted average shares outstanding 30,763 30,591 30,403 Add dilutive effect of performance stock units (two-class method) 23 9 — Diluted average shares outstanding 30,786 30,600 30,403 Basic net income per share $ 3.51 $ 3.38 $ 3.18 Diluted net income per share $ 3.50 $ 3.38 $ 3.18 and 2020:(amounts are per share):First Payment Second Payment Declared Amount Record
DateDate
PaidAmount Record
DateDate
PaidAmount 2/3/2023 $ 0.92 2/16/2023 2/28/2023 $ 0.46 8/15/2023 8/31/2023 $ 0.46 2/3/2022 $ 0.86 2/15/2022 2/28/2022 $ 0.43 8/15/2022 8/31/2022 $ 0.43 2/4/2021 $ 0.70 2/15/2021 2/26/2021 $ 0.35 8/15/2021 8/31/2021 $ 0.35
Date
Paid
Date
Paiduncertainty surrounding the ongoing effects of the COVID-19 pandemicuncertain macroeconomic conditions on our results of operations and cash flows.table disclosestables disclose the changes ineffects on accumulated other comprehensive loss of each component of other comprehensive loss,income (loss), net of tax (in thousands):Total Ending balance, August 31, 2020 $ (176,820) $ 134 $ (176,686) Foreign currency translation adjustments (7,837) 117 (7,720) (230) — (230) 2,252 — 2,252 Amounts reclassified from accumulated other comprehensive loss 127 — 127 Ending balance, August 31, 2021 $ (182,508) $ 251 $ (182,257) Foreign currency translation adjustments (19,034) 3 (19,031) (341) — (341) 6,170 — 6,170 Amounts reclassified from accumulated other comprehensive loss 127 — 127 Sale of Aeropost — (254) (254) Ending balance, August 31, 2022 $ (195,586) $ — $ (195,586) Foreign currency translation adjustments 33,708 — 33,708 (1,819) — (1,819) (443) — (443) Amounts reclassified from accumulated other comprehensive loss 148 — 148 Ending balance, August 31, 2023 $ (163,992) $ — $ (163,992) lossincome (loss) related to the minimum pension liability are included in warehouse club and other operations in the Company's Consolidated Statementsconsolidated statements of Income.income.thatwhich cannot be distributed as dividends to PriceSmart, Inc. according to applicable statutory regulations (in thousands):August 31,
2023August 31,
2022Retained earnings not available for distribution $ 9,110 $ 8,648 Years Ended August 31,
2023August 31,
2022Number of common shares acquired 71,530 — Average price per common share acquired $ 78.54 $ — Total cost of common share acquired $ 5,618 $ — nondiscretionarynon-discretionary contributions to the 401(k) plan with a 4% “Company Contribution” based on the employee’s salary regardless of the employee’s own contributions to the plan up to the IRS maximum allowed. The Company also makes incremental nondiscretionarynon-discretionary contributions to the 401(k) plan to the employees who defer up to 2% of their salary. Employer contributions to the 401(k) plan for the Company's U.S. employees were $2.9 million $2.6 millionduring fiscal years 2023 and $2.22022, and $2.6 million during fiscal years 2022, 2021 and 2020, respectively.nondiscretionarynon-discretionary contributions to these plans based on the employee’s salary, regardless of the employee’s own contributions to the plan, up to the maximum allowed. The expenses associated with the plans for the Company’s non-U.S. employees were $4.5 million, $3.6 million $3.0 million and $3.1$3.0 million during fiscal years 2023, 2022 and 2021, and 2020, respectively.benefits. benefits. The liabilities for these unfunded plans are recorded as non-current liabilities.20222023 and 20212022 and consolidated statements of income for the fiscal years ended August 31, 2023, 20222021 and 20202021 (in thousands):Other Long-Term
LiabilityAccumulated Other
Comprehensive LossOperating Expenses August 31, Year Ended August 31, 2023 2022 2023 2022 2023 2022 2021 Start of period $ (2,976) $ (2,298) $ 1,205 $ 897 $ — $ — $ — Service cost (303) (205) — — 365 315 229 Interest cost (139) (129) — — 139 129 104 Prior service cost (including amortization) — — (26) (36) 26 36 55 Actuarial gains/(losses) (2,425) (344) 2,425 344 122 92 72 Totals $ (5,843) $ (2,976) $ 3,604 $ 1,205 (1) $ 652 $ 572 $ 460
Liability
Comprehensive Loss$377,000$1,106,000 and $282,000$377,000 as of August 31, 20222023 and 2021,2022, respectively, relating to the unrealized expense on defined benefit plans. The Company also recorded accumulated other comprehensive loss, net of tax, for $(829,000)$(2,500,000) and $(615,000)$(829,000) as of August 31, 2023 and 2022, respectively. The primary driver of the recorded accumulated other comprehensive loss was a change in assumption for our Trinidad and 2021, respectively.Tobago post-employment benefit plan in which we expect less turnover from our employees.Year Ended August 31, Valuation Assumptions: 2023 2022 Discount rate 4.6% to 6.4% 3.5% to 6.4% Future salary escalation 3.0% to 5.2% 3.0% to 4.5% Percentage of employees assumed to withdraw from Company without a benefit (“turnover”) 6.7% to 15.0% 6.7% to 15.0% Percentage of employees assumed to withdraw from Company with a benefit (“disability”) 0.5% to 1.5% 0.5% to 6.6% 2023,2024, the Company expects to recognize, as components of net periodic benefit cost, the following amounts currently recorded in accumulated other comprehensive loss (in thousands):Prior service cost$26Actuarial gain/loss152$178Prior service cost $ 26 Amortization of actuarial loss 539 $ 565 Accrued Salaries
and BenefitsOther Long-Term Liability Operating Expenses Years Ended August 31, 2023 2022 2023 2022 2023 2022 2023 2022 2021 Other Post Employment Plans $ 738 $ 522 $ 5,077 $ 4,567 $ 4,859 $ 4,382 $ 1,754 $ 1,423 $ 1,447
and Benefits
Liability
yearyears 2021 to increase the number of shares of Common Stock available for the grant of awards by 500,000 shares and further amended in fiscal year 2023 to increase the number of shares of Common Stock available for the grant of awards by an additional 750,000 shares. The number of shares reserved for issuance under the 2013 Plan increases during the term of the plan by the number of shares relating to awards outstanding under the 2013 Plan or any of the prior plans that expire, or are forfeited, terminated, canceled or repurchased, or are settled in cash in lieu of shares. However, in no event will more than an aggregate of 2,031,8182,966,867 shares of the Company’s common stock be issued under the 2013 Plan.Shares available to grant Shares authorized for issuance as of August 31, 2023
(including shares originally authorized for issuance under prior plans)August 31,
2023August 31,
20222013 Plan 2,317,923 1,223,574 549,319 2021 and 20202021 (in thousands), which are included in general and administrative expense and warehouse club and other operations in the consolidated statements of income:Years Ended August 31, 2023 2022 2021 Restricted stock awards $ 10,641 $ 9,378 $ 11,010 Restricted stock units 3,701 3,519 3,939 Performance-based restricted stock units 2,232 3,906 3,475 Stock-based compensation expense $ 16,574 $ 16,803 $ 18,424 Balance as of August 31,
2023August 31,
2022August 31,
2021Remaining unrecognized compensation cost (in thousands) $ 15,386 $ 18,478 $ 16,349 Weighted average period of time over which this cost will be recognized (years) 2 2 2 Years Ended August 31, 2023 2022 2021 Excess tax benefit (deficiency) on stock-based compensation (in thousands) $ (2,787) $ (2,259) $ (778) 2021 and 20202021 was as follows:Years Ended August 31,
2023August 31,
2022August 31,
2021Grants outstanding at beginning of period 361,822 375,622 415,869 Granted 365,850 261,204 166,160 Forfeited (118,577) (16,184) (12,436) Vested (266,354) (258,820) (193,971) Grants outstanding at end of period 342,741 361,822 375,622 2021 and 2020:Weighted Average Grant Date Fair Value Weighted Average Grant Date Fair Value Years Ended August 31,
2023August 31,
2022August 31,
2021RSAs, RSUs, and PSUs granted $ 63.93 $ 76.85 $ 79.02 RSAs, RSUs, and PSUs vested $ 70.26 $ 72.69 $ 70.03 RSAs, RSUs, and PSUs forfeited $ 66.14 $ 69.70 $ 70.56 Years Ended August 31,
2023August 31,
2022August 31,
2021Total fair market value of restricted stock awards and units vested (in thousands) $ 19,325 $ 18,422 $ 17,478 minimum statutory tax withholding requirements related to the vesting of restricted stock awards. The Company expects to continue this practice going forward. The Company does not have a stock repurchase program.sharesequity securities repurchased during fiscal years 2023, 2022 and 2021 and 2020:Years Ended August 31,
2023August 31,
2022August 31,
2021Shares repurchased 99,998 88,415 62,282 Cost of repurchase of shares (in thousands) $ 7,245 $ 6,259 $ 5,542 Years Ended August 31,
2023August 31,
2022August 31,
2021Reissued treasury shares 6,333 8,314 96,400 FromOn August 5, 2022, PriceSmart received notice from Click USA Inc. and Aeropost, Inc. alleging that PriceSmart had breached certain provisions of a Stock Purchase Agreement between PriceSmart and Click USA, Inc. dated October 1, 2021, concerning the sale of Aeropost, Inc. to Click USA Inc. In this notice, Click USA Inc. and Aeropost, Inc. allege that PriceSmart made inaccurate or incomplete representations and warranties relating to Aeropost, Inc.’s cyber security and the condition of its IT systems in connection with the sale. Click USA Inc. and Aeropost, Inc. further asserted that, in or around April 2022, Aeropost, Inc. suffered cyberattacks, and they seek to hold PriceSmart liable for some amount of damages due to alleged losses directly relating to the cyber-attacks as well as due to possible third-party claims as a result of the cyber-attacks. The notice suggested that aggregate losses attributable to these losses and future claims could exceed $3,000,000. Per the express terms of the agreement, the maximum amount of all losses for which PriceSmart may be liable for claims arising out of allegations concerning the above-referenced representations and warranties is $4,000,000. PriceSmart intends to vigorously defend itself and, as such, we have concluded that a loss related to this matter is not probable and any potential loss is not reasonably estimable; therefore, we have not accrued a liability for this matter.Taxes respect to the interpretations the Company used to calculate its tax liability and therefore require the Company to pay additional taxes.aless than 50% or less likelihood of being sustained (refer to “Note 10 - Income Taxes for additional information”).20222023 and 2021,2022, the Company has recorded within other accrued expenses and other current liabilities a total of $9.6 million and $1.1 million, and $1.8 million, respectively,, for various non-income tax related tax contingencies.ReferRefer to “Note“Note 12 – Leases”.isalso committed to non-cancelable construction service obligations for various warehouse club developments and expansions. As of August 31, 20222023 and August 31, 2021,2022, the Company had approximately $16.5$11.3 million and $16.2$16.5 million, respectively, in contractual obligations for construction services not yet rendered.
Years Ended August 31, Amount 2024 $ — 2025 276 2026 1,604 2027 1,558 2028 1,513 Thereafter 20,013 Total future lease payments $ 24,964 F-2022,2023, the Company had entered into four land purchase agreements that, (three for new warehouse clubs and one for a new produce distribution center), if completed, would result in the use of approximately $13.5$14.0 million in cash.“Note“Note 15 - Unconsolidated Affiliates” for a description of additional capital contributions that may be required in connection with joint ventures to develop commercial centers adjacent to PriceSmart warehouse clubs in Panama and Costa Rica.F-Years Ended August 31, 2023 2022 2021 United States $ 57,941 $ 55,667 $ 33,818 Foreign 111,270 100,754 113,368 Income from continuing operations before provision for income taxes and loss of unconsolidated affiliates $ 169,211 $ 156,421 $ 147,186 Years Ended August 31, 2023 2022 2021 Current: U.S. tax expense $ 21,604 $ 20,824 $ 16,904 Foreign tax expense 41,639 34,334 35,918 Total $ 63,243 $ 55,158 $ 52,822 Deferred: U.S. tax benefit $ (11,958) $ (11,894) $ (10,212) U.S. valuation allowance change 12,598 11,823 9,777 Foreign tax benefit (3,935) (3,259) (3,125) Foreign valuation allowance change 3 30 (293) Total $ (3,292) $ (3,300) $ (3,853) Provision for income taxes $ 59,951 $ 51,858 $ 48,969 Years Ended August 31, 2023 2022 2021 Federal tax provision at statutory rates 21.0 % 21.0 % 21.0 % State taxes, net of federal benefit 0.3 0.2 0.1 Differences in foreign tax rates 6.8 7.1 6.9 Permanent items and other adjustments (0.1) (2.6) (2.2) Increase in valuation allowance 7.4 7.5 7.5 Provision for income taxes 35.4 % 33.2 % 33.3 % F-20222023 and 20212022 are shown below (in thousands):August 31, 2023 2022 Deferred tax assets: Foreign tax credits $ 43,632 $ 32,322 Deferred compensation 1,664 1,782 U.S. timing differences 6,845 7,746 Foreign net operating losses 4,911 5,026 Foreign timing differences: Accrued expenses and other timing differences 9,365 9,937 Depreciation and amortization 15,160 13,019 Deferred income 7,338 7,749 Gross deferred tax assets 88,915 77,581 U.S. deferred tax liabilities (depreciation and other timing differences) (3,035) (2,273) Foreign deferred tax liabilities netted against deferred tax assets (5,552) (8,697) U.S. valuation allowance (43,860) (33,824) Foreign valuation allowance (4,430) (4,432) Net deferred tax assets $ 32,038 $ 28,355 2022,year 2023, the effective tax rate was 33.2%35.4%. The decreaseincrease in the effective rate versus the prior year was primarily attributable to the comparably favorable impact of 0.4% resulting2.0% due to a greater portion of income falling into lower tax jurisdictions, offset by the comparably unfavorable impact of 1.8% from the effect of the change in foreign currency valueAMT settlement and 2.2% from asset impairment and related adjustments.2022,year 2023, management concluded that a valuation allowance continues to be necessary for certain U.S. and foreign deferred tax assets primarily because of the existence of negative objective evidence, such as the fact that certain subsidiaries are in a cumulative loss position for the past three years, and the determination that certain net operating loss carryforward periods are not sufficient to realize the related deferred tax assets. The Company factored into its analysis the inherent risk of forecasting revenue and expenses over an extended period of time and also considered the potential risks associated with its business. The Company had net foreign deferred tax assets of $22.6$26.8 million and $19.5$22.6 million as of August 31, 2023 and 2022, and 2021, respectively.because theThe Company considers these earnings to be permanently reinvested asfor any jurisdictionoffrom these foreign affiliates. As of August 31, 20222023 and 20212022 the undistributed earnings of these foreign subsidiaries are approximately $369.6 million and $335.5 million, and $254.5 million, respectively.Years Ended August 31, 2023 2022 2021 Balance at beginning of fiscal year $ 5,041 $ 3,911 $ 4,573 Gross increase - tax positions in prior period 35 264 135 Gross decrease - tax positions in prior period — — (306) Additions based on tax positions related to the current year 143 1,356 333 Expiration of the statute of limitations for the assessment of taxes (474) (490) (824) Balance at end of fiscal year $ 4,745 $ 5,041 $ 3,911 2022,2023, the liability for income taxes associated with unrecognized tax benefits was $5.0$4.7 million and can be reduced by $1.5$1.4 million of tax benefits recorded as deferred tax assets and liabilities. The total $5.0$4.7 million unrecognized tax benefit includes $400,000$300,000 of associated timing adjustments. The net amount of $4.6$4.4 million would, if recognized, favorably affect the Company's financial statements and favorably affect the Company's effective income tax rate.20222023 and 2021,2022, the Company had accrued an additional $1.5$1.6 million and $1.6$1.5 million, respectively, for the payment of interest and penalties related to the above-mentioned unrecognized tax benefits.20222023 could result in a total income tax benefit amounting up to $800,000.ratherif the resulting tax were greater than income.the tax payable based on a percentage of income (AMT). As a result, the Company is making income taxAMT payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $10.7 million and $11.0 million as of August 31, 20222023 and August 31, 2021,2022, respectively, and deferred tax assets of $3.5$3.7 million and $3.3$3.5 million as of August 31, 20222023 and August 31, 2021,2022, respectively, in these countries.thesethe remaining tax receivables, or deferred tax assets or amounts that may be deemed under-paid, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests.requests and appeals of these rules.2011*2014* to 2017*, 2018, 2020 to the present20182019 to the present20192020 to the presentBarbados 2017 to the present Barbados2016 to the present20182019 to the present20162017 to the presentEl Salvador 2019 to the present El SalvadorGuatemalaGuatemalaHonduras20122018 to 2013, 2017 the presentHondurasJamaicaJamaicaMexicoNicaragua 2019 to the present Panama 2018 to the present Trinidad 2016 to the present Mexico2017 to the presentNicaragua2018 to the presentPanama2018 to the presentTrinidad2016 to the present20192020 to the present2019*2020* to the present*Aeropost only
F-credit.credit and short-term overdraft borrowings. The following table summarizes the balances of total facilities, facilities used and facilities available (in thousands):Total Amount
of FacilitiesFacilities Used Facilities
AvailableWeighted average
interest rateShort-term
BorrowingsLetters of
CreditAugust 31, 2023 - Committed August 31, 2023 - Committed $ 75,000 — — 75,000 —% August 31, 2023 - Uncommitted August 31, 2023 - Uncommitted 91,000 8,376 — 82,624 13.2 August 31, 2023 - Overdraft Used (Uncommitted) August 31, 2023 - Overdraft Used (Uncommitted) — 303 — — 12.0 August 31, 2023 - Total August 31, 2023 - Total $ 166,000 $ 8,679 $ — $ 157,624 12.7% August 31, 2022 - Committed $ 75,000 — 73 74,927 —% August 31, 2022 - Uncommitted 91,000 10,608 — 80,392 5.3 August 31, 2022 - Total $ 166,000 $ 10,608 $ 73 $ 155,319 5.3% 20222023 and August 31, 2021,2022, the Company was in compliance with all covenants or amended covenants for each of its short-term facility agreements. These facilities generally expire annually or bi-annually and are normally renewed. One of these facilities is a committed credit agreement with one bank for $75.0 million.$75.0 million. In exchange for the bank’s commitment to fund any drawdowns the Company requests, the Company pays an annual commitment fee of 0.25%, payable quarterly, on any unused portion of this facility. Additionally, the Company has uncommitted facilities in most of the countries where it operates, with drawdown requests subject to approval by the individual banks each time a drawdown is requested.2022:(Amounts in thousands) Current
portion of
long-term debtLong-term
debt (net of current portion)Total Balances as of August 31, 2021 $ 19,395 $ 110,110 $ 129,505 (1) Proceeds from long-term debt received during the period: Guatemala subsidiary — 4,204 4,204 Trinidad subsidiary 4,924 21,505 26,429 Total proceeds from long-term debt received during the period 4,924 25,709 30,633 Repayments of long-term debt: (8,110) (14,587) (22,697) Reclassifications of long-term debt due in the next 12 months 17,618 (17,618) — (112) (58) (170) Balances as of August 31, 2022 33,715 103,556 137,271 (3) Proceeds from long-term debt received during the period: Guatemala subsidiary — 12,454 12,454 Barbados subsidiary — 7,460 7,460 Honduras subsidiary 1,001 12,798 13,799 Trinidad subsidiary 750 4,250 5,000 Total proceeds from long-term debt received during the period 1,751 36,962 38,713 Repayments of long-term debt: (17,541) (18,443) (35,984) Reclassifications of long-term debt due in the next 12 months 1,729 (1,729) — 539 (859) (320) Balances as of August 31, 2023 $ 20,193 $ 119,487 $ 139,680 (4)
portion of
long-term debt
debt (net of current portion)on non-cash assets assigned as collateral for these loans was $158.6 million. No cash assets were assigned as collateral for these loans.(2)The carrying amount onof non-cash assets assigned as collateral for these loans was $153.5 million. The carrying amount onof cash assets assigned as collateral for these loans was $7.0 million.(3)(2)These foreign currency translation adjustments are recorded within other comprehensive loss.(4)(3)The carrying amount onof non-cash assets assigned as collateral for these loans was $155.6 million. The carrying amount onof cash assets assigned as collateral for these loans was $5.3 million.F-August 31,
2023August 31,
2022Loans entered into by the Company's subsidiaries for which the subsidiary has entered into a cross-currency interest rate swap with non-cash assets and/or cash or cash equivalents assigned as collateral and with/without established debt covenants $ 23,099 $ 33,853 Loans entered into by the Company's subsidiaries for which the subsidiary has entered into an interest rate swap with non-cash assets and/or cash or cash equivalents assigned as collateral and with/without established debt covenants 30,069 39,969 Unhedged loans entered into by the Company's subsidiaries with non-cash assets and/or cash or cash equivalents assigned as collateral and with/without established debt covenants Unhedged loans entered into by the Company's subsidiaries with non-cash assets and/or cash or cash equivalents assigned as collateral and with/without established debt covenants 86,512 63,449 Total long-term debt 139,680 137,271 Less: current portion 20,193 33,715 Long-term debt, net of current portion $ 119,487 $ 103,556 20222023 and August 31, 2021,2022, the Company had approximately $110.7$91.2 million and $103.4$110.7 million, respectively, of long-term loans in several foreign subsidiaries thatwhich require these subsidiariesentities to comply with certain annual or quarterly financial covenants, which include debt service and leverage ratios. The Company was in compliance with all covenants or amended covenants for both periods. The net increase in long-term debt during the twelve months ended August 31, 20222023 is primarily attributable to a loanloans entered into by the Company’s Honduras, Guatemala, Barbados, and Trinidad subsidiary, whereby it received $25.0 million in U.S. dollars, which it will pay back in Trinidad dollars (using a conversion rate fixed upon initial disbursement) over the four year life of the loan.Twelve Months Ended August 31, Amount 2024 $ 20,193 2025 36,151 2026 18,450 2027 33,188 2028 2028 17,512 Thereafter 14,186 Total $ 139,680 2022,2023, the Company only has operating leases for its clubs, distribution centers, office space, and land. Operating leases, net of accumulated amortization, are included in operating lease right of use (“ROU”) assets, and current and non-current operating lease liabilities, on the Company’s consolidated balance sheets. Lease expense for operating leases is included in selling, general and administrative expense on the Company’s consolidated statements of income. Leases with an initial term of twelve months or less are not recorded on the Company’s consolidated balance sheet. years to 3041 years.20222023 and 20212022 (in thousands):Years Ended August 31, 2023 2022 Operating lease cost $ 15,753 $ 15,632 Short-term lease cost 162 49 Variable lease cost 5,034 4,376 Sublease income (91) (180) Total lease costs $ 20,858 $ 19,877 20222023 and August 31, 20212022 were as follows:Years Ended August 31, 2023 2022 Weighted average remaining lease term in years 17.8 18.3 Weighted average discount rate percentage 6.8 % 6.7 % Years Ended August 31, 2023 2022 Operating cash flows paid for operating leases $ 15,753 $ 14,885 Years Ended August 31, Leased
Locations2024 $ 15,502 2025 15,244 2026 13,711 2027 11,520 2028 11,028 Thereafter 166,398 Total future lease payments 233,403 Less imputed interest (103,587) Total operating lease liabilities $ 129,816 twoone of its wholly owned subsidiaries. To manage this foreign currency and interest rate cash flow exposure, the Company’s subsidiaries entered into cross-currency interest rate swaps that convert their U.S. dollar denominated floating interest payments to functional currency fixed interest payments during the life of the hedging instrument. As changes in foreign exchange and interest rates impact the future cash flow of interest payments, the hedges are intended to offset changes in cash flows attributable to interest rate and foreign exchange movements.Currently, these contracts do not qualify for derivative hedge accounting. The Company seeks to mitigate foreign-currency exchange-rate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features.2022,2023, all of the Company’s interest rate swap and cross-currency interest rate swap derivative financial instruments are designated and qualify as cash flow hedges. The Company formally documents the hedging relationships for its derivative instruments that qualify for hedge accounting.F-transactions as offor the twelve months ended August 31, 2022:2023:
Entered
into
Financial
Counter-
party
Financial
Instruments
US$
Notional
Amount
US$
loan
Held
with
(swap
counter-party)
for PSMT
Subsidiary
Dates
Period of swapEntity Date
Entered
intoDerivative
Financial
Counter-
partyDerivative
Financial
InstrumentsInitial
US$
Notional
AmountBank
US$
loan
Held
withFloating Leg
(swap
counter-party)Fixed Rate
for PSMT
SubsidiarySettlement
DatesEffective
Period of swap
May 3, 2027Colombia subsidiary 12-Apr-23 Citibank, N.A. ("Citi") Cross currency interest rate swap $10,000,000 PriceSmart, Inc. 4.00% 11.40 % 11th day of each July, October, January and April, beginning on July 11, 2023 April 12, 2023 - April 11, 2028
November 18, 2024Colombia subsidiary 26-Sep-22 Citibank, N.A. ("Citi") Cross currency interest rate swap $12,500,000 PriceSmart, Inc. 3.00% 10.35 % 24th day of each December, March, June and September beginning December 26, 2022 September 26, 2022 - September 24, 2024
December 3, 2024Colombia subsidiary 3-May-22 Citibank, N.A. ("Citi") Cross currency interest rate swap $10,000,000 PriceSmart, Inc. 3.00% 9.04 % 3rd day of each May, August, November and February, beginning on August 3, 2022 May 3, 2022 - May 3, 2027
November 27, 2024Colombia subsidiary 17-Nov-21 Citibank, N.A. ("Citi") Cross currency interest rate swap $10,000,000 PriceSmart, Inc. 3.00% 8.40 % 17th day of each February, May, August, and November, beginning on February 17, 2022 November 17, 2021 - November 18, 2024
September 26, 2022Colombia subsidiary 03-Dec-19 Citibank, N.A. ("Citi") Cross currency interest rate swap $7,875,000 Citibank, N.A. Variable rate 3-month Libor plus 2.45% 7.87 % 3rd day of each December, March, June and September beginning March 3, 2020 December 3, 2019 - December 3, 2024
March 23, 2023
February 24, 2023Colombia subsidiary Colombia subsidiary 27-Nov-19 Citibank, N.A. ("Citi") Cross currency interest rate swap $25,000,000 Citibank, N.A. Variable rate 3-month Libor plus 2.45% 7.93 % 27th day of each November, February, May and August beginning February 27, 2020 November 27, 2019 - November 27, 2024
March 1, 2027PriceSmart, Inc. 07-Nov-16 MUFG Union Bank, N.A. ("Union Bank") Interest rate swap $35,700,000 Union Bank Variable rate 3-month Libor plus 1.70% 3.65 % 1st day of each month beginning on April 1, 2017 March 1, 2017 - March 1, 2027 2021 and 20202021, the Company included the gain or loss on the hedged items (that is, variable-rate borrowings) in the same line item—interest expense—as the offsetting gain or loss on the related interest rate swaps as follows (in thousands):
expense on
borrowings(1)
swaps(2)Income Statement Classification Total Interest expense for the year ended August 31, 2023 Interest expense for the year ended August 31, 2023 $ 4,630 $ 1,205 $ 5,835 Interest expense for the year ended August 31, 2022 $ 2,577 $ 3,234 $ 5,811 Interest expense for the year ended August 31, 2021 $ 2,619 $ 3,655 $ 6,274 F-Floating Rate Payer (Swap Counterparty) Floating Rate Payer (Swap Counterparty) Notional Amount as of August 31,
2023August 31,
2022Union Bank $ 30,069 $ 31,344 Citibank N.A. 65,599 66,353 Scotiabank — 8,625 Total $ 95,668 $ 106,322 Derivatives designated as cash flow hedging instruments Derivatives designated as cash flow hedging instruments Balance Sheet
ClassificationAugust 31, 2023 August 31, 2022
Classification
Value
Effect
OCI
Value
Effect
OCIFair
ValueNet Tax
EffectNet
OCIFair
ValueNet Tax
EffectNet
OCICross-currency interest rate swaps Other current assets $ — $ — $ — $ 2,736 $ (348) $ 2,388 Cross-currency interest rate swaps Other non-current assets 5,574 (1,950) 3,624 10,289 (4,559) 5,730 Cross-currency interest rate swaps Other current liabilities — — — (82) 25 (57) Cross-currency interest rate swaps Cross-currency interest rate swaps Other long-term liabilities (3,321) 1,162 (2,159) — — — Interest rate swaps Other non-current assets 2,243 (501) 1,742 1,596 (6) 1,590 Net fair value of derivatives designated as hedging instruments $ 4,496 $ (1,289) $ 3,207 $ 14,539 $ (4,888) $ 9,651 2022:2023:
PRICESMART, INC.SubsidiaryDates
entered intoFinancial
Derivative
(Counterparty)Derivative
Financial
InstrumentNotional
Amount
(in thousands)SettlementDateEffective Period
of ForwardColombia30-Aug-22Scotiabank Colpatria, S.A.Forward foreign
exchange contracts (USD)$1,50011-Jan-23August 30, 2022 - January 11, 2023Colombia17-Aug-22Scotiabank Colpatria, S.A.Forward foreign
exchange contracts (USD)$1,50030-Dec-22August 17, 2022 - December 30, 2022Financial
Derivative
(Counterparty)Subsidiary Dates
Entered into (Range)Derivative
Financial
InstrumentTotal Notional
Amounts
(in thousands)Settlement
Dates (Range)Scotiabank Colpatria, S.A. Colombia 11-Jan-2023 - 19-Jul-2023 Forward foreign exchange contracts (USD) $ 8,500 8-Sep-2023 - 24-Jan-2024 Citibank, N.A. ("Citi") Colombia 18-Jan-2023 - 31-Aug-2023 Forward foreign exchange contracts (USD) $ 13,000 18-Sep-2023 - 24-Apr-2024 2021, and 2020.Other InstrumentsOther derivatives not designated as hedging instruments consist primarily of written call options in which the Company receives a premium that it uses to reduce the costs associated with its hedging activities. As of August 31, 2022, the Company has settled its outstanding call options and does not have any other contracts not designated as hedging instruments.For the twelve-month periods ended August 31, 2022, 2021, and 2020, the Company included in its consolidated statements of income the loss of its other non-designated derivative contracts as follows (in thousands):$1.4 million, and $1.5$1.4 million in rental income for this space during the fiscal years ended 2023, 2022 2021 and 2020.2021. Additionally, Mr. Zurcher is a director of Molinos de Costa Rica S.A. The Company paid approximately $1.1$1.9 million for products purchased from this entity for the fiscal year ended August 31, 2023, and $1.1 million for products purchased for each of the fiscal years ended August 31, 2022,, 2021 and 2020,2021, respectively.2021 and 2020,2021, the Company sold approximately $1.0 million, $438,000, and $1.6 million, and $525,000, respectively, of supplies to Price Philanthropies Foundation. Robert Price, Chairman of the Company's Board of Directors and Interim Chief Executive Officer of the Company, is the Chairman of the Board and President of the Price Philanthropies Foundation. Sherry S. Bahrambeygui, a director and the Chief Executive Officer of the Company, serves as an independenta director of the Board of the Price Philanthropies Foundation. Jeffrey R. Fisher, a director of the Company, serves as the Chief Financial Officer and as a independent director of the Board of the Price Philanthropies Foundation. David Price, a director and the Executive Vice President – Omnichannel Initiatives & Social and Environmental ResponsibilityChief Transformation Officer of the Company, serves as an independent directora Vice President and a Vice Chair of the Board of the Price Philanthropies Foundation.each of the fiscal yearsyear ended August 31, 20212021.August 31, 2020.Chairman of the Board, became Interim Chief Executive Officer. Mr. Price has elected not to receive compensation for his role as Interim Chief Executive Officer. Therefore, the financial statements do not include compensation charges for his services. We have estimated the fair value of these services, based on a number of factors, to be approximately $5.1 million on an annual basis. We acknowledge that this may not be representative of what ultimately could be the cost to the Company when a replacement Chief Executive Officer is hired.each of the fiscal yearsyear ended August 31, 2021 and August 31, 2020.20222023 (in thousands):Entity %
OwnershipInitial
InvestmentAdditional
InvestmentsNet Income (Loss)
Inception to
DateCompany’s
Variable
Interest
in EntityGolfPark Plaza, S.A. 50 % $ 4,616 $ 2,402 $ (98) $ 6,920 $ 99 $ 7,019 Price Plaza Alajuela PPA, S.A. 50 % 2,193 1,236 130 3,559 785 4,344 Total $ 6,809 $ 3,638 $ 32 $ 10,479 $ 884 $ 11,363
Ownership
Investment
Investments
Variable
Interest
in Entity
to Future
Additional
Investments(1)
Maximum
Exposure
to Loss in
Entity(2)August 31,
2023August 31,
2022Current assets $ 1,654 $ 1,839 Noncurrent assets $ 10,324 $ 10,109 Current liabilities $ 158 $ 175 Noncurrent liabilities $ 9 $ 8 Years Ended August 31, 2023 2022 2021 PriceSmart’s share of the net loss of unconsolidated affiliates $ (55) $ (10) $ (58) 5051 warehouse clubs located in 12 countries and one U.S. territory that are located in Central America, the Caribbean and Colombia. In addition, the Company operates distribution centers and corporate offices in the United States. The Company has aggregated its warehouse clubs, distribution centers and corporate offices into reportable segments. The Company’s reportable segments are based on management’s organization of these locations into operating segments by general geographic location, which are used by management and the Company's chief operating decision maker in setting up management lines of responsibility, providing support services, and making operational decisions and assessments of financial performance. Segment amounts are presented after converting to U.S. dollars and consolidating eliminations. Certain revenues, operating costs and inter-company charges included in the United States segment are not allocated to the segments within this presentation, as it is impractical to do so, and they appear as reconciling items to reflect the amount eliminated on consolidation of intersegment transactions. From time to time, the Company revises the measurement of each segment's operating income and net income, including certain corporate overhead allocations, and other measures as determined by the information regularly reviewed by the Company's chief operating decision maker.management. When the Company does so, the previous period amounts and balances are reclassified to conform to the current period's presentation.United
States
OperationsCentral
American
OperationsColombia Operations Total Year Ended August 31, 2023 Revenue from external customers $ 31,741 $ 2,671,083 $ 1,269,307 $ 439,711 $ — $ 4,411,842 Intersegment revenues 1,538,588 27,709 5,621 4,466 (1,576,384) — Depreciation, Property and equipment 5,482 37,053 19,188 10,210 — 71,933 Amortization, Intangibles 765 — — — — 765 Operating income (loss) 29,844 191,721 87,223 15,467 (139,739) 184,516 Interest income from external sources 3,604 3,977 2,135 155 — 9,871 Interest income from intersegment sources 2,454 1,603 253 — (4,310) — Interest expense from external sources 1,165 2,664 3,251 3,940 — 11,020 Interest expense from intersegment sources 75 1,258 1,041 1,939 (4,313) — Provision (benefit) for income taxes 23,283 28,045 9,873 (1,250) — 59,951 Net income attributable to PriceSmart, Inc. 9,540 159,014 68,635 11,755 (139,739) 109,205 Long-lived assets (other than deferred tax assets) 71,919 566,139 210,000 205,295 — 1,053,353 Goodwill 8,981 24,083 10,046 — — 43,110 Investment in unconsolidated affiliates — 10,479 — — — 10,479 Total assets 302,115 995,881 425,145 282,467 — 2,005,608 Capital expenditures, net 10,204 79,526 24,234 29,948 — 143,912 Year Ended August 31, 2022 Revenue from external customers $ 48,716 $ 2,382,163 $ 1,156,607 $ 478,607 $ — $ 4,066,093 Intersegment revenues 1,492,648 22,119 5,857 3,600 (1,524,224) — Depreciation, Property and equipment 4,719 34,155 17,061 10,320 — 66,255 Amortization, Intangibles 1,613 — — — — 1,613 Operating income (loss) 23,364 171,119 79,022 22,526 (128,965) 167,066 Interest income from external sources 147 1,115 863 76 — 2,201 Interest income from intersegment sources 1,789 1,954 255 — (3,998) — Interest expense from external sources 1,225 3,107 2,163 3,116 — 9,611 Interest expense from intersegment sources 27 1,187 1,821 899 (3,934) — Provision for income taxes 19,629 23,396 8,106 727 — 51,858 Net income attributable to PriceSmart, Inc. 8,292 144,159 62,799 18,268 (128,984) 104,534 Long-lived assets (other than deferred tax assets) 70,978 498,204 218,021 175,194 — 962,397 Intangibles, net 765 — — — — 765 Goodwill 8,981 24,250 10,072 — — 43,303 Investment in unconsolidated affiliates — 10,534 — — — 10,534 Total assets 230,411 867,898 474,411 235,680 — 1,808,400 Capital expenditures, net 5,119 46,959 36,610 33,654 — 122,342 Year Ended August 31, 2021 Revenue from external customers $ 88,397 $ 2,105,856 $ 1,004,793 $ 420,825 $ — $ 3,619,871 Intersegment revenues 1,280,236 17,861 5,087 3,869 (1,307,053) — Depreciation, Property and equipment 6,970 31,319 15,432 8,858 — 62,579 Amortization, Intangibles 2,404 — — — — 2,404 Operating income (loss) 12,687 151,933 74,769 21,932 (103,301) 158,020 Interest income from external sources 13 878 985 103 — 1,979 Interest income from intersegment sources 2,130 2,393 483 — (5,006) — Interest expense from external sources 1,606 2,831 427 2,346 — 7,210 Interest expense from intersegment sources 34 1,286 2,647 298 (4,265) — Provision for income taxes 15,919 22,661 8,006 2,383 — 48,969 Net income (loss) attributable to PriceSmart, Inc. (4,777) 127,879 61,025 17,333 (103,497) 97,963 Long-lived assets (other than deferred tax assets) 79,404 490,099 197,030 164,970 — 931,503 Intangibles, net 7,762 — — — — 7,762 Goodwill 10,695 24,332 10,068 — — 45,095 Investment in unconsolidated affiliates — 10,544 — — — 10,544 Total assets 246,896 795,940 434,428 228,526 — 1,705,790 Capital expenditures, net 9,061 45,524 23,342 28,181 — 106,108
States
Operations
American
Operations
Operations(1)
Items(2)F-20222023 through the date of issuance of these consolidated financial statements and has determined that except as set forth below, there are no subsequent events that require disclosure.On September 26, 2022, the Company’s Colombia subsidiary entered into a fixed-to-fixed cross-currency interest rate swap on an existing U.S. Dollar-denominated loan wherein the Company will pay interest of 10.35% on 56.0 billion Colombian pesos and receive interest of 3.00% on $12.5 million U.S. dollars. The swap is designated as a cash flow hedge.On October 3, 2022, the Company’s Guatemala subsidiary received a disbursement of 97.5 million Guatemalan quetzals, or approximately $12.4 million in U.S. dollars, on a loan originally entered into in October 2021.F-ADDITIONALADDITIONAL INFORMATIONFriday,3, 20231, 2024 at 10:00 AMRoad.,Road, San Diego, CA 92121. Internet users can access PriceSmart's web site at http://www.investors.pricesmart.com.F-