UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, ~~2017~~2021


☐¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to

COMMISSION FILE NUMBER ~~0-22793~~000-22793

PriceSmart, Inc.

(Exact name of registrant as specified in its charter)

Delaware

33-0628530

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

~~9740 Scranton Road, San Diego, CA~~


9740 Scranton Road, San Diego, CA		92121
(Address of principal executive offices)		(Zip Code)

~~(Address of principal executive offices)~~

(858) 404-8800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value	PSMT	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.


Yes ☒x	No ☐¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).


Yes ☒x	No ☐¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer ☒x		Accelerated filer ☐¨
Non-accelerated filer ¨		Smaller Reporting Company ☐¨
~~Non-accelerated filer ☐ (Do not check if a smaller reporting company)~~		Emerging growth company ☐¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes ☐¨	No ☒x

The registrant had ~~30,403,542~~30,862,391 shares of its common stock, par value $0.0001 per share, outstanding at December 31, ~~2017.~~2021.

PRICESMART, INC.

INDEX TO FORM 10-Q


		Page
PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	1
	CONSOLIDATED BALANCE SHEETS AS OF NOVEMBER 30, ~~2017~~2021 (UNAUDITED) AND AUGUST 31, ~~2017~~2021	2
	CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED NOVEMBER 30, ~~2017~~2021 AND ~~2016~~2020 - UNAUDITED	4
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED NOVEMBER 30, ~~2017~~2021 AND ~~2016~~2020 - UNAUDITED	5
	CONSOLIDATED STATEMENTS OF EQUITY FOR THE THREE MONTHS ENDED NOVEMBER 30, ~~2017~~2021 AND ~~2016~~2020 - UNAUDITED	6
	CONSOLIDATED STATEMENTS OF CASH FLOWS FOR ~~THE~~ THREE MONTHS ENDED NOVEMBER 30, ~~2017~~2021 AND ~~2016~~2020 - UNAUDITED	7
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED	8 9
ITEM 22..	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	29 31
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	50 51
ITEM 4.	CONTROLS AND PROCEDURES	51 52
PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	52 53
ITEM 1A.	RISK FACTORS	52 53
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	52 53
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	52 53
ITEM 4.	MINE SAFETY DISCLOSURES	52 53
ITEM 5.	OTHER INFORMATION	52 53
ITEM 6.	EXHIBITS	53 54

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PriceSmart, Inc.’s (“PriceSmart,” “we” or the “Company”) unaudited consolidated balance sheet as of November 30, ~~2017~~2021 and the consolidated balance sheet as of August 31, ~~2017,~~2021, the unaudited consolidated statements of income for the three months ended November 30, ~~2017~~2021 and ~~2016,~~2020, the unaudited consolidated statements of comprehensive income for the three months ended November 30, ~~2017~~2021 and ~~2016,~~2020, the unaudited consolidated statements of equity for the three months ended November 30, ~~2017~~2021 and ~~2016,~~2020, and the unaudited consolidated statements of cash flows for the three months ended November 30, ~~2017~~2021 and ~~2016,~~2020 are included herein. Also included herein are the notes to the unaudited consolidated financial statements.

‎

Table of Contents

PRICESMART, INC.

CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)



	November 30,				November 30,
	2017		August 31,		2021		August 31,
	(Unaudited)		2017		(Unaudited)		2021
ASSETS
Current Assets:
Cash and cash equivalents	$	129,183	$	162,434	$	176,072	$	202,060
Short-term restricted cash		373		460		4,165		3,647
Receivables, net of allowance for doubtful accounts of $6 as of November 30, 2017 and $7 as of August 31, 2017, respectively.		6,602		6,460
Short-term investments						39,201		50,233
Receivables, net of allowance for doubtful accounts of $42 as of November 30, 2021 and $94 as of August 31, 2021, respectively						15,572		12,359
Merchandise inventories		372,413		310,946		500,767		389,711
Prepaid expenses and other current assets (includes $71 and $0 as of November 30, 2017 and August 31, 2017, respectively, for the fair value of foreign currency forward contracts)		36,168		30,070
Prepaid expenses and other current assets (includes $1,717 and $0 as of November 30, 2021 and August 31, 2021, respectively, for the fair value of derivative instruments)						46,639		39,194
Total current assets		544,739		510,370		782,416		697,204
Long-term restricted cash		2,986		2,818		12,363		9,772
Property and equipment, net		567,038		557,829		733,219		730,204
Operating lease right-of-use assets, net						117,754		123,655
Goodwill		35,578		35,642		43,332		45,095
Other intangibles, net						1,922		7,762
Deferred tax assets		15,200		15,412		23,922		24,225
Other non-current assets (includes $3,278 and $2,547 as of November 30, 2017 and August 31, 2017, respectively, for the fair value of derivative instruments)		46,506		44,678
Other non-current assets (includes $4,412 and $2,464 as of November 30, 2021 and August 31, 2021, respectively, for the fair value of derivative instruments)						63,851		57,329
Investment in unconsolidated affiliates		10,781		10,765		10,534		10,544
Total Assets	$	1,222,828	$	1,177,514	$	1,789,313	$	1,705,790
LIABILITIES AND EQUITY
Current Liabilities:
Short-term borrowings	$	2,483	$	—	$	4,986	$	—
Accounts payable		297,371		272,248		461,046		388,791
Accrued salaries and benefits		19,250		19,151		30,221		41,896
Deferred membership income		22,234		22,100
Deferred income						28,128		26,898
Income taxes payable		5,217		5,044		6,955		8,310
Other accrued expenses		28,253		26,483
Other accrued expenses and other current liabilities						39,204		39,736
Operating lease liabilities, current portion						6,771		8,526
Long-term debt, current portion		18,257		18,358		16,843		19,395
Total current liabilities		393,065		363,384		594,154		533,552
Deferred tax liability		1,647		1,812		1,631		1,568
Long-term portion of deferred rent		8,838		8,914
Long-term income taxes payable, net of current portion		898		909		6,039		4,160
Long-term operating lease liabilities						125,046		129,256
Long-term debt, net of current portion		80,340		87,939		110,601		110,110
Other long-term liabilities (includes $346 and $682 for the fair value of derivative instruments and $5,335 and $5,051 for post employment plans as of November 30, 2017 and August 31, 2017, respectively)		5,731		5,789
Other long-term liabilities (includes $2,097 and $3,010 for the fair value of derivative instruments and $7,599 and $7,380 for post-employment plans as of November 30, 2021 and August 31, 2021, respectively)						9,696		10,930
Total Liabilities		490,519		468,747		847,167		789,576

‎

Table of Contents



Stockholders' Equity:
Common stock $0.0001 par value, 45,000,000 shares authorized; 31,598,389 and 31,467,971 shares issued and 30,862,489 and 30,755,308 shares outstanding (net of treasury shares) as of November 30, 2021 and August 31, 2021, respectively		3		3
Additional paid-in capital		469,170		465,015
Accumulated other comprehensive loss		(188,639)		(182,508)
Retained earnings		689,430		658,919
Less: treasury stock at cost, 735,900 shares as of November 30, 2021 and 712,663 shares as of August 31, 2021		(27,818)		(26,084)
Total stockholders' equity attributable to PriceSmart, Inc. stockholders		942,146		915,345
Noncontrolling interest in consolidated subsidiaries		—		869
Total Stockholders' Equity		942,146		916,214
Total Liabilities and Equity	$	1,789,313	$	1,705,790

Equity:

Common stock $0.0001 par value, 45,000,000 shares authorized; 31,278,595 and 31,275,727 shares issued and 30,403,610 and 30,400,742 shares outstanding (net of treasury shares) as of November 30, 2017 and August 31, 2017, respectively

3

3
Additional paid-in capital

424,856

422,395
Tax benefit from stock-based compensation

11,486

11,486
Accumulated other comprehensive loss

(111,468)

(110,059)
Retained earnings

443,356

420,866
Less: treasury stock at cost, 874,985 shares as of both November 30, 2017 and August 31, 2017

(35,924)

(35,924)
Total Equity

732,309

708,767
Total Liabilities and Equity

$
1,222,828

$
1,177,514

See accompanying notes.
‎

Table of Contents

PRICESMART, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED—AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)



	Three Months Ended				Three Months Ended
	November 30,		November 30,		November 30,		November 30,
	2017		2016		2021		2020
Revenues:
Net warehouse club sales	$	745,401	$	716,079
Net merchandise sales					$	944,043	$	838,369
Export sales		8,147		10,734		10,534		10,881
Membership income		12,375		11,710		14,791		13,299
Other income		1,149		1,049
Other revenue and income						5,988		14,883
Total revenues		767,072		739,572		975,356		877,432
Operating expenses:
Cost of goods sold:
Net warehouse club		637,236		608,490
Export		7,749		10,181
Net merchandise sales						793,193		703,619
Export sales						10,067		10,433
Non-merchandise						1,809		5,824
Selling, general and administrative:
Warehouse club operations		69,502		65,426
Warehouse club and other operations						91,196		84,832
General and administrative		18,830		16,802		31,693		27,521
Pre-opening expenses		430		(113)		970		602
Loss/(gain) on disposal of assets		159		407
Loss on disposal of assets						411		70
Total operating expenses		733,906		701,193		929,339		832,901
Operating income		33,166		38,379		46,017		44,531
Other income (expense):
Interest income		400		502		518		491
Interest expense		(1,255)		(1,654)		(1,590)		(2,033)
Other income (expense), net		278		(928)		1,409		(1,545)
Total other income (expense)		(577)		(2,080)		337		(3,087)
Income before provision for income taxes and income (loss) of unconsolidated affiliates		32,589		36,299
Income before provision for income taxes and ‎loss of unconsolidated affiliates						46,354		41,444
Provision for income taxes		(10,115)		(11,437)		(15,814)		(13,618)
Income (loss) of unconsolidated affiliates		16		7
Loss of unconsolidated affiliates						(10)		(9)
Net income	$	22,490	$	24,869		30,530		27,817
Net income per share available for distribution:
Basic net income per share	$	0.74	$	0.82
Diluted net income per share	$	0.74	$	0.82
Less: net income attributable to noncontrolling interest						(19)		(80)
Net income attributable to PriceSmart, Inc.					$	30,511	$	27,737
Net income attributable to PriceSmart, Inc. per share available for distribution:
Basic					$	0.98	$	0.90
Diluted					$	0.98	$	0.90
Shares used in per share computations:
Basic		30,078		29,982		30,551		30,398
Diluted		30,079		29,987		30,603		30,420
Dividends per share	$	—	$	—

See accompanying notes.
‎

Table of Contents

PRICESMART, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED—AMOUNTS IN THOUSANDS)



	Three Months Ended				Three Months Ended
	November 30,		November 30,		November 30,		November 30,
	2017		2016		2021		2020
Net income	$	22,490	$	24,869	$	30,530	$	27,817
Less: net income attributable to noncontrolling interest						(19)		(80)
Net income attributable to PriceSmart, Inc.					$	30,511	$	27,737

Other Comprehensive Income, net of tax:
Foreign currency translation adjustments (1)	$	(2,026)	$	(10,866)		(8,131)		2,761
Defined benefit pension plan:
Net gain arising during period						17		60
Amortization of prior service cost and actuarial gains included in net periodic pensions cost		30		(7)		34		33
Total defined benefit pension plan		30		(7)		51		93
Derivative instruments: (2)
Unrealized gains/(losses) on change in fair value of interest rate swaps		587		492
Unrealized gains/(losses) on change in derivative obligations						(1,301)		1,230
Unrealized gains/(losses) on change in ‎fair value of interest rate swaps						3,250		(922)
Total derivative instruments		587		492		1,949		308
Other comprehensive income (loss)		(1,409)		(10,381)		(6,131)		3,162
Comprehensive income	$	21,081	$	14,488		24,380		30,899
Less: comprehensive income attributable to noncontrolling interest						3		31
Comprehensive income attributable to PriceSmart, Inc.					$	24,377	$	30,868

⁽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 indefinite 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.

⁽²⁾

~~See Note 7 - Derivative Instruments and Hedging Activities.~~

⁽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 indefinite 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.

⁽²⁾See Note 8 - Derivative Instruments and Hedging Activities.

See accompanying notes.

Table of Contents

PRICESMART, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED—AMOUNTS IN THOUSANDS)


																	Three Months Ended
						Tax Benefit		Accumulated																						Total
				Additional		From		Other														Accumulated								Stockholders'
	Common Stock			Paid-in		Stock Based		Comprehensive		Retained		Treasury Stock			Total					Additional		Other								Equity
	Shares	Amount		Capital		Compensation		Income(Loss)		Earnings		Shares	Amount		Equity		Common Stock			Paid-in		Comprehensive		Retained		Treasury Stock				Attributable to		Noncontrolling	Total
Balance at August 31, 2016	31,238	$	3	$	412,369	$	11,321	$	(103,951)	$	351,060	836	$	(32,731)	$	638,071
																	Shares	Amount		Capital		Loss		Earnings		Shares	Amount			PriceSmart, Inc.		Interest	Equity
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																	—		—		—		—		—	7		(526)		(526)		—		(526)
Issuance of treasury stock																	(96)		—		(7,864)		—		—	(96)		7,864		—		—		—
Issuance of restricted stock award	5		—		—		—		—		—	—		—		—	77		—		—		—		—	—		—		—		—		—
Forfeiture of restricted stock awards																	(3)		—		—		—		—	—		—		—		—		—
Stock-based compensation																	—		—		4,075		—		—	—		—		4,075		—		4,075
Net income																	—		—		—		—		27,737	—		—		27,737		80		27,817
Other comprehensive income																	—		—		—		3,162		—	—		—		3,162		31		3,193
Balance at November 30, 2020																	31,396	$	3	$	450,666	$	(173,658)	$	610,224	658	$	(21,068)	$	866,167	$	1,124	$	867,291

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																	—		—		—		—		—	32		(2,433)		(2,433)		—		(2,433)
Issuance of treasury stock																	(9)		—		(699)		—		—	(9)		699		—		—		—
Issuance of restricted stock award																	140		—		—		—		—	—		—		—		—		—
Forfeiture of restricted stock awards																	(1)		—		—		—		—	—		—		—		—		—
Stock-based compensation	—		—		2,442		—		—		—	—		—		2,442	—		—		4,567		—		—	—		—		4,567		—		4,567
Net income	—		—		—		—		—		24,869	—		—		24,869	—		—		—		—		30,511	—		—		30,511		19		30,530
Other comprehensive income (loss)	—		—		—		—		(10,381)		—	—		—		(10,381)	—		—		—		(6,131)		—	—		—		(6,131)		3		(6,128)
Balance at November 30, 2016	31,243	$	3	$	414,811	$	11,321	$	(114,332)	$	375,929	836	$	(32,731)	$	655,001

Balance at August 31, 2017	31,276	$	3	$	422,395	$	11,486	$	(110,059)	$	420,866	875	$	(35,924)	$	708,767
Issuance of restricted stock award	3		—		—		—		—		—	—		—		—
Stock-based compensation	—		—		2,461		—		—		—	—		—		2,461
Net income	—		—		—		—		—		22,490	—		—		22,490
Other comprehensive income (loss)	—		—		—		—		(1,409)		—	—		—		(1,409)
Balance at November 30, 2017	31,279	$	3	$	424,856	$	11,486	$	(111,468)	$	443,356	875	$	(35,924)	$	732,309
Sale of Aeropost stock																	—		—		287		—		—	—		—		287		(891)		(604)
Balance at November 30, 2021																	31,598	$	3	$	469,170	$	(188,639)	$	689,430	736	$	(27,818)	$	942,146	$	—	$	942,146

See accompanying ~~notes.~~notes

Table of Contents

PRICESMART, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED—AMOUNTS IN THOUSANDS)



	Three Months Ended				Three Months Ended
	November 30,		November 30,		November 30,		November 30,
	2017		2016		2021		2020
Operating Activities:
Net income	$	22,490	$	24,869	$	30,530		27,817
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		12,237		11,117		15,603		15,485
Allowance for doubtful accounts		(1)		7		2		10
(Gain)/loss on sale of property and equipment		159		407
Loss on sale of property and equipment						411		70
Deferred income taxes		(349)		984		654		798
Equity in (gains) losses of unconsolidated affiliates		(16)		(7)
Equity in losses of unconsolidated affiliates						10		9
Stock-based compensation		2,461		2,442		4,567		4,075
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		(7,049)		(6,516)		(27,108)		(8,907)
Merchandise inventories		(61,467)		(44,082)		(111,062)		(63,669)
Accounts payable		21,372		12,894		73,054		6,539
Net cash provided by (used in) operating activities		(10,163)		2,115
Net cash used in operating activities						(13,339)		(17,773)
Investing Activities:
Proceeds from the disposal of Aeropost, net of divested cash						4,959		—
Additions to property and equipment		(19,752)		(16,973)		(29,729)		(21,171)
Deposits for land purchase option agreements		—		(500)
Purchases of short-term investments						(4,310)		(32,121)
Proceeds from settlements of short-term investments						15,488		4,433
Purchases of long-term investments						—		(1,478)
Proceeds from settlements of long-term investments						1,486		—
Proceeds from disposal of property and equipment		20		108		56		27
Net cash provided by (used in) investing activities		(19,732)		(17,365)
Net cash used in investing activities						(12,050)		(50,310)
Financing Activities:
Proceeds from long-term bank borrowings						4,204		—
Repayment of long-term bank borrowings		(7,554)		(3,688)		(6,126)		(3,897)
Proceeds from short-term bank borrowings		16,954		681		10,041		—
Repayment of short-term bank borrowings		(14,696)		(4,155)		(4,488)		(17,695)
Purchase of treasury stock						(2,433)		(526)
Other financing activities						—		(80)
Net cash provided by (used in) financing activities		(5,296)		(7,162)		1,198		(22,198)
Effect of exchange rate changes on cash and cash equivalents and restricted cash		2,021		(1,650)		1,312		(1,095)
Net increase (decrease) in cash, cash equivalents and restricted cash		(33,170)		(24,062)
Net decrease in cash, cash equivalents						(22,879)		(91,376)
Cash, cash equivalents and restricted cash at beginning of period		165,712		202,716		215,479		303,771
Cash, cash equivalents and restricted cash at end of period	$	132,542	$	178,654	$	192,600	$	212,395

Supplemental disclosure of noncash investing activities:
Capital expenditures accrued, but not yet paid					$	5,772		9,150

‎

Table of Contents

PRICESMART, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

(UNAUDITED—AMOUNTS IN THOUSANDS)

The following table provides a breakdown of cash and cash equivalents, and restricted cash reported within the statement of cash flows:


	Three Months Ended				Three Months Ended
	November 30,		November 30,		November 30,		November 30,
	2017		2016		2021		2020
Cash and cash equivalents	$	129,183	$	175,402	$	176,072	$	207,955
Short-term restricted cash		373		517		4,165		185
Long-term restricted cash		2,986		2,735	$	12,363	$	4,255
Total cash and cash equivalents, and restricted cash shown in the statement of cash flows	$	132,542	$	178,654
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows					$	192,600	$	212,395

See accompanying notes.

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

November 30, ~~2017~~2021

NOTE 1 – COMPANY OVERVIEW AND BASIS OF PRESENTATION

PriceSmart, Inc.’s (“~~PriceSmart”~~PriceSmart,” the “Company,” or ~~the “Company”~~"we") 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 November 30, ~~2017,~~2021, the Company had ~~40 consolidated~~49 warehouse clubs in operation in 12 countries and ~~one~~1 U.S. territory ~~(seven each~~(9 in ~~Colombia and~~Colombia; 8 in Costa Rica; ~~five~~7 in Panama; ~~four~~5 in ~~Trinidad; three each in Guatemala,~~ the Dominican Republic and Guatemala, 4 in Trinidad; 3 in Honduras; ~~two~~2 each in El Salvador and Nicaragua; and ~~one~~1 each in Aruba, Barbados, Jamaica 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). ~~The~~In addition, the Company ~~opened a new warehouse~~plans to open its 50^th club in ~~Santa Ana, Costa Rica~~Portmore, Jamaica in ~~October 2017, bringing~~April 2022. Our operating segments are the total warehouse clubs operating in Costa Rica to seven. In June 2017, the Company acquired land in Santo Domingo, Dominican Republic. The Company is currently building a warehouse club on this site and expects to open in the spring of calendar year 2018. This will bring the number of PriceSmart warehouse clubs operating in Dominican Republic to four.

~~The Company continues to explore other potential sites for future warehouse clubs in~~United States, Central America, the Caribbean and Colombia.

PriceSmart continues to invest in technology and related talent for two main purposes:

To drive growth by:

oIncreasing membership benefits and creating greater value and connectivity with our Members, by optimizing use of our membership data;

oInforming and guiding our plans for physical and geographic expansion; and

oDriving incremental sales through PriceSmart.com.

To increase our efficiencies and provide valuable tools that will support better decision-making.

Basis of Presentation – The interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, ~~2017~~2021 (the ~~“2017~~“2021 Form 10-K”). The interim consolidated financial statements include the accounts of PriceSmart, Inc., a Delaware corporation, and its subsidiaries. ~~Inter-company~~Intercompany transactions between the Company and its subsidiaries have been eliminated in consolidation.

~~Reclassifications to consolidated statement of cash flows recorded during fiscal year 2018 for fiscal year 2017~~ – Accounting Standards Update (ASU) 2016-18 - The amendments in ASU 2016-18 require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Thus, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and the end-of-period total amounts set forth on the statement of cash flows. The amendments in this ASU are effective for annual periods beginning after December 15, 2017 and interim periods within those fiscal years and will be applied using a retrospective transition method to each period presented. The Company early adopted this ASU as of August 31, 2017. The adoption of this ASU impacted the presentation of cash flows with inclusion of restricted cash flows for each of the presented periods.

Additionally, the Company adopted Accounting Standards Update (ASU) 2016-09, effective as of September 1, 2017. The Company made certain elections and changes to account for share-based payments to employees according to the new standard as follows:

~~Accounting for policy election to recognize forfeitures as they occur~~ –The Company made a policy election to recognize forfeitures as they occur. Accordingly, the Company applied the modified retrospective transition method, with a cumulative-effect adjustment to prior-year (August 31, 2017) retained earnings. Therefore, the Company recorded an increase to prior-year retained earnings and a decrease to additional paid-in capital of $367,000 in each case.

August 31, 2017
balance sheet line item
as previously reported

Amount
reclassified

August 31, 2017
balance sheet line item
as currently reported
Retained earnings

$
420,499

$
367

$
420,866
Additional paid-in capital

$
422,762

$
(367)

$
422,395

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~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~Presentation of excess tax benefits and employee taxes paid on the statement of cash flows~~

According to ASU 2016-09, the cash paid to a tax authority when shares are withheld to satisfy the employer’s statutory income tax withholding obligation should be classified as a financing activity on the statement of cash flows, and the full retrospective transition method should be applied. The Company already classifies cash paid for tax withholdings as a financing activity; thus, the adoption did not change the Company’s classification for this activity. However, the Company will change the naming convention from “Purchase of treasury stock” to “Purchase of treasury stock for tax withholding on stock compensation” in the statement of cash flows. There were no such transactions for the three months ended November 30, 2017 and 2016.

Furthermore, the new standard requires the Company to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity. The Company has adopted and implemented this change, retrospectively, for the three months ended November 30, 2017 and 2016; however, no such transactions have occurred during these periods.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation – The interim consolidated financial statements of the Company included herein include the assets, liabilities and results of operations of the Company’s wholly owned subsidiaries, subsidiaries in which it has a controlling interest, and the Company’s joint ventures for which the Company has determined that it is the primary beneficiary. The Company’s net income excludes income attributable to noncontrolling interests. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. The interim 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 interim 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. The results for interim periods are not necessarily indicative of the results for the ~~full~~ year. As of November 30, 2017, all of the Company's subsidiaries were wholly owned. Additionally, the Company's ownership interest in real estate development joint ventures as of November 30, 2017 is listed below:



~~Real Estate Development Joint Ventures~~	~~Countries~~	~~Ownership~~		~~Basis of~~ ~~Presentation~~
~~GolfPark Plaza, S.A.~~	~~Panama~~	~~50.0~~	%	~~Equity(1)~~
~~Price Plaza Alajuela PPA, S.A.~~	~~Costa Rica~~	~~50.0~~	%	~~Equity(1)~~

⁽¹⁾

~~Joint venture interests are recorded as investment in unconsolidated affiliates on the consolidated balance sheets.~~

The Company determines whether any of the joint ventures in which it has made investments is a Variable Interest Entity (“VIE”) at the start of each new venture and if a reconsideration event has occurred. At this time, the Company also considers whether it must consolidate a VIE and/or disclose information about its involvement in a VIE. A reporting entity must consolidate a VIE if that reporting entity has a variable interest (or combination of variable interests) and is determined to be the primary beneficiary. If the Company determines that will absorb a majority of the VIE's expected losses, receive a majority of the VIE's expected residual returns, or both. A reporting entity must consider the rights and obligations conveyed by its variable interests and the relationship of its variable interests with variable interests held by other parties to determine whether its variable interests will absorb a majority of a VIE's expected losses, receive a majority of the VIE's expected residual returns, or both. The reporting entity that consolidates a VIEit is ~~called~~not the primary beneficiary of ~~that VIE.~~

the VIE, then the Company records its investment in, and the Company's share of the income (loss) of, joint ventures recorded under the equity method. Due to the ~~initial~~ nature of the joint ventures that the Company participates in and the continued commitments for additional financing, the Company determined these joint ventures are VIEs. ~~Since~~

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

In the case of the Company's ownership interest in real estate development joint ventures, both parties to each joint venture share all rights, obligations and the power to direct the activities of athe VIE that most significantly impact the VIE's economic ~~performance is shared equally by both parties within each joint venture,~~performance. As a result, the Company has determined that it is not the primary beneficiary of the VIEs and, therefore, has accounted for these entities under the equity method. Under the equity method, the Company's investments in unconsolidated affiliates are initially recorded as an investment in the stock of an investee at cost and are adjusted for the carrying amount of the investment to recognize the investor's share of the earnings or losses of the investee after the date of the initial investment. The Company's ownership interest in real estate development joint ventures the Company has recorded under the equity method as of November 30, 2021 are listed below:



Real Estate Development Joint Ventures	Countries	Ownership		Basis of ‎Presentation
GolfPark Plaza, S.A.	Panama	50.0	%	Equity⁽¹⁾
Price Plaza Alajuela PPA, S.A.	Costa Rica	50.0	%	Equity⁽¹⁾

⁽¹⁾Joint venture interests are recorded as investment in unconsolidated affiliates on the consolidated balance sheets.

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 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 2022 in Other income (expense), net in the consolidated statements of income.

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the interim consolidated financial statements and accompanying notes. Actual results could differ from those estimates.The novel coronavirus (COVID-19) pandemic continues to significantly impact the economies of the countries where the Company operates due to elevated infection rates and government restrictions. The Company has assessed the impact that COVID-19 has had on our estimates, assumptions and accounting policies and made additional disclosures, if and as necessary.

Cash and Cash Equivalents – The Company considers as cash and cash equivalents all cash on deposit, highly liquid investments with a maturity of three months or less at the date of purchase and proceeds due from credit and debit card transactions in the process of settlement.

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

Restricted Cash – The following table summarizes the restricted cash reported by the Company (in thousands):


	November 30,		August 31,
	2021		2021
Short-term restricted cash	$	4,165	$	3,647
Long-term restricted cash		12,363		9,772
Total restricted cash⁽¹⁾	$	16,528	$	13,419

⁽¹⁾Restricted cash consists 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, as measured in U.S. dollars, of approximately $11.7 million with a few of its lenders as compensating balances for several U.S. dollar denominated loans payable over several years. The certificates of deposit will be reduced annually commensurate with the loan balances.

Short-Term Investments – The Company considers as short-term investments certificates of deposit and similar time-based deposits with financial institutions with maturities over three months and up to one year.

Long-Term Investments – The Company considers as long-term investments certificates of deposit and similar time-based deposits with financial institutions with maturities over one year.

Goodwill and Other Intangibles, net – Goodwill and other intangibles totaled $45.3 million as of November 30, 2021 and $52.9 million as of August 31, 2021. 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, we wrote off $1.7 million of goodwill, $4.4 million of other intangibles related to the Aeropost trademark, and $1.0 million of other intangibles related to the developed technology of Aeropost directly associated with Aeropost’s legacy marketplace and casillero business. These write-offs are included as part of the $2.7 million pre-tax gain recorded for the sale of Aeropost.

Receivables –Receivables consist primarily of credit card receivables and receivables from vendors and are stated net of allowances for credit losses. The determination of the allowance for 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.

Tax Receivables –The Company pays Value Added Tax (“VAT”) or similar taxes, ~~(“input VAT”),~~ income taxes, and other taxes within the normal course of ~~its~~ business in most of the countries in which it operates related to the procurement of merchandise and/or services itthe 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 ~~also~~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 ~~similar taxes on~~

~~Table of Contents~~

~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~behalf of~~applied to subsequent returns, and the ~~government (“output VAT”) for merchandise and/or services it sells. If the output~~net underpaid VAT ~~exceeds the input VAT, then the difference is~~must be remitted to the government, usually on a monthly basis. If the input VAT exceeds the output VAT, this creates a VAT receivable. In most countries where the Company operates, the governments have implemented additional collection procedures, such as requiring credit and debit card processors to remit a portion of sales processed via credit and debit card directly to the government as advance payments of VAT and/or income tax. In the case of VAT, these procedures alter the natural offset of input and output VAT and generally leave the Company with a net VAT receivable, forcing the Company to process significant refund claims on a recurring basis.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. ~~The~~In most countries where the Company ~~either requests~~operates, the governments have implemented additional collection procedures, such as requiring credit card processors to remit a ~~refund~~portion of ~~these~~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, ~~or applies~~forcing the ~~balance~~Company to ~~expected future tax payments.~~ process significant refund claims on a recurring basis.These refund or offset processes can take anywhere from several months to several years to complete.

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

In most countries where the Company operates, ~~the tax refund process is~~there are defined and structured ~~with regular~~processes to recover VAT receivables via refunds or offsets. However, ~~as of November 30, 2017,~~ in one country the government has alleged there is not a clearly defined process to allow the tax authorities to refund VAT receivables. As of August 31, 2016, there were three countries that lacked a clearly defined process; however, during the third and fourth quarters of fiscal year 2017, two of these countries clarified the refund mechanism, which we are currently pursuing. The Company, together with its tax and legal advisers, is currently seeking clarification in court in the remaining country without a clearly defined refund process, ~~and expects~~the Company is actively engaged with the local government to ~~prevail. The balance of the~~recover VAT ~~receivable in the country with undefined refund mechanisms was approximately $2.2~~receivables totaling $11.1 million and ~~$1.2~~$9.7 million as of November 30, ~~2017~~2021 and August 31, ~~2017,~~2021, respectively. In ~~another country~~two other countries, there have been changes in the method of computing minimum tax payments, under which the ~~Company operates warehouse clubs, a new minimum income tax mechanism took effect in fiscal year 2015, which requires~~governments have sought to require the Company to pay taxes based on a percentage of sales rather than taxable income. As a result, the Company ~~is making~~has made and may continue to make income tax payments substantially in excess of those it would expect to pay based on taxable income. The ~~current rules (which the~~ Company ~~has challenged in court) do not clearly allow the Company to obtain a refund or to offset this excess~~had income tax ~~against other taxes. As~~receivables of ~~November 30, 2017~~$11.1 million and ~~August 31, 2017, the Company had~~$11.0 million and deferred tax assets of ~~approximately $2.0 million in this country. Also, the Company had an income tax receivable balance of $5.3~~$3.5 million and ~~$4.3~~$3.3 million as of November 30, ~~2017~~2021 and August 31, ~~2017,~~2021, respectively, in these countries. While the rules related to ~~excess payments from fiscal years 2015 to 2017. The~~refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of these tax receivables or deferred tax assets, because the Company believes that it is more likely than not that it will ultimately succeed in its refund ~~requests,~~requests. 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 and/~~appeals. There can be no assurance, however, that the Company will be successful in recovering all tax receivables or ~~court challenge on this matter.~~deferred tax assets.

The ~~Company's~~Company’s policy for classification and presentation of VAT receivables, income tax receivables and other tax receivables is as follows:

Short-term VAT and Income tax receivables, recorded as 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.

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.

The following table summarizes the VAT receivables reported by the Company (in thousands):



	November 30,		August 31,		November 30,		August 31,
	2017		2017		2021		2021
Prepaid expenses and other current assets	$	9,998	$	6,650	$	4,703		3,173
Other non-current assets		22,954		24,904		32,438		28,437
Total amount of VAT receivables reported	$	32,952	$	31,554	$	37,141	$	31,610

~~Table of Contents~~

~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

The following table summarizes the Income tax receivables reported by the Company (in thousands):



	November 30,		August 31,		November 30,		August 31,
	2017		2017		2021		2021
Prepaid expenses and other current assets	$	6,910	$	6,403	$	12,144		11,491
Other non-current assets		13,494		10,492		19,361		18,872
Total amount of Income tax receivables reported	$	20,404	$	16,895
Total amount of income tax receivables reported					$	31,505	$	30,363

Lease Accounting – The Company’s leases are operating leases for warehouse clubs and non-warehouse club facilities such as corporate headquarters, regional offices, and regional distribution centers. The Company determines if an arrangement is a lease and classifies it as either a finance or operating lease at lease inception. Operating leases are included in Operating lease right-of-use assets, net; Operating lease liabilities, current portion; and Long-term operating lease liabilities on the consolidated balance sheets. The Company does not have finance leases.

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

Operating lease liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term. The Company’s leases generally do not have a readily determinable implicit rate; therefore, the Company uses a collateralized incremental borrowing rate at the commencement date in determining the present value of future payments. The incremental borrowing rate is based on a yield curve derived from publicly traded bond offerings for companies with credit characteristics that approximate the Company's market risk profile. In addition, we adjust the incremental borrowing rate for jurisdictional risk derived from quoted interest rates from financial institutions to reflect the cost of borrowing in the Company’s local markets. The Company’s lease terms may include options to purchase, extend or terminate the lease, which are recognized when it is reasonably certain that the Company will exercise that option. The Company does not combine lease and non-lease components.

The Company measures Right-of-use (“ROU”) assets based on the corresponding lease liabilities, adjusted for any initial direct costs and prepaid lease payments made to the lessor before or at the commencement date (net of lease incentives). The lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are not included in the calculation of the ROU asset and the related lease liability and are recognized as 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.

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 ~~between physical inventory counts~~based on ~~the basis of~~ a percentage of sales. The provision is adjusted ~~periodically~~every reporting period to reflect the trend of actual physical inventory and cycle count ~~results, with physical inventories occurring primarily in the second and fourth fiscal quarters.~~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.

Stock Based Compensation– The Company utilizes ~~three~~3 types of equity awards: ~~stock options (“options”),~~ restricted stock awards (“RSAs”) ~~and~~, restricted stock units (“RSUs”)~~. The Company adopted ASU 2016-09 – Compensation - Stock Compensation (Topic 718) on September 1, 2017, see Note 1 – Company Overview~~ and ~~Basis of Presentation for more information on the implementation. Compensation related to options is accounted for by applying the valuation technique based on the Black-Scholes model.~~performance-based restricted stock units (“PSUs”). Compensation related to RSAs, RSUs and ~~RSUs~~PSUs is based on the fair market value at the time of grant. The Company recognizes the compensation cost related to ~~these awards~~RSAs and RSUs over the requisite service period as determined by the grant, amortized ratably or on a ~~straight line~~straight-line basis over the life of the grant. ~~As a result~~The Company also recognizes compensation cost for PSUs over the performance period of ~~adoption~~each tranche, adjusting this cost based on the Company’s estimate of ~~ASU 2016-09,~~the probability that performance metrics will be achieved. If the Company ~~currently~~determines that an award is unlikely to vest, any previously recorded expense is then reversed.

The Company accounts for actual forfeitures as they occur. The Company records the tax savings resulting from tax deductions in excess of expense for stock-based compensation and the tax deficiency resulting from stock-based compensation in excess of the related tax deduction as income tax expense or ~~benefit, based on ASU 2016-09.~~benefit. In addition, the Company reflects the tax savings (deficiency) resulting from the taxation of stock-based compensation as an operating cash flow in its consolidated statement of cash flows.

RSAs are outstanding shares of common stock and have the same cash dividend and voting rights as other ~~common stock and are considered to be currently issued and outstanding~~ shares of common stock. Shares of common stock subject to RSUs are not issued nor outstanding until vested, and RSUs do not have the same dividend and voting rights as common stock. However, all outstanding RSUs have accompanying dividend equivalents, requiring payment to the employees and directors with unvested RSUs of amounts equal to the dividend they would have received had the shares of common stock underlying the RSUs been actually issued and outstanding. Payments of dividend equivalents to employees are recorded as compensation expense.

~~Exit or Disposal Cost Obligations~~ PSUs, similar to RSUs, are awarded with dividend equivalents, provided that such amounts become payable only if the performance metric is achieved. At the time the Compensation Committee confirms the performance metric has been achieved, the accrued dividend equivalents are paid on the PSUs.

Treasury Stock– ~~In January 2017,~~Shares of common stock repurchased by the Company ~~purchased a distribution center~~are recorded at cost as treasury stock and result in ~~Medley, Miami-Dade County, Florida.~~the reduction of stockholders’ equity in the Company’s consolidated balance sheets. The Company ~~transferred its Miami dry distribution center activities that were previously in a leased facility to the new facility during the third quarter of fiscal year 2017. As~~may reissue these treasury shares as part of ~~this transaction,~~its stock-based compensation programs. When treasury shares are reissued, the Company ~~has recorded an exit obligation related to~~uses the ~~lease~~first in/first out (“FIFO”) cost method for determining cost of the ~~previous distribution center. The obligation consists~~reissued shares. If the issuance price is higher than the cost, the excess of the costs associated with the exit or disposal activity measured initially at its fair value as of May 1, 2017, the date on which the obligation was incurred. These costs are primarily comprised of the costs to terminate the operating lease and other associated costs, including costs to consolidate or close facilities, net of any potential sub-lease income the Company could receive during the remaining lease term. In periods subsequent to initial measurement, changes to the exit obligation, including any changes resulting from a revision to either the timing or the amount of estimated cash flowsissuance price over the ~~remaining lease period,~~cost is ~~measured using~~credited to additional paid-in capital (“APIC”). If the ~~credit-adjusted risk-free rate that was used~~issuance price is lower than the cost, the difference is first charged against any credit balance in APIC from treasury stock and the balance is charged to ~~measure the initial obligation.~~retained earnings. During the third quarter of fiscal year 2017, the Company initially recorded an obligation related to this exit activity for approximately $496,000 within other long-term liabilities. The Company’s exit obligation recorded as of August 31, 2017 was approximately $57,000. The Company’s exit obligation recorded as of November 30, 2017 was approximately $50,000. Exit costs of approximately $1.4 million were recorded to net warehouse club cost of goods sold for the twelve months ended August 31, 2017. Exit costs of approximately $338,000 were recorded to net warehouse club cost of goods sold for the three months ended November 30, ~~2017.~~2021, the Company reissued approximately 9,000 treasury shares.

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

Fair Value Measurements – The Company measures the fair value for all financial and nonfinancial 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.

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~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

The Company has established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring and revaluing 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.~~

Non-financial assets and liabilities are revalued and recognized at fair value subsequent to initial recognition when there is evidence of impairment. For the periods reported, no0 impairment of such non-financial assets was recorded.

The Company’s current and long-term financial assets and liabilities have fair values that approximate their carrying values. The Company’s long-term financial liabilities consist of long-term debt, which is recorded on the balance sheet at issuance price and adjusted for any applicable unamortized discounts or premiums and debt issuance costs. There have been no significant changes in fair market value of the Company’s current and long-term financial assets, and there have been no material changes to the valuation techniques utilized in the fair value measurement of assets and liabilities as disclosed in the Company’s ~~2017~~2021 Annual Report on Form 10-K.

Derivatives 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 ~~providing~~and 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 ~~offset~~reported in accumulated other comprehensive ~~income (loss)~~loss until the hedged item completes its contractual term. ~~If any portion of the hedge is deemed ineffective, the change in fair value of the hedged assets or liabilities will be immediately recognized in earnings during the period.~~ 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. 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.

Cash Flow Instruments. The Company is a party to receive floating interest rate, pay fixed-rate interest rate swaps to hedge the interest rate risk of certain U.S. dollar denominated debt within its international subsidiaries. The swaps are designated as cash flow hedges of interest expense risk. These instruments are considered effective hedges and are recorded using hedge accounting. The Company is also a party to receive variable interest rate, pay fixed interest rate cross-currency interest rate swaps to hedge the interest rate and currency exposure associated with the expected payments of principal and interest of U.S. denominated debt within its international subsidiaries whose functional currency is other than the U.S. dollar. The swaps are designated as cash flow hedges of the currency risk and interest-rate risk related to payments on the U.S. denominated debt. These instruments are also considered to be effective hedges and are recorded using hedge accounting. Under cash flow hedging, the ~~effective portion of the fair value~~entire gain or loss of the derivative, calculated as the net present value of the future cash flows, is ~~deferred~~reported on the consolidated balance sheets in accumulated other comprehensive loss. ~~If any portion of an interest rate swap is determined to be an ineffective hedge, the gains or losses from changes in fair value would be recorded directly in the consolidated statements of income.~~ Amounts recorded in accumulated other comprehensive loss are released to earnings in the same period that the hedged transaction impacts consolidated earnings. ~~See Note 7~~Refer to “Note 8 - Derivative Instruments and Hedging ~~Activities~~Activities” for information on the fair value of interest rate swaps and cross-currency interest rate swaps as of November 30, ~~2017~~2021 and August 31, ~~2017.~~2021.

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

Fair Value Instruments. The Company is exposed to ~~foreign-currency~~foreign currency exchange rate fluctuations in the normal course of business. This includes exposure to ~~foreign-currency~~foreign currency exchange rate fluctuations on U.S. dollar denominated liabilities within the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. The Company manages these fluctuations, in part, through the use of non-deliverable forward foreign-exchange contracts that are intended to offset changes in cash flows attributable to currency exchange movements. The contracts are intended primarily to economically address exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar.

Currently, these contracts are treated for accounting purposes as fair value instruments and do not qualify for derivative hedge accounting, and as such the Company does not apply derivative hedge accounting to record these transactions. As a result, these contracts are valued at fair value with unrealized gains or losses reported in earnings during the period of the change. The Company seeks to mitigate ~~foreign-currency~~foreign currency exchange-rate risk with the use of these contracts and

~~Table of Contents~~

~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features and are limited to less than one year in duration. ~~See Note 7 - Derivative Instruments~~

Revenue Recognition – The accounting policies and ~~Hedging Activities for information on~~other disclosures such as the ~~fair value~~disclosure of ~~open, unsettled forward foreign-exchange contracts~~disaggregated revenues are described in “Note 3 – Revenue Recognition.”

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 ~~November 30, 2017 and August 31, 2017.~~

~~Insurance Reimbursements –Receipts~~our business, gain contingencies arise when we have the opportunity to recover costs or damages we incur from insurance reimbursements up to the amount of the losses recognized are considered recoveries. These recoveries are accounted for when they are probable of receipt. Insurance recoveries are not recognized prior to the recognition of the related cost. carriers or other third parties. Anticipated proceeds in excess of the amount of loss recognized are considered ~~gains and are subject to gain contingency guidance.~~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.

Cost of Goods Sold – The Company includes the cost of merchandise and food service and bakery raw materials in cost of goods sold, net merchandise sales. The Company also includes in cost of goods sold: net merchandise sales the external and internal distribution and handling costs for supplying merchandise, raw materials and supplies to the warehouse clubs, and, when applicable, costs of shipping to Members. External costs include inbound freight, duties, drayage, fees, insurance, ~~claim are resolved.~~and non-recoverable value-added tax related to inventory shrink, spoilage and damage. Internal costs include payroll and related costs, utilities, consumable supplies, repair and maintenance, rent expense and building and equipment depreciation at the Company's distribution facilities and payroll and other direct costs for in-club demonstrations.

~~Self-Insurance –As of October 1, 2017, PriceSmart, Inc. became self-insured for its employee medical health benefits and in doing so~~For export sales, the Company ~~has assumed~~includes the ~~financial risk~~cost of merchandise and external and internal distribution and handling costs for ~~providing health care benefits~~supplying merchandise in cost of goods sold, exports.

For the marketplace and casillero operations, the Company includes the costs of external and internal shipping, handling and other direct costs incurred to ~~its employees.~~provide delivery, insurance and customs processing services in cost of goods sold, non-merchandise.

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 ~~contracted~~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 ~~Cigna Health~~the resulting effect recorded to cost of goods sold when the inventory is sold.

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

Selling, General and ~~Life Insurance Company (“CHLIC”), a third party administrator, to process claims on its behalf under an~~ Administrative ~~Services Only (ASO) agreement.~~ – Selling, general and administrative costs consist primarily of expenses associated with operating warehouse clubs and freight forwarding operations. These costs include payroll and related costs, 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.

Pre-Opening Costs – The Company ~~has elected to purchase “Stop~~ expenses pre-opening costs (the costs of start-up activities, including organization costs and rent) for new warehouse clubs as incurred.

Loss ~~Insurance” to cover the risk in excess of certain dollar limits.~~Contingencies and Litigation – The Company ~~establishes~~records and reserves for loss contingencies if (a) information available prior to issuance of the consolidated financial statements indicates that it is probable that an ~~estimated~~asset had been impaired or a liability had been incurred at the date of the consolidated financial statements and (b) the amount of loss can be reasonably estimated. If one or both criteria for accrual ~~for its insurance program based on available comparable claims data, trends and projected ultimate costs of claims. This accrual~~are not met, but there is based on estimates prepared with the assistance of outside actuaries and the ultimate cost of these claims may vary from initial estimates and established accrual. The actuaries periodically update their estimates andat least a reasonable possibility that a material loss will occur, the Company ~~records such adjustments in~~does not record and reserve for a loss contingency but describes the ~~period in which such determination~~contingency within a note and provides detail, when possible, of the estimated potential loss or range of loss. If an estimate cannot be made, a statement to that effect is made. ~~The accrued obligation for this self-insurance program is included in “Accrued salaries and benefits” in the consolidated balance sheets and is $574,000 as of November 30, 2017.~~

Foreign Currency Translation – The assets and liabilities of the Company’s foreign operations are translated to U.S. dollars when the functional currency in the Company’s international subsidiaries is the local currency and not U.S. dollars. Assets and liabilities of these foreign 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 affect net income upon the sale or liquidation of the underlying investment.

The following table discloses the net effect of translation into the reporting currency on other comprehensive loss for these local currency denominated accounts for the three months ended November 30, 2021 and 2020 (in thousands):


	Three Months Ended
	November 30,		November 30,
	2021		2020
Effect on other comprehensive income (loss) due to foreign currency translation	$	(8,131)	$	2,761

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 gains (losses), including transactions recorded involving these monetary assets and liabilities, are recorded as Other income (expense) in the consolidated statements of ~~income.~~

~~The following table summarizes the amounts recorded for the three months ended November 30, 2017 and 2016~~income (in thousands):

Three Months Ended

November 30,

November 30,

2017

2016
Currency gain (loss)

$
278

$
(928)



	Three Months Ended
	November 30,		November 30,
	2021		2020
Currency loss	$	(1,864)	$	(1,492)

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

Recent Accounting Pronouncements ~~– Not Yet~~ Adopted

FASB ASC ~~815~~740 ASU ~~2017-12 Derivatives and Hedging - Targeted Improvements to~~2019-12—Income Taxes (Topic 740): Simplifying the Accounting for ~~Hedging Activities~~Income Taxes

~~The~~In December 2019, the FASB ~~has~~ issued ~~Accounting Standards Update (ASU)~~ASU No. ~~2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to~~2019-12, Simplifying the Accounting for ~~Hedging Activities, which aims~~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 ~~the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements.~~consistent application. The ~~amendments in this~~ ASU are intended to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To satisfy that objective, the amendments expand and refine hedge accounting for both non-financial and financial risk components, and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements.

Additionally, the amendments (1) permit hedge accounting for risk components in hedging relationships involving non-financial risk and interest rate risk; (2) change the guidance for designating fair value hedges of interest rate risk and for measuring the change in fair value of the hedged item in fair value hedges of interest rate risk; (3) continue to allow an entity to exclude option premiums and forward points from the assessment of hedge effectiveness; and (4) permit an entity to exclude the portion of the change in fair value of a currency swap that is ~~attributable to a cross-currency basis spread from the assessment of hedge effectiveness. The amendments in this ASU are~~ effective for annual periods beginning after December 15, ~~2018 and interim~~

~~Table of Contents~~

~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~periods within those annual periods. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.~~

~~FASB ASC 715 ASU 2017-09 -Compensation—Stock Compensation (Topic 718)—Scope of Modification Accounting~~

The FASB has issued Accounting Standards Update (ASU) No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which seeks to provide clarity, reduce diversity in practice, and reduce cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, regarding a change to the terms or conditions of a share-based payment award. This ASU provides guidance concerning which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Specifically, an entity is to account for the effects of a modification, unless all of the following are satisfied: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified; (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (3) the classification of the modified award as an equity instrument or as a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments in this ASU are effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods.2020. Early adoption is permitted. The Company ~~will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.~~

~~FASB ASC 715 ASU 2017-07-Compensation—Retirement Benefits (Topic 715) —Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~

~~In March 2017, the FASB issued~~adopted ASU No. ~~2017-07, Compensation—Retirement Benefits (Topic 715) — Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU~~ is designed to improve guidance related to the presentation of defined benefit costs in the income statement. In particular, ASU 2017-07 requires that an employer report the service cost component in the same line item(s) as other compensation costs arising from services rendered by the pertinent employees during the period. The amendments in this ASU are effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is permitted. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

~~FASB ASC 350 ASU 2017-04-Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~

In January 2017, the FASB issued Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under the amendments in this ASU, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Additionally, ASU 2017-04 requires any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. The amendments in this ASU are effective for annual periods beginning after December 15, 2019. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

~~FASB ASC 740 ASU 2016-16-Income Taxes (Topic 740)—Intra-Entity Transfers of Assets Other Than Inventory~~

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740)—Intra-Entity Transfers of Assets Other Than Inventory. Currently, U.S. GAAP prohibits recognizing current and deferred income tax consequences for an intra-entity asset transfer until the asset has been sold to an outside party. ASU 2016-16 states that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.

The amendments in this ASU are effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is permitted. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

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~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~FASB ASC 230 ASU 2016-15-Statement of Cash Flows (Topic 230)—Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force)~~

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU addresses stakeholders’ concerns regarding diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and Other Topics. In particular, ASU No. 2016-15 addresses eight specific cash flow issues in an effort to reduce this diversity in practice: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon bonds; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle.

The amendments in this ASU are effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is permitted. The amendments in this ASU should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company will evaluate the impact adoption of this guidance may have on the Company's consolidated financial statements.

~~FASB ASC 842 ASU 2016-02 -Leases (Topic 842): Amendments to the FASB Accounting Standards Codification~~

~~In February 2016, the FASB issued guidance codified in ASC 842,~~ ~~Leases, which supersedes the guidance in ASC 840,~~ ~~Leases. ASC 842 will be effective for the Company~~2019-12 on September 1, ~~2019, and~~2021, the Company expects to apply the transition practical expedients allowed by the standard. Note 11 – “Leases” provides details on the Company’s current lease arrangements. While the Company continues to evaluate the provisions of ASC 842 to determine how it will be affected, the primary effect will be to require recording right-of-use assets and corresponding lease obligations for current operating leases. The Company expects the adoption of this guidance to have a material impact on the Company's consolidated balance sheets, but not on the consolidated statements of income or cash flows.

~~FASB ASC 606 ASU 2014-09 - Revenue from Contracts with Customers~~

In May 2014, the Financial Accounting Standards Board (FASB) issued new guidance on the recognition of revenue from contracts with customers. The guidance combines the requirements for reporting revenue and requires disclosures sufficient to describe the nature, amount, timing, and uncertainty of revenue and cash flows arising from these contracts. Transition is permitted either retrospectively or as a cumulative effect adjustment as of the date of adoption. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2019. The Company is evaluating the impact of adoption of this guidance on all potentially significant revenue transactions that will be impacted by the new standard on the Company's consolidated financial statements and related disclosures as a result of adopting this standard.

~~Recent Accounting Pronouncements Adopted~~

~~FASB ASC 718 ASU 2016-09 - Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~

In March 2016, the FASB issued new guidance on stock compensation intended to simplify accounting for share-based payment transactions. The guidance will change accounting for income taxes, forfeitures, and minimum statutory tax withholding requirements. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2016, with early adoption permitted. The Company adopted this guidance on September 1, 2017.

The Company determined that the adoption of this guidance did not have a material effect on the result of operations and the calculation of earnings per share. The Company has used the two-step method for the diluted net income per share calculation over the last several years.

The adoption of this guidance and the amendments related to the presentation of employee taxes paid on the statement of cash flows did not have a material effect on the consolidated statements of cash flows.

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~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

The adoption of this guidance and the amendments related to the timing of when excess tax benefits are recognized, the effect of minimum statutory withholding requirements, forfeitures, and intrinsic value and the adoption of this methodology using the modified retrospective transition method resulted in the Company electing to eliminate the recording of the forfeiture rate on the expense recorded. The elimination of the forfeiture rate required recording a cumulative-effect adjustment by increasing retained earnings and reducing Additional Paid in Capital, at the beginning of the year of adoption, which was September 1, 2017, for the service periods already incurred for unvested shares.

~~FASB ASC 330 ASU 2015-11 -Inventory (Topic 330): Simplifying the Measurement of Inventory~~

In July 2015, the FASB issued guidance that will require an entity to measure in-scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This amendment applies to entities, like the Company, that measure inventory value using the average cost method. The amendments in this ASU more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards.

The amendment in this ASU is effective on a prospective basis for public entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company adopted this guidance on September 1, 2017.2022. Adoption of this guidance did not have a material ~~effect~~impact on the Company’s consolidated financial statements.

There were no other new accounting standards that had a material impact on the Company’s consolidated financial statements during the three-month period ended November 30, 2021, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of November 30, 2021 that the Company expects to have a material impact on its consolidated financial statements.

NOTE 3 – REVENUE RECOGNITION

Performance Obligations

The Company identifies each distinct performance obligation to transfer goods (or bundle of goods) or services. The Company recognizes revenue when (or as) it satisfies a performance obligation by transferring control of the goods or services to the customer.

Net Merchandise Sales. The Company recognizes net merchandise sales revenue, net of sales taxes, on transactions where the Company has determined that it is the principal in the sale of merchandise. These transactions may include shipping commitments and/or shipping revenue if the transaction involves delivery to the customer.

Non-merchandise Sales. The Company recognizes non-merchandise revenue, net of sales taxes, on transactions where the Company has determined that it is the agent in the transaction. These transactions primarily consist of contracts the Company enters into with its customers to provide delivery, insurance and customs processing services for products its customers purchase online in the United States either directly from other vendors utilizing the vendor’s website or through the Company’s marketplace site. Revenue is recognized when the Company’s performance obligations have been completed (that is when delivery of the items have been made to the destination point) and is recorded in “non-merchandise revenue” on the consolidated statements of income. Prepayment for orders for which the Company has not fulfilled its performance obligation are recorded as deferred income. Additionally, the Company records revenue at the net amounts retained, i.e., the amount paid by the customer less amounts remitted to the respective merchandise vendors, as the Company is acting as an agent and is not the principal in the sale of those goods being purchased from the vendors by the Company’s customers.

Membership Fee Revenue. Membership income represents annual membership fees paid by the Company’s warehouse club Members, which are recognized ratably over the 12-month term of the membership. Our membership policy allows Members to cancel their membership in the first 60 days and receive a full refund. After the 60-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, no refund reserve was required for the periods presented. Membership fee revenue is included in membership income in the Company's consolidated ~~financial statements.~~ statements of income. The deferred membership fee is included in deferred income in the Company's consolidated balance sheets.

~~FASB ASC 230 ASU 2016-18-Statement~~17

Table of ~~Cash Flows(Topic 230)—Restricted Cash~~Contents

PRICESMART, INC.

~~In November 2016,~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

Platinum Points Reward Programs. The Company currently offers Platinum Memberships in all of its 13 countries. 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 ~~FASB issued ASU No. 2016-18, Statement~~warehouse club during the redemption period. The Company records this 2% rebate as a reduction of ~~Cash Flows (Topic 230)—Restricted Cash. This ASU addresses~~revenue at the ~~diversity in practice~~time of the sales transaction. Accordingly, the Company has reduced warehouse sales and has accrued a liability within other accrued expenses and other current liabilities, platinum rewards. The Company has determined that ~~exists regarding~~breakage revenue is 5% of the ~~classification~~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 ~~presentation of changes in restricted cash~~expired unused rebates are recognized as “Other revenue and income” on the ~~statement~~consolidated statements of ~~cash flows.~~income.

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 ~~amendments~~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.

Gift Cards. Members’ purchases of gift cards to be utilized at the Company's warehouse clubs are not recognized as sales until the card is redeemed and the customer purchases merchandise using the gift card. The outstanding gift cards are reflected as other accrued expenses and other current liabilities in ~~ASU No. 2016-18 require~~the consolidated balance sheets. These gift cards generally have a one-year stated expiration date from the date of issuance and are generally redeemed prior to expiration. However, the absence of a large volume of transactions for gift cards impairs the Company's ability to make a reasonable estimate of the redemption levels for gift certificates; therefore, the Company assumes a 100% redemption rate prior to expiration of the gift certificate. The Company periodically reviews unredeemed outstanding gift certificates, and the gift certificates that have expired are recognized as “Other revenue and income” on the consolidated statements of income.

Co-branded Credit Card Revenue Sharing Agreements. As part of the co-branded credit card agreements that the Company has entered into with financial institutions within its markets, the Company often enters into revenue sharing agreements. As part of these agreements, in some countries, the Company receives a ~~statement~~portion of ~~cash flows explain~~ the ~~change~~interest income generated from the average outstanding balances on the co-branded credit cards from these financial institutions (“interest generating portfolio” or “IGP”). The Company recognizes its portion of interest received as revenue during the period it is earned. The Company has determined that this revenue should be recognized as “Other revenue and income” on the consolidated statements of income.

Contract Performance Liabilities

Contract performance liabilities as a result of transactions with customers primarily consist of deferred membership income, other deferred income, deferred gift card revenue, Platinum points programs, and liabilities related to co-branded credit card points rewards programs which are included in deferred income and other accrued expenses and other current liabilities in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Thus, amounts generally described as restricted cash and restricted cash equivalents should be includedCompany’s consolidated balance sheets. The following table provides these contract balances from transactions with cash and cash equivalents when reconciling the beginning-of-period and the end-of-period total amounts set forth on the statement of cash flows. The amendments in this ASU are effective for annual periods beginning after December 15, 2017 and interim periods within those fiscal years and will be applied using a retrospective transition method to each period presented. The Company early adopted this ASUcustomers as of ~~August 31, 2017. The adoption~~the dates listed (in thousands):


	Contract Liabilities
	November 30, 2021		August 31, 2021
Deferred membership income	$	26,952	$	25,951
Other contract performance liabilities	$	11,811	$	7,871

Table of ~~this ASU impacted~~Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

Disaggregated Revenues

In the ~~presentation of cash flows with inclusion of restricted cash flows for each of the presented periods.~~following table, net merchandise sales are disaggregated by merchandise category (in thousands):



		Three Months Ended
		November 30, 2021		November 30, 2020
Foods & Sundries	$	470,950	$	418,374
Fresh Foods		269,677		235,289
Hardlines		111,936		112,785
Softlines		50,474		40,329
Other Business		41,006		31,592
Net Merchandise Sales	$	944,043	$	838,369

NOTE 34 – EARNINGS PER SHARE

The Company presents basic net income per share using the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders and that determines basic net income per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings that would have been available to common stockholders. A participating security is defined as a security that may participate in undistributed earnings with common stock. The Company’s capital structure includes securities that participate with common stock on a one-for-one basis for distribution of dividends. These are the restricted stock awards and restricted stock units issued pursuant to the 2013 Equity Incentive Award Plan. The Company does not include performance stock units as participating securities until the performance criteria are satisfied. The Company determines the diluted net income per share by using the more dilutive of the two class-method or the treasury stock method and by including the basic weighted average of outstanding performance stock ~~options~~units for which performance criteria have not been met in the calculation of diluted net income per share under the two-class method and including all potential common shares assumed issued in the calculation of diluted net income per share under the treasury stock method.

~~Table of Contents~~

~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

The following table sets forth the computation of net income per share for the ~~three months~~three-months ended November 30, ~~2017~~2021 and ~~2016~~2020 (in thousands, except per share amounts):



	Three Months Ended				Three Months Ended
	November 30,		November 30,		November 30,		November 30,
	2017		2016		2021		2020
Net income	$	22,490	$	24,869
Net income attributable to PriceSmart, Inc.					$	30,511	$	27,737
Less: Allocation of income to unvested stockholders		(300)		(420)		(560)		(459)
Net earnings available to common stockholders	$	22,190	$	24,449
Net income attributable to PriceSmart, Inc. per share available for distribution					$	29,951	$	27,278
Basic weighted average shares outstanding		30,078		29,982		30,551		30,398
Add dilutive effect of stock options (two-class method)		1		5
Add dilutive effect of performance stock units (two-class method)						52		22
Diluted average shares outstanding		30,079		29,987		30,603		30,420
Basic net income per share	$	0.74	$	0.82	$	0.98	$	0.90
Diluted net income per share	$	0.74	$	0.82	$	0.98	$	0.90

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

NOTE 45 – STOCKHOLDERS’ EQUITY

Dividends

NoNaN dividends were declared by the Company’s Board of Directors during the first three months of fiscal year ~~2018.~~2022. The following table summarizes the dividends declared and paid during fiscal year ~~2017.~~2021 (amounts are per share).

First Payment

Second Payment

First Payment

Second Payment

Declared

Amount

Record
Date

Date
Paid

Date
Payable

Amount

Record
Date

Date
Paid

Date
Payable

Amount

Record
‎Date

Date
‎Paid

Amount

Record
‎Date

Date
‎Paid

Amount

2/1/2017

0.70

2/15/2017

2/28/2017

N/A

0.35

8/15/2017

N/A

8/31/2017

0.35

2/4/2021

0.70

2/15/2021

2/26/2021

0.35

8/15/2021

8/31/2021

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.~~requirements, taking into account the uncertainty surrounding the ongoing effects of the COVID-19 pandemic on our results of operations and cash flows.

Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss

The following tables disclose the effects on accumulated other comprehensive loss of each component of other comprehensive income (loss), net of tax (in thousands):

Three Months Ended November 30, 2017

Foreign
currency
translation
adjustments

Defined
benefit
pension
plans

Derivative
Instruments

Total
Beginning balance, September 1, 2017

$
(108,539)

$
(442)

$
(1,078)

$
(110,059)
Other comprehensive income (loss)

(2,026)

30

587
(1)

(1,409)
Ending balance, November 30, 2017

$
(110,565)

$
(412)

$
(491)

$
(111,468)


	Attributable to		Noncontrolling
	PriceSmart		Interests		Total
Beginning balance, September 1, 2021	$	(182,508)		251	$	(182,257)
Foreign currency translation adjustments		(8,131)		3		(8,128)
Defined benefit pension plans ⁽¹⁾		51		—		51
Derivative instruments ⁽²⁾		1,949		—		1,949
Sale of Aeropost		—		(254)		(254)
Ending balance, November 30, 2021	$	(188,639)	$	—	$	(188,639)

Three Months Ended November 30, 2016

Foreign
currency
translation
adjustments

Defined
benefit
pension
plans

Derivative
Instruments

Total
Beginning balance, September 1, 2016

$
(102,242)

$
(315)

$
(1,394)

$
(103,951)
Other comprehensive income (loss)

(10,866)

(7)

492
(1)

(10,381)
Ending balance, November 30, 2016

$
(113,108)

$
(322)

$
(902)

$
(114,332)


	Attributable to		Noncontrolling
	PriceSmart		Interests		Total
Beginning balance, September 1, 2020	$	(176,820)	$	134	$	(176,686)
Foreign currency translation adjustments		2,761		31		2,792
Defined benefit pension plans ⁽¹⁾		93		—		93
Derivative Instruments ⁽²⁾		308		—		308
Ending balance, November 30, 2020	$	(173,658)	$	165	$	(173,493)


	Attributable to		Noncontrolling
	PriceSmart		Interests		Total
Beginning balance, September 1, 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)

⁽¹⁾Amounts reclassified from accumulated other comprehensive income (loss) related to the minimum pension liability are included in warehouse club and other operations in the Company's consolidated statements of income.

⁽²⁾Refer to Note 8 - Derivative Instruments and Hedging Activities.

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS —(Continued)

Twelve Months Ended August 31, 2017

Foreign
currency
translation
adjustments

Defined
benefit
pension
plans

Derivative
Instruments

Total
Beginning balance, September 1, 2016

$
(102,242)

$
(315)

$
(1,394)

$
(103,951)
Other comprehensive income (loss)

(6,297)

(166)

316
(1)

(6,147)
Amounts reclassified from accumulated other comprehensive income (loss)

—

39
(2)

—

39
Ending balance, August 31, 2017

$
(108,539)

$
(442)

$
(1,078)

$
(110,059)

⁽¹⁾

~~See Note 7 - Derivative Instruments and Hedging Activities.~~

⁽²⁾

Amounts reclassified from accumulated other comprehensive income (loss) related to the minimum pension liability are included in warehouse club operations in the Company's Consolidated Statements of Income.

Retained Earnings Not Available for Distribution

The following table summarizes retained earnings designated as legal reserves of various subsidiaries which cannot be distributed as dividends to PriceSmart, Inc. according to applicable statutory regulations (in thousands):

November 30,

August 31,

2017

2017
Retained earnings not available for distribution

$
6,557

$
6,459

NOTE 56 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company and its subsidiaries are subject to legal proceedings, claims and litigation arising in the ordinary course of business related to the Company’s operations and property ownership. The Company evaluates such matters on a case by case basis, and vigorously contests any such legal proceedings or claims which the Company believes are without merit. The Company believes that the final disposition of these matters will not have a material adverse effect on its financial position, results of operations or liquidity. It is possible, however, that the Company's results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to such matters.

The Company establishes an accrual for legal proceedings if and when those matters reach a stage where they present loss contingencies that are both probable and reasonably estimable. In such cases, there may be a possible exposure to loss in excess of any amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss and the accrued amount, if any, thereof, and adjusts the amount as appropriate. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but will continue to monitor the matter for developments that will make the loss contingency both probable and reasonably estimable. If it is at least a reasonable possibility that a material loss will occur, the Company will provide disclosure regarding the contingency. The Company believes that the final disposition of the pending legal proceedings, claims and litigation will not have a material adverse effect on its financial position, results of operations or liquidity. It is possible, however, that the Company's results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to such matters.

~~Taxes~~

Income Taxes –~~The~~ For interim reporting, the Company ~~accounts for~~uses an estimated annual effective tax rate (AETR), pursuant to ASC 740-270, to calculate income ~~taxes using the asset and liability method. Under the asset and liability method,~~tax expense. Income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. The Company is subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgments and estimates are ~~recognized for~~required in the ~~future~~determination of the consolidated income tax ~~consequences attributed to~~expense. Deferred income taxes arise from temporary differences between the ~~financial statement carrying amounts~~tax basis 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~~reported amounts in the ~~years~~financial statements, which will result in ~~which those temporary differences and carry-forwards are expected~~taxable or deductible amounts in the future. In evaluating its ability to ~~be recovered or settled. The effect on~~recover deferred tax assets ~~and liabilities of a change in tax rates is recognized in income~~ in the ~~period that includes~~jurisdictions from which they arise, the ~~enactment date. A valuation allowance is established when necessary to reduce~~Company considers all available positive and negative evidence, including scheduled reversals of deferred tax ~~assets~~liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, the Company begins with historical results adjusted for the results of discontinued operations and incorporates assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to ~~amounts expected to be realized.~~manage the underlying businesses. In evaluating the objective evidence that historical results provide, the Company considers three years of cumulative operating income (loss).

The Company is required to 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 the Company to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by the Company. The Company, in consultation with its tax advisors, bases its tax returns on interpretations that are believed to be reasonable under the circumstances. The tax returns, however, are subject to routine reviews by the various taxing authorities in the jurisdictions in which the Company files its returns.

~~Table of Contents~~

~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

As part of these reviews, a taxing authority may disagree with ~~respect to~~ the interpretations the Company used to calculate its tax liability and therefore require the Company to pay additional taxes.

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

The Company accrues an amount for its 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 less than 50% likelihood of being sustained. There were no material changes in the ~~Company's~~Company’s uncertain income tax positions ~~as of~~during the three months ended November 30, ~~2017 and August 31, 2017.~~2021.

In evaluating the exposure associated with various non-income tax filing positions, the Company accrues for probable and estimable exposures for non-income tax related tax contingencies. As of November 30, ~~2017~~2021 and August 31, ~~2017,~~2021, the Company has recorded within other accrued expenses and other current liabilities a total of ~~$3.2~~$1.7 million and ~~$3.4~~$1.8 million, respectively, for various non-income tax related tax contingencies.

While the Company believes the recorded liabilities are adequate, there are inherent limitations in projecting the outcome of litigation, in estimating probable additional income tax liability taking into account uncertain tax positions and in evaluating the probable additional tax associated with various non-income tax filing positions. As such, the Company is unable to make a reasonable estimate of the sensitivity to change of estimates affecting its recorded liabilities. As additional information becomes available, the Company assesses the potential liability and revises its estimates as appropriate.

The Company has various appeals pending before tax courts in its subsidiaries' jurisdictions. Any possible settlement could increase or decrease earnings but is not expected to be significant. Audit outcomes and the timing of audit settlements are subject to significant uncertainty. One of the Company’s subsidiaries received assessments claiming $2.7 million of taxes, penalties and interest related to withholding taxes on certain charges for services rendered by the Company. In addition, this subsidiary received assessments totaling $5.5 million for lack of deductibility of the underlying service charges due to the lack of withholding. Based on a review of the Company's tax advisers' interpretation of local law, rulings and jurisprudence (including Supreme Court precedents with respect to the deductibility assessment),two countries where the Company ~~expects to prevail in both instances and has not recorded a provision for these assessments. However, the Company had to submit these amounts as advance payments to the government while it appeals.~~

~~In another country in which the Company has warehouse clubs, beginning in fiscal year 2015, a new~~operates, minimum income tax ~~mechanism took effect, which requires~~rules require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company is making income tax payments substantially in excess of those it would expect to pay based on taxable income. The ~~current rules (which the~~ Company ~~has challenged in court) do not clearly allow the Company to obtain a refund or to offset this excess~~had income tax ~~against other taxes. As~~receivables of ~~November 30, 2017~~$11.1 million and ~~August 31, 2017, the Company had~~$11.0 million and deferred tax assets of ~~approximately $2.0 million in this country. Also, the Company had an income tax receivable balance of $5.3~~$3.5 million and ~~$4.3~~$3.3 million as of November 30, ~~2017~~2021 and August 31, ~~2017,~~2021, respectively, in these countries. While the rules related to ~~excess payments from fiscal years 2015 and 2017. The~~refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of these tax receivables or deferred tax assets, because the Company believes that it is more likely than not that it will ultimately succeed in its refund ~~request and/or court challenge on this matter.~~requests.

The Company has not provided for U.S. deferred taxes on cumulative non-U.S. undistributed earnings as such earnings are deemed by the Company to be indefinitely reinvested. Subsequent to the passage of new US tax legislation described in Note 9 – Subsequent Events, the Company is in the process of calculating the amount of taxes that will be due on these non-U.S. undistributed earnings.

~~Table of Contents~~

~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Other Commitments

The Company is committed under non-cancelable operating leases for the rental of facilities and land. Future minimum lease commitments for facilities under these leases with an initial term in excess of one year are as follows (in thousands):

Open

Years ended November 30,

Locations(1)

2018

$
12,113

2019

11,715

2020

10,795

2021

9,339

2022

9,027

Thereafter

113,822

Total

$
166,811
(2)

⁽¹⁾

Operating lease obligations have been reduced by approximately $883,000 to reflect sub-lease income. Certain obligations under leasing arrangements are collateralized by the underlying asset being leased.

⁽²⁾

Future minimum lease payments include $3.0 million of lease payment obligations for the prior leased Miami distribution center. For the purposes of calculating the minimum lease payments, no reduction was considered for the potential sub-lease income the Company could receive during the remaining lease term. This potential sub-lease income was considered, however, for the purposes of calculating the exit obligation of $50,000 recorded on the balance sheet as of November 30, 2017. Projected income for any executed sub-leases would be used to reduce the amount reported as minimum lease payments.

In January 2017, the Company purchased a distribution center in Medley, Miami-Dade County, Florida. The Company transferred its Miami dry distribution center activities that were previously in the leased facility to the new facility during the third quarter of fiscal year 2017. Some portions of the vacated previously leased space were subleased (and subsequently returned to the landlord) while the remainder remains available for sublease. As part of the subleases the Company was required to execute and deliver to the landlord of the leased facility a letter of credit (“LOC”) in the amount of $500,000 which entitles the landlord to draw on the LOC based on a decreasing scale over four years, if certain conditions occur related to nonpayment by the new tenant. Although this agreement is considered a guarantee, in measuring the fair value, the Company considers the risk and probability of default by the third party tenant as not likely nor probable, based on the Company’s review of the third party tenant’s financial position as well as the third party’s considerable capital investment into the leased facility. Therefore, the Company has not recorded a liability for this guarantee.

The Company is also committed to non-cancelable construction ~~services~~service obligations for various warehouse club developments and expansions. As of November 30, ~~2017~~2021 and August 31, ~~2017,~~2021, the Company had approximately ~~$3.2~~$10.1 million and ~~$7.9~~$16.2 million, respectively, in contractual obligations for construction services not yet rendered.

~~The~~From time to time, the Company has entered into general land purchase and land purchase option agreements. The Company’s land purchase agreements ~~that have~~are typically subject to various conditions, including, but not ~~been recorded as commitments, for which~~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 ~~recorded within restricted cash and~~the right to cancel any of its agreements to purchase land without cause by forfeiture of some or all of the deposits asit has made pursuant to the agreement. As of November 30, ~~2017 and August 31, 2017 approximately $600,000. The~~2021, the Company had entered into two land purchase ~~option~~ agreements ~~can be canceled at~~that, if completed, would result in the ~~sole option~~use of the Company, with the deposits being fully refundable until all permits are issued. The Company does not have a timetable of when or if it will exercise these land purchase options, due to the uncertainty related to the completion of the Company's due diligence reviews. The Company's due diligence reviews include evaluations of the legal status of each property, the zoning and permitting issues related to acquiring approval for the construction and operation of a warehouse club and any other issues related to the property itself that could render the property unsuitable or limit the property's economic viability as a warehouse club site. If the purchase option agreements are exercised, the cash use would be approximately ~~$20.8 million.~~$9.4 million in cash.

2022

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS —(Continued)

The table below summarizes the Company’s interest in real estate joint ventures, commitments to additional future investments and the Company’s maximum exposure to loss as a result of its involvement in these joint venture as of November 30, ~~2017~~2021 (in thousands):



Entity	% Ownership		Initial Investment		Additional Investments		Net (Loss)/Income Inception to Date		Company’s Variable Interest in Entity		Commitment to Future Additional Investments(1)		Company's Maximum Exposure to Loss in Entity(2)		% ‎Ownership		Initial ‎Investment		Additional ‎Investments		Net Income ‎Inception to ‎Date		Company’s ‎Variable ‎Interest ‎in Entity		Commitment ‎to Future ‎Additional ‎Investments⁽¹⁾		Company's ‎Maximum ‎Exposure ‎to Loss in ‎Entity⁽²⁾
GolfPark Plaza, S.A.	50	%	$	4,616	$	2,402	$	301	$	7,319	$	99	$	7,418	50	%	$	4,616	$	2,402	$	(23)	$	6,995	$	99	$	7,094
Price Plaza Alajuela, S.A.	50	%		2,193		1,236		33		3,462		785		4,247
Price Plaza Alajuela PPA, S.A.															50	%		2,193		1,236		110		3,539		785		4,324
Total			$	6,809	$	3,638	$	334	$	10,781	$	884	$	11,665			$	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.

⁽²⁾

The maximum exposure is determined by adding the Company’s variable interest in the entity and any explicit or implicit arrangements that could require the Company to provide additional financial support.

⁽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.

⁽²⁾The maximum exposure is determined by adding the Company’s variable interest in the entity and any explicit or implicit arrangements that could require the Company ~~contracts for distribution center services in Mexico. The contract for this distribution center's services expires on August 31, 2020, with the applicable fees and rates~~ to ~~be reviewed at the beginning of each calendar year. Future minimum service commitments related to this contract through the end of the contract term are approximately $442,000.~~provide additional financial support.

The Company contracts for off-site data recovery services as part of its disaster recovery plan. The contract for these data recovery services expires on November 30, 2019. Future minimum service commitments related to this contract are approximately $372,000 for each of the 12-month periods ending November 30, 2018 and 2019.

NOTE 67 – DEBT

Short-term borrowings consist of unsecured lines of ~~credit that are secured by certain assets of the Company and its subsidiaries, which, in some cases, are guaranteed by the Company.~~credit. The following table summarizes the balances of total facilities, facilities used and facilities available (in thousands):

Facilities Used

Total Amount

Short-term

Letters of

Facilities

Weighted average

of Facilities

Borrowings

Credit

Available

interest rate

November 30, 2017

$
69,000

$
2,483

$
562

$
65,955

4.3
%
August 31, 2017

$
69,000

$
—

$
966

$
68,034

—
%


			Facilities Used
	Total Amount		Short-term		Letters of		Facilities		Weighted average
	of Facilities		Borrowings		Credit		Available		interest rate
November 30, 2021	$	131,000	$	4,986	$	—	$	126,014	3.0	%
August 31, 2021	$	131,000	$	—	$	97	$	130,903	—	%

As of November 30, ~~2017~~2021 and August 31, 2017, the Company had approximately $40.0 million of short-term facilities in the U.S. that require compliance with certain quarterly financial covenants. As of November 30, 2017 and August 31, 2017,2021, the Company was in compliance with ~~respect to these covenants. Each~~all covenants or amended covenants for each of ~~the~~its short-term facility agreements. These facilities ~~expires~~generally expire annually or bi-annually and isare normally renewed.

2123

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS —(Continued)

The following table provides the changes in long-term debt for the three months ended November 30, ~~2017:~~2021:

(Amounts in thousands)

Current
portion of
long-term debt

Long-term
debt (net of current portion)

Total

Balances as of August 31, 2017

$
18,358

$
87,939

$
106,297
(1)
Repayments of long-term debt

—

(3,000)

(3,000)

Regularly scheduled loan payments

(225)

(4,554)

(4,779)

Translation adjustments on foreign-currency debt of subsidiaries whose functional currency is not the U.S. dollar (2)

124

(45)

79

Balances as of November 30, 2017

$
18,257

$
80,340

$
98,597
(3)


(Amounts in thousands)	Current ‎portion of ‎long-term debt		Long-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 incurred during the period:
Guatemala subsidiary		—		4,204		4,204
Repayments of long-term debt:
Guatemala subsidiary		(377)		—		(377)
Costa Rica subsidiary		(1,261)		(109)		(1,370)
Regularly scheduled loan payments		(1,739)		(2,640)		(4,379)
Reclassifications of long-term debt due in the next 12 months		879		(879)		—
Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar⁽²⁾		(54)		(85)		(139)
Balances as of November 30, 2021	$	16,843	$	110,601	$	127,444	⁽³⁾

⁽¹⁾

~~The carrying amount of non-cash assets assigned as collateral for these loans was $128.4 million. No cash assets were assigned as collateral for these loans.~~

⁽²⁾

~~These foreign currency translation adjustments are recorded within Other comprehensive income.~~

⁽³⁾

~~The carrying amount of non-cash assets assigned as collateral for these loans was $121.0 million. No cash assets were assigned as collateral for these loans.~~

~~In August 2017, the Company’s Panama subsidiary paid off the outstanding principal balance~~⁽¹⁾The carrying amount of ~~U.S. $13.3 million on a loan agreement entered into with Scotiabank. The Company’s subsidiary also settled the interest rate swap that it had entered into with Scotiabank related to this loan.~~

~~On March 31, 2017, the Company's Trinidad subsidiary entered into a loan agreement with Citibank, N.A. The agreement provides~~non-cash assets assigned as collateral for ~~a $12.0 million loan to be repaid in eight quarterly principal payments plus interest. The interest rate is set at the 90 day LIBOR rate plus 3%. The loan~~these loans was ~~funded on March 31, 2017.~~

~~In January 2017, the Company finalized its acquisition of a distribution center in Medley, Miami-Dade County, Florida for a total purchase price of approximately $46.0~~$153.5 million. The ~~Company transferred its Miami distribution center activities previously located in leased facilities to the new distribution center during the third quarter~~carrying amount of ~~fiscal year 2017. To finance the acquisition~~cash assets assigned as collateral for these loans was $7.0 million.

⁽²⁾These foreign currency translation adjustments are recorded within Other comprehensive income (loss).

⁽³⁾The carrying amount of ~~this property, the Company entered into a 10-year real estate secured loan with MUFG Union Bank, N.A. (“Union Bank”)~~cash and non-cash assets assigned as collateral for ~~$35.7~~these loans was $146.0 million ~~in January 2017. This loan has a variable interest rate of 30-day LIBOR plus 1.7%, with monthly principal~~ and ~~interest payments maturing in 2027. The monthly principal and interest payments begin in April 2019. The Company also entered into an interest rate hedge with Union Bank for $35.7~~$6.2 million, the notional amount. Under the hedge, the Company will receive variable interest equal to 30-day LIBOR plus 1.7% and pay fixed interest at a rate of 3.65%, with an effective date of March 1, 2017 and maturity date of March 1, 2027. respectively.

As of November 30, ~~2017,~~2021 and August 31, 2021, the Company had approximately ~~$82.8~~$99.3 million and $103.4 million, respectively, of long-term loans in ~~the U.S., Trinidad, Panama, El Salvador, Honduras, Costa Rica, Barbados and Colombia~~several foreign subsidiaries that require these subsidiaries to comply with certain annual or quarterly financial covenants, which include debt service and leverage ratios. ~~As of November 30, 2017, the~~The Company was in compliance with all covenants or amended ~~covenants.~~covenants for both periods.

As of August 31, 2017, the Company had approximately $85.6 million of long-term loans in Trinidad, Panama, El Salvador, Honduras, Costa Rica, Barbados, and Colombia that require these subsidiaries to comply with certain annual or quarterly financial covenants, which include debt service and leverage ratios. As of August 31, 2017, the Company was in compliance with all covenants or amended covenants.

Annual maturities of long-term debt are as follows (in thousands):



Twelve Months Ended November 30,	Amount		Amount
2018	$	18,257
2019		19,437
2020		21,438
2021		5,805
2022		2,634	$	16,843
2023				26,836
2024				27,024
2025				10,907
2026				11,481
Thereafter		31,026		34,353
Total	$	98,597	$	127,444

2224

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS —(Continued)

NOTE 78 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to interest rate risk relating to its ongoing business operations. To manage interest rate exposure, the Company enters into hedge transactions (interest rate swaps) using derivative financial instruments. The objective of entering into interest rate swaps is to eliminate the variability of cash flows in the LIBOR interest payments associated with variable-rate loans over the life of the loans. As changes in interest rates impact the future cash flow of interest payments, the hedges provide a synthetic offset to interest rate movements.

In addition, the Company is exposed to foreign currency and interest rate cash flow exposure related to non-functional currency long-term debt of ~~three~~two 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.

These derivative instruments (cash flow hedging instruments) are designated and qualify as cash flow hedges, with the ~~effective portion of the~~entire gain or loss on the derivative reported as a component of other comprehensive ~~income (loss)~~loss. Amounts are deferred in other comprehensive loss and reclassified into earnings in the same ~~period or periods during which~~income statement line item that is used to present the earnings effect of the hedged ~~transaction is determined to be ineffective. There were no such amounts recorded for ineffectiveness for~~item when the ~~periods reported herein related to the interest rate or cross-currency interest rate swaps of long-term debt.~~hedged item affects earnings.

The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business, including foreign-currency exchange-rate fluctuations on U.S. dollar denominated liabilities within its international subsidiaries whose functional currency is other than the U.S. dollar. The Company manages these fluctuations, in part, through the use of non-deliverable forward foreign-exchange contracts (NDFs) that are intended to offset changes in cash flow attributable to currency exchange movements. These contracts are intended primarily to economically address exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. 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.

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

Cash Flow Hedges

As of November 30, ~~2017,~~2021, 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.

~~Table of Contents~~

~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

The following table summarizes agreements for which the Company has recorded cash flow hedge accounting for the three months ended November 30, ~~2017:~~2021:

Subsidiary

Date
Entered
into

Derivative
Financial
Counter-
party

Derivative
Financial
Instruments

Initial
US$
Notional
Amount

Bank
US$
loan
Held
with

Floating Leg
(swap
counter-party)

Fixed Rate
for PSMT
Subsidiary

Settlement
Dates

Effective
Period of swap

Date
‎Entered
‎into

Derivative
‎Financial
‎Counter-
‎party

Derivative
‎Financial
‎Instruments

Initial
‎US$
‎Notional
‎Amount

Bank
‎US$
‎loan
‎Held
‎with

Floating Leg
‎(swap
‎counter-party)

Fixed Rate
‎for PSMT
‎Subsidiary

Settlement
‎Dates

Effective
‎Period of swap

PriceSmart, Inc (1)

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 -
March 1, 2027

Costa Rica

28-Aug-15

Citibank, N.A. ("Citi")

Cross currency interest rate swap

7,500,000

Citibank, N.A.

Variable rate 3-month Libor plus 2.50%

7.65

28th day of August, November, February, and May beginning on November 30, 2015

August 28, 2015 -
August 28, 2020

Honduras

24-Mar-15

Citibank, N.A. ("Citi")

Cross currency interest rate swap

8,500,000

Citibank, N.A.

Variable rate 3-month Libor plus 3.25%

10.75

24th day of March, June, September, and December beginning on June 24, 2015

March 24,2015 -
March 20, 2020

El Salvador

16-Dec-14

Bank of Nova Scotia ("Scotiabank")

Interest rate swap

4,000,000

Bank of Nova Scotia

Variable rate 30-day Libor plus 3.5%

4.78

29th day of each month beginning on December 29, 2014

December 1, 2014 -
August 29, 2019

Colombia

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

Colombia

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 -
‎December 3, 2024

Colombia

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

Colombia

10-Dec-14

Citibank, N.A. ("Citi")

Cross currency interest rate swap

15,000,000

Citibank, N.A.

Variable rate 3-month Libor plus 2.8%

8.25

4th day of March, June, Sept, Dec. beginning on March 4, 2015

December 4, 2014 -
December 3, 2019

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 -
‎September 26, 2022

Panama

9-Dec-14

Bank of Nova Scotia ("Scotiabank")

Interest rate swap

10,000,000

Bank of Nova Scotia

Variable rate 30-day Libor plus 3.5%

5.16

28th day of each month beginning December 29, 2014

November 28, 2014 -
November 29, 2019

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 -
‎March 23, 2023

Honduras

23-Oct-14

Citibank, N.A. ("Citi")

Cross currency interest rate swap

5,000,000

Citibank, N.A.

Variable rate 3-month Libor plus 3.5%

11.6

22nd day of January, April, July, and October beginning on January 22, 2015

Settled on
October 22, 2017

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 -
‎February 24, 2024

Panama

1-Aug-14

Bank of Nova Scotia ("Scotiabank")

Interest rate swap

5,000,000

Bank of Nova Scotia

Variable rate 30-day Libor plus 3.5%

4.89

21st day of each month beginning on September 22, 2014

August 21, 2014 -
August 21, 2019

Panama

22-May-14

Bank of Nova Scotia ("Scotiabank")

Interest rate swap

3,970,000

Bank of Nova Scotia

Variable rate 30-day Libor plus 3.5%

4.98

4th day of each month beginning on June 4, 2014

May 5, 2014 -
April 4, 2019

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 -
‎March 1, 2027

⁽¹⁾

~~The initial notional amount and fixed rate were modified effective January 2017.~~

For the three months ended November 30, ~~2017~~2021 and ~~2016,~~November 30, 2020, 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):

Income Statement Classification

Interest
expense on
borrowings(1)

Cost of
swaps (2)

Total
Interest expense for the three months ended November 30, 2017

$
849

$
322

$
1,171
Interest expense for the three months ended November 30, 2016

$
750

$
423

$
1,173



Income Statement Classification	Interest ‎expense on ‎borrowings⁽¹⁾		Cost of ‎swaps⁽²⁾		Total
Interest expense for the three months ended November 30, 2021	$	557	$	849	$	1,406
Interest expense for the three months ended November 30, 2020	$	642	$	925	$	1,567

⁽¹⁾This amount is representative of the interest expense recognized on the underlying hedged transactions.

⁽²⁾This amount is representative of the interest expense recognized on the interest rate swaps and cross-currency swaps designated as cash flow hedging instruments.

⁽¹⁾

~~This amount is representative of the interest expense recognized on the underlying hedged transactions.~~

⁽²⁾

~~This amount is representative of the interest expense recognized on the cross-currency interest rate swaps designated as cash flow hedging instruments.~~

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

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				Notional Amount as of
	November 30,		August 31,		November 30,		August 31,
Floating Rate Payer (Swap Counterparty)	2017		2017		2021		2021
Union Bank	$	35,700	$	35,700	$	32,300	$	32,619
Citibank N.A.		25,063		26,088		59,862		51,032
Scotiabank		12,924		13,724		9,750		10,125
Total	$	73,687	$	75,512	$	101,912	$	93,776

~~Table of Contents~~

~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Derivatives listed on the table below were designated as cash flow hedging instruments. The table summarizes the effect of the fair value of interest rate swap and cross-currency interest rate swap derivative instruments that qualify for derivative hedge accounting and its associated tax effect on accumulated other comprehensive (income)/loss (in thousands):



		November 30, 2017						August 31, 2017							November 30, 2021						August 31, 2021
Derivatives designated as cash flow hedging instruments	Balance Sheet Location	Fair Value		Net Tax Effect		Net OCI		Fair Value		Net Tax Effect		Net OCI		Balance Sheet ‎Classification	Fair ‎Value		Net Tax ‎Effect		Net ‎OCI		Fair ‎Value		Net Tax ‎Effect		Net ‎OCI
Cross-currency interest rate swaps	Other non-current assets	$	2,514		(938)		1,576	$	2,547	$	(950)	$	1,597	Other non-current assets	$	4,412	$	(1,327)	$	3,085	$	2,464	$	(741)	$	1,723
Interest rate swaps	Other non-current assets		764		(272)		492		—		—		—
Cross-currency interest rate swaps														Other current assets		1,717		(517)		1,200		—		—		—
Interest rate swaps	Other long-term liabilities		(4)		(3)		(7)		(231)		80		(151)	Other long-term liabilities		(1,563)		362		(1,201)		(2,305)		535		(1,770)
Cross-currency interest rate swaps	Other long-term liabilities		(342)		114		(228)		(451)		135		(316)	Other long-term liabilities		(534)		160		(374)		(705)		212		(493)
Net fair value of derivatives designated as hedging instruments		$	2,932	$	(1,099)	$	1,833	$	1,865	$	(735)	$	1,130		$	4,032	$	(1,322)	$	2,710	$	(546)	$	6	$	(540)

Fair Value Instruments

~~The~~From time to time the Company ~~has entered~~enters into non-deliverable forward foreign-exchange contracts. These contracts are treated for accounting purposes as fair value contracts and do not qualify for derivative hedge accounting. The use of non-deliverable forward foreign-exchange contracts is intended to offset changes in cash flow attributable to currency exchange movements. These contracts are intended primarily to economically hedge exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar.

The following table summarizes the non-deliverable forward foreign exchange contracts that are open as of November 30, ~~2017:~~2021.

Subsidiary

Dates
‎entered into

Financial
‎Derivative
‎(Counterparty)

Derivative
‎Financial
‎Instrument

Notional
‎Amount
‎(in thousands)

Settlement

Date

Effective Period
‎of Forward

Colombia

~~Oct-17~~28-Apr-21

~~Citibank, N.A.~~Scotiabank Colpatria, S.A.

Forward foreign
‎exchange contracts (USD)

~~1,000~~

~~Dec-17~~5,000

~~October 13, 2017~~28-Dec-21

April 28, 2021 -
December ~~6, 2017~~28, 2021

Colombia

~~Oct-17~~28-May-21

~~Citibank, N.A.~~Scotiabank Colpatria, S.A.

Forward foreign
‎exchange contracts (USD)

~~1,000~~

~~Dec-17~~2,000

~~October 17, 2017 -~~
~~December 13, 2017~~

~~Colombia~~29-Dec-21

~~Oct-17~~

~~Citibank, N.A.~~

~~Forward foreign~~
~~exchange contracts (USD)~~

~~1,000~~

~~Dec-17~~

~~October 18, 2017~~May 28, 2021 -
December ~~20, 2017~~

~~Colombia~~

~~Oct-17~~

~~Citibank, N.A.~~

~~Forward foreign~~
~~exchange contracts (USD)~~

~~1,000~~

~~Dec-17~~

~~October 19, 2017 -~~
~~December 27, 2017~~29, 2021

~~For~~Forward derivative gains and (losses) on non-deliverable forward foreign-exchange contracts are included in Other income (expense), net in the consolidated statements of income in the period of change, but the amounts were immaterial for the three months ended November 30, ~~2017, the Company included in its consolidated statements of income the forward derivative gain or (loss) on the non-deliverable forward foreign-exchange contracts as follows (in thousands):~~2021 and November 30, 2020.

Three Months Ended

November 30,

November 30,
Income Statement Classification

2017

2016
Other income (expense), net

$
93

$
219

2527

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS —(Continued)

~~The following table summarizes the fair value of foreign currency forward contracts that do not qualify for derivative hedge accounting (in thousands):~~



	~~November 30, 2017~~			~~August 31, 2017~~
~~Non-deliverable forward foreign exchange contracts~~	~~Balance Sheet~~ ~~Location~~	~~Fair Value~~		~~Balance Sheet~~ ~~Location~~	~~Fair Value~~
~~Foreign currency forward contracts~~	~~Other current assets~~	$	71	~~Other current assets~~	$	—
~~Foreign currency forward contracts~~	~~Other accrued expenses~~		—	~~Other accrued expenses~~		—
~~Net fair value of non-deliverable forward foreign exchange contracts designated as hedging instruments that do not qualify for hedge accounting(1)~~		$	71		$	—

⁽¹⁾

The fair value of these financial assets and liabilities measured and recorded using Level 2 inputs, which are inputs other than quoted prices in active markets that are either directly or indirectly observable.

~~Table of Contents~~

~~PRICESMART, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

NOTE 89 – SEGMENTS

The Company and its subsidiaries are principally engaged in the international operation of membership shopping in 4049 warehouse clubs located in ~~13 countries/territories~~12 countries and 1 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. When the Company does so, the previous period amounts and balances are reclassified to conform to the current period's presentation.

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

The following tables summarize by segment certain revenues, operating costs and balance sheet items (in thousands):



	United States Operations		Central American Operations		Caribbean Operations		Colombia Operations		Reconciling Items(1)		Total		United ‎States ‎Operations		Central ‎American ‎Operations		Caribbean ‎Operations⁽¹⁾		Colombia Operations		Reconciling ‎Items⁽²⁾		Total
Three Months Ended November 30, 2017
Three Months Ended November 30, 2021
Revenue from external customers	$	8,147	$	452,166	$	214,642	$	92,117	$	—	$	767,072	$	13,423	$	572,065	$	272,487	$	117,381	$	—	$	975,356
Intersegment revenues		340,128		—		1,207		198		(341,533)		—		414,342		4,998		1,443		822		(421,605)		—
Depreciation and amortization		1,744		5,523		2,677		2,293		—		12,237
Operating income		3,739		31,942		11,470		2,145		(16,130)		33,166
Net income (loss)		82		26,796		10,317		1,425		(16,130)		22,490
Capital expenditures, net		1,004		11,370		10,297		832		—		23,503
Depreciation, Property and equipment														465		8,300		4,018		2,364		—		15,147
Amortization, Intangibles														456		—		—		—		—		456
Operating income (loss)														6,257		43,379		19,878		6,378		(29,875)		46,017
Net income (loss) attributable to PriceSmart, Inc.														3,373		35,900		16,450		4,682		(29,894)		30,511
Long-lived assets (other than deferred tax assets)		70,352		304,434		130,896		121,629		—		627,311		71,399		495,517		203,042		167,762		—		937,720
Intangibles, net														1,922		—		—		—		—		1,922
Goodwill		—		31,014		4,564		—		—		35,578		8,981		24,313		10,038		—		—		43,332
Total assets		121,674		580,523		334,279		186,352		—		1,222,828		212,371		867,868		460,381		248,693		—		1,789,313
Capital expenditures, net														1,909		12,690		7,073		12,383		—		34,055

Three Months Ended November 30, 2016
Three Months Ended November 30, 2020
Revenue from external customers	$	10,755	$	438,234	$	207,022	$	83,561	$	—	$	739,572	$	23,617	$	494,692	$	258,516	$	100,607	$	—	$	877,432
Intersegment revenues		317,662		—		1,698		10		(319,370)		—		350,103		4,736		1,146		1,129		(357,114)		—
Depreciation and amortization		1,574		4,864		2,458		2,221		—		11,117
Operating income		7,597		33,504		12,214		913		(15,849)		38,379
Net income		3,658		26,227		10,861		(28)		(15,849)		24,869
Capital expenditures, net		2,337		10,756		4,438		473		—		18,004
Depreciation, Property and equipment														1,665		7,694		3,792		1,735		—		14,886
Amortization, Intangibles														599		—		—		—		—		599
Operating income (loss)														5,742		34,445		21,594		5,565		(22,815)		44,531
Net income (loss) attributable to PriceSmart, Inc.														(372)		29,238		17,170		4,596		(22,895)		27,737
Long-lived assets (other than deferred tax assets)		20,372		278,721		110,939		125,589		—		535,621		81,277		472,892		178,879		159,459		—		892,507
Intangibles, net														9,566		—		—		—		—		9,566
Goodwill		—		31,072		4,531		—		—		35,603		10,695		24,317		10,111		—		—		45,123
Total assets		70,283		542,238		321,235		184,114		—		1,117,870		212,434		771,933		436,418		257,210		—		1,677,995
Capital expenditures, net														1,218		7,544		2,458		8,539		—		19,759

As of August 31, 2017
As of August 31, 2021
Long-lived assets (other than deferred tax assets)	$	70,353	$	296,915	$	122,616	$	126,206	$	—	$	616,090	$	79,404	$	490,099	$	197,030	$	164,970	$	—	$	931,503
Intangibles, net														7,762		—		—		—		—		7,762
Goodwill		—		31,118		4,524		—		—		35,642		10,695		24,332		10,068		—		—		45,095
Total assets		147,650		544,683		303,234		181,947		—		1,177,514		246,896		795,940		434,428		228,526		—		1,705,790

⁽¹⁾

~~The reconciling items reflect the amount eliminated on consolidation of intersegment transactions.~~

⁽¹⁾Management considers its club in the U.S. Virgin Islands to be part of its Caribbean operations.

⁽²⁾The reconciling items reflect the amount eliminated on consolidation of intersegment transactions.

Table of Contents

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS —(Continued)

NOTE 910 – SUBSEQUENT EVENTS

The Company has evaluated all events subsequent to the balance sheet date as of November 30, ~~2017~~2021 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.

~~Non-deliverable forward foreign-exchange contracts~~Financing Transactions

~~The Company has~~On December 3, 2021, the Company's Trinidad subsidiary entered into ~~forward exchange contracts during December 2017~~a long-term loan agreement for ~~approximately $5.0~~$25.0 million U.S. dollars with ~~settlement dates during January 2018.~~a term of four years and a fixed interest rate of 7.7% per annum. The loan is indexed to local currency (Trinidad Dollar).

~~New tax legislation~~

In December 2017, the United States approved new legislation that significantly modifies current tax legislation. The Company is currently assessing the impact of this recent legislation; however, the most significant changes to the Company are:

a reduction in the U.S. corporate tax rate from 35.0% to 21.0% starting in January 2018. This will likely result in a one-time non-cash expense to be booked in the second quarter of fiscal year 2018 to reduce the value of certain deferred tax assets. On an ongoing basis, it will likely result in a favorable impact on the Company’s overall effective tax rate. However, substantially all of the Company’s revenue are from foreign sources, much of which attracts foreign withholding taxes. In the past, the Company has generally been able to recover all of the foreign tax credits generated by these withholdings as an offset to U.S. taxes payable. However, the Company currently estimates that foreign tax credits will be higher than 21% of U.S. taxable income and lower than 35%. Therefore, the Company expects to benefit from the reduction of tax rates, but not to the full extent of the rate reduction, as excess foreign tax credits will have to be expensed; and

a one-time tax on accumulated foreign profits, which will likely result in a tax expense being recorded for the full amount in the second quarter of fiscal 2018, while the payment will be spread over eight years. However, from a cash perspective, the Company expects to be able to offset some of this charge by foreign tax credits accumulated prior to January 1, 2018.

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PRICESMART, INC.

~~ITE~~MITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements concerning PriceSmart, Inc.'s ("PriceSmart", the "Company" or "we") 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, the following risks: our financial performance is dependent on international operations, which exposes us to various risks; any failure by us to manage our widely dispersed operations could adversely affect our business; we face significant competition; future sales growth depends,but not limited to: adverse changes in ~~part, on our ability to successfully open new warehouse clubs and grow sales~~economic conditions in our ~~existing locations; we might not identify~~markets, natural disasters, compliance risks, volatility in ~~a timely manner or effectively respond to changes~~currency exchange rates and illiquidity of certain local currencies in consumer preferences for merchandise, which could adversely affect our relationship with members, demand for our products and market share; although we offer limited online shopping to our members in certain markets, 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; failure to grow our e-commerce~~competition, consumer and small business ~~through~~spending patterns, political instability, increased costs associated with the integration of ~~physical~~online commerce with our traditional business, whether the Company can successfully execute strategic initiatives, cybersecurity breaches that could cause disruptions in our systems or jeopardize the security of Member or business information, cost increases from product and ~~digital retail~~service providers, interruption of supply chains, novel coronavirus (COVID-19) related factors and challenges, including among others, the duration of the pandemic, the unknown long-term economic impact, the impact of government policies and restrictions that have limited access for our Members, and shifts in demand away from discretionary or ~~otherwise, and the cost of our increasing e-commerce investments, may materially adversely affect our market position, net sales and financial performance; our profitability is vulnerable~~higher priced products to cost increases; we face difficulties in the shipment of, and risks inherent in the importation of, merchandise to our warehouse clubs; we are exposed to weather and other natural disaster risks that might not be adequately compensated by insurance; negative economic conditions could adversely impact our business in various respects; our failure to maintain our brand and reputation could adversely affect our results of operations; we face the risk oflower priced products, exposure to product liability claims aand product recall and adverse publicity; we are subject to risks associated with possible changes in our relationships with third parties with which we do business, as well as the performance of such third parties; we could be subject to additional tax liabilities or subject to reserves on therecalls, recoverability of ~~tax receivables;~~ ~~we face the possibility of operational interruptions related~~moneys owed to union work stoppages; we are subject to volatility in foreign currency exchange rates and limits on our ability to convert foreign currencies into U.S. dollars; we face compliance risks related to our international operations; we rely extensively on computer systems to process transactions, summarize results and manage our business. Failure to adequately maintain our systems and disruptions in our systems could harm our business and adversely affect our results of operations; w~~e may experience difficulties implementing our new global enterprise resource planning system~~; any failure by us to maintain the security of the information that we hold relating to our company, members, employees and vendors, whether as a result of cybersecurity attacks on our information systems, failure of internal controls, employee negligence or malfeasance or otherwise, could damage our reputation with members, employees, vendors and others, 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; ~~we are subject to payment related risks; failure to attract and retain qualified employees, increases in wage and benefit costs, changes in laws~~PriceSmart from governments, and other ~~labor issues could materially adversely affect~~important factors discussed under the captions “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our financial performance; 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; a few of our stockholders own approximately 25.3% of our voting stock as of November 30, 2017, which may make it difficult to complete some corporate transactions without their support and may impede a change in control. The risks described above as well as the other risks detailed in the Company’s U.S. Securities and Exchange Commission (“SEC”) reports, including the Company’s Annual Report on Form 10-K ~~filed~~ for the fiscal year ended August 31, ~~2017~~2021 filed with the United States Securities and Exchange Commission (“SEC”) on October ~~26, 2017, pursuant~~21, 2021. These risk factors may be updated from time to time in our other filings with the ~~Securities Exchange Act~~SEC, which are accessible on the SEC’s website at www.sec.gov. Forward-looking statements speak only as of ~~1934, see “Part I - Item 1A - Risk Factors,” could materially~~the date that they are made, and ~~adversely affect our business, financial condition and results of operations. These~~the Company does not undertake to update them, 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.

~~The following discussion~~Overview

PriceSmart exists to improve the lives and ~~analysis compares~~businesses of our Members, our employees and our communities by reliably and consistently providing quality goods and valuable services at the ~~results~~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 leads to better pricing that we can then offer to our Members, validating the value of the annual membership fee.

PriceSmart began operations ~~for the three months ended November 30, 2017 and 2016 and should be read~~ in ~~conjunction~~1996 in San Diego, California, with the ~~consolidated financial statements and the accompanying notes included therein.~~

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~~Our business consists primarily of operating international~~intent to bring our U.S. style membership shopping warehouse ~~clubs similar~~club concept to ~~but smaller in size than,~~underserved countries. We currently operate 49 warehouse clubs in Central America, the ~~United States.~~ Caribbean and Colombia. Our Members also are able to shop on our e-commerce platform, PriceSmart.com, which is available in all 13 markets.

We ~~operate~~offer our individual and business Members a carefully-curated selection of high quality, brand name and private label consumer products, essential goods and direct-from-farm fresh produce. We also provide prepared foods and fresh-baked goods. Most all merchandise is available for delivery or contactless curbside pickup through our Click & Go™ service. Some of our clubs also provide services that include Optical, Pharmacy, Audiology and Tire departments and serve food at our food courts. Historically, our typical warehouse buildings have ranged in ~~13 countries/territories that~~sales floor size from approximately 40,000 to 60,000 square feet and are located in ~~Latin America~~ and around the ~~Caribbean.~~ major cities in our markets to take advantage of dense populations and relatively higher levels of disposable income. Additionally, we operate smaller format clubs, with sales floors ranging from approximately 30,000 to 40,000 square feet. These smaller format clubs serve markets where the population may be less dense and/or where there may be significant business to business opportunities. We also have utilized the smaller format option to access and serve urban areas where it is difficult to secure sufficient real estate at a reasonable cost. The option of using a smaller format club, coupled with our omni-channel initiatives, helps us expand our membership base and geographic reach in existing markets. We strategically invest in technology to enhance Member experience and convenience. Technology allows us to use valuable membership and other data to increase efficiencies and use our insights about our Members to positively impact their lives. We also provide wholesale supply services to a retailer in the Philippines.

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Logistics and distribution efficiencies are fundamental to delivering high quality merchandise at low prices to our Members. We utilize regional distribution centers in the U.S. and Costa Rica as well as several local distribution centers to distribute merchandise efficiently, retain flexibility and provide alternatives to source and transport goods, and mitigate the risk of supply-chain disruption. As our business grows and includes more e-commerce activity, we continually evaluate how to utilize our logistics and distribution system to most efficiently provide merchandise to our Members. We also seek to drive membership value and efficiencies by expanding our network of Produce Distribution Centers and are exploring centralizing production activities, 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. 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. We own and lease our real estate, depending upon the best available opportunities.

Our ~~ownership~~warehouse clubs currently operate in ~~all operating subsidiaries~~emerging markets that historically have had higher growth rates and lower warehouse club market penetration than the U.S. market. In the countries in which we operate, we do not currently face direct competition from U.S. membership warehouse club operators. However, we do face competition from various retail formats such as ~~of November 30, 2017 is 100%,~~hypermarkets, supermarkets, cash and ~~they are presented on a consolidated basis.~~ carry, home improvement centers, electronic retailers, specialty stores, convenience stores, traditional wholesale distribution and online sales.

The number of warehouse clubs ~~in operation as of November 30, 2017~~ for each country or territory ~~are~~were as follows:



	Number of		Number of		Anticipated		Number of	Number of
	Warehouse Clubs		Warehouse Clubs		Warehouse		Warehouse Clubs	Warehouse Clubs
	in Operation as of		in Operation as of		Club Openings		in Operation as of	in Operation as of
Country/Territory	August 31, 2017		November 30, 2017		In Fiscal Year 2018		November 30, 2021	November 30, 2020
Colombia		7		7		—	9	7
Costa Rica		6		7		—	8	8
Panama		5		5		—	7	7
Trinidad		4		4		—
Dominican Republic		3		3		1	5	5
Guatemala		3		3		—	5	4
Trinidad							4	4
Honduras		3		3		—	3	3
El Salvador		2		2		—	2	2
Nicaragua		2		2		—	2	2
Aruba		1		1		—	1	1
Barbados		1		1		—	1	1
U.S. Virgin Islands		1		1		—	1	1
Jamaica		1		1		—	1	1
Totals		39		40		1	49	46

Our warehouse clubs, one regional distribution center and several smaller local distribution centers are located in Latin America and the Caribbean, and our corporate headquarters, U.S. buying operations and our larger regional distribution ~~centers~~center are located primarily in the United States. Our operating segments are the United States, Central America, the Caribbean and Colombia.

We ~~opened~~are currently proceeding with the construction of a ~~new~~standard format warehouse club located within the city of Portmore, Jamaica. Portmore is a suburb west of the capital city of Kingston. We expect to open this warehouse club, which will be our second warehouse club in ~~Santa Ana, Costa Rica~~Jamaica, in ~~October 2017, bringing~~April 2022; it will also be our 50th warehouse club.

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Factors Affecting Our Business

The COVID-19 pandemic has resulted in significant challenges across our 13 markets since March 2020. Many markets imposed limitations, varying by market and in frequency, on access to the ~~total warehouse~~Company’s clubs ~~operating~~and on the Company’s club operations, including in ~~Costa Rica~~some cases frequent temporary club closures, a reduction in the number of days during the week and hours per day the Company’s clubs were permitted to ~~seven.~~ ~~In June 2017, we acquired land~~be open, restrictions on segments of the population permitted to shop or circulate on particular days, and significant limits on the number of people permitted to be in ~~Santo Domingo, Dominican Republic.~~ the club at the same time. We also experienced product mix shifts due to changing consumer habits and/or government imposed limitations on many non-food categories, decreases in purchases by many business Members, particularly restaurants and hotels, and sporadic supply chain challenges, which can impact inventory levels.

We are currently ~~building a warehouse club~~focused on these four main priorities:

Protect the safety and well-being of our employees and our Members.

Take proactive measures to protect and expand our supply chain options.

Expand technology-enabled shopping and more effective use of data.

Manage cash and capital resources.

We recognize that this ~~site that~~is an evolving and fluid situation; therefore, we are vigilantly adapting to shifting consumer demands emerging from the pandemic. The situation remains unpredictable in duration and intensity, and we continue to see periodic reinstatements of stay-at-home orders and other restrictions. In addition, we expect ~~to open~~continued uncertainty in the ~~spring~~economies of ~~calendar~~our markets as a result of the pandemic and anticipate volatility in employment trends, industry and consumer confidence and demand; volatility and liquidity of foreign currency exchange rates; volatility of commodity prices; and possible fiscal austerity measures taken by governments in our markets, which will likely impact our results for the foreseeable future. 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 ~~2018. This will bring~~ended August 31, 2021.

Overall economic trends, foreign currency exchange volatility, and other factors impacting the ~~number of PriceSmart warehouse clubs operating in Dominican Republic to four.~~ ~~We continue to explore other potential sites for future warehouse clubs in Central America, the Caribbean and Colombia.~~business

~~General Market Factors~~

Our sales and profits vary from market to market depending on general economic factors, including GDP growth; consumer ~~spending patterns;~~preferences; foreign currency exchange rates; political policies and social conditions; local demographic characteristics (such as population growth); the number of years ~~PriceSmart has~~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. Global and local travel restrictions and a general slow-down in global economic activity as a result of COVID-19 have significantly impacted and may continue to impact the economies in several of our markets, causing significant declines in GDP and employment and devaluations of local currencies against the U.S. dollar.

During the last half of fiscal year 2021 and continuing into fiscal 2022, we saw several factors pressuring supply chains, including container shortages, port delays, and truck and driver shortages. These disruptions and shortages are impacting the timing of deliveries and leading to higher freight costs. Despite all these issues, we continue to see strong sales. We are working to hold down and/or mitigate the price increases passed on to the Members and maintain sufficient inventory to grow sales. One key mitigating factor has been our expanded network of distribution centers, which has facilitated alternative routings of shipments, increased throughput, and provided flexibility to more effectively mitigate these challenges. In addition, we have made strategic investments in inventory and worked with our local vendors to source alternative products, in order to reduce future out-of-stocks on high demand items that have been impacted by these disruptions or that have been affected by electronic part shortages. We expect pandemic-related conditions to continue throughout fiscal 2022.

Currency fluctuations can be one of the largest ~~variable~~variables affecting our overall sales and profit performance, as we have experienced in prior fiscal years, ~~2015 and 2016,~~ because many of our markets are susceptible to foreign currency exchange rate volatility. InDuring the first three months of both fiscal year ~~2018~~2022 and ~~during fiscal year 2017,~~2021, approximately ~~77%~~77.8% of our net ~~warehouse~~merchandise sales were in currencies other than the U.S. dollar. Of those sales, ~~that were currencies other than the U.S. dollar, approximately 52% were comprised~~48.5% and 49.5% consisted of sales of products we purchased in U.S. ~~dollars.~~dollars for each period, respectively.

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A devaluation of ~~the~~ local currency ~~not only~~ reduces the value of sales and membership income that is generated in that country when translated to U.S. dollars for our consolidated ~~results, but also increases~~results. In addition, when local currency experiences devaluation, we may elect to increase the local currency price of imported merchandise to maintain our target margins, which ~~impacts~~could impact demand for ~~a significant portion~~the merchandise affected by the price increase. We may also modify the mix of ~~the Company’s~~imported versus local merchandise ~~offering. For example, changes in~~and/or the value of the Colombian peso (“COP”) relative to the U.S. dollar negatively impacted sales and margins in that market during fiscal years 2015 and 2016. A stabilization of the currency during fiscal year 2017 contributed to improving business conditions in Colombia, resulting in good sales growth and a return to operating profitability in our Colombia segment that has continued into the first three months of fiscal year 2018.

Certain of our Central American and Caribbean markets experienced some slowing of overall economic activity during fiscal year 2017, which, to some degree, is continuing into the first three months of fiscal year 2018. In particular, Trinidad, which depends on oil and gas exports as a major source of ~~income, has been experiencing overall difficult economic conditions. These adverse economic conditions, combined with government policies intended~~imported merchandise in an effort to ~~manage foreign~~mitigate the impact of currency ~~reserves, have adversely affected consumer spending. Other countries where general market conditions provided a difficult operating environment during~~fluctuations. Information about the effect of local currency devaluations is discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net Merchandise Sales and Comparable Sales.”

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~~fiscal year 2017 and continuing into the first three months of fiscal year 2018 include USVI, where Hurricanes Irma and Maria had a severe impact on the infrastructure of the island, and Barbados.~~

Our capture of total retail and wholesale sales can vary from market to market due to competition and the availability of other shopping options for our members. In larger, more developed countries, such as Costa Rica, Panama and Colombia, customers have many alternatives available to them to satisfy their shopping needs, and therefore, our market share is less than in other smaller countries, such as Jamaica and Nicaragua, where consumers have a limited number of shopping options.

Members. Demographic characteristics within each of our markets can ~~also~~ affect both the overall level of sales and ~~also~~ future sales growth opportunities. ~~Island countries~~Certain island markets, such as Aruba, Barbados and the U.S. Virgin Islands offer us limited upside for sales growth given their overall market size. Countries with a smaller upper and middle class consumer population, such as Honduras, El Salvador, Jamaica and Nicaragua, also have a more limited potential opportunity for sales growth as compared to more developed countries with larger upper and middle class consumer populations.

Political and other factors in each of our markets may have significant effects on our business. For example, ~~when~~the civil unrest in Colombia paralyzed significant portions of the country’s infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal 2021. Austerity and tax reform measures for Colombia and other Latin American countries with high national ~~elections~~debt levels and income disparity pose a risk for political instability. Similar unrest happened in Nicaragua and Honduras in 2018 and 2019, respectively; Costa Rica also had a general strike against tax reform measures that significantly impeded regular economic activity in 2018. Events of this sort have, and may continue to have, an adverse effect on our business.

Our operations are ~~being held, the political situation can introduce uncertainty about how the leadership change may impact the economy~~subject to volatile weather conditions and ~~affect near-term consumer spending. As has been the case in recent weeks in~~natural disasters. In November 2020, Hurricanes Eta and Iota brought severe rainfall, winds, and flooding to a significant portion of Central America, especially Honduras, ~~political turmoil can result in local unrest, resulting in curfews and reduced operating hours and interrupt the normal flow~~that caused significant damage to parts of ~~merchandise to~~that country’s infrastructure. Although our warehouse ~~clubs. The need for increased tax revenue~~clubs were not significantly affected and we were able to manage our supply chain to keep our warehouse clubs stocked with merchandise, these natural disasters could adversely impact our overall sales, costs and profit performance in ~~certain countries can also cause changes in tax policies affecting consumer’s personal tax rates and/or added consumption taxes, such as VAT (value-added taxes), effectively raising~~ the ~~prices of various products.~~ future.

~~From time to time~~In the past, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity)., particularly in Trinidad. This ~~impedes~~can and has impeded our ability to convert local currencies obtained through ~~warehouse~~merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products ~~increasing~~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. During fiscal year ~~2017~~2021 and continuing into ~~the first three months of~~ fiscal year ~~2018,~~2022, we ~~experienced this situation~~continue to experience significant limitations on our ability to convert Trinidad dollars to U.S. dollars or other tradeable currencies. As liquidity conditions have tightened, we have raised prices on imported goods in Trinidad ~~(“TT”). We are working with our banks in~~due to increased costs of conversion of Trinidad dollars to ~~source tradable currencies (including Euros and Canadian dollars), but until the central bank in Trinidad makes more~~ U.S. dollars ~~available, this illiquidity condition is likely~~and risks associated with continued illiquidity. We have also sought to ~~continue. During part~~shift the purchase of ~~the first half of fiscal year 2017, we limited shipments of merchandise~~certain goods to Trinidad from our distribution center in Miami to levels that generally aligned with our Trinidad subsidiary’s ability to source U.S. dollars to pay for that merchandise. This resulted in a reduced level of shipments, which negatively affected sales in the second quarter, particularly December 2016, although by less than our initial estimate. These actions did not impact the level of merchandise we obtain locally in Trinidad. Starting in the third quarter of fiscal year 2017, we were able to improve our sourcing of tradeable currencies, which, in addition to other steps we took, allowed for a more normalized flow of imported merchandise during the thirdlocal sources where appropriate, and ~~fourth fiscal quarters. Over the past three months, however, we have been unable to source a sufficient level of tradeable currencies in Trinidad consistent with the level of merchandise~~ we are importing for the holiday shopping season. As of November 30, 2017, our Trinidad subsidiary had net U.S. dollar denominated liability exposures of approximately $12.1 million, an increase of $16.1 million from August 31, 2017 when our Trinidad subsidiary had net U.S. dollar denominated assets position of approximately $4.0 million. We are carefully monitoring the situation, which may require us to limit future shipments from the U.S. to Trinidad in line with our abilityactively seeking to exchange Trinidad dollars for tradeable currencies to manage our exposure to any potential devaluation. In addition, we significantly limited shipments of goods from the U.S. to Trinidad during most of fiscal 2021 and continuing into fiscal 2022 due to the illiquidity of the Trinidad dollar. We further reduced our already limited shipments in the last quarter of fiscal 2021 because of the government imposed restrictions on non-essential items during that period. However, while shipments remained low relative to historic levels, shipments did increase sequentially from the fourth quarter of fiscal 2021 to the first quarter of fiscal 2022 in connection with the government’s lifting of restrictions on sales of non-essential items during the first quarter.

~~Business Strategy~~We continue to explore and execute several options to increase our ability to generate more reliable sources of U.S. dollars in Trinidad, some of which may lead us to incur additional expenses. For instance, in December 2021, we executed a loan whereby we received $25 million of U.S. dollars, but the associated principal and interest will be repaid in Trinidad dollars (converted at rates in effect in December 2021) over a four-year period, thereby locking in the conversion of a significant amount of Trinidad dollars at current conversion rates and freeing up this cash in U.S. dollars for deployment for general corporate purposes.

~~Our business strategy is~~As of November 30, 2021, our Trinidad subsidiary had Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars of approximately $49.9 million, a decrease of $3.0 million from August 31, 2021 when these same balances were approximately $52.9 million. The Trinidad central bank manages the exchange rate of the Trinidad dollar with the U.S. dollar. While the Trinidad government has publicly stated it has no intention to ~~operate membership warehouse clubs~~devalue the Trinidad dollar, it could in ~~Latin America~~the future decide to devalue the currency to improve market liquidity, resulting in a devaluation in the U.S. dollar value of these cash and investments balances.

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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 $10.0 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 November 30, 2021, we had a U.S. dollar denominated monetary asset position of approximately $21.1 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% 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 approximate $4.2 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 ~~Caribbean. We sell~~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.

Our Barbados subsidiary also began facing a ~~limited number~~U.S. dollar illiquidity situation in fiscal 2020. The Barbados dollar has a conventional fixed-peg currency arrangement, in which the Barbados dollar exchange rate is fixed to the U.S. dollar. Thus, we do not expect a devaluation of ~~high volume products~~this currency at this time. As of November 30, 2021, our Barbados subsidiary had Barbados dollar denominated cash and ~~services across a broad range~~cash equivalents measured in U.S. dollars of ~~categories~~approximately $3.3 million, which could not be readily converted to U.S. dollars for general use within the Company. However, this balance has decreased significantly from the $12.4 million balance as of August 31, 2021.

Mission and Business Strategy

PriceSmart exists to improve the lives and businesses of our Members, our employees, and ~~families~~our communities through the responsible delivery of the best quality goods and services at the lowest possible prices. ~~PriceSmart members pay an~~Our mission is to serve as a model company, which operates profitably and provides a good return to our investors, by providing Members in emerging and developing markets with exciting, high-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 opportunity for growth. We strive to treat our suppliers right and empower them when we can. 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. The annual membership fee ~~and that fee, combined with volume purchasing and operating efficiencies throughout the supply chain, enable~~enables us to operate our business ~~efficiently~~ with lower margins than traditional retail stores. As we increase our technological capabilities, we are increasing our tools to drive sales and ~~prices than conventional retail stores and wholesale suppliers.~~

While our traditional membership warehouse club strategy continues to work well in our markets, we recognize that technology is having an increasingly profound impact on shopping habits throughout the world.operational efficiencies. We believe we are well-positioned to blend the excitement and appeal of our ~~business strategy needs to be broadened to respond to changes in shopping habits so our members will have the shopping experience they desire.~~

~~Our longer range strategic objective is to combine the traditional membership warehouse club “brick and mortar”~~brick-and-mortar business with the convenience and additional benefits of online shopping and services.

Growth

As we look to ~~provide~~ the ~~best shopping experience possible for~~future, our ~~members.~~

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~~Growth~~

We measure our growth primarily by the amount of the period-over-period activity in our net warehouse sales, our comparable warehouse club sales (which include the impact of e-commerce sales) and our membership income. At times, we make strategic investments that areCompany is focused on ~~the long-term growth~~three major drivers of ~~the Company. These investments can impact near-term results, such as when we incur fixed costs in advance of achieving full projected~~growth:

Real Estate – New Clubs and Distribution facilities

Membership Value

Incremental sales ~~negatively impacting near-term operating profit~~generated from PriceSmart.com and ~~net income, or when we open a new warehouse club in an existing market, which can reduce reported comparable warehouse sales due~~digital and online capabilities

Real Estate - New Clubs and Distribution Facilities. We continue to ~~the cannibalization of sales from existing~~actively seek opportunities to expand our geographic footprint for brick-and-mortar warehouse clubs.

~~Current~~Our 50^th club is scheduled to open in Jamaica in April 2022. We intend to continue, and ~~Future Management Actions~~

~~Generally,~~even accelerate, our ~~operating efficiencies, earnings~~current pace of club growth over the next 3-5 years and ~~cash~~to continue to explore and evaluate opportunities in new markets. Our growth strategy, as it pertains to real estate, includes physical distribution centers of various types to most efficiently support the flow ~~improve as sales increase. Higher sales provide greater purchasing power which often translates into lower cost~~ of merchandise from ~~our suppliers and lower prices~~the supplier to the Member, be it sales generated from the clubs or through PriceSmart.com. Also, the need for ~~our members. Higher sales, coupled with continuous efforts~~optionality in today’s world has proven essential. Therefore, we plan to ~~improve efficiencies through~~make appropriate investments in our distribution network to maximize efficiencies, minimize supply chain disruption, and ~~within~~to provide optimal support for a growing e-commerce business. In addition to our ~~warehouse clubs,~~distribution center in Miami, Florida, we also ~~give~~operate a regional distribution center in Costa Rica and are actively considering others. We also intend to expand our network of Produce Distribution Centers. In some cases, these facilities also provide the opportunity to capture efficiencies by centralizing certain production activities, such as bakery, meat processing, packaging and labeling.

Membership Value. Driving membership value leads to a higher membership base, the opportunity to increase the membership fee when appropriate, and contributes to the bottom line of the business. We focus on growth of our membership base, member renewal rates and spend per Member as part of how we determine how Members see our value. By adding more

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benefits that Members can only obtain with us, we expect to see growth in Membership income. Recent examples 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 Optical services with free eye exams for the member and additional members of their families and deeply discounted eyeglass frames, Audiology services with free hearing exams and deeply discounted hearing aids, and Pharmacy, which provides a significant convenience to our Members.

Another driver of Membership value is our private label offering, which we are working to expand. Private label also provides us the opportunity to ~~leverage our operating costs~~source quality items locally when appropriate. Select local sourcing has multiple benefits including support of local communities in which we operate by developing industry and ~~reduce prices~~creating direct and indirect jobs, mitigation of foreign currency exchange risk, local currency procurement, and reduced supply chain exposure. These initiatives offer additional benefits and services for our ~~members.~~Members whether they choose to shop on-line, in-club, or both.

WeIncremental sales generated from PriceSmart.com and digital and online capabilities. Members continue to seek ~~to grow sales by increasing transaction size and shopping frequency of~~all the great value our members by providing high quality, differentiated merchandise at a good value. We also grow sales by attracting new members and improving the capacity of our existing warehouse clubs to serve the growing membership base and level of sales in those locations through physical expansions of the building or adding additional parking or improving the flow of merchandise to and within the warehouse club. Sales growth is also achieved when we add new warehouse clubs with a corresponding increase in members in those markets that can support that growth. Sales during the first three months of fiscal year 2018 were positively impacted by the addition of a new warehouse club that opened in Santa Ana, Costa Rica in October 2017, fiscal year 2018. Although we recognize that opening new warehouse club locations in certain existing markets can have adverse short-term implications for comparable store growth, as the new warehouse club will often attract sales from existing locations, each decision to add a location in an existing market is based on a long-term outlook. Overall, for the first quarter of fiscal year 2018, net warehouse sales increased 4.1% when compared to the same three month period in fiscal year 2017. Finally, we believe that online sales constitute a significant opportunity to grow sales in the future.

~~One of the distinguishing features of the warehouse club format is the role membership plays, both~~distinct business model provides in terms of quality, pricing and ~~member loyalty. Membership fees are considered~~an exciting experience. However, there is a ~~component~~growing expectation of ~~overall gross margin and therefore allow us to reduce merchandise prices. In most of~~consumers in our markets ~~the annual membership fee is the equivalent of U.S. $35~~ for both business members and non-business “Diamond” members. In Colombia, the membership fee was 65,000 (COP) (including VAT) since our initial entrance into the Colombian market. The Colombian peso (COP) was trading at approximately 2,000 COP to $1.00 US dollar at that time. More recently, the Colombian peso has been trading at approximately 3,000 COP to $1.00 US dollar so that the converted membership price in U.S. dollars decreased from approximately U.S. $30 to approximately U.S. $20. In February 2017, we raised the membership fee in Colombia to 75,000 COP moving the converted membership price to approximately U.S. $25. In addition to the standard warehouse club membership, we have offered in Costa Rica what we call Platinum membership since 2012 for $75. A Platinum membership earns a 2% rebate on annual purchases up to a maximum $500 rebate per year. In September, fiscal year 2018, we introduced the Platinum membership in Panama, and in October, fiscal year 2018, we introduced the Platinum membership in the Dominican Republic.

Logistics and distribution efficiencies are an important part of what allows us to deliver high quality merchandise at low prices to our members. We acquire a significant amount of merchandise internationally, a significant portion of which we receive at our Miami distribution centers. In January 2017, we purchased a distribution center in Medley, Miami-Dade County, Florida, into which we transferred our Miami dry distribution center activities from a leased facility during the third quarter of fiscal year 2017. This new distribution facility has increased our ability to efficiently receive, handle and distribute merchandise. We then ship the merchandise either directly to our warehouse clubs or to regional distribution centers located in some of our larger markets. Our ability to efficiently receive, handle and distribute merchandise to the point where our members put that merchandise into their shopping carts has a significant impact on our level of operating expenses and ultimately how low we can price our merchandise.convenience. We continue to ~~explore ways~~build capabilities and our offerings on PriceSmart.com. We also build and apply technological tools to ~~improve efficiency, reduce costs and ensure a good flow of merchandise to our warehouse clubs. As we~~ continue to ~~refine~~learn more about and strengthen our logistics and distribution infrastructure, we are investing in regional distribution centers. We recently entered into a long-term lease for a 107,640 square foot distribution center in Costa Rica. We expect to begin operating this distribution center during the fourth quarterrelationships with each of fiscal year 2018. In August of fiscal year 2017, we entered into a long-term lease for a 52,463 square foot distribution center in Panama that we occupied in September 2017. We expect that both these new distribution centers will improve the merchandise flow and in-stock conditions in our ~~warehouse clubs, reduce merchandise costs and facilitate online sales to our members.~~

Purchasing land and constructing warehouse clubs is generally our largest ongoing capital investment. Securing land for warehouse club locations is challenging within our markets, especially in Colombia, because suitable sites at economically feasible prices are difficult to find. While our preference is to own rather than lease real estate,Members. Together with data analytics, we have ~~entered into real estate leases in certain cases (most recently~~been able to provide our ~~Bogota, Colombia site)~~Members with enhancements to the membership experience. PriceSmart.com and ~~will likely do so~~these tools provide 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. ~~Real estate ownership~~

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provides a number of advantages as compared to leasing, including lower operating expenses, flexibility to expand or otherwise enhance our buildings, long-term control over the use of the property and the residual value that the real estate may have in future years. In order to secure warehouse club locations, we occasionally have purchased more land than is actually needed for the warehouse club facility. To the extent that we acquire property in excess of what is needed for a particular warehouse club, we generally have looked to either sell or develop the excess property. Excess land at Alajuela (Costa Rica) and Brisas (Panama) is being developed by joint ventures formed by us and the sellers of the property. We are employing a similar development strategy for the excess land at the San Fernando, Trinidad and Arroyo Hondo, Dominican Republic locations where the properties are fully owned by us. The profitable sale or development of excess real estate not required to operate a warehouse club is highly dependent on real estate market conditions.

We are currently engaged in the selection of a new global enterprise resource planning system (ERP) and evaluating other technology-related investments with the long-term objective of offering our members a seamless multi-channel experience. To oversee our efforts to identify and adopt new technologies that can help us better serve our members, our Board of Directors has approved a new committee of the Board, the Innovation Committee. The committee members include Board Chairman Robert Price as Chairman of the committee, our CEO Jose Luis Laparte and two other members of our Board. The Board of Directors has designated an incremental $3.0 to $5.0 million of technology-related spending for fiscal year 2018 for evaluation and selection of the ERP vendor and to fund a newly established team to direct our technology investment and preopening spending to develop a new online business that we hope to launch during the summer of 2018. Substantially all of this spending for fiscal year 2018 will be recorded as expenses on the statement of income that will impact earnings during the fiscal year as we pursue these long-term initiatives, which will likely require further investments beyond the current fiscal year.

Financial highlights for the first quarter of fiscal year ~~2018~~2022 included:

Net warehouse club sales increased 4.1% over the comparable prior-year period. We ended the quarter with 40 warehouse clubs compared to 39 warehouse clubs at the end of the first quarter of fiscal year 2017.

Comparable warehouse club sales (that is, sales in the warehouse clubs that have been open for greater than 13 1/2 calendar months) for the 13 weeks ended December 3, 2017 increased 2.2%, impacted by the opening of our Santa Ana, Costa Rica warehouse club in October.

~~Membership income for the first quarter of fiscal year 2018 increased 5.7% to $12.4 million over the comparable prior-year period.~~

Warehouse gross profits (net warehouse club sales less associated cost of goods sold) increased 0.5% over the comparable prior year period and warehouse gross profits as a percent of net warehouse club sales were 14.5%, a decrease of 51 basis points (0.51%) from the same period last year.

~~Operating income for the first quarter of fiscal year 2018 was $33.2 million, compared to $38.4 million in the first quarter of fiscal year 2017.~~

~~We recorded a $278,000 net currency gain from currency transactions in the current quarter compared to a $928,000 net loss in the same period last year.~~

~~The effective tax rate for the first quarter of fiscal year 2018 was 31.0%, as compared to the effective tax rate for the first quarter of fiscal year 2017 of 31.5%.~~

~~Net income for the first quarter of fiscal year 2018 was $22.5 million, or $0.74 per diluted share, compared to $24.9 million, or $0.82 per diluted share, in the comparable prior-year period.~~

Total revenues increased 11.2% over the comparable prior year period.

Net merchandise sales increased 12.6% over the comparable prior year period. We ended the quarter with 49 warehouse clubs compared to 46 warehouse clubs at the end of the first quarter of fiscal 2021. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by 1.0% versus the comparable three-month period.

Comparable net merchandise sales (that is, sales in the 46 warehouse clubs that have been open for greater than 13 ½

calendar months) for the 13 weeks ended November 28, 2021 increased 9.4%. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by 1.0%.

Membership income for the first quarter of fiscal 2022 increased 11.2% to $14.8 million.

Total gross margins (net merchandise sales less associated cost of goods sold) increased 11.9% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 16%, a decrease of 10 basis points (0.1%) from the same period in the prior year.

Operating income for the first quarter of fiscal 2022 was $46.0 million, an increase of 3.3%, or $1.5 million, compared to the first quarter of fiscal 2021.

We recorded a $1.4 million gain in Other income (expense), net, primarily from a $2.7 million gain from the sale of Aeropost, Inc., partially offset by a $1.9 million loss from foreign currency transactions, in the first quarter of fiscal 2022 compared to a $1.5 million net currency loss in the same period last year. The gain from the sale of Aeropost, net of tax, resulted in a $1.5 million net income gain and contributed $0.05 to basic and diluted net income per share in the first quarter of fiscal 2022.

Our effective tax rate increased in the first quarter of fiscal 2022 to 34.1% from 32.9% in first quarter of fiscal 2021, primarily related to changes in uncertain tax positions.

Net income attributable to PriceSmart for the first quarter of fiscal 2022 was $30.5 million, or $0.98 per diluted share, compared to $27.7 million, or $0.90 per diluted share, in the first quarter of fiscal 2021.

COMPARISON OF THE ~~THREE MONTHS ENDED~~three months ended NOVEMBER 30, ~~2017 AND 2016~~2021 and 2020

The following discussion and analysis compares the results of operations for the three-month period ended on November 30, ~~2017~~2021 with the three-month period ended on November 30, ~~2016~~2020 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report. Unless otherwise noted, all tables on the following pages present U.S. dollar amounts in thousands. Certain percentages presented are calculated using actual results prior to rounding.

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Net Merchandise Sales

~~Net Warehouse Club Sales~~

The following tables indicate the net ~~warehouse~~merchandise club sales in the segments in which we operate and the percentage growth in net ~~warehouse club~~merchandise sales by segment during the three months ended November 30, ~~2017~~2021 and ~~2016.~~November 30, 2020.



	Three Months Ended

	November 30, 2017								November 30, 2016				Three Months Ended
													November 30, 2021								November 30, 2020
	Amount		% of net sales		Increase/ (decrease) from prior year		Change		Amount		% of net sales		Amount		% of net ‎sales		Increase from prior year		Change		Amount		% of net ‎sales
Central America	$	443,667	59.5	%	$	13,495	3.1	%	$	430,172	60.1	%	$	560,596	59.4	%	$	75,556	15.6	%	$	485,040	57.8	%
Caribbean		211,439	28.4	%		7,534	3.7	%		203,905	28.5	%		268,334	28.4			13,728	5.4			254,606	30.4
Colombia		90,295	12.1	%		8,293	10.1	%		82,002	11.4	%		115,113	12.2			16,390	16.6			98,723	11.8
Net warehouse club sales	$	745,401	100.0	%	$	29,322	4.1	%	$	716,079	100.0	%
Net merchandise sales													$	944,043	100.0	%	$	105,674	12.6	%	$	838,369	100.0	%

Comparison of Three Months Ended November 30, ~~2017~~2021 and ~~2016~~November 30, 2020

Overall, total net ~~warehouse~~merchandise sales ~~growth of 4.1%~~grew 12.6% for the first ~~quarter~~quarter. The increase resulted from ~~a 4.6%~~an 11.3% increase in transactions and a ~~0.5% decrease~~1.2% increase in average ticket. Transactions represent the total number of visits our Members make to our warehouse clubs and Click & Go™ curbside pickup and delivery service transactions. Average ticket represents the amount our Members spend on each visit or Click & Go™ order. We had 49 clubs in operation as of November 30, 2021 compared to 46 clubs as of November 30, 2020.

Net ~~warehouse~~merchandise sales in our Central America segment increased ~~3.1%~~15.6% for the three-months ended November 30, 2021. The increase had a 900 basis point (9.0%) positive impact on total net merchandise sales growth. All markets within this segment had positive net merchandise sales growth for the three-month period. We added one new club to the segment when compared to the comparable prior-year periods. We opened our fifth club in Guatemala in October 2021.

Net merchandise sales in our Caribbean segment increased 5.4% for the first quarter. The increase for the quarter had a 160 basis point (1.6%) positive impact on net merchandise sales growth. Our Dominican Republic market continued its strong performance in the quarter with 16.8% growth. Our Aruba and Jamaica markets also showed strong performance this quarter with 12.4% and 10.7% growth, respectively. This strong performance was offset by our Trinidad market which had declines in net merchandise sales for the same period. Trinidad sales were adversely affected by our measured approach to rebalance our merchandise mix following the reopening of the economy from the pandemic restrictions, and we generally continue to manage our imports to be in line with the amounts of U.S. dollars we expect to source in Trinidad. Net merchandise sales growth for Trinidad improved during the first quarter of fiscal year ~~2018, with~~2022 compared to the ~~addition~~fourth quarter of fiscal 2021 as the Trinidad government lifted restrictions on sales of non-essential merchandise, but sales have still not returned to the level we achieved in the first quarter of fiscal 2021. Refer to “Management’s Discussion & Analysis – Factors Affecting Our Business” for more information regarding the impact on us of the Santa Ana warehouse club which opened in October contributing to an overall positive sales growth in Costa Rica. Panama sales were essentially flat, but all other Central American countries recorded positive growth in warehouse sales for the three-month period.

Our Caribbean segment showed improvement in sales growth from the past few quarters. While Trinidad, our largest market in the segment, was essentially flat, this was an improvement from negative sales growth experienced in eachilliquidity of the ~~prior four quarters. All other countries in the segment recorded positive sales growth, including Barbados which, like~~ Trinidad had negative sales growth in each of the previous four quarters. Sales in the Company’s USVI warehouse club grew 15.3% for the quarter. Despite significant business interruption in September due to the hurricanes that hit the island, the return to normal operations in October and November resulted in strong sales as some other retailers in the market have not recovered.dollar.

Net ~~warehouse~~merchandise sales in our Colombia segment ~~experienced growth~~increased 16.6% for the first quarter. This increase had a 200 basis point (2.0%) basis point positive impact on total net merchandise sales growth. The primary driver of ~~10.1%~~the increased revenue for the quarter was the addition of two clubs to the segment when compared to the comparable prior year period. We opened our eighth club in Colombia in December 2020 and our ninth club in Colombia in November 2021.

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The following table indicates the impact that currency exchange rates had on our net merchandise sales in dollars and the percentage change from the three-month period ~~compared~~ended November 30, 2021. The term “currency exchange rates” refers to ~~a year ago. With~~ the ~~stabilization of~~currency exchange rates we use to convert net merchandise and comparable net merchandise sales for all countries where the ~~exchange rate between the Colombian peso and~~functional currency is not the U.S. dollar ~~over~~into U.S. dollars. We calculate the ~~past 15 months, we have seen continued sales growth~~effect of changes in ~~all of our warehouse clubs in Colombia. Transaction growth of 11.7% accounted for all~~currency exchange rates as the difference between current period activities translated using the current period’s currency exchange rates and the comparable prior year period’s currency exchange rates. We believe the disclosure of the ~~sales increase. Year~~effects of currency exchange rate fluctuations on ~~year~~our results permits investors to understand better the Company’s underlying performance.


	Currency exchange rate fluctuations for the
	Three months ended
	November 30, 2021
	Amount		% change
Central America	$	(6,642)	(1.4)	%
Caribbean		874	0.4
Colombia		(2,649)	(2.7)
Net merchandise sales	$	(8,417)	(1.0)	%

Overall, the effects of currency ~~changes did not have any material~~fluctuations within our markets had an approximately $8.4 million, or 100 basis point (1.0%), negative impact on net merchandise sales for the ~~U.S.~~quarter ended November 30, 2021.

Currency fluctuations had a $6.6 million, or 140 basis point (1.4%), negative impact on net merchandise sales in our Central America segment for the quarter ended November 30, 2021. These currency fluctuations contributed approximately 80 basis points (0.8%) of the total negative impact on total net merchandise sales for the current period. The Costa Rica Colón depreciated significantly against the dollar ~~reported growth.~~as compared to the same three-month period a year ago, and was a significant factor in the contribution to the unfavorable currency fluctuations in this segment.

Currency fluctuations had a $0.9 million, or 40 basis point (0.4%), positive impact on net merchandise sales in our Caribbean segment for the quarter ended November 30, 2021. These currency fluctuations contributed approximately 10 basis points (0.1%) of positive impact on total net merchandise sales for the period. The Dominican Republic experienced currency appreciation when compared to the same period last year.

Currency fluctuations had a $2.6 million, or 270 basis point (2.7%), negative impact on net merchandise sales in our Colombia segment for the quarter. These currency fluctuations contributed approximately 30 basis points (0.3%) of the total negative impact on total net merchandise sales for the quarter.

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Comparable Merchandise Sales

~~Comparable Sales~~

We report comparable ~~warehouse club~~net merchandise sales on a “same week” basis with 13 weeks in each quarter beginning on a Monday and ending on a Sunday. The periods are established at the beginning of the fiscal year to provide as close of a match as possible to the calendar month and quarter that is used for financial reporting purposes. This approach equalizes the number of weekend days and weekdays in each period for improved sales comparison, as we experience higher ~~warehouse~~merchandise club sales on the weekends. ~~Further, each~~Each of the warehouse clubs used in the calculations was open for at least 13 ½ calendar months before its results for the current period were compared with its results for the prior period. ~~For example,~~As a result, sales related to ~~the~~one of our warehouse ~~club~~clubs opened ~~in Colombia in September 2016 were not used in the calculation of comparable sales until November 2017. Sales related to the warehouse opened in Costa Rica in October 2017~~during calendar year 2021 will not be used in the calculation of comparable sales until ~~December 2018.~~they have been open for at least 13 ½ months. Therefore, comparable net merchandise sales includes 46 warehouse clubs for the thirteen-week period ended November 28, 2021.

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The following tables indicate the comparable net ~~warehouse club~~merchandise sales in the reportable segments in which we operate and the percentage ~~growth~~changes in net ~~warehouse club~~merchandise sales by segment during ~~fiscal years 2017~~the thirteen-week period ended November 28, 2021 and ~~2016.~~November 29, 2020 compared to the prior year.


	Three Months Ended				Thirteen Weeks Ended
	November 30, 2017		November 30, 2016		November 28, 2021		November 29, 2020
	% Increase/(decrease) in comparable net warehouse sales		% Increase/(decrease) in comparable net warehouse sales		% Increase/(decrease) in comparable net merchandise sales		% Increase/(decrease) in comparable net merchandise sales
Central America	(0.1)	%	0.7	%	14.1	%	(0.7)	%
Caribbean	3.3	%	(2.8)	%	5.0		9.9
Colombia	11.3	%	4.3	%	(2.8)		8.6
Consolidated segments	2.2	%	—	%
Consolidated comparable net merchandise sales					9.4	%	3.6	%

Comparison of ~~Three Months~~Thirteen-Week Periods Ended November ~~30, 2017~~28, 2021 and ~~2016~~November 29, 2020

Comparable ~~warehouse club~~net merchandise sales for those warehouse clubs that were open for at least 13 ½ months for some or all of the ~~13-week~~thirteen-week period ended ~~December 3, 2017 grew 2.2%~~November 28, 2021 increased 9.4%.

Comparable net merchandise sales in our Central America segment increased 14.1% for the thirteen-week period ended November 28, 2021. All of our markets in Central America had positive comparable ~~warehouse club~~net merchandise sales growth and this increase contributed approximately 820 basis points (8.2%) of positive impact in total comparable merchandise sales for the period.

Comparable net merchandise sales in our Caribbean segment increased 5.0% for the thirteen-week period ended November 28, 2021. The increase contributed approximately 150 basis points (1.5%) of positive impact on total comparable merchandise sales for the period.

Our Dominican Republic market continued its strong performance in the thirteen-week period with 16.8% comparable sales growth. Our Aruba and Jamaica markets also showed strong performance this quarter with 12.9% and 7.7% comparable sales growth, respectively. This strong performance was offset by our Trinidad market, which declined in comparable net merchandise sales by 6.2% for the thirteen-week period. Trinidad sales were ~~impacted by the opening~~adversely affected during most of the ~~Company’s seventh warehouse club~~first quarter because we limited merchandise shipments to the market due to the ongoing U.S. dollar illiquidity situation. Refer to “Management’s Discussion & Analysis – Factors Affecting Our Business” for more discussion on the Trinidad illiquidity situation.

Comparable net merchandise sales in ~~Costa Rica~~our Colombia segment decreased 2.8% for the thirteen-week period ended November 28, 2021. This decrease contributed approximately 30 basis points (0.3%) of negative impact in ~~an area called Santa Ana. Often times, new warehouse clubs that we open are not far~~total comparable merchandise sales for the period. The decrease in Colombia during the current quarter was primarily due to the foreign currency devaluation and sales transfers from existing ~~warehouse~~ clubs ~~that are~~ included in the ~~calculation for~~ comparable ~~warehouse club~~net merchandise sales ~~resulting in a transfer of some sales from an existing club (in this case Escazu) to the new club. This transfer of sales from existing warehouse clubs that are included in the~~ calculation ~~of comparable warehouse club sales~~ to new ~~warehouse~~ clubs ~~that are~~ not included in the ~~calculation can have~~calculation.

The following tables illustrate the impact that changes in foreign currency exchange rates had on our comparable merchandise sales in dollars and the percentage change for the thirteen-week period ended November 28, 2021.


	Currency Exchange Rate Fluctuations for the
	Thirteen Weeks Ended
	November 28, 2021
	Amount		% change
Central America	$	(6,800)	(1.4)	%
Caribbean		867	0.3
Colombia		(2,538)	(2.5)
Consolidated comparable net merchandise sales	$	(8,471)	(1.0)	%

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Overall, the mix of currency fluctuations within our markets had an ~~adverse~~approximately $8.5 million, or 100 basis point (1.0%) negative impact on ~~reported~~ comparable ~~warehouse club sales. We estimate that the transfer of sales associated with the Santa Ana opening negatively impacted the comparable warehouse club~~net merchandise sales for the thirteen-week period ended November 28, 2021.

Currency fluctuations within our Central America segment ~~by 150~~contributed approximately 80 basis points ~~(1.50%~~(0.8%) of negative impact in total comparable merchandise sales for the thirteen-week period. ~~New warehouse clubs attract new members from areas not previously served by us and also create~~Our Costa Rica market was the ~~opportunity for some existing members, particularly those who now find~~main contributor as the ~~new clubs closer to their homes, to shop more frequently.~~

~~The Caribbean segment~~market experienced ~~positive comparable warehouse sales on improving conditions in all markets~~currency devaluation when compared to the ~~past few quarters, aided~~same period last year.

Currency fluctuations within our Caribbean segment contributed approximately 10 basis points (0.1%) points of positive impact in total comparable merchandise sales for the thirteen-week period. Our Dominican Republic market experienced currency appreciation, which was partially offset by ~~strong growth~~our Jamaica market, which experienced currency devaluation when compared to the same period last year.

Currency fluctuations within our Colombia segment contributed approximately 30 basis points (0.3%) of negative impact in ~~USVI.~~total comparable merchandise sales for the thirteen-week period. This reflects the movement of the Colombian peso’s foreign currency exchange rate when compared to the same period a year ago.

~~The calculation of comparable warehouse club sales in Colombia included the Chia warehouse club for five weeks in the 13-week period ending December 3, 2017.~~

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Membership Income

Three Months Ended

November 30,

November 30,

2017

2016

Amount

Increase/
(decrease)
from
prior year

% Change

Membership
income % to
net warehouse
club sales

Amount
Membership income - Central America

$
7,694

$
381

5.2
%

1.7
%

$
7,313
Membership income - Caribbean

3,018

65

2.2

1.4

2,953
Membership income - Colombia

1,663

219

15.2

1.8

1,444
Membership income - Total

$
12,375

$
665

5.7
%

1.7
%

$
11,710

Number of accounts - Central America

831,906

24,572

3.0
%

807,334
Number of accounts - Caribbean

393,397

1,338

0.3

392,059
Number of accounts - Colombia

318,680

18,395

6.1

300,285
Number of accounts - Total

1,543,983

44,305

3.0
%

1,499,678

~~Comparison of Three Months Ended November 30, 2017 and 2016~~

Membership income is recognized ratably over the one-year life of the membership. The increase in membership income primarily reflects a growth in membership accounts for which income is recognized during the last twelve months. The average number of member accounts during the first quarter of fiscal year 2018 was 2.7% higher than during the same period a year ago. The income recognized per average member account increased 2.9%. In February 2017, we increased the annual membership fee in Colombia by 15.4% to COP 75,000, which had the effect of increasing the membership income per average membership account in Colombia by 9.0% in the quarter compared to the first quarter of last year.

~~The Company had a net increase~~ of 44,305 membership accounts over the past 12 months. Membership accounts in Colombia increased 18,395 on improving renewal rates and continued new membership sign-ups, mostly associated with the Chia warehouse club. The Company’s twelve-month renewal rate for the period ended November 30, 2017 was 85%, which is the same as the rate for the twelve-month period ended August 31, 2017. Excluding Colombia, the twelve-month renewal rate was 87% as of November 30, 2017.



	Three Months Ended
	November 30,								November 30,
	2021								2020
	Amount		Increase from prior year		% Change		Membership ‎income % to ‎net merchandise ‎club sales		Amount
Membership income - Central America	$	8,776	$	901	11.4	%	1.6	%	$	7,875
Membership income - Caribbean		3,973		262	7.1		1.5			3,711
Membership income - Colombia		2,042		329	19.2		1.8			1,713
Membership income - Total	$	14,791	$	1,492	11.2	%	1.6	%	$	13,299

Number of accounts - Central America		917,929		78,542	9.4	%				839,387
Number of accounts - Caribbean		432,144		4,273	1.0					427,871
Number of accounts - Colombia		341,412		27,252	8.7					314,160
Number of accounts - Total		1,691,485		110,067	7.0	%				1,581,418

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~~Results of Operations~~

Three Months Ended
Results of Operations Consolidated

November 30, 2017

November 30, 2016

Increase/(Decrease)

(Amounts in thousands, except percentages and
number of warehouse clubs)

Net warehouse club sales

Net warehouse club sales

$
745,401

$
716,079

$
29,322

Warehouse club sales gross margin

$
108,165

$
107,589

$
576

Warehouse club gross margin percentage

14.5
%

15.0
%

(0.5)
%

Revenues

Total revenues

$
767,072

$
739,572

$
27,500

Percentage change from comparable period

3.7
%

Comparable warehouse club sales

Total comparable warehouse club sales increase (decrease)

2.2
%

—
%

2.2
%

Gross margin

Total gross margin

$
122,087

$
120,901

$
1,186

Gross margin percentage to total revenues

15.9
%

16.3
%

(0.4)
%

Selling, general and administrative

Selling, general and administrative

$
88,921

$
82,522

$
6,399

Selling, general and administrative percentage of total revenues

11.6
%

11.2
%

0.4
%

Operating income- by segment

Operating income - Central America

$
31,942

$
33,504

$
(1,562)

Operating income - Caribbean

$
11,470

$
12,214

$
(744)

Operating income - Colombia

$
2,145

$
913

$
1,232

Operating Income - United States

$
3,739

$
7,597

$
(3,858)

Reconciling Items (1)

$
(16,130)

$
(15,849)

$
(281)

Operating income - Total

$
33,166

$
38,379

$
(5,213)

Operating income as a percentage of total revenues

4.3
%

5.2
%

(0.9)
%

Warehouse clubs

Warehouse clubs at period end

40

39

1

Warehouse club square feet at period end (2)

1,998

1,940

58

⁽¹⁾

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.

⁽²⁾

~~Warehouse club square feet at period end has been updated to reflect sales floor square feet vs. total building square feet to align with industry standards.~~

Comparison of Three Months Ended November 30, ~~2017~~2021 and ~~2016~~November 30, 2020

OnThe number of Member accounts as of November 30, 2021 was 7.0% higher than the prior year period. Membership income increased 11.2% over the three-month period ended November 30, 2021, compared to the prior-year period.

Membership income increased across all of our operating segments in the three months ended November 30, 2021. The consolidated increase in membership income is due to an increasing membership base since the start of fiscal year 2021. Since August 31, 2021, all segments have increased their membership base. Central America had the largest increase in membership in the first three months of fiscal year 2022, with 9.4% growth, due primarily to the opening of our fifth club in Guatemala in November 2021, followed by Colombia with an 8.7% increase due primarily to the opening of our ninth club in that country and the Caribbean with a ~~consolidated basis, warehouse club gross margins~~1.0% increase.

Table of Contents

We now offer the 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 ~~percent~~reduction on net merchandise sales at the time of ~~net warehouse~~the sales ~~were generally~~transaction. Platinum Membership accounts are 6.5% of our total membership base as of November 30, 2021, an increase from 5.3% as of November 30, 2020. Platinum Members tend to have higher renewal rates than our Diamond Members.

Our trailing twelve-month renewal rate was 89.0% and 81.9% for the periods ended November 30, 2021 and November 30, 2020, respectively. The COVID-19 pandemic caused a decrease in ~~line with the past three fiscal quarters at 14.5%, although 51 basis points (0.51%) below~~in-club traffic in the first quarter of fiscal year ~~2017 which~~2021, resulting in fewer in-club visits and thus fewer renewals as most of our renewals occur in the warehouse club. However, approximately 15% and 11% of our membership sign-ups were completed using our online platform for the three-month periods ended November 30, 2021 and November 30, 2020, respectively. Our online platform facilitates capturing data and provides the opportunity for automatic renewal of memberships, as well as improving our digital connection with our Members.

Other Revenue

Other revenue primarily consists of non-merchandise revenue from freight and handling fees generated from the marketplace and casillero operations we sold in October 2021, interest-generating portfolio from our co-branded credit cards, and rental income from operating leases where the Company is the lessor.


	Three Months Ended
	November 30, 2021						November 30, 2020
	Amount		Increase (decrease) from ‎prior year		% Change		Amount
Non-merchandise revenue	$	3,307	$	(9,348)	(73.9)	%	$	12,655
Miscellaneous income		2,046		549	36.7			1,497
Rental income		635		(96)	(13.1)			731
Other revenue	$	5,988	$	(8,895)	(59.8)	%	$	14,883

Comparison of Three Months Ended November 30, 2021 and November 30, 2020

The primary driver of the decrease in other revenue for the quarter is due to the sale of our Aeropost subsidiary and its marketplace and casillero operations on October 1, 2021. For additional information on the results of the disposition, refer to “Item 1. Financial Statements: Notes to Consolidated Financial Statements, Note 2 – Summary of Significant Accounting Policies.”

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Results of Operations



	Three Months Ended
Results of Operations Consolidated		November 30, 2021			November 30, 2020			Increase/(Decrease)
(Amounts in thousands, except percentages and ‎number of warehouse clubs)
Net merchandise sales
Net merchandise sales	$	944,043		$	838,369		$	105,674
Total gross margin	$	150,850		$	134,750		$	16,100
Total gross margin percentage		16.0	%		16.1	%		(0.1)	%

Revenues
Total revenues	$	975,356		$	877,432		$	97,924
Percentage change from prior period								11.2	%

Comparable net merchandise sales
Total comparable net merchandise sales increase		9.4	%		3.6	%		5.8	%

Total revenue margin
Total revenue margin	$	170,287		$	157,556		$	12,731
Total revenue margin percentage		17.4	%		18.0	%		(0.6)	%

Selling, general and administrative
Selling, general and administrative	$	124,270		$	113,025		$	11,245
Selling, general and administrative percentage of total revenues		12.7	%		12.9	%		(0.2)	%

Warehouse clubs
Warehouse clubs at period end		49			46			3
Warehouse club sales square feet at period end		2,424			2,267			157


	Three Months Ended
		November 30,	% of			November 30,	% of
Results of Operations Consolidated		2021	Total Revenue			2020	Total Revenue
Operating income- by segment
Central America	$	43,379	4.4	%	$	34,445	3.9	%
Caribbean		19,878	2.0			21,594	2.5
Colombia		6,378	0.7			5,565	0.6
United States		6,257	0.7			5,742	0.7
Reconciling Items ⁽¹⁾		(29,875)	(3.1)			(22,815)	(2.6)
Operating income - Total	$	46,017	4.7	%	$	44,531	5.1	%

⁽¹⁾The reconciling items reflect the amount eliminated upon consolidation of intersegment transactions.

Table of Contents

The following table summarizes the selling, general and administrative expense for the periods disclosed.


	Three Months Ended
		November 30,	% of			November 30,	% of
		2021	Total Revenue			2020	Total Revenue
Warehouse club and other operations	$	91,196	9.4	%	$	84,832	9.7	%
General and administrative		31,693	3.2			27,521	3.1
Pre-opening expenses		970	0.1			602	0.1
Loss on disposal of assets		411	—			70	—
Total Selling, general and administrative	$	124,270	12.7	%	$	113,025	12.9	%

Comparison of Three Months Ended November 30, 2021 and November 30, 2020 —

Total gross margin is derived from our Revenue – Net merchandise sales less our Cost of goods sold – Net merchandise sales and represents our sales and cost of sales generated from the business activities of our warehouse clubs. We express our Total gross margin percentage as a percentage of our Net merchandise sales.

On a consolidated basis, total gross margin for the three months ended November 30, 2021 was ~~unusually high at 15.0%. Exit~~16.0%, 10 basis points (0.1%) lower than the comparable prior year period. The primary driver of the decrease for the quarter was a decrease in sales in Trinidad, where our gross margins have recently been higher because of the foreign currency exchange premium we include in prices we charge there due to increased costs of conversion of Trinidad dollars to U.S. dollars and risks associated with continued illiquidity of the Trinidad dollar. Trinidad sales were adversely affected by our ~~leased distribution facility~~measured approach to rebalance our merchandise mix following the reopening of the economy from the pandemic restrictions, and we generally continue to manage our imports to be in ~~Miami~~line with the amounts of U.S. dollars we expect to source in Trinidad.

Total revenue margin is derived from Total revenues, which includes our Net merchandise sales, Membership income, Export sales, and Other revenue and income less our Cost of goods sold for net merchandise ~~labeling activity reduced consolidated margins by 8~~sales, Export sales, and Non-merchandise revenues. We express our Total revenue margin as percentage of Total revenues.

Total revenue margin decreased 60 basis points (0.6%) for the three months ended November 30, 2021 compared to ~~a year ago,~~the prior-year period, which is primarily the result of lower revenue margins from our casillero and ~~warehouse club margins were lower in the Central America and Caribbean segments by 31~~marketplace business of 50 basis points ~~(0.31%~~(0.5%) ~~and 26~~along with the lower total gross margins of 10 basis points ~~(0.26%), respectively, largely from pricing actions to drive sales. Colombia’s margins increased 62 basis points (0.62%~~(0.1%).

Selling, general, and administrative expenses consist of warehouse club and other operations, general and administrative expenses, pre-opening expenses, and ~~loss/(gain)~~loss on disposal of assets. In total, selling, general and administrative expenses increased ~~$6.4~~$11.2 million ~~to 11.6% of sales~~ compared to ~~11.2%~~the prior year but decreased as a percentage of total revenue, declining 20 basis points (0.2%) to 12.7% of total revenue compared to 12.9% of total revenues for the first quarter of fiscal year 2021.

Warehouse club and other operations expenses decreased to 9.4% of total revenues for the first quarter of fiscal year 2022 compared to 9.7% for the first quarter of fiscal year 2021 primarily due to 40 basis points (0.40%) of lower operations expenses from our casillero and marketplace business due to the sale of Aeropost on October 1, 2021. This decrease was partially offset by 10 basis points (0.10%) from the new clubs in Colombia and Guatemala that had not reached sales maturity as of November 30, 2021.

General and administrative expenses increased to 3.2% of total revenues for the current quarter compared to 3.1% for the first quarter of fiscal year 2021. The 10 basis point (0.1%) increase is primarily due to a 20 basis point (0.2%) increase from our continued investments to support our technology development, talent acquisition, and employee development offset by a 10 basis point (0.1%) decrease from the reduction in general and administrative expenses due to the sale of Aeropost. Given our strategic initiatives, we anticipate that we will continue to make investments at comparable levels (as a percentage of revenue) to further our omni-channel, technology and employee development initiatives.

Operating income in the first quarter of fiscal year ~~2017. Warehouse club operations expense was 9.3%~~2022 increased to $46.0 million (4.7% of ~~sales compared 9.1% a year ago. The added cost of the new warehouse club in Santa Ana, Costa Rica added~~

~~Table of Contents~~

approximately 10 basis points, and hurricane-related costs, including support payments made to our employees in our St. Thomas, USVI club added another 5 basis points. Colombia continued to see a positive trend with a 46 basis point (0.46%) improvement in warehouse club operations expense as a percent of salestotal revenue) compared to ~~same three months in fiscal year 2017. General and administrative expenses grew 12.1% from the first quarter~~$44.5 million (5.1% of fiscal year 2017 and 4% sequentially from the prior quarter. The Company continues to grow our buying staff and is now increasingly investing in efforts to evaluate and develop technologies to create a seamless omni-channel experience for our members in the future with expected $3.0 million to $5.0 million spending for the current fiscal year, of which, $735,000 was spent in the first quarter. Expenses incurred before a warehouse club is in operation are captured in pre-opening expenses and during the first three months of fiscal year 2018 included preopening expenses for Santa Ana, Costa Rica. Preopening expenses for the same three months of fiscal year 2017 included the preopening expenses for Chia, Colombia.

~~Operating income decreased to $33.2 million for the three months ended November 30, 2017 compared to $38.4 million~~total revenue) for the same period last ~~year on lower merchandise margins as a percent~~year.

Table of sales and higher expenses particularly those related to the addition of a new warehouse club and increased corporate-level general and administrative expenses. Higher net warehouse sales and membership income and increased warehouse club gross margins resulted in a $1.2 million increase in operating profit in Colombia compared to a year ago, while operating profit decreased in other segments on lower merchandise margins, along with new club expenses (Central America), hurricane related costs (Caribbean) and higher corporate spending (United States). Operating profit was also adversely impacted by exit costs associated with our leased facility in Miami (which were recorded to warehouse club costs of goods sold) and a higher level of merchandise labeling activity due to the volume of shipments flowing through Miami to support the upcoming holiday season. Contents

Interest Expense

Three Months Ended

November 30,

November 30,

2017

2016

Amount

Increase/
(decrease)
from prior
year

Amount
Interest expense on loans

$
1,191

$
(228)

$
1,419
Interest expense related to hedging activity

322

(101)

423
Less: Capitalized interest

258

70

188
Net interest expense

$
1,255

$
(399)

$
1,654

~~Comparison of Three Months Ended November 30, 2017 and 2016~~

~~Interest~~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, warehouse club expansions and distribution centers, ~~warehouse club and distribution center expansions,~~ the capital requirements of warehouse club and other operations and ongoing working capital requirements.

~~Interest expense on loans decreased year-on-year. An increase year-on-year in long-term debt~~


	Three Months Ended
	November 30,				November 30,
	2021				2020
	Amount		Change		Amount
Interest expense on loans	$	1,335	$	(390)	$	1,725
Interest expense related to hedging activity		850		(75)		925
Less: Capitalized interest		(595)		22		(617)
Net interest expense	$	1,590	$	(443)	$	2,033

Comparison of ~~approximately $14.1 million, primarily to finance the acquisition of the distribution center in Miami, Florida~~Three Months Ended November 30, 2021 and ~~an additional loan within our Trinidad subsidiary as part efforts to improve liquidity, were offset by decreases in the payments on various loans held by our subsidiaries. Additionally,~~November 30, 2020

Net interest expense ~~related~~decreased for the three-month period ended November 30, 2021 primarily due to ~~hedging activity decreased~~lower short-term borrowings compared to the comparable prior year period. We drew down on short-term lines of credit in the first quarter of fiscal year ~~2018 compared~~2021 as a part of our efforts to ~~the first quarter of fiscal year 2017 due~~secure adequate cash to the pay-off of the various loans held by our subsidiaries that were hedged. Additionally, an increase in capitalized interest in the first quarter of fiscal year 2018 compared to the first quarter of fiscal year 2017 resultedcover contingencies arising from ~~higher levels of construction activities.~~ COVID-19 related risks.

~~Table of Contents~~

Other Income (Expense), ~~net~~Net

Other income (expense), net, consists of currency ~~gain~~gains or ~~loss.~~losses, as well as net benefit costs related to our defined benefit plans and other items considered to be non-operating in nature.



	Three Months Ended
	November 30,						November 30,
	2021						2020
	Amount		Increase from prior year		% Change		Amount
Other income (expense), net	$	1,409	$	2,954	191.2	%	$	(1,545)

Three Months Ended

November 30,

November 30,

2017

2016

Amount

Increase
from
prior year

%Change

Amount
Other income (expense), net

$
278

$
1,206

130.0
%

$
(928)

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 ~~gains~~ gains/(losses), are recorded as currency gains or losses.

~~Receipts~~ Additionally, gains or losses from ~~insurance reimbursements up to~~transactions denominated in currencies other than the ~~amount~~functional currency of the losses recognized are considered recoveries. These recoveries are accounted for when they are probable of receipt. Insurance recoveries are not recognized prior to the recognition of the related cost. Anticipated proceeds in excess of the amount of loss recognized are consideredrespective entity also generate currency gains and are subject to gain contingency guidance. Anticipated proceeds in excess of a loss recognized in the financial statements are not recognized until all contingencies related to the insurance claim are resolved.or losses.

Comparison of Three Months Ended November 30, ~~2017~~2021 and ~~2016~~2020

For the ~~three-month period, we had~~three-months ended November 30, 2021 the primary driver of Other income (expense), net included a ~~net~~ gain of $2.7 million associated with the sale of our Aeropost subsidiary on October 1, 2021. This gain was partially offset by a $1.9 million loss associated with foreign currency ~~transactions. These~~transactions and the revaluation of monetary assets and liabilities in several of our markets. The foreign currency gains and losses resulted from the revaluation of net U.S. dollar assets and liabilities in markets where the local functional currency revalued or devalued against the U.S. dollar and from exchange ~~transactions, net of any exchange reserve movements. In particular, in Costa Rica and~~transactions.

The primary foreign currency impacts during the ~~Dominican Republic, we experienced strengthening of the local currencies relative to the U.S. Dollar. These benefits~~quarter were ~~offset in part by~~ higher transaction costs ~~we continue to incur~~ associated with converting Trinidad dollars into available tradeable currencies such as Euros or Canadian dollars before converting them to U.S. dollars. ~~For so long as~~Additionally, the devaluation of the Colombian Peso resulted in a loss recognized on our net U.S. dollar liability position in that ~~situation continues~~market. These losses were partially offset by a devaluation of the Jamaican dollar, which resulted in ~~Trinidad, we plan to take~~a gain recognized on our U.S. dollar asset position in that additional cost into consideration in our pricing model and will limit our shipments from the U.S. to Trinidad to levels that generally align with our Trinidad subsidiary’s ability to pay for the merchandise in U.S. dollars. market.

Table of Contents

Provision for Income Taxes


	Three Months Ended
	November 30,					November 30,
	2021					2020
	Amount			Increase from prior year		Amount
Provision for income taxes	$	15,814		$	2,196	$	13,618
Effective tax rate		34.1	%				32.9	%

Three Months Ended

November 30,

November 30,

2017

2016

Amount

Increase/
(decrease)
from
prior year

Amount
Current tax expense

$
10,464

$
11

$
10,453

Net deferred tax provision (benefit)

(349)

(1,333)

984

Provision for income taxes

$
10,115

$
(1,322)

$
11,437

Effective tax rate

31.0
%

31.5
%

~~Table of Contents~~

Comparison of Three ~~Months~~ Ended November 30, ~~2017~~2021 and ~~2016~~November 30, 2020

For the three months ended November 30, ~~2017,~~2021, the effective tax rate was ~~31.0%.~~34.1% compared to 32.9% for the prior year period. The ~~decrease~~increase in the effective tax rate versus the prior year was primarily attributable to the following factors:

An intercompany transaction between PriceSmart, Inc. and our Colombian subsidiary in support of PriceSmart’s ongoing market development and growth in Colombia resulted in a favorable year-on-year impact on the effective tax rate of 0.8% due to the reductions to taxable income in the U.S. and a resulting increase in taxable income in our Colombia subsidiary. This income did not generate income tax expense in Colombia because the additional taxable income in Colombia was fully offset by the reversal of valuation allowances on accumulated net losses in that subsidiary. We expect that the favorable impact of this transaction on the consolidated Company’s effective tax rate will decrease over the next several quarters.

The comparably favorable impact of 0.3% resulting from improved financial results in the Company’s Colombia subsidiary for which no tax benefit was recognized, net of adjustment to valuation allowance; and

~~The unfavorable impact of 0.7% in the current period from the effect of changes in foreign currency value.~~

A comparably favorable benefit from recurring items of 0.5%, primarily resulting from valuation allowances we took with respect to deferred tax assets from foreign tax credits that are no longer deemed recoverable; and

A comparably unfavorable net tax impact from non-recurring items of 1.7%, primarily related to changes in uncertain tax positions.

Other Comprehensive Income (Loss)


	Three Months Ended
	November 30,						November 30,
	2021						2020
	Amount		Change		% Change		Amount
Other comprehensive income (loss)	$	(6,131)	$	(9,293)	(293.9)	%	$	3,162

Three Months Ended

November 30,

November 30,

2017

2016

Amount

Increase
from
prior year

% Change

Amount
Other comprehensive income (loss)

$
(1,409)

$
8,972

(86.4)
%

$
(10,381)

Comparison of Three Months Ended November 30, ~~2017~~2021 and ~~2016~~November 30, 2020

Our other comprehensive loss of approximately ~~$1.4~~$6.1 million for the first quarter of fiscal year ~~2018~~2022 resulted primarily from the comprehensive loss of approximately ~~$2.2~~$8.1 million from foreign currency translation adjustments related to assets and liabilities and the translation of revenue, costs and expenses on the statements of income of our subsidiaries whose functional currency is not the U.S. dollar, offset by ~~comprehensive income of~~ approximately ~~$587,000~~$2.0 million related to unrealized gains on changes in our derivative obligations. ~~When~~For the ~~functional currency in our international subsidiaries is~~first quarter of fiscal year 2022, the ~~local currency~~Colombia Peso, Costa Rica Colón and ~~not U.S. dollars, the assets and liabilities of such subsidiaries are translated to U.S. dollars at the~~Jamaican Dollar exchange rate onwith the ~~balance sheet date, and revenue, costs and expenses are translated at average rates~~U.S. Dollar declined significantly.

Table of exchange in effect during the period. The corresponding translation differences 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. Contents

LIQUIDITY AND CAPITAL RESOURCES

Financial Position and Cash Flow

Our operations have historically supplied us with a significant source of liquidity. We ~~require~~generate cash from operations primarily through net merchandise sales and membership fees. Cash used in operations generally consist of payments to our merchandise vendors, warehouse club and distribution center operating costs (including payroll, employee benefits and utilities), as well as payments for income taxes. Our cash flows provided by operating activities, supplemented with our long-term debt and short-term borrowings, have generally been sufficient to fund our ~~operating expenses and working capital requirements, including investments~~operations while allowing us to invest in ~~merchandise inventories, acquisition~~activities that support the long-term growth of land and construction of new warehouse clubs and distribution centers, expansion of existing warehouse clubs and distribution centers, acquisitions of fixtures and equipment, routine upgrades and maintenance of fixtures and equipment within existing warehouse clubs, investments in joint ventures in Panama and Costa Rica to own and operate commercial retail centers located adjacent to the new warehouse clubs, the purchase of treasury stock upon the vesting of restricted stock awards and payment of dividends to stockholders. Our primary sources for funding these requirements are cash and cash equivalents on hand, cash generated fromour operations and ~~bank borrowings.~~to pay dividends on our common stock. We evaluate our funding requirements on a regular basis ~~whether we may need to borrow additional funds~~ to cover any shortfall in our ability to generate sufficient cash from operations to meet our ~~operating and~~ capital requirements. We may ~~obtain additional loans and/or credit facilities~~consider funding alternatives to provide additional liquidity ~~when~~if necessary. Refer to “Item 1. Financial Statements: Notes to Consolidated Financial Statements, Note 7 - Debt” for additional information regarding our available short-term facilities, short-term and long-term borrowings, and any repayments.

~~Table of Contents~~

~~The following table summarizes the cash and cash equivalents held by our foreign subsidiaries and domestically (in thousands).~~ Repatriation of cash and cash equivalents held by foreign subsidiaries may require us to accrue and pay taxes. We have no plans at this time to repatriate cash through the payment of cash dividends by our foreign subsidiaries to our domestic operations and, therefore, have not accrued taxes that would be due from repatriation.

The following table summarizes the cash and cash equivalents, including restricted cash, held by our foreign subsidiaries and domestically (in thousands).

November 30,

August 31,

2017

2017
Cash and cash equivalents held by foreign subsidiaries

$
130,648

$
139,270
Cash and cash equivalents held domestically

1,894

26,442
Total cash and cash equivalents

$
132,542

$
165,712



	November 30,		August 31,
	2021		2021
Amounts held by foreign subsidiaries	$	174,429	$	160,808
Amounts held domestically		18,171		54,671
Total cash and cash equivalents, including restricted cash	$	192,600	$	215,479

The following table summarizes the short-term investments held by our foreign subsidiaries and domestically (in thousands).


	November 30,		August 31,
	2021		2021
Amounts held by foreign subsidiaries	$	39,201	$	50,233
Amounts held domestically		—		—
Total short-term investments	$	39,201	$	50,233

As of November 30, 2021 and August 31, 2021, certificates of deposit with a maturity of over one year held by our foreign subsidiaries and domestically were $0 and $1.5 million, respectively.

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 ~~warehouse~~merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products ~~increasing~~or otherwise fund our ~~foreign exchange exposure to any devaluation of local currency relative to the U.S. dollar. During~~operations. Since fiscal ~~year~~ 2017, ~~and continuing into the first three months of fiscal year 2018,~~ we have experienced this situation in ~~Trinidad. We are working with our banks in~~ Trinidad ~~to source tradable currencies (including Euros~~ and Canadian dollars), but until the central bank in Trinidad makes more U.S. dollars available, this illiquidity condition is likely to continue. During part of the first half of fiscal year 2017, we limited shipments of merchandise to Trinidad from our distribution center in Miami to levels that generally aligned with our Trinidad subsidiary’s ability to source U.S. dollars to pay for that merchandise. This resulted in a reduced level of shipments, which negatively affected sales in the second quarter, particularly December 2016, although by less than our initial estimate. These actions did not impact the level of merchandise we obtain locally in Trinidad. Starting in the third quarter of fiscal year 2017, we were able to improve our sourcing of tradeable currencies, which, in addition to other steps we took, allowed for a more normalized flow of imported merchandise during the third and fourth fiscal quarters. Over the past three months, however, we have been unable to source a sufficient level of tradeable ~~currencies~~currencies. We are working with our banks in Trinidad ~~consistent with~~and government officials to source tradeable currencies. We expect the ~~level~~illiquid market conditions in Trinidad to continue and are considering various measures to address the adverse effect of ~~merchandise we were importing for~~this situation on the ~~holiday shopping season. As of November 30, 2017,~~Company’s liquidity. In addition, our ~~Trinidad~~Barbados subsidiary ~~had net~~recently began facing a similar U.S. dollar ~~denominated liability exposures~~liquidity situation. Refer to “Management’s Discussion & Analysis – Factors Affecting Our Business” for our quantitative analysis and discussion.

Table of approximately $12.1 million, an increase of $16.1 million from August 31, 2017 when our Trinidad subsidiary had a net U.S. dollar denominated asset position of approximately $4.0 million. We are carefully monitoring the situation, which may require us to limit future shipments from the U.S. to Trinidad in line with our ability to exchange Trinidad dollars for tradeable currencies to manage our exposure to any potential devaluation. Contents

Our cash flows are summarized as follows (in thousands):

Three Months Ended

November 30,

November 30,

2017

2016
Net cash provided by (used in) operating activities

$
(10,163)

$
2,115
Net cash provided by (used in) investing activities

(19,732)

(17,365)
Net cash provided by (used in) financing activities

(5,296)

(7,162)
Effect of exchange rates

2,021

(1,650)
Net increase (decrease) in cash and cash equivalents

$
(33,170)

$
(24,062)


	Three Months Ended
	November 30,		November 30,
	2021		2020		Change
Net cash used in operating activities	$	(13,339)	$	(17,773)	$	4,434
Net cash used in investing activities		(12,050)		(50,310)		38,260
Net cash provided by (used in) financing activities		1,198		(22,198)		23,396
Effect of exchange rates		1,312		(1,095)		2,407
Net increase in cash and cash equivalents	$	(22,879)	$	(91,376)	$	68,497

~~Table of Contents~~

~~Our net~~Net cash ~~provided by (used in)~~used in operating activities ~~for the three months ended November 30, 2017~~totaled $13.3 million and ~~2016 is summarized below:~~

Three Months Ended

Increase/

November 30,

November 30,

(Decrease)

2017

2016

2017 to 2016
Net income

$
22,490

$
24,869

$
(2,379)
Adjustments to reconcile net income to net cash provided from (used in) operating activities:

Depreciation and amortization

12,237

11,117

1,120
(Gain) loss on sale of property and equipment

159

407

(248)
Deferred income taxes

(349)

984

(1,333)
Stock-based compensation expenses

2,461

2,442

19
Other non-cash operating activities

(16)

—

(16)
Net non-cash related expenses

$
14,492

$
14,950

$
(458)
Net income from operating activities reconciled for non-cash operating activities

36,982

39,819

(2,837)
Changes in operating assets and liabilities not including merchandise inventories

14,322

6,378

7,944
Changes in merchandise inventories

(61,467)

(44,082)

(17,385)
Net cash provided by (used in) operating activities

$
(10,163)

$
2,115

$
(12,278)

~~Net income from operating activities reconciled for non-cash operating activities decreased approximately $2.8~~$17.8 million for the three months ended November 30, ~~2017 over the same period last year, resulting from a year-on-year~~2021 and November 30, 2020, respectively. The decrease in net ~~income~~cash used is primarily a result of ~~approximately $2.4 million~~the increase in profits during the ~~first~~ quarter ~~of fiscal year 2018~~when compared to the ~~first quarter of fiscal~~prior year, ~~2017~~with changes in operating assets and ~~a decrease in deferred income taxes of $1.3~~liabilities largely offsetting each other. However, inventory was $500.8 million quarter-over quarter, due to the improved financial results in the Company’s Colombia subsidiary for which no tax benefit was recognized. These decreases were offset by an increase in depreciation expense of approximately $1.1 million in the first quarter of fiscal year 2018 compared to the first quarter of fiscal year 2017 due to new warehouse club construction and the continued ongoing capital improvements to existing warehouse clubs. In addition to the decrease in net income from operating activities reconciled for non-cash operating activities there was a net cash usage of $9.4 million primarily related to a higher growth in merchandise inventories during the current three month period compared to the same period a year ago. The Company partially offset this increased inventory with an increase in accounts payable as of November 30, ~~2017~~2021, compared towith $389.7 million and $373.2 million at August 31, 2021 and November 30, ~~2016~~2020, respectively. The increase over the balances as of ~~approximately $8.5 million.~~ November 30, 2021 reflects our efforts to bring our inventory levels in-line with our sales trends. In addition, we have made strategic investments in inventory to avoid future out-of-stocks on high volume items that have been impacted from container, commodity, and electronic part shortages. Lastly, we have two additional clubs in the current year.

~~Our use of~~Net cash used in investing activities totaled $12.1 million and $50.3 million for the three months ended November 30, ~~2017~~2021 and ~~2016~~November 30, 2020. The decrease is ~~summarized below:~~primarily the result of a decrease in purchases of certificates of deposits compared to the same three-month period a year-ago, primarily due to the significant improvement (decrease) in our balance of Trinidad dollars on hand. Refer to “Management’s Discussion and Analysis – Factors Affecting Our Business” for additional discussion of the current U.S. dollar illiquidity we are experiencing in that market.

Three Months Ended

Increase/

November 30,

November 30,

(Decrease)

2017

2016

2017 to 2016
Cash used for additions of property and equipment:

Deposits for land purchase option agreements

$
—

$
500

$
(500)
Warehouse club and distribution center expansion, construction and land improvements

6,283

1,189

5,094
Acquisition of fixtures and equipment

13,469

15,784

(2,315)
Proceeds from disposals of property and equipment

(20)

(108)

88
Net cash flows used by (provided in) investing activities

$
19,732

$
17,365

$
2,367

Net cash provided by financing activities totaled $1.2 million and net cash used in ~~investing~~financing activities ~~increased in the first three months of fiscal year 2018 compared to the first three months of fiscal year 2017 by approximately $2.4 million. This~~ was primarily due to an increase in cash expenditures for construction activities for a warehouse club in Santa Ana, Costa Rica that opened in September 2017 and construction activities for a warehouse club in ~~Santo Domingo~~, Dominican Republic that is anticipated to open in the spring of 2018. Continued investments in warehouse club expansion activities related to warehouse expansions in Guatemala, Honduras, El Salvador, Trinidad and Jamaica during the first three months of fiscal year 2018 also increased period-over-period investing activities.

~~As of November 30, 2017, we had commitments for capital expenditures for new warehouse club construction for approximately $7.9~~$22.2 million related to our building of a warehouse club in Santo Domingo, Dominican Republic. We expect to spend between $125.0 million and $140.0 million in capital expenditures for ongoing replacement of equipment, building/leasehold improvements, expansion projects on existing warehouse clubs and land acquisitions during fiscal year 2018. Future capital expenditures will be dependent on the timing of future land purchases and/or warehouse club construction activity.

~~Table of Contents~~

We have entered into land purchase option agreements within our subsidiaries that have not been recorded as commitments, for which we have recorded deposits of approximately $600,000. The land purchase option agreements can generally be canceled at our sole options with the deposits being fully refundable until all permits are issued. We also entered into a land lease option in one of our markets, for which no deposits have been made. We do not have a timetable of when or if we will exercise these land purchase/lease options due to the uncertainty related to the completion of our due diligence reviews. Our due diligence reviews include evaluations of the legal status of the property, the zoning and permitting issues related to acquiring approval for the construction and operation of a warehouse club and any other issues related to the property itself that could render the property unsuitable or limit the property's economic viability as a warehouse club site. If all of these purchase option agreements are exercised, the cash use for the acquisition of land would be approximately $20.8 million. We may enter into additional land purchase option agreements in the future.

In January 2017, we finalized our acquisition of a distribution center in Medley, Miami-Dade County, Florida, for a total purchase price of approximately $46.0 million, and we transferred our Miami dry distribution center activities previously located in our leased facilities to this location. This was completed during the third quarter of fiscal year 2017. The Company has terminated and intends to continue to terminate leases with respect to portions of the existing leased Miami distribution facilities or enter into sublease agreements for portions of the leased facilities.

~~Net cash (used in) provided by financing activities~~ for the three months ended November 30, ~~2017~~2021 and ~~2016~~November 30, 2020, respectively. We use cash flows provided by financing primarily 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 $23.4 million shift from cash used in, to cash provided by financing activities is ~~summarized below:~~primarily the result of higher net repayments of short-term debt compared to the same three-month period a year-ago, when we were repaying short-term facilities accessed at the early stages of the COVID-19 pandemic.

Three Months Ended

Increase/

November 30,

November 30,

(Decrease)

2017

2016

2017 to 2016
New bank loans offset by regularly scheduled payments on existing bank loans (loan activities)

$
(7,554)

$
(3,688)

$
(3,866)
New short-term bank loans, offset by payments

2,258

(3,474)

5,732
Net cash provided by (used in) financing activities

$
(5,296)

$
(7,162)

$
1,866

Net cash from long-term and short-term loan activities increased approximately $1.9 million during the first three months of fiscal year 2018 over the first three months of fiscal year 2017. This increase in cash primarily resulted from a period-over-period increase in cash from short-term loans, offset by an increase in loan payments of approximately $3.9 million primarily resulting from an early loan payment of approximately $3.0 million within our Trinidad subsidiary.

The following table summarizes the dividends declared and paid during fiscal year ~~2017. No dividends have been declared or paid during the first three months of fiscal year 2018.~~ 2021 (amounts are per share).

First Payment

Second Payment

First Payment

Second Payment

Declared

Amount

Record
Date

Date
Paid

Date
Payable

Amount

Record
Date

Date
Paid

Date
Payable

Amount

Record
‎Date

Date
‎Paid

Amount

Record
‎Date

Date
‎Paid

Amount

2/1/2017

0.70

2/15/2017

2/28/2017

N/A

0.35

8/15/2017

N/A

8/31/2017

0.35

2/4/2021

0.70

2/15/2021

2/26/2021

0.35

8/15/2021

8/31/2021

0.35

We anticipate the ongoing payment of semi-annual dividends in subsequent periods, although the actual declaration of future dividends, 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.

~~Financing Activities~~

In August 2017, the Company’s Panama subsidiary paid off its outstanding loan balance of U.S. $13.3 million under a loan agreement entered into with Scotiabank. The Company’s subsidiary also settled the interest rate swap that it had entered into with Scotiabank related to this loan.

On March 31, 2017, the Company's Trinidad subsidiary entered into a loan agreement with Citibank, N.A. The agreement provides for a U.S. $12.0 million loan to be repaid in eight quarterly principal payments plus interest. The interest rate is set at the 90 day LIBOR rate plus 3%. The loan was funded on March 31, 2017.

On January 27, 2017, the Company entered into a 10-year real estate secured loan with MUFG Union Bank, N.A. (“Union Bank”). The loan establishes a credit facility of up to 75% LTV of the acquired property at a variable interest rate of 30-day LIBOR plus 1.7% for a ten-year term, with monthly principal and interest payments, maturing in 2027. The monthly principal and interest payments begin in April 2019. An initial loan amount of $35.7 million was funded on January 27, 2017. The

~~Table of Contents~~

Company entered into an interest rate hedge on November 7, 2016 with Union Bank for $35.7 million, the notional amount. The Company will receive variable 30-day LIBOR plus 1.7% and pay fixed (3.65%), with an effective date of March 1, 2017 and maturity date of March 1, 2027.

~~Derivatives~~

We are exposed to certain risks relating to our ongoing business operations. One risk managed by us using derivative instruments is interest rate risk. To manage interest rate exposure, we enter into hedging transactions (interest rate swaps) using derivative financial instruments. The objective of entering into interest rate swaps is to eliminate the variability of cash flows in the interest payments associated with variable-rate LIBOR loans over the life of the loans. As changes in interest rates impact the future cash flow of interest payments, the hedges provide a synthetic offset to interest rate movements.

In addition, we are exposed to foreign currency and interest rate cash flow exposure related to non-functional currency long-term debt of two of our wholly owned subsidiaries. To manage foreign currency and interest rate cash flow exposure, these subsidiaries enter 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 lows attributable to interest rate and foreign exchange movements.

We are also exposed to foreign-currency exchange-rate fluctuations on U.S. dollar denominated liabilities within our international subsidiaries whose functional currency is other than the U.S. dollar. We manage these fluctuations, in part, through the use of non-deliverable forward foreign-exchange contracts that are intended to offset changes in cash flow attributable to currency exchange movements. The contracts are intended primarily to economically address exposure to U.S. dollar merchandise inventory expenditures made by our international subsidiaries whose functional currency is other than the U.S. dollar. We seek to mitigate foreign-currency exchange-rate risk with the use of these contracts and do not intend to engage in speculative transactions. Currently, these contracts do not contain any credit-risk-related contingent features. These contracts do not qualify for derivative hedge accounting. The forward currency hedges are not effective cash flow hedges because the notional amount and maturity date of the forward contract does not coincide with the accounts payable balance and due dates. The hedge ineffectiveness is measured by use of the “hypothetical derivative method,” and we record the changes in the fair value of the forward contract related to the re-measurement of the payable at spot exchange rates as exchange rate gains or losses. The implied interest rate included within the forward contract is reflected in earnings as interest expense.

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction is determined to be ineffective. There were no such amounts for the periods reported herein.

~~Table of Contents~~

~~The following table summarizes agreements for which the Company has recorded cash flow hedge accounting transactions during the three months ended November 30, 2017:~~

Subsidiary

Date
Entered
into

Derivative
Financial
Counter-
party

Derivative
Financial
Instruments

Initial
US$
Notional
Amount

Bank
US$
loan
Held
with

Floating Leg
(swap
counter-party)

Fixed Rate
for PSMT
Subsidiary

Settlement
Dates

Effective
Period of swap
PriceSmart, Inc (1)

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 - March 1, 2027
Costa Rica

28-Aug-15

Citibank, N.A. ("Citi")

Cross currency interest rate swap

$
7,500,000

Citibank, N.A.

Variable rate 3-month Libor plus 2.50%

7.65
%

28th day of August, November, February, and May beginning on November 30, 2015

August 28, 2015 -
August 28, 2020
Honduras

24-Mar-15

Citibank, N.A. ("Citi")

Cross currency interest rate swap

$
8,500,000

Citibank, N.A.

Variable rate 3-month Libor plus 3.25%

10.75
%

24th day of March, June, September, and December beginning on June 24, 2015

March 24,2015 -
March 20, 2020
El Salvador

16-Dec-14

Bank of Nova Scotia ("Scotiabank")

Interest rate swap

$
4,000,000

Bank of Nova Scotia

Variable rate 30-day Libor plus 3.5%

4.78
%

29th day of each month beginning on December 29, 2014

December 1, 2014 -
August 29, 2019
Colombia

10-Dec-14

Citibank, N.A. ("Citi")

Cross currency interest rate swap

$
15,000,000

Citibank, N.A.

Variable rate 3-month Libor plus 2.8%

8.25
%

4th day of March, June, Sept, Dec. beginning on March 4, 2015

December 4, 2014 -
December 3, 2019
Panama

9-Dec-14

Bank of Nova Scotia ("Scotiabank")

Interest rate swap

$
10,000,000

Bank of Nova Scotia

Variable rate 30-day Libor plus 3.5%

5.16
%

28th day of each month beginning December 29, 2014

November 28, 2014 -
November 29, 2019
Honduras

23-Oct-14

Citibank, N.A. ("Citi")

Cross currency interest rate swap

$
5,000,000

Citibank, N.A.

Variable rate 3-month Libor plus 3.5%

11.6
%

22nd day of January, April, July, and October beginning on January 22, 2015

Settled on
October 22, 2017
Panama

1-Aug-14

Bank of Nova Scotia ("Scotiabank")

Interest rate swap

$
5,000,000

Bank of Nova Scotia

Variable rate 30-day Libor plus 3.5%

4.89
%

21st day of each month beginning on September 22, 2014

August 21, 2014 -
August 21, 2019
Panama

22-May-14

Bank of Nova Scotia ("Scotiabank")

Interest rate swap

$
3,970,000

Bank of Nova Scotia

Variable rate 30-day Libor plus 3.5%

4.98
%

4th day of each month beginning on June 4, 2014

May 5, 2014 -
April 4, 2019

⁽¹⁾

~~The initial notional amount and fixed rate were modified effective January 2017.~~

We measure the fair value for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis during the reporting period. We have designated the interest rate swaps and cross-currency interest rate swap agreements as hedging instruments and have accounted for them under hedge accounting rules. Derivatives listed on the table above were designated as cash flow hedging instruments.

The following table summarizes the effect of the fair value of interest rate swap and cross-currency interest rate swap derivative instruments that qualify for derivative hedge accounting and its associated tax effect on accumulated other comprehensive (income) / loss (in thousands):

November 30, 2017

August 31, 2017
Derivatives designated as cash flow hedging instruments

Balance Sheet
Location

Fair
Value

Net Tax
Effect

Net
OCI

Fair
Value

Net Tax
Effect

Net
OCI
Cross-currency interest rate swaps

Other non-current assets

$
2,514

(938)

1,576

$
2,547

$
(950)

$
1,597
Interest rate swaps

Other non-current assets

764

(272)

492

—

—

—
Interest rate swaps

Other long-term liabilities

(4)

(3)

(7)

(231)

80

(151)
Cross-currency interest rate swaps

Other long-term liabilities

(342)

114

(228)

(451)

135

(316)
Net fair value of derivatives designated as hedging instruments

$
2,932

$
(1,099)

$
1,833

$
1,865

$
(735)

$
1,130

From time to time, we enter into non-deliverable forward exchange contracts. These contracts are treated for accounting purposes as fair value contracts and do not qualify for derivative hedge accounting.

~~Table of Contents~~

~~The following table summarizes these agreements as of November 30, 2017:~~

~~Subsidiary~~

~~Dates~~
~~entered into~~

~~Financial~~
~~Derivative~~
~~(Counterparty)~~

~~Derivative~~
~~Financial~~
~~Instrument~~

~~Notional~~
~~Amount~~
~~(in thousands)~~

~~Settlement~~

~~Date~~

~~Effective Period~~
~~of Forward~~

~~Colombia~~

~~Oct-17~~

~~Citibank, N.A.~~

~~Forward foreign~~
~~exchange contracts (USD)~~

~~1,000~~

~~Dec-17~~

~~October 13, 2017 -~~
~~December 6, 2017~~

~~Colombia~~

~~Oct-17~~

~~Citibank, N.A.~~

~~Forward foreign~~
~~exchange contracts (USD)~~

~~1,000~~

~~Dec-17~~

~~October 17, 2017 -~~
~~December 13, 2017~~

~~Colombia~~

~~Oct-17~~

~~Citibank, N.A.~~

~~Forward foreign~~
~~exchange contracts (USD)~~

~~1,000~~

~~Dec-17~~

~~October 18, 2017 -~~
~~December 20, 2017~~

~~Colombia~~

~~Oct-17~~

~~Citibank, N.A.~~

~~Forward foreign~~
~~exchange contracts (USD)~~

~~1,000~~

~~Dec-17~~

~~October 19, 2017 -~~
~~December 27, 2017~~

~~The following table summarizes the fair value of foreign currency forward contracts that do not qualify for derivative hedge accounting (in thousands):~~



	~~November 30, 2017~~			~~August 31, 2017~~
~~Non-deliverable forward foreign exchange contracts~~	~~Balance Sheet~~ ~~Location~~	~~Fair Value~~		~~Balance Sheet~~ ~~Location~~	~~Fair Value~~
~~Foreign currency forward contracts~~	~~Other current assets~~	$	71	~~Other current assets~~	$	—
~~Foreign currency forward contracts~~	~~Other accrued expenses~~		—	~~Other accrued expenses~~		—
~~Net fair value of non-deliverable forward foreign exchange contracts designated as hedging instruments that do not qualify for hedge accounting(1)~~		$	71		$	—

⁽¹⁾

Short-Term Borrowings and Long-Term Debt

~~Short-term~~Our financing strategy is to ensure liquidity and access to capital markets while minimizing our borrowing costs. The proceeds of these borrowings ~~consist~~were or will be used for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, acquisitions, and repayment of ~~lines of credit that are secured by certain assets of the Company~~existing debt. Please refer to “Item 1. Financial Statements: Notes to Consolidated Financial Statements, Note 7 – Debt.”

Derivatives

Please refer to “Item 1. Financial Statements: Notes to Consolidated Financial Statements, Note 8 – Derivative Instruments and ~~its subsidiaries, which, in some cases, are guaranteed by the Company. The following table summarizes the balances of total facilities, facilities used and facilities available (in thousands):~~Hedging Activities” for further discussion.

As of November 30, 2017 and August 31, 2017, the Company had approximately $40.0 million of short-term facilities in the U.S. that require compliance with certain quarterly financial covenants. As of November 30, 2017 and August 31, 2017, the Company was in compliance with respect to these covenants. Each of the facilities expires annually and is normally renewed.

~~Table of Contents~~

~~The following table provides the changes in our long-term debt for the three months ended November 30, 2017:~~

⁽¹⁾

~~The carrying amount of non-cash assets assigned as collateral for these loans was $128.4 million. No cash assets were assigned as collateral for these loans.~~

⁽²⁾

~~These foreign currency translation adjustments are recorded within Other comprehensive income.~~

⁽³⁾

~~The carrying amount of non-cash assets assigned as collateral for these loans was $121.0 million. No cash assets were assigned as collateral for these loans.~~

As of November 30, 2017, the Company had approximately $82.8 million of long-term loans in the U.S., Trinidad, Panama, El Salvador, Honduras, Costa Rica, Barbados and Colombia that require compliance with certain annual or quarterly financial covenants, which include debt service and leverage ratios. As of November 30, 2017, the Company was in compliance with all covenants or amended covenants.

As of August 31, 2017, the Company had approximately $85.6 million of long-term loans in Trinidad, Panama, El Salvador, Honduras, Costa Rica, Barbados and Colombia that require these subsidiaries to comply with certain annual or quarterly financial covenants, which include debt service and leverage ratios. As of August 31, 2017, the Company was in compliance with all covenants or amended covenants.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have had, or are reasonably likely to have, a material current or future effect on its financial condition or consolidated financial statements.

Table of Contents

Repurchase of Equity Securities and Reissuance of Treasury Shares

At the vesting dates for restricted stock awards to our employees, we repurchase a portion of the shares that have vested at the prior day's closing price per share ~~with~~and apply the ~~funds used~~proceeds to pay the employees' minimum statutory tax withholding requirements related to the vesting of restricted stock awards. The Company expects to continue this practice going forward. We do not currently have a stock repurchase program.

Shares of common stock repurchased by us are recorded at cost as treasury stock and result in the reduction of stockholders’ equity in our ~~Consolidated Balance Sheets.~~consolidated balance sheets. We may reissue these treasury ~~shares. When treasury~~ shares ~~are reissued, we use~~in the first in/first out (“FIFO”) cost method for determining cost of the reissued shares. If the issuance price is higher than the cost, the excess of the issuance price over the cost is credited to additional paid-in capital (“APIC”). If the issuance price is lower than the cost, the difference is first charged against any credit balance in APIC from treasury stock and the balance is charged to retained earnings.future.

~~We did not repurchase any shares during the first three months of fiscal years 2017 and 2016.~~

Three Months Ended

November 30,

November 30,

2017

2016
Shares repurchased

—

—
Cost of repurchase of shares (in thousands)

$
—

$
—

We have reissued treasury shares as part of our stock-based compensation programs. ~~However,~~During the three-months ended November 30, 2021, we ~~did not reissue any~~ reissued approximately 9,000 treasury ~~shares during the first three months of fiscal years 2018 and 2017.~~shares.

4748

Table of Contents

Critical Accounting Estimates

The preparation of our consolidated financial statements requires that management make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of our accounting policies require management to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Management continues to review its accounting policies and evaluate its estimates, including those related to 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.

Income ~~Taxes:~~ ~~We account for~~Taxes

For interim reporting, we estimate an annual effective tax rate (AETR) pursuant to ASC 740-270 to calculate income ~~taxes using the asset and liability method. Under the asset and liability method, deferred~~ tax ~~assets and liabilities are recognized for the future~~expense. Our income 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. As of November 30, 2017, we evaluated ourexpense, deferred tax assets and liabilities, and ~~determined that a valuation allowance was necessary~~liabilities for ~~certain~~unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the consolidated income tax expense. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax ~~asset balances, primarily because~~assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the ~~existence~~results of discontinued operations and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant ~~negative~~judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence ~~such as the fact~~ that ~~certain subsidiaries are in a cumulative loss position for the past~~historical results provide, we consider three years ~~indicating that certain net~~of cumulative operating ~~loss carry-forward periods are not sufficient to realize the related deferred tax assets.~~income (loss).

We ~~and our subsidiaries~~ are required to file federal and state income 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 could affect the amount of tax we pay. InWe, in consultation with our tax advisors, we base our tax returns on interpretations that we ~~believed~~believe to be reasonable under the circumstances. The tax returns, however, are subject to routine reviews by the various ~~federal, state and foreign~~ taxing authorities in the jurisdictions in which we ~~or one of~~file our ~~subsidiaries file~~ tax returns. As part of these reviews, a taxing authority may disagree with respect to the ~~income~~interpretations we used to calculate our tax ~~positions we have taken (“uncertain tax positions”)~~liability and, therefore, require us ~~or one of our subsidiaries~~ to pay additional taxes.

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 less than 50% 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~~in the ~~periods~~three months ended on November 30, ~~2017 and August 31, 2017. During the first quarter~~2021.

Table of fiscal year 2015, one of the Company’s subsidiaries received assessments claiming $2.7 million of taxes, penalties and interest related to withholding taxes on certain charges for services rendered by the Company. In addition, this subsidiary received assessments totaling $5.5 million for lack of deductibility of the underlying service charges due to the lack of withholding. Based on the Company's interpretation of local law, rulings and jurisprudence (including Supreme Court precedents with respect to the deductibility assessment), the Company expects to prevail in both instances and has not recorded a provision for these assessments.Contents

We have not provided for U.S. deferred taxes on cumulative non-U.S. undistributed earnings as we deem such earnings to be indefinitely reinvested. It is not practicable to determine the U.S. federal income tax liability that would be associated with the repatriation earnings because of the complexity of the computation.Tax Receivables

~~Tax Receivables:~~ We pay Value Added Tax (“VAT”) or similar taxes, ~~(“input VAT”),~~ income taxes, and other taxes within the normal course of our business in most of the countries in which we operate related to the procurement of merchandise and/or services we ~~acquires~~acquire 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. We ~~also~~generally collect VAT from our Members upon sale of goods and services and pay VAT to our vendors upon purchase of goods and services. Periodically, we submit VAT reports to governmental agencies and reconcile the VAT paid and VAT received. The net overpaid VAT may be refunded or ~~similar taxes on behalf of~~applied to subsequent returns, and the ~~government (“output VAT”) for merchandise and/or services we sell. If the output~~net underpaid VAT ~~exceeds the input VAT, then the difference is~~must be remitted to the ~~government, usually on a monthly basis. If~~government. With respect to income taxes paid, if the ~~input VAT exceeds~~estimated income taxes paid or withheld exceed the ~~output VAT,~~actual income tax due this creates ~~a VAT~~an income tax receivable. In most countries where we operate, the governments have implemented additional collection procedures, such as requiring credit card processors to remit a portion of sales processed via credit ~~card~~and debit cards directly to the government as advance payments of VAT and/or income tax. ~~In the case of VAT, these procedures alter the natural offset of input and output VAT and~~This collection mechanism generally ~~leave~~leaves us with a net VAT ~~receivable,~~and/or income tax receivables, forcing us to process significant refund claims on a recurring basis. 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. We either request a refund of these tax receivables or apply the balance to expected future tax payments. These refund or offset processes can take anywhere from several months to several years to complete.

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In most countries where we operate, there are defined and structured processes to recover VAT receivables via refunds or offsets. However, in one country without a clearly defined refund process, the Company is actively engaged with the local government to recover VAT receivables totaling $11.1 million and $9.7 million as of November 30, 2021 and August 31, 2021, respectively. In addition, in two other countries where the Company operates, ~~the tax refund process is defined and structured with regular refunds or offsets. However, as of November 30, 2017, in one country the government has alleged~~ there is not a clearly defined process to allow the tax authorities to refund VAT receivables. As of August 31, 2016, there were three countries that lacked a clearly defined process; however, during the third and fourth quarters of fiscal year 2017, two of these countries clarified the refund mechanism, which we are currently pursuing. The Company, together with its tax and legal advisers, is currently seeking clarification in courthave been changes in the ~~country without a clearly defined process and expects to prevail. The balance~~method of the VAT receivable in the country with undefined refund mechanisms was approximately $1.3 million and $1.2 million as of November 30, 2017 and August 31, 2017, respectively. In another country incomputing minimum tax payments under which the governments have sought to require the Company ~~has warehouse clubs, beginning in fiscal year 2015, a new minimum income tax mechanism took effect, which requires us~~ to pay taxes based on a percentage of sales rather than taxable income. As a result, we ~~are making~~have made and may continue to make income tax payments substantially in excess of those we would expect to pay based on taxable income. The ~~current rules (which we have challenged in court) do not clearly allow us to obtain a refund or offset this excess~~Company had income tax ~~against other taxes. As~~receivables of ~~November 30, 2017~~$11.1 million and ~~August 31, 2017, the Company had~~$11.0 million and deferred tax assets of ~~approximately $2.0 million in this country. Also, the Company had an income tax receivable balance of $5.3~~$3.5 million and ~~$4.3~~$3.3 million as of November 30, ~~2017~~2021 and August 31, ~~2017,~~2021, respectively, in these countries. While the rules related to ~~excess payments from fiscal years 2015 to 2017. The~~refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of these tax receivables or deferred tax assets because the Company believes that it is more likely than not that it will ultimately succeed in ~~our~~its refund ~~requests,~~requests. 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 and/~~appeals. There can be no assurance, however, that we will be successful in recovering all tax receivables or ~~court challenge on this matter.~~deferred tax assets.

~~The Company’s~~Our policy for classification and presentation of VAT receivables, income tax receivables and other tax receivables is as follows:

Short-term VAT and Income tax receivables, recorded as 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 classify as short-term any approved refunds or credit notes to the extent that the Company 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 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 do not expect to eventually prevail in its recovery. The Company does not currently have any allowances provided against VAT and income tax receivables.

Short-term VAT and Income tax receivables, recorded as Other 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.

Long-lived Assets:

We ~~periodically~~ evaluate quarterly our long-lived assets for indicators of impairment. ~~Some of the key indicators~~Indicators that an asset may be impaired are:

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.

~~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;~~

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~~significant changes in its strategic business objectives and utilization of the asset(s); and~~

~~the impact of significant negative industry or economic trends.~~

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, which in turn drives estimates of future cash flows from these assets. These periodic evaluations could cause management to conclude that impairment factors exist, ~~requiring~~which could require an adjustment of these assets to their then-current fair market value. Loss/(gain) on disposal of assets recorded during the years reported resulted from improvements to operations and normal preventive maintenance.

~~Seasonality~~Goodwill

Goodwill 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 $45.3 million of certain acquired goodwill, the fair value was greater than the carrying value; any deterioration in the fair value may result in an impairment charge.

Seasonality

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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to our operations result primarily from changes in interest rates and changes in currency exchange rates. There have been no material changes in our market risk factors at November 30, ~~2017~~2021 compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended August 31, 2017. The gross fair value of our derivative financial instruments designated as cash flow hedges has increased by $1.1 million since August 31, 2017, primarily due to the fluctuations in interest rates, fluctuations in exchange rates for the currencies that are being hedged, and changes in the scheduled maturities of the underlying instruments during the three months ended November 30, 2017. Movements in currency exchange rates and the related impact on the translation of the balance sheets of the Company's subsidiaries whose functional currency is not the U.S. dollar were the primary cause of the $2.0 million net loss for the three months ended November 30, 2017 in the foreign currency translation adjustments category of accumulated other comprehensive income (loss).2021.

In addition, the Company's subsidiaries whose functional currency is not the U.S. dollar carry 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 gains (losses), including transactions recorded involving these monetary assets and liabilities, are recorded as currency gain (loss) within Other income (expense) in the consolidated statements of income.

~~The following table summarizes the amounts recorded for the three months ending November 30, 2017 and 2016 (in thousands):~~

Three Months Ended

November 30,

November 30,

2017

2016
Currency gain (loss)

$
278

$
(928)

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 ~~warehouse~~merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported ~~products, increasing our foreign exchange exposure to any devaluation of local currency relative to the U.S. dollar. During~~products. Since fiscal year 2017, ~~and continuing into the first three months of fiscal year 2018,~~ we have experienced this situation in ~~Trinidad. We are working with our banks in~~ Trinidad ~~to source tradable currencies (including Euros~~ and Canadian dollars), but until the central bank in Trinidad makes more U.S. dollars available, this illiquidity condition is likely to continue. During part of the first half of fiscal year 2017, we limited shipments of merchandise to Trinidad from our distribution center in Miami to levels that generally aligned with our Trinidad subsidiary’s ability to source U.S. dollars to pay for that merchandise. This resulted in a reduced level of shipments, which negatively affected sales in the second quarter, particularly December 2016, although by less than our initial estimate. These actions did not impact the level of merchandise we obtain locally in Trinidad. Starting in the third quarter of fiscal year 2017, we were able to improve our sourcing of tradeable currencies, which, in addition to other steps we took, allowed for a more normalized flow of imported merchandise during the third and fourth fiscal quarters. Over the past three months, however, we have been unable to source a sufficient level of tradeable ~~currencies~~currencies. We are working with our banks in Trinidad ~~consistent with~~and Barbados to source tradeable currencies. We expect the ~~level~~illiquid market conditions in both markets to continue. Refer to “Item 2. Management’s Discussion & Analysis – Factors Affecting Our Business” and “Item 2. Management’s Discussion & Analysis – Liquidity: Financial Position and Cash Flow” for our quantitative analysis and discussion.

Information about the financial impact of ~~merchandise we were importing~~foreign currency exchange rate fluctuations for the ~~holiday shopping season. As of~~three-month period ended November 30, ~~2017,~~2021 is disclosed in “Item 2. Management’s Discussion & Analysis – Other Expense, net”.

Information about the change in the fair value of our ~~Trinidad subsidiary had net~~hedges and the financial impact thereof for the three-month period ended November 30, 2021 is disclosed in “Item 1. Financial Statements: Notes to Consolidated Financial Statements, Note 8 – Derivative Instruments and Hedging Activities.”

Information about the movements in currency exchange rates and the related impact on the translation of the balance sheets of our subsidiaries whose functional currency is not the U.S. dollar denominated liability exposures of approximately $12.1 million, an increase of $16.1 million from August 31, 2017 when our Trinidad subsidiary had a net U.S. dollar denominated asset position of approximately $4.0 million. We are carefully monitoringfor the ~~situation, which may require us to limit future shipments from the U.S. to Trinidad~~three-month period ended November 30, 2021 is disclosed in ~~line with our ability to exchange Trinidad dollars for tradeable currencies to manage our exposure to any potential devaluation.~~ “Item 2. Management’s Discussion & Analysis – Other Comprehensive Loss.”

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ITEM 4. CONTROLS AND PROCEDURES

Limitations on Effectiveness of Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the timelines specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decision regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, we have investments in certain unconsolidated entities. Because we do not control or manage those entities, our control procedures with respect to those entities were substantially more limited than those we maintain with respect to our consolidated subsidiaries.

Evaluation of Disclosure Controls and Procedures

As required by SEC Rules 13a-15(e) or 15d-15(e), we carried out an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

In the ordinary course of business, we review our system of internal control over financial reporting and make changes to our systems and processes to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems and automating manual processes. There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibit 31.1 and 31.2 to this report.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~None.~~We are often involved in claims arising in the ordinary course of business seeking monetary damages and other relief. Based upon information currently available to us, none of these claims is expected to have a material adverse effect on our business, financial condition or results of operations.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I,I. “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended August 31, ~~2017.~~2021. There have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended August 31, ~~2017.~~2021.

~~Available Information~~

The PriceSmart, Inc. website or internet address is www.pricesmart.com. On this website the Company makes available, free of charge, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, and the annual report to the security holders, as soon as reasonably practicable after electronically filing such material with or furnishing it to the U.S. Securities and Exchange Commission (SEC). The Company’s SEC reports can be accessed through the investor relations section of its website under “SEC Filings.” All of the Company’s filings with the SEC may also be obtained at the SEC’s Public Reference Room at Room 1580, 100 F Street NE, Washington, DC 20549. For information regarding the operation of the SEC’s Public Reference Room, please contact the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The Company made available its annual report on Form 10-K and its annual Proxy Statement for the fiscal year 2017 at the internet address ~~http://materials.proxyvote.com/741511~~.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) None.

(b) None.

Upon vesting of restricted stock awarded by the Company to employees, the Company repurchases shares and withholds the amount of the repurchase payment to cover employees’ tax withholding obligations. As set forth in the table below, during the quarter ended November 30, 2021, the Company repurchased 31,551 shares in the indicated months. These were the only repurchases of equity securities made by the Company during the first quarter of fiscal year 2022. The Company does not have a stock repurchase program.



Period	(a) ‎Total Number ‎of Shares ‎Purchased		(b) ‎Average Price ‎Paid Per Share		(c) ‎Total Number ‎of Shares ‎Purchased ‎as Part of ‎Publicly ‎Announced ‎Plans or ‎Programs		(d) ‎Maximum ‎Number of ‎Shares That ‎May Yet Be ‎Purchased ‎Under the ‎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
Total		31,551	$	77.11		—		—

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

(a) Exhibits:



3.1(1)	Amended and Restated Certificate of Incorporation of the Company.
3.2(2)	Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company.
3.3(3)	Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company.
3.4~~(1)~~(4)	Second Amended and Restated Bylaws of the Company.
10.1 **	~~Amendment to 2013 Equity Incentive Award Plan of PriceSmart, Inc.~~Amended and Restated Employment Agreement dated September 1, 2021 between Nicolas Maslowski and the Company.
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..
~~32.1~~32.1****	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~32.2~~32.2****	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


*	Identifies management contract or compensatory plan or arrangement.

**	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.

⁽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.~~

⁽²⁾

~~Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2004 filed with the Commission on April 14, 2004.~~

⁽³⁾

~~Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2004 filed with the Commission on November 24, 2004.~~

⁽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.

⁽²⁾Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2004 filed with the Commission on April 14, 2004.

⁽³⁾Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2004 filed with the Commission on November 24, 2004.

⁽⁴⁾Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on July 17, 2015.

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~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		PRICESMART, INC.

Date:	January ~~4, 2018~~6, 2022	By:	/s/ ~~JOSE LUIS LAPARTE~~SHERRY S. BAHRAMBEYGUI
			~~Jose Luis Laparte~~Sherry S. Bahrambeygui
			~~Director,~~ Chief Executive Officer ~~and President~~
			(Principal Executive Officer)

Date:	January ~~4, 2018~~6, 2022	By:	/s/ ~~JOHN M. HEFFNER~~MICHAEL L. MCCLEARY
			~~John M. Heffner~~Michael L. McCleary
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer and Principal Accounting Officer)
			~~Principal Accounting Officer)~~

5455



Equity:
Common stock $0.0001 par value, 45,000,000 shares authorized; 31,278,595 and 31,275,727 shares issued and 30,403,610 and 30,400,742 shares outstanding (net of treasury shares) as of November 30, 2017 and August 31, 2017, respectively		3		3
Additional paid-in capital		424,856		422,395
Tax benefit from stock-based compensation		11,486		11,486
Accumulated other comprehensive loss		(111,468)		(110,059)
Retained earnings		443,356		420,866
Less: treasury stock at cost, 874,985 shares as of both November 30, 2017 and August 31, 2017		(35,924)		(35,924)
Total Equity		732,309		708,767
Total Liabilities and Equity	$	1,222,828	$	1,177,514



	August 31, 2017 balance sheet line item as previously reported		Amount reclassified		August 31, 2017 balance sheet line item as currently reported
Retained earnings	$	420,499	$	367	$	420,866
Additional paid-in capital	$	422,762	$	(367)	$	422,395



	Three Months Ended November 30, 2017
	Foreign currency translation adjustments		Defined benefit pension plans		Derivative Instruments			Total
Beginning balance, September 1, 2017	$	(108,539)	$	(442)	$	(1,078)		$	(110,059)
Other comprehensive income (loss)		(2,026)		30		587	(1)		(1,409)
Ending balance, November 30, 2017	$	(110,565)	$	(412)	$	(491)		$	(111,468)



	Twelve Months Ended August 31, 2017
	Foreign currency translation adjustments		Defined benefit pension plans			Derivative Instruments			Total
Beginning balance, September 1, 2016	$	(102,242)	$	(315)		$	(1,394)		$	(103,951)
Other comprehensive income (loss)		(6,297)		(166)			316	(1)		(6,147)
Amounts reclassified from accumulated other comprehensive income (loss)		—		39	(2)		—			39
Ending balance, August 31, 2017	$	(108,539)	$	(442)		$	(1,078)		$	(110,059)



	Open
Years ended November 30,	Locations(1)
2018	$	12,113
2019		11,715
2020		10,795
2021		9,339
2022		9,027
Thereafter		113,822
Total	$	166,811	(2)



(Amounts in thousands)	Current portion of long-term debt		Long-term debt (net of current portion)		Total
Balances as of August 31, 2017	$	18,358	$	87,939	$	106,297	(1)
Repayments of long-term debt		—		(3,000)		(3,000)
Regularly scheduled loan payments		(225)		(4,554)		(4,779)
Translation adjustments on foreign-currency debt of subsidiaries whose functional currency is not the U.S. dollar (2)		124		(45)		79
Balances as of November 30, 2017	$	18,257	$	80,340	$	98,597	(3)



Income Statement Classification	Interest expense on borrowings(1)		Cost of swaps (2)		Total
Interest expense for the three months ended November 30, 2017	$	849	$	322	$	1,171
Interest expense for the three months ended November 30, 2016	$	750	$	423	$	1,173



	Three Months Ended				Increase/
	November 30,		November 30,		(Decrease)
	2017		2016		2017 to 2016
Net income	$	22,490	$	24,869	$	(2,379)
Adjustments to reconcile net income to net cash provided from (used in) operating activities:
Depreciation and amortization		12,237		11,117		1,120
(Gain) loss on sale of property and equipment		159		407		(248)
Deferred income taxes		(349)		984		(1,333)
Stock-based compensation expenses		2,461		2,442		19
Other non-cash operating activities		(16)		—		(16)
Net non-cash related expenses	$	14,492	$	14,950	$	(458)
Net income from operating activities reconciled for non-cash operating activities		36,982		39,819		(2,837)
Changes in operating assets and liabilities not including merchandise inventories		14,322		6,378		7,944
Changes in merchandise inventories		(61,467)		(44,082)		(17,385)
Net cash provided by (used in) operating activities	$	(10,163)	$	2,115	$	(12,278)

November 30,

August 31,

Retained earnings not available for distribution