x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
February 28, 2023 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Delaware 33-0628530 9740 Scranton Road, San Diego, CA 92121 (Address of principal executive offices) (Zip Code) Trading Symbol Name of each exchange on which registered Common Stock, $0.0001 par value PSMT NASDAQ Global Select Market Large accelerated filer Accelerated filer Non-accelerated filer o Smaller Reporting Company No 2023. Page November 30, 2022 August 31, (Unaudited) 2022 ASSETS Current Assets: Cash and cash equivalents $ 267,944 $ 237,710 Short-term restricted cash 2,873 3,013 Short-term investments 8,920 11,160 Receivables, net of allowance for doubtful accounts of $119 as of November 30, 2022 and $103 as of August 31, 2022, respectively 18,757 13,391 Merchandise inventories 510,060 464,411 Prepaid expenses and other current assets (includes $194 and $2,761 as of November 30, 2022 and August 31, 2022, respectively, for the fair value of derivative instruments) 44,731 43,894 Total current assets 853,285 773,579 Long-term restricted cash 10,871 10,650 Property and equipment, net 756,663 757,241 Operating lease right-of-use assets, net 108,762 111,810 Goodwill 43,173 43,303 Deferred tax assets 27,427 28,355 Other non-current assets (includes $15,986 and $11,884 as of November 30, 2022 and August 31, 2022, respectively, for the fair value of derivative instruments) 77,242 72,928 Investment in unconsolidated affiliates 10,497 10,534 Total Assets $ 1,887,920 $ 1,808,400 LIABILITIES AND EQUITY Current Liabilities: Short-term borrowings $ 11,050 $ 10,608 Accounts payable 446,572 408,407 Accrued salaries and benefits 33,693 44,097 Deferred income 29,609 29,228 Income taxes payable 9,617 7,243 Other accrued expenses and other current liabilities 40,388 38,667 Operating lease liabilities, current portion 7,349 7,491 Long-term debt, current portion 33,280 33,715 Total current liabilities 611,558 579,456 Deferred tax liability 1,877 2,165 Long-term income taxes payable, net of current portion 5,036 5,215 Long-term operating lease liabilities 115,808 118,496 Long-term debt, net of current portion 118,505 103,556 Other long-term liabilities (includes $8,772 and $8,440 for post-employment plans as of November 30, 2022 and August 31, 2022, respectively) 8,773 8,439 Total Liabilities 861,557 817,327 Stockholders' Equity: Common stock $0.0001 par value, 45,000,000 shares authorized; 31,857,969 and 31,697,590 shares issued and 31,050,917 and 30,904,826 shares outstanding (net of treasury shares) as of November 30, 2022 and August 31, 2022, respectively 3 3 Additional paid-in capital 485,096 481,406 Accumulated other comprehensive loss (196,137) (195,586) Retained earnings 769,799 736,894 Less: treasury stock at cost, 807,052 shares as of November 30, 2022 and 792,764 shares as of August 31, 2022 (32,398) (31,644) Total Stockholders' Equity 1,026,363 991,073 Total Liabilities and Equity $ 1,887,920 $ 1,808,400 See accompanying notes. Three Months Ended November 30, November 30, 2022 2021 Revenues: Net merchandise sales $ 1,025,463 $ 944,043 Export sales 10,458 10,534 Membership income 15,895 14,791 Other revenue and income 2,990 5,988 Total revenues 1,054,806 975,356 Operating expenses: Cost of goods sold: Net merchandise sales 859,068 793,193 Export sales 9,989 10,067 Non-merchandise — 1,809 Selling, general and administrative: Warehouse club and other operations 96,892 91,196 General and administrative 33,172 31,693 Pre-opening expenses — 970 Loss on disposal of assets 158 411 Total operating expenses 999,279 929,339 Operating income 55,527 46,017 Other income (expense): Interest income 1,157 518 Interest expense (2,749) (1,590) Other income (expense), net (4,566) 1,409 Total other income (expense) (6,158) 337 Income before provision for income taxes and 49,369 46,354 Provision for income taxes (16,426) (15,814) Loss of unconsolidated affiliates (38) (10) Net income 32,905 30,530 Less: net income attributable to noncontrolling interest — (19) Net income attributable to PriceSmart, Inc. $ 32,905 $ 30,511 Net income attributable to PriceSmart, Inc. per share available for distribution: Basic $ 1.05 $ 0.98 Diluted $ 1.05 $ 0.98 Shares used in per share computations: Basic 30,713 30,551 Diluted 30,719 30,603 Three Months Ended November 30, November 30, 2022 2021 Net income $ 32,905 $ 30,530 Less: net income attributable to noncontrolling interest — (19) Net income attributable to PriceSmart, Inc. $ 32,905 $ 30,511 Other Comprehensive Income, net of tax: Foreign currency translation adjustments (1) (885) (8,131) Defined benefit pension plan: Net gain/(loss) arising during period (28) 17 Amortization of prior service cost and actuarial gains included in net periodic pensions cost 37 34 Total defined benefit pension plan 9 51 Derivative instruments: (2) Unrealized losses on change in derivative obligations (695) (1,301) Unrealized gains/(losses) on change in fair value of interest rate swaps (1,716) 3,250 Amounts reclassified from accumulated other comprehensive income to other expense, net for settlement of derivatives 2,736 — Total derivative instruments 325 1,949 Other comprehensive loss (551) (6,131) Comprehensive income 32,354 24,380 Less: comprehensive income attributable to noncontrolling interest — 3 Comprehensive income attributable to PriceSmart, Inc. $ 32,354 $ 24,377 (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. Three Months Ended Total Accumulated Stockholders' Additional Other Equity Common Stock Paid-in Comprehensive Retained Treasury Stock Attributable to Noncontrolling Total Shares Amount Capital Loss Earnings Shares Amount PriceSmart, Inc. Interest Equity Balance at August 31, 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 — — 4,567 — — — — 4,567 — 4,567 Net income — — — — 30,511 — — 30,511 19 30,530 Other comprehensive income (loss) — — — (6,131) — — — (6,131) 3 (6,128) 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 Balance at August 31, 2022 31,698 $ 3 $ 481,406 $ (195,586) $ 736,894 793 $ (31,644) $ 991,073 $ — $ 991,073 Purchase of treasury stock — — — — — 21 (1,300) (1,300) — (1,300) Issuance of treasury stock (7) — (546) — — (7) 546 — — — Issuance of restricted stock award 174 — — — — — — — — — Forfeiture of restricted stock awards (7) — — — — — — — — — Stock-based compensation — — 4,236 — — — — 4,236 — 4,236 Net income — — — — 32,905 — — 32,905 — 32,905 Other comprehensive loss — — — (551) — — — (551) — (551) Balance at November 30, 2022 31,858 $ 3 $ 485,096 $ (196,137) $ 769,799 807 $ (32,398) $ 1,026,363 $ — $ 1,026,363 PRICESMART, INC. Three Months Ended November 30, November 30, 2022 2021 Operating Activities: Net income $ 32,905 $ 30,530 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 17,568 15,603 Allowance for doubtful accounts 16 2 Loss on sale of property and equipment 158 411 Deferred income taxes 358 654 Equity in losses of unconsolidated affiliates 38 10 Stock-based compensation 4,236 4,567 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 (15,856) (27,108) Merchandise inventories (45,649) (111,062) Accounts payable 36,689 73,054 Net cash provided by (used in) operating activities 30,463 (13,339) Investing Activities: Proceeds from the disposal of Aeropost, net of divested cash — 4,959 Additions to property and equipment (23,944) (29,729) Purchases of short-term investments — (4,310) Proceeds from settlements of short-term investments 2,230 15,488 Proceeds from settlements of long-term investments — 1,486 Proceeds from disposal of property and equipment 221 56 Net cash used in investing activities (21,493) (12,050) Financing Activities: Proceeds from long-term bank borrowings 19,914 4,204 Repayment of long-term bank borrowings (5,113) (6,126) Proceeds from short-term bank borrowings 1,218 10,041 Repayment of short-term bank borrowings — (4,488) Purchase of treasury stock (1,300) (2,433) Net cash provided by financing activities 14,719 1,198 Effect of exchange rate changes on cash and cash equivalents and restricted cash 6,626 1,312 Net increase (decrease) in cash, cash equivalents 30,315 (22,879) Cash, cash equivalents and restricted cash at beginning of period 251,373 215,479 Cash, cash equivalents and restricted cash at end of period $ 281,688 $ 192,600 Supplemental disclosure of noncash investing activities: Capital expenditures accrued, but not yet paid $ 4,606 $ 5,772 The following table provides a breakdown of cash and cash equivalents, and restricted cash reported within the statement of cash flows: Three Months Ended November 30, November 30, 2022 2021 Cash and cash equivalents $ 267,944 $ 176,072 Short-term restricted cash 2,873 4,165 Long-term restricted cash $ 10,871 $ 12,363 Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 281,688 $ 192,600 shopping and services offered both online and at warehouse clubs similar to, but typically smaller in size than, warehouse clubs in the United States. As of —(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 the VIE that most significantly impact the VIE's economic 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 Real Estate Development Joint Ventures Countries Ownership Basis of GolfPark Plaza, S.A. Panama 50.0 % Price Plaza Alajuela PPA, S.A. Costa Rica 50.0 % (1)Joint venture interests are recorded as investment in unconsolidated affiliates on the consolidated balance sheets. November 30, August 31, 2022 2022 Short-term restricted cash $ 2,873 $ 3,013 Long-term restricted cash 10,871 10,650 Total restricted cash(1) $ 13,744 $ 13,663 (1)Restricted cash consists —(Continued) Tax Receivables – The Company pays Value Added Tax (“VAT”) or similar taxes, income taxes, and other taxes within the normal course of business in most of the countries in which it operates related to the procurement of merchandise and/or services the Company acquires and/or on sales and taxable income. VAT is a form of indirect tax applied to the value added at each stage of production (primary, manufacturing, wholesale and retail). This tax is similar to, but operates somewhat differently than, sales tax paid in the United States. The Company generally collects VAT from its Members upon sale of goods and services and pays VAT to its vendors upon purchase of goods and services. Periodically, the Company submits VAT reports to governmental agencies and reconciles the VAT paid and VAT received. The net overpaid VAT may be refunded or applied to subsequent returns, and the net underpaid VAT must be remitted to the government. With respect to income taxes paid, if the estimated income taxes paid or withheld exceed the actual income tax due, this creates an income tax receivable. In most countries where the Company operates, the governments have implemented additional collection procedures, such as requiring credit card processors to remit a portion of sales processed via credit and debit cards directly to the government as advance payments of VAT and/or income tax. This collection mechanism generally leaves the Company with net VAT and/or income tax receivables, forcing the Company to process significant refund claims on a recurring basis.These refund or offset processes can take anywhere from several months to several years to complete. November 30, August 31, 2022 2022 Prepaid expenses and other current assets $ 3,523 $ 3,890 Other non-current assets 34,443 32,460 Total amount of VAT receivables reported $ 37,966 $ 36,350 —(Continued) The following table summarizes the Income tax receivables reported by the Company (in thousands): November 30, August 31, 2022 2022 Prepaid expenses and other current assets $ 13,496 $ 12,077 Other non-current assets 20,721 19,985 Total amount of income tax receivables reported $ 34,217 $ 32,062 —(Continued) RSAs are outstanding shares of common stock and have the same cash dividend and voting rights as other 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. Fair Value Measurements – The Company measures the fair value for all financial and —(Continued) 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 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 reported in accumulated other comprehensive loss until the hedged item completes its contractual term. Instruments that do not meet the criteria for hedge accounting, or contracts for which the Company has not elected hedge accounting, are valued at fair value with unrealized gains or losses reported in earnings during the period of the change. 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. —(Continued) Cost of Goods Sold – The Company includes the cost of merchandise and food service and bakery raw materials in cost of goods The Company substantially fulfilled all payment obligations by the end of the second quarter of fiscal year 2023; however, some vesting of PSUs will occur in the first quarter of fiscal year 2024. –On February 3, 2023, Robert E. Price, a Company founder and Chairman of the Board, became Interim Chief Executive Officer. Mr. Price has elected not to receive compensation for his role as Interim Chief Executive Officer. Therefore, the financial statements do not include compensation charges for his services. We have estimated the fair value of these services, based on a number of factors, to be approximately $5.1 million on an annual basis. We acknowledge that this may not be representative of what ultimately could be the cost to the Company when a replacement Chief Executive Officer is hired. 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 and six months ended Three Months Ended November 30, November 30, 2022 2021 Effect on other comprehensive loss due to foreign currency translation $ (885) $ (8,131) Three Months Ended November 30, November 30, 2022 2021 Currency loss $ (4,503) $ (1,864) Adopted —(Continued) 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. Until the disposal of Aeropost in the first quarter of fiscal 2022, the Company recognized 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 statements of income. The deferred membership fee is included in deferred income in the Company's consolidated balance sheets. —(Continued) 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 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 cards; therefore, the Company assumes a 100% redemption rate prior to expiration of the gift Contract Liabilities November 30, 2022 August 31, 2022 Deferred membership income $ 28,250 $ 28,000 Other contract performance liabilities $ 15,387 $ 10,473 Three Months Ended November 30, 2022 November 30, 2021 Foods & Sundries $ 511,894 $ 470,950 Fresh Foods 295,288 269,677 Hardlines 115,594 111,936 Softlines 54,420 50,474 Other Business 48,267 41,006 Net Merchandise Sales $ 1,025,463 $ 944,043 —(Continued) Three Months Ended November 30, November 30, 2022 2021 Net income attributable to PriceSmart, Inc. $ 32,905 $ 30,511 Less: Allocation of income to unvested stockholders (586) (560) Net income attributable to PriceSmart, Inc. per share available for distribution $ 32,319 $ 29,951 Basic weighted average shares outstanding 30,713 30,551 Add dilutive effect of performance stock units (two-class method) 6 52 Diluted average shares outstanding 30,719 30,603 Basic net income per share $ 1.05 $ 0.98 Diluted net income per share $ 1.05 $ 0.98 : First Payment Second Payment Declared Amount Record Date Amount Record Date Amount 2/3/2022 $ 0.86 2/15/2022 2/28/2022 $ 0.43 8/15/2022 8/31/2022 $ 0.43 —(Continued) Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss Attributable to Noncontrolling PriceSmart Interests Total Beginning balance, September 1, 2022 $ (195,586) $ — $ (195,586) Foreign currency translation adjustments (885) — (885) Defined benefit pension plans (1) 9 — 9 Derivative instruments (2) 325 — 325 Ending balance, November 30, 2022 $ (196,137) $ — $ (196,137) 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) Attributable to Noncontrolling PriceSmart Interests Total Beginning balance, September 1, 2021 $ (182,508) $ 251 $ (182,257) Foreign currency translation adjustments (19,034) 3 (19,031) Defined benefit pension plans (1) (341) — (341) Derivative Instruments (2) 6,170 — 6,170 Amounts reclassified from accumulated other comprehensive loss 127 — 127 Sale of Aeropost — (254) (254) Ending balance, August 31, 2022 $ (195,586) $ — $ (195,586) (1)Amounts reclassified from accumulated other comprehensive income (loss) related to the minimum pension liability are included in warehouse club and other operations in the Company's consolidated statements of income. November 30, August 31, 2022 2022 Retained earnings not available for distribution $ 8,750 $ 8,648 —(Continued) 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. As part of these reviews, a taxing authority may disagree with the interpretations the Company used to calculate its tax liability and therefore require the Company to pay additional taxes. February 28, 2023. 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 Entity % Initial Additional Net Income Company’s Commitment Company's GolfPark Plaza, S.A. 50 % $ 4,616 $ 2,402 $ (85) $ 6,933 $ 99 $ 7,032 Price Plaza Alajuela PPA, S.A. 50 % 2,193 1,236 135 3,564 785 4,349 Total $ 6,809 $ 3,638 $ 50 $ 10,497 $ 884 $ 11,381 (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. NOTE 7 – DEBT Facilities Used Total Amount Short-term Letters of Facilities Weighted average of Facilities Borrowings Credit Available interest rate November 30, 2022 - Committed $ 75,000 — — 75,000 — % November 30, 2022 - Uncommitted 91,000 11,050 — 79,950 6.3 November 30, 2022 - Total $ 166,000 $ 11,050 $ — $ 154,950 6.3 % August 31, 2022 - Committed $ 75,000 — 73 74,927 — % August 31, 2022 - Uncommitted 91,000 10,608 — 80,392 5.3 August 31, 2022 - Total $ 166,000 $ 10,608 $ 73 $ 155,319 5.3 % February 28, 2023: (Amounts in thousands) Current Long-term Total Balances as of August 31, 2022 $ 33,715 $ 103,556 $ 137,271 (1) Proceeds from long-term debt incurred during the period: Guatemala subsidiary — 12,454 12,454 Barbados subsidiary — 7,460 7,460 Total proceeds from long-term debt received during the period — 19,914 19,914 Repayments of long-term debt: (713) (4,400) (5,113) Reclassifications of long-term debt due in the next 12 months 280 (280) — Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar (2) (2) (285) (287) Balances as of November 30, 2022 $ 33,280 $ 118,505 $ 151,785 (3) (1)The carrying amount of non-cash assets assigned as collateral for these loans was $155.6 million. The carrying amount of cash assets assigned as collateral for these loans was $5.3 million. (2)These foreign currency translation adjustments are recorded within Other comprehensive income (loss). Annual maturities of long-term debt are as follows (in thousands): Twelve Months Ended November 30, Amount 2023 $ 33,280 2024 34,343 2025 18,302 2026 14,157 2027 34,676 Thereafter 17,027 Total $ 151,785 —(Continued) —(Continued) Cash Flow Hedges February 28, 2023: Entity Date Derivative Derivative Initial Bank Floating Leg Fixed Rate Settlement Effective Colombia subsidiary 26-Sep-22 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 12,500,000 PriceSmart, Inc. 3.00% 10.35 % 24th day of each December, March, June and September beginning December 26, 2022 September 26, 2022 - Colombia subsidiary 3-May-22 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 10,000,000 PriceSmart, Inc. 3.00% 9.04 % 3rd day of each May, August, November and February, beginning on August 3, 2022 May 3, 2022 - Colombia subsidiary 17-Nov-21 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 10,000,000 PriceSmart, Inc. 3.00% 8.40 % 17th day of each February, May, August, and November, beginning on February 17, 2022 November 17, 2021 - Colombia subsidiary 3-Dec-19 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 7,875,000 Citibank, N.A. Variable rate 3-month Libor plus 2.45% 7.87 % 3rd day of each December, March, June, and September, beginning on March 3, 2020 December 3, 2019 - Colombia subsidiary 27-Nov-19 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 25,000,000 Citibank, N.A. Variable rate 3-month Libor plus 2.45% 7.93 % 27th day of each November, February, May and August beginning February 27, 2020 November 27, 2019 - Panama subsidiary 25-Jun-18 Bank of Nova Scotia ("Scotiabank") Interest rate swap $ 14,625,000 Bank of Nova Scotia Variable rate 3-month Libor plus 3.0% 5.99 % 23rd day of each month beginning on July 23, 2018 June 25, 2018 - Honduras subsidiary 26-Feb-18 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 13,500,000 Citibank, N.A. Variable rate 3-month Libor plus 3.00% 9.75 % 29th day of May, August, November and February beginning May 29, 2018 February 26, 2018 - PriceSmart, Inc 7-Nov-16 MUFG Union Bank, N.A. ("Union Bank") Interest rate swap $ 35,700,000 Union Bank Variable rate 1-month Libor plus 1.7% 3.65 % 1st day of each month beginning on April 1, 2017 March 1, 2017 - —(Continued) For the three and six months ended Income Statement Classification Interest Cost of Total Interest expense for the three months ended November 30, 2022 $ 1,103 $ 347 $ 1,450 Interest expense for the three months ended November 30, 2021 $ 557 $ 849 $ 1,406 (1)This amount is representative of the interest expense recognized on the underlying hedged transactions. Notional Amount as of November 30, August 31, Floating Rate Payer (Swap Counterparty) 2022 2022 Union Bank $ 31,025 $ 31,344 Citibank N.A. 65,183 66,353 Scotiabank 8,250 8,625 Total $ 104,458 $ 106,322 November 30, 2022 August 31, 2022 Derivatives designated as cash flow hedging instruments Balance Sheet Fair Net Tax Net Fair Net Tax Net Cross-currency interest rate swaps Other current assets $ 41 $ (11) $ 30 $ 2,736 $ (348) $ 2,388 Cross-currency interest rate swaps Other non-current assets 13,958 (4,885) 9,073 10,289 (4,559) 5,730 Cross-currency interest rate swaps Other current liabilities (15) 4 (11) (82) 25 (57) Interest rate swaps Other non-current assets 2,028 (448) 1,580 1,596 (6) 1,590 Net fair value of derivatives designated as hedging instruments $ 16,012 $ (5,340) $ 10,672 $ 14,539 $ (4,888) $ 9,651 The following table summarizes the non-deliverable forward foreign exchange contracts that are open as of February 28, 2023: Financial Derivative Subsidiary Dates Settlement Scotiabank Colpatria, S.A. Colombia $ 3,500 Citibank, N.A. ("Citi") Colombia $ 6,000 Forward foreign $ 5,000 1-Mar-2023 - 7-Mar-2023 February 28, 2022. —(Continued) The following tables summarize by segment certain revenues, operating costs and balance sheet items (in thousands): United Central Caribbean Colombia Operations Reconciling Total Three Months Ended November 30, 2022 Revenue from external customers $ 10,458 $ 629,079 $ 307,525 $ 107,744 $ — $ 1,054,806 Intersegment revenues 407,640 6,582 1,514 705 (416,441) — Depreciation, Property and equipment 1,378 8,799 4,631 2,376 — 17,184 Amortization, Intangibles 384 — — — — 384 Operating income (loss) 13,592 50,130 24,503 4,868 (37,566) 55,527 Net income (loss) attributable to PriceSmart, Inc. 5,825 42,006 19,284 3,356 (37,566) 32,905 Long-lived assets (other than deferred tax assets) 73,083 509,961 213,963 167,027 — 964,034 Goodwill 8,981 24,142 10,050 — — 43,173 Total assets 238,551 924,049 492,744 232,576 — 1,887,920 Capital expenditures, net 5,491 12,244 3,401 4,283 — 25,419 Three Months Ended November 30, 2021 Revenue from external customers $ 13,423 $ 572,065 $ 272,487 $ 117,381 $ — $ 975,356 Intersegment revenues 414,342 4,998 1,443 822 (421,605) — 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) 73,321 495,517 203,042 167,762 — 939,642 Goodwill 8,981 24,313 10,038 — — 43,332 Total assets 212,371 867,868 460,381 248,693 — 1,789,313 Capital expenditures, net 1,909 12,690 7,073 12,383 — 34,055 As of August 31, 2022 Long-lived assets (other than deferred tax assets) $ 71,743 $ 498,204 $ 218,021 $ 175,194 $ — $ 963,162 Goodwill 8,981 24,250 10,072 — — 43,303 Investment in unconsolidated affiliates — 10,534 — — — 10,534 Total assets 230,411 867,898 474,411 235,680 — 1,808,400 (1)Management considers its club in the U.S. Virgin Islands to be part of its Caribbean operations. —(Continued) PRICESMART, INC. However, for future clubs with a smaller physical footprint, beginning with our San Miguel, El Salvador Club, we have redesigned the layout in order to accommodate a similar number of selling pallet positions as our larger clubs. We strategically invest in technology to enhance Member experience and convenience. We believe technology allows us to access valuable data that supports our ability to increase efficiencies and gain important insights about our Number of Number of Anticipated Warehouse Clubs Warehouse Clubs Warehouse in Operation as of in Operation as of Club Openings Country/Territory November 30, 2021 November 30, 2022 In Fiscal Year 2023 Colombia 9 9 1 Costa Rica 8 8 — Panama 7 7 — Dominican Republic 5 5 — Guatemala 5 5 — Trinidad 4 4 — Honduras 3 3 — El Salvador 2 2 1 Nicaragua 2 2 — Jamaica 1 2 — Aruba 1 1 — Barbados 1 1 — U.S. Virgin Islands 1 1 — Totals 49 50 2 We are currently constructing a A devaluation of local currency reduces the value of sales and membership income that is generated in that country when translated to U.S. dollars for our consolidated 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 could impact demand for the merchandise affected by the price increase. We may also modify the mix of imported versus local merchandise and/or the source of imported merchandise to mitigate the impact of currency fluctuations. Our Colombia market has experienced a foreign currency devaluation against the U.S. dollar of approximately Growth III.Drive Incremental Net Merchandise Sales Three Months Ended November 30, 2022 November 30, 2021 Amount % of net Increase/ (decrease) from prior year Change Amount % of net Central America $ 617,052 60.2 % $ 56,456 10.1 % $ 560,596 59.4 % Caribbean 302,864 29.5 34,530 12.9 268,334 28.4 Colombia 105,547 10.3 (9,566) (8.3) 115,113 12.2 Net merchandise sales $ 1,025,463 100.0 % $ 81,420 8.6 % $ 944,043 100.0 % Currency exchange rate fluctuations for the Three months ended November 30, 2022 Amount % change Central America $ (2,312) (0.4) % Caribbean 4,664 1.8 Colombia (23,568) (20.5) Net merchandise sales $ (21,216) (2.3) % February 28, 2023, respectively. contribution to the favorable currency fluctuations in this segment. a year ago. March 5, 2023. year: Thirteen Weeks Ended December 4, 2022 November 28, 2021 % Increase/(decrease) in comparable net merchandise sales % Increase/(decrease) in comparable net merchandise sales Central America 8.0 % 14.1 % Caribbean 6.6 5.0 Colombia (13.1) (2.8) Consolidated comparable net merchandise sales 5.0 % 9.4 % Comparison of Comparable net merchandise sales for those warehouse clubs that were open for at least 13 ½ months for some or all of the twenty-six week period ended March 5, 2023 increased 6.8%. Our Dominican Republic market continued its strong performance in the thirteen-week devaluation. March 5, 2023: Currency Exchange Rate Fluctuations for the Thirteen Weeks Ended December 4, 2022 Amount % change Central America $ (1,541) (0.2) % Caribbean 4,777 1.7 Colombia (22,763) (19.6) Consolidated comparable net merchandise sales $ (19,527) (2.1) % Overall, the mix of currency fluctuations within our markets had an approximately March 5, 2023. Membership Income Three Months Ended November 30, November 30, 2022 2021 Amount Increase/ (Decrease) from prior year % Change Membership income % to net merchandise club sales Amount Membership income - Central America $ 9,525 $ 749 8.5 % 1.5 % $ 8,776 Membership income - Caribbean 4,415 442 11.1 1.5 3,973 Membership income - Colombia 1,955 (87) (4.3) 1.9 2,042 Membership income - Total $ 15,895 $ 1,104 7.5 % 1.6 % $ 14,791 Number of accounts - Central America 953,660 35,731 3.9 % 917,929 Number of accounts - Caribbean 455,800 23,656 5.5 432,144 Number of accounts - Colombia 347,739 6,327 1.9 341,412 Number of accounts - Total 1,757,199 65,714 3.9 % 1,691,485 February 28, 2023 periods. Other Revenue Three Months Ended November 30, 2022 November 30, 2021 Amount Increase/ (decrease) from prior year % Change Amount Non-merchandise revenue $ — $ (3,307) (100.0) % $ 3,307 Miscellaneous income 2,397 351 17.2 2,046 Rental income 593 (42) (6.6) 635 Other revenue $ 2,990 $ (2,998) (50.1) % $ 5,988 Results of Operations Three Months Ended Results of Operations Consolidated November 30, 2022 November 30, 2021 Increase/(Decrease) (Amounts in thousands, except percentages and number of warehouse clubs) Net merchandise sales Net merchandise sales $ 1,025,463 $ 944,043 $ 81,420 Total gross margin $ 166,395 $ 150,850 $ 15,545 Total gross margin percentage 16.2 % 16.0 % 0.2 % Revenues Total revenues $ 1,054,806 $ 975,356 $ 79,450 Percentage change from prior period 8.1 % Comparable net merchandise sales Total comparable net merchandise sales increase/(decrease) 5.0 % 9.4 % (4.4) % Total revenue margin Total revenue margin $ 185,749 $ 170,287 $ 15,462 Total revenue margin percentage 17.6 % 17.4 % 0.2 % Selling, general and administrative Selling, general and administrative $ 130,222 $ 124,270 $ 5,952 Selling, general and administrative percentage of total revenues 12.3 % 12.7 % (0.4) % Warehouse clubs Warehouse clubs at period end 50 49 1 Warehouse club sales square feet at period end 2,484 2,424 60 Three Months Ended November 30, % of November 30, % of Results of Operations Consolidated 2022 Total Revenue 2021 Total Revenue Operating income- by segment Central America $ 50,130 4.8 % $ 43,379 4.4 % Caribbean 24,503 2.3 19,878 2.0 Colombia 4,868 0.5 6,378 0.7 United States 13,592 1.3 6,257 0.7 Reconciling Items (1) (37,566) (3.6) (29,875) (3.1) Operating income - Total $ 55,527 5.3 % $ 46,017 4.7 % (1)The reconciling items reflect the amount eliminated upon consolidation of intersegment transactions. The reconciling items reflect the amount eliminated upon consolidation of intersegment transactions. disclosed: Three Months Ended November 30, % of November 30, % of 2022 Total Revenue 2021 Total Revenue Warehouse club and other operations $ 96,892 9.2 % $ 91,196 9.4 % General and administrative 33,172 3.1 31,693 3.2 Pre-opening expenses — — 970 0.1 Loss on disposal of assets 158 — 411 — Total Selling, general and administrative $ 130,222 12.3 % $ 124,270 12.7 % Total revenue margin increased 30 basis points (0.3%) for the six months ended February 28, 2023 compared to the prior-year period, which is primarily the result of higher total gross margin percentage of 30 basis points (0.3%). and 2022. . Interest Expense Three Months Ended November 30, November 30, 2022 2021 Amount Change Amount Interest expense on loans $ 2,653 $ 1,318 $ 1,335 Interest expense related to hedging activity 347 (503) 850 Less: Capitalized interest (251) 344 (595) Net interest expense $ 2,749 $ 1,159 $ 1,590 year period. Three Months Ended November 30, November 30, 2022 2021 Amount Increase from prior year % Change Amount Other income (expense), net $ (4,566) $ (5,975) (424.1) % $ 1,409 Provision for Income Taxes Three Months Ended November 30, November 30, 2022 2021 Amount Increase from prior year Amount Provision for income taxes $ 16,426 $ 612 $ 15,814 Effective tax rate 33.3 % 34.1 % Three Months Ended November 30, November 30, 2022 2021 Amount Change % Change Amount Other comprehensive loss $ (551) $ 5,580 91.0 % $ (6,131) Colombia and Dominican Republic subsidiaries. LIQUIDITY AND CAPITAL RESOURCES November 30, August 31, 2022 2022 Amounts held by foreign subsidiaries $ 214,329 $ 203,952 Amounts held domestically 67,359 47,421 Total cash and cash equivalents, including restricted cash $ 281,688 $ 251,373 November 30, August 31, 2022 2022 Amounts held by foreign subsidiaries $ 8,920 $ 11,160 Amounts held domestically — — Total short-term investments $ 8,920 $ 11,160 Our cash flows are summarized as follows (in thousands): Three Months Ended November 30, November 30, 2022 2021 Change Net cash provided by (used in) operating activities $ 30,463 $ (13,339) $ 43,802 Net cash used in investing activities (21,493) (12,050) (9,443) Net cash provided by financing activities 14,719 1,198 13,521 Effect of exchange rates 6,626 1,312 5,314 Net increase (decrease) in cash and cash equivalents $ 30,315 $ (22,879) $ 53,194 in that market in shorter dated certificates of deposits or other liquid investments classified as cash or cash equivalents. First Payment Second Payment Declared Amount Record Date Amount Record Date Amount 2/3/2022 $ 0.86 2/15/2022 2/28/2022 $ 0.43 8/15/2022 8/31/2022 $ 0.43 Please refer to “Item 1. Financial Statements: Notes to Consolidated Financial Statements, Note 8 – Derivative Instruments and Hedging Activities” for further discussion. Critical Accounting Estimates February 28, 2023. With respect to income taxes paid, if the estimated income taxes paid or withheld exceed the actual income tax due this creates an income tax receivable. In most countries where we operate, the governments have implemented additional collection procedures, such as requiring credit card processors to remit a portion of sales processed via credit and debit cards directly to the government as advance payments of VAT and/or income tax. This collection mechanism generally leaves us with net VAT and/or income tax receivables, forcing us to process significant refund claims on a recurring basis. These refund or offset processes can take anywhere from several months to several years to complete. Goodwill Period (a) (b) (c) (d) September 1, 2022 - September 30, 2022 — — — N/A October 1, 2022 - October 31, 2022 20,621 $ 63.05 — N/A November 1, 2022 - November 30, 2022 — $ — — N/A Total 20,621 $ 63.05 — — Amended and Restated Certificate of Incorporation of the Company. Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company. Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company. Amendment to Second Amended and Restated Bylaws of Certification Pursuant to Section 302 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) (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. SIGNATURES PRICESMART, INC. Date: By: /s/ Robert E. Price Interim Chief Executive Officer (Principal Executive Officer) Date: By: /s/ MICHAEL L. MCCLEARY Michael L. McCleary Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)November 30, 2022¨oTitle of each class ¨o¨ox ¨o¨¨oEmerging growth company ¨o¨o¨o31,050,91731,001,100 shares of its common stock, par value $0.0001 per share, outstanding at DecemberMarch 31, 2022PRICESMART,PRICESMART, INC.NOVEMBER 30, 2022 FEBRUARY 28, 2023 (UNAUDITED) AND AUGUST 31, 2022 NOVEMBER 30, 2022 FEBRUARY 28, 2023 AND 20212022 - UNAUDITED NOVEMBER 30, 2022 FEBRUARY 28, 2023 AND 20212022 - UNAUDITED NOVEMBER 30, 2022 FEBRUARY 28, 2023 AND 20212022 - UNAUDITEDTHREETHE SIX MONTHS ENDED NOVEMBER 30, 2022 FEBRUARY 28, 2023 AND 20212022 - UNAUDITED78910525753585459545954595560556055605661PARTPART I—FINANCIAL INFORMATIONITEMNovember 30, 2022February 28, 2023 and the consolidated balance sheet as of August 31, 2022, the unaudited consolidated statements of income for the three and six months ended November 30,February 28, 2023 and 2022, and 2021, the unaudited consolidated statements of comprehensive income for the three and six months ended November 30,February 28, 2023 and 2022, and 2021, the unaudited consolidated statements of equity for the three and six months ended November 30,February 28, 2023 and 2022, and 2021, and the unaudited consolidated statements of cash flows for the threesix months ended November 30,February 28, 2023 and 2022 and 2021 are included herein. Also included herein are the notes to the unaudited consolidated financial statements.
PRICESMART,PRICESMART, INC.
February 28,
2023
(Unaudited)August 31,
2022ASSETS Current Assets: Cash and cash equivalents $ 260,927 $ 237,710 Short-term restricted cash 9,110 3,013 Short-term investments 54,322 11,160 Receivables, net of allowance for doubtful accounts of $54 as of February 28, 2023 and $103 as of August 31, 2022, respectively 16,401 13,391 Merchandise inventories 449,101 464,411 Prepaid expenses and other current assets (includes $41 and $2,761 as of February 28, 2023 and August 31, 2022, respectively, for the fair value of derivative instruments) 46,910 43,894 Total current assets 836,771 773,579 Long-term restricted cash 10,515 10,650 Property and equipment, net 774,826 757,241 Operating lease right-of-use assets, net 106,043 111,810 Goodwill 43,185 43,303 Deferred tax assets 27,898 28,355 Other non-current assets (includes $15,994 and $11,884 as of February 28, 2023 and August 31, 2022, respectively, for the fair value of derivative instruments) 76,474 72,928 Investment in unconsolidated affiliates 10,460 10,534 Total Assets $ 1,886,172 $ 1,808,400 LIABILITIES AND EQUITY Current Liabilities: Short-term borrowings $ 10,133 $ 10,608 Accounts payable 406,581 408,407 Accrued salaries and benefits 35,340 44,097 Deferred income 32,665 29,228 Income taxes payable 9,587 7,243 Other accrued expenses and other current liabilities (includes $171 and $82 as of February 28, 2023 and August 31, 2022, respectively, for the fair value of derivative instruments) 43,256 38,667 Operating lease liabilities, current portion 7,144 7,491 Dividends payable 14,456 — Long-term debt, current portion 27,421 33,715 Total current liabilities 586,583 579,456 Deferred tax liability 2,105 2,165 Long-term income taxes payable, net of current portion 4,729 5,215 Long-term operating lease liabilities 113,335 118,496 Long-term debt, net of current portion 126,383 103,556 Other long-term liabilities (includes $9,125 and $8,440 for post-employment plans as of February 28, 2023 and August 31, 2022, respectively) 9,125 8,439 Total Liabilities 842,260 817,327 Stockholders' Equity: Common stock $0.0001 par value, 45,000,000 shares authorized; 31,869,393 and 31,697,590 shares issued and 31,001,117 and 30,904,826 shares outstanding (net of treasury shares) as of February 28, 2023 and August 31, 2022, respectively 3 3 Additional paid-in capital 492,099 481,406 Accumulated other comprehensive loss (183,703) (195,586) Retained earnings 772,430 736,894 Less: treasury stock at cost, 868,276 shares as of February 28, 2023 and 792,764 shares as of August 31, 2022 (36,917) (31,644) Total Stockholders' Equity 1,043,912 991,073 Total Liabilities and Equity $ 1,886,172 $ 1,808,400
PRICESMART,PRICESMART, INC.Three Months Ended Six Months Ended February 28,
2023February 28,
2022February 28,
2023February 28,
2022Revenues: Net merchandise sales $ 1,115,999 $ 1,011,896 $ 2,141,462 $ 1,955,939 Export sales 6,882 8,674 17,340 19,208 Membership income 16,176 15,071 32,071 29,862 Other revenue and income 3,132 2,916 6,122 8,904 Total revenues 1,142,189 1,038,557 2,196,995 2,013,913 Operating expenses: Cost of goods sold: Net merchandise sales 937,462 853,633 1,796,530 1,646,826 Export sales 6,563 8,215 16,552 18,282 Non-merchandise — — — 1,809 Selling, general and administrative: Warehouse club and other operations 103,630 93,993 200,522 185,189 General and administrative 32,759 33,951 65,931 65,644 Separation costs associated with Chief Executive Officer departure Separation costs associated with Chief Executive Officer departure 7,747 — 7,747 — Pre-opening expenses 89 130 89 1,100 Loss on disposal of assets 139 313 297 724 Total operating expenses 1,088,389 990,235 2,087,668 1,919,574 Operating income 53,800 48,322 109,327 94,339 Other income (expense): Interest income 1,942 549 3,099 1,067 Interest expense (2,814) (2,438) (5,563) (4,028) Other income (expense), net (5,344) (819) (9,910) 590
loss of unconsolidated affiliatesTotal other expense Total other expense (6,216) (2,708) (12,374) (2,371) Income before provision for income taxes and loss of unconsolidated affiliates Income before provision for income taxes and loss of unconsolidated affiliates 47,584 45,614 96,953 91,968 Provision for income taxes (16,202) (14,139) (32,628) (29,953) Loss of unconsolidated affiliates (35) (14) (73) (24) Net income 31,347 31,461 64,252 61,991 Less: Net income attributable to noncontrolling interest Less: Net income attributable to noncontrolling interest — — — (19) Net income attributable to PriceSmart, Inc. $ 31,347 $ 31,461 $ 64,252 $ 61,972 Net income attributable to PriceSmart, Inc. per share available for distribution: Basic $ 1.02 $ 1.03 $ 2.07 $ 2.01 Diluted $ 1.02 $ 1.03 $ 2.07 $ 2.01 Shares used in per share computations: Basic 30,741 30,578 30,727 30,565 Diluted 30,760 30,582 30,740 30,593
PRICESMART,PRICESMART, INC.Three Months Ended Six Months Ended February 28,
2023February 28,
2022February 28,
2023February 28,
2022 Net income $ 31,347 $ 31,461 $ 64,252 $ 61,991 Less: net income attributable to noncontrolling interest — — — (19) Net income attributable to PriceSmart, Inc. $ 31,347 $ 31,461 $ 64,252 $ 61,972 Other Comprehensive Income, net of tax: 12,199 2,413 11,314 (5,718) Defined benefit pension plan: Net gain/(loss) arising during period (31) 20 (59) 37 Amortization of prior service cost and actuarial gains included in net periodic pensions cost 37 30 74 64 Total defined benefit pension plan 6 50 15 101 Unrealized gains/(losses) on change in derivative obligations 160 883 (536) (418) Unrealized gains/(losses) on change in fair value of interest rate swaps 83 880 (1,632) 4,130 Amounts reclassified from accumulated other comprehensive income to other expense, net for settlement of derivatives (14) — 2,722 — Total derivative instruments 229 1,763 554 3,712 Other comprehensive income (loss) 12,434 4,226 11,883 (1,905) Comprehensive income 43,781 35,687 76,135 60,067 Less: comprehensive income attributable to noncontrolling interest — — — 3 Comprehensive income attributable to PriceSmart, Inc. $ 43,781 $ 35,687 $ 76,135 $ 60,064 PRICESMART,PRICESMART, INC.Three Months Ended Common Stock Additional
Paid-in
CapitalAccumulated
Other
Comprehensive
LossRetained
EarningsTreasury Stock Total
EquityShares Amount Shares Amount Total
EquityBalance at November 30, 2021 Balance at November 30, 2021 31,598 $ 3 $ 469,170 $ (188,639) $ 689,430 736 $ (27,818) $ 942,146 Purchase of treasury stock — — — — — 19 (1,351) (1,351) Issuance of restricted stock award 31 — — — — — — — Forfeiture of restricted stock awards (3) — — — — — — — Stock-based compensation — — 4,107 — — — — 4,107 Dividend paid to stockholders Dividend paid to stockholders — — — — (13,275) — — (13,275) Dividend payable to stockholders Dividend payable to stockholders — — — — (13,430) — — (13,430) Net income — — — — 31,461 — — 31,461 Other comprehensive income Other comprehensive income — — — 4,226 — — — 4,226 Balance at February 28, 2022 Balance at February 28, 2022 31,626 $ 3 $ 473,277 $ (184,413) $ 694,186 755 $ (29,169) $ 953,884 Balance at November 30, 2022 Balance at November 30, 2022 31,858 $ 3 $ 485,096 $ (196,137) $ 769,799 807 $ (32,398) $ 1,026,363 Purchase of treasury stock — — — — — 61 (4,519) (4,519) Issuance of restricted stock award 63 — — — — — — — Forfeiture of restricted stock awards (52) — — — — — — — Stock-based compensation — — 7,003 — — — — 7,003 Dividend paid to stockholders Dividend paid to stockholders — — — — (14,260) — — (14,260) Dividend payable to stockholders Dividend payable to stockholders — — — — (14,456) — — (14,456) Net income — — — — 31,347 — — 31,347 Other comprehensive income Other comprehensive income — — — 12,434 — — — 12,434 Balance at February 28, 2023 Balance at February 28, 2023 31,869 $ 3 $ 492,099 $ (183,703) $ 772,430 868 $ (36,917) $ 1,043,912 Six Months Ended Common Stock Additional
Paid-in
CapitalAccumulated
Other
Comprehensive
LossRetained
EarningsTreasury Stock Total
Stockholders'
Equity
Attributable to
PriceSmart, Inc.Noncontrolling
InterestTotal
EquityShares Amount Shares Amount 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 — — — — — 51 (3,784) (3,784) — (3,784) Issuance of treasury stock (9) — (699) — — (9) 699 — — — Issuance of restricted stock award 171 — — — — — — — — — Forfeiture of restricted stock awards (4) — — — — — — — — — Stock-based compensation — — 8,674 — — — — 8,674 — 8,674 Dividend paid to stockholders — — — — (13,275) — — (13,275) — (13,275) Dividend payable to stockholders — — — — (13,430) — — (13,430) — (13,430) Net income — — — — 61,972 — — 61,972 19 61,991 Other comprehensive income (loss) — — — (1,905) — — — (1,905) 3 (1,902) Sale of Aeropost stock — — 287 — — — — 287 (891) (604) Balance at February 28, 2022 31,626 $ 3 $ 473,277 $ (184,413) $ 694,186 755 $ (29,169) $ 953,884 $ — $ 953,884 Balance at August 31, 2022 31,698 $ 3 $ 481,406 $ (195,586) $ 736,894 793 $ (31,644) $ 991,073 $ — $ 991,073 Purchase of treasury stock — — — — — 82 (5,819) (5,819) — (5,819) Issuance of treasury stock (7) — (546) — — (7) 546 — — — Issuance of restricted stock award 237 — — — — — — — — — Forfeiture of restricted stock awards (59) — — — — — — — — — Stock-based compensation — — 11,239 — — — — 11,239 — 11,239 Dividend paid to stockholders — — — — (14,260) — — (14,260) — (14,260) Dividend payable to stockholders — — — — (14,456) — — (14,456) — (14,456) Net income — — — — 64,252 — — 64,252 — 64,252 Other comprehensive income — — — 11,883 — — — 11,883 — 11,883 Balance at February 28, 2023 31,869 $ 3 $ 492,099 $ (183,703) $ 772,430 868 $ (36,917) $ 1,043,912 $ — $ 1,043,912
Six Months Ended February 28,
2023February 28,
2022Operating Activities: Net Income $ 64,252 $ 61,991 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 35,443 32,701 Allowance for doubtful accounts (49) 12 Loss on sale of property and equipment 297 724 Deferred income taxes (737) (2,124) Equity in losses of unconsolidated affiliates 73 24 Stock-based compensation 11,239 8,674 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 (6,513) (19,503) Merchandise inventories 15,310 (80,608) Accounts payable (2,634) (9,811) Net cash provided by (used in) operating activities 116,681 (7,920) Investing Activities: Proceeds from the disposal of Aeropost, net of divested cash — 4,959 Additions to property and equipment (53,016) (60,468) Purchases of short-term investments (47,500) (17,658) Proceeds from settlements of short-term investments 4,301 41,075 Proceeds from settlements of long-term investments — 1,484 Proceeds from disposal of property and equipment 137 77 Net cash used in investing activities (96,078) (30,531) Financing Activities: Proceeds from long-term bank borrowings 33,712 30,180 Repayment of long-term bank borrowings (16,994) (10,969) Proceeds from short-term bank borrowings 301 20,179 Repayment of short-term bank borrowings — (4,488) Cash dividend payments (14,260) (13,275) Purchase of treasury stock (5,819) (3,784) Net cash provided by (used in) financing activities (3,060) 17,843 Effect of exchange rate changes on cash and cash equivalents and restricted cash 11,636 42 Net increase (decrease) in cash, cash equivalents 29,179 (20,566) Cash, cash equivalents and restricted cash at beginning of period 251,373 215,479 Cash, cash equivalents and restricted cash at end of period $ 280,552 $ 194,913 Supplemental disclosure of noncash investing activities: Capital expenditures accrued, but not yet paid $ 3,937 $ 8,369 Dividends declared but not yet paid 14,456 13,430 Six Months Ended February 28,
2023February 28,
2022Cash and cash equivalents $ 260,927 $ 178,705 Short-term restricted cash 9,110 4,172 Long-term restricted cash 10,515 12,036 Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 280,552 $ 194,913 November 30, 2022NOTE"we""our") business consists primarily of international membershipNovember 30, 2022,February 28, 2023, the Company had 50 warehouse clubs in operation in 12 countries and one U.S. territory (nine in Colombia; eight in Costa Rica; seven in Panama; five in the Dominican Republic and Guatemala,Guatemala; four in Trinidad; three in Honduras; two each in El Salvador, Jamaica,Nicaragua and Nicaragua;Jamaica; and one each in Aruba, Barbados and the United States Virgin Islands), of which the Company owns 100% of the corresponding legal entities (see Note 2 - Summary of Significant Accounting Policies). In addition, the Company plans to open two warehouse clubs in El Salvador, one in San Miguel in May 2023 and the other in Santa Ana in early 2024. The Company also plans to open a warehouse club in San Miguel, El Salvador in the spring of 2023 and a warehouse club in Medellín, Colombia and Escuintla, Guatemala in the summer of 2023. Once these twofour new clubs are open, the Company will operate 5254 warehouse clubs. Our operating segments are the United States, Central America, the Caribbean and Colombia.Expand Real Estate Footprint withInvest in Remodeling Current PriceSmart Clubs, Adding New ClubsPriceSmart Locations and Opening More Distribution Facilities;Centers;noncontrollingnon-controlling interests. The Company reports noncontrollingnon-controlling 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 year.— (Continued)November 30, 2022February 28, 2023 are listed below:PresentationFebruary 28,
2023August 31,
2022Short-term restricted cash $ 9,110 $ 3,013 Long-term restricted cash 10,515 10,650 $ 19,625 $ 13,663 mainly of cash deposits held within banking institutions in compliance with federal regulatory requirements in Costa Rica and Panama. In addition, the Company is required to maintain a certificate of deposit and/or security deposits of Trinidad dollars, as measured in U.S. dollars, of approximately $8.4$7.7 million with a few of its lenders as compensating balances for several U.S. dollar and euro denominated loans payable over several years. The certificates of deposit will be reduced annually commensurate with the loan balances.November 30, 2022February 28, 2023 and $43.3 million as of August 31, 2022. The Company reviews reported goodwill 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.
— (Continued)athe 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 Company had income tax receivables of $11.2$11.3 million and $11.0 million and deferred tax assets of $3.7$4.0 million and $3.5 million as of November 30, 2022February 28, 2023 and August 31, 2022, respectively, in these countries. 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.•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.February 28,
2023August 31,
2022Prepaid expenses and other current assets $ 1,898 $ 3,890 Other non-current assets 33,964 32,460 Total amount of VAT receivables reported $ 35,862 $ 36,350 — (Continued)February 28,
2023August 31,
2022Prepaid expenses and other current assets $ 13,949 $ 12,077 Other non-current assets 20,725 19,985 Total amount of income tax receivables reported $ 34,674 $ 32,062 TheThe Company does not combine lease and non-lease components.lease expense is incurred. The Company’s variable lease payments generally relate to amounts the Company pays for additional contingent rent based on a contractually stipulated percentage of sales.WhenIf the Company determines that an award is forfeited,unlikely to vest, any previously recorded expense is then reversed.
— (Continued)threesix months ended November 30, 2022,February 28, 2023, the Company reissued approximately 7,000 treasury shares.nonfinancialnon-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring or nonrecurringnon-recurring 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.
— (Continued)November 30, 2022February 28, 2023 and August 31, 2022.
— (Continued)sold,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, 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.Formarketplace and casillero operations, which were disposeddisposal of Aeropost in the first quarter of fiscal year 2022, the Company included the costs for the marketplace and casillero operations, of external and internal shipping, handling and other direct costs incurred to provide delivery, insurance and customs processing services in cost of goods sold, non-merchandise.November 30,February 28, 2023 and 2022 and 2021 (in thousands):Three Months Ended Six Months Ended February 28,
2023February 28,
2022February 28,
2023February 28,
2022Effect on other comprehensive income (loss) due to foreign currency translation $ 12,199 $ 2,413 $ 11,314 $ (5,718) Three Months Ended Six Months Ended February 28,
2023February 28,
2022February 28,
2023February 28,
2022Currency loss $ (5,555) $ (1,775) $ (10,058) $ (3,638) three-monthsix-month period ended November 30, 2022,February 28, 2023, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of November 30, 2022February 28, 2023 that the Company expects to have a material impact on its consolidated financial statements.
— (Continued)non merchandisenon-merchandise revenue, net of sales taxes, on transactions where the Company had determined that it was the agent in the transaction. These transactions primarily consisted of contracts the Company entered into with its customers to provide delivery, insurance and customs processing services for products its customers purchased online in the United States either directly from other vendors utilizing the vendor’s website or through the Company’s marketplace site. Revenue was recognized when the Company’s performance obligations were completed (that is when delivery of the items have been made to the destination point) and was recorded in “non-merchandise revenue” on the consolidated statements of income. Prepayment for orders for which the Company had not fulfilled its performance obligation were recorded as deferred income. Additionally, the Company recorded 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 was acting as an agent and was not the principal in the sale of those goods being purchased from the vendors by the Company’s customers.thirteen12 countries. The annual fee for a Platinum Membership is approximately $75.$75. The Platinum Membership provides Members with a 2% rebate on most items, up to an annual maximum of $500.$500. The rebate is issued annually to Platinum Members on March 1 and expires August 31. Platinum Members can apply this rebate to future purchases at the warehouse club during the redemption period. The Company records this 2% rebate as a reduction of revenue at the time of the sales transaction. Accordingly, the Company has reduced warehouse sales and has accrued a liability within other accrued expenses and other current liabilities, platinum rewards. The Company has determined that breakage revenue is 5%5% of the awards issued; therefore, it records 95% of the Platinum Membership liability at the time of sale. Annually, the Company reviews for expired unused rebates outstanding, and the expired unused rebates are recognized as “Other revenue and income” on the consolidated statements of income.
— (Continued)card.cards. The Company periodically reviews unredeemed outstanding gift cards,certificates, and the gift cardscertificates that have expired are recognized as “Other revenue and income” on the consolidated statements of income.Contract Liabilities February 28,
2023August 31,
2022Deferred membership income $ 31,128 $ 28,000 Other contract performance liabilities $ 20,140 $ 10,473 Three Months Ended Six Months Ended February 28,
2023February 28,
2022February 28,
2023February 28,
2022Foods & Sundries $ 552,153 $ 492,776 $ 1,064,046 $ 963,726 Fresh Foods 325,479 289,122 620,766 558,797 Hardlines 119,689 120,335 235,285 232,274 Softlines 66,372 64,561 120,790 115,034 Other Business 52,306 45,102 100,575 86,108 Net Merchandise Sales $ 1,115,999 $ 1,011,896 $ 2,141,462 $ 1,955,939 — (Continued)three-monthsthree and six-months ended November 30,February 28, 2023 and 2022 and 2021 (in thousands, except per share amounts):Three Months Ended Six Months Ended February 28,
2023February 28,
2022February 28,
2023February 28,
2022Net income attributable to PriceSmart, Inc. $ 31,347 $ 31,461 $ 64,252 $ 61,972 Less: Allocation of income to unvested stockholders (51) (78) (627) (600) Net income attributable to PriceSmart, Inc. available for distribution Net income attributable to PriceSmart, Inc. available for distribution $ 31,296 $ 31,383 $ 63,625 $ 61,372 Basic weighted average shares outstanding 30,741 30,578 30,727 30,565 Add dilutive effect of performance stock units (two-class method) 19 4 13 28 Diluted average shares outstanding 30,760 30,582 30,740 30,593 Basic net income per share $ 1.02 $ 1.03 $ 2.07 $ 2.01 Diluted net income per share $ 1.02 $ 1.03 $ 2.07 $ 2.01 No dividends were declared by the Company’s Board of Directors during the first three months of fiscal year 2023. .First Payment Second Payment
Date
Paid
Date
PaidDeclared Amount Record
DateDate
PaidDate
PayableAmount Record
DateDate
PaidDate
PayableAmount 2/3/2023 2/3/2023 $ 0.92 2/16/2023 2/28/2023 N/A $ 0.46 8/15/2023 N/A 8/31/2023 $ 0.46 2/3/2022 $ 0.86 2/15/2022 2/28/2022 N/A $ 0.43 8/15/2022 8/31/2022 N/A $ 0.43 — (Continued)Total Beginning balance, September 1, 2022 $ (195,586) $ — $ (195,586) Foreign currency translation adjustments 11,314 — 11,314 15 — 15 554 — 554 Ending balance, February 28, 2023 $ (183,703) $ — $ (183,703) Attributable to
PriceSmartNoncontrolling
InterestsTotal Beginning balance, September 1, 2021 $ (182,508) $ 251 $ (182,257) Foreign currency translation adjustments (5,718) 3 (5,715) 101 — 101 3,712 — 3,712 Sale of Aeropost — (254) (254) Ending balance, February 28, 2022 $ (184,413) $ — $ (184,413) Attributable to
PriceSmartNoncontrolling
InterestsTotal Beginning balance, September 1, 2021 $ (182,508) $ 251 $ (182,257) Foreign currency translation adjustments (19,034) 3 (19,031) (341) — (341) 6,170 — 6,170 Amounts reclassified from accumulated other comprehensive loss 127 — 127 Sale of Aeropost — $ (254) (254) Ending balance, August 31, 2022 $ (195,586) $ — $ (195,586)
February 28,
2023August 31,
2022Retained earnings not available for distribution $ 8,971 $ 8,648 — (Continued)cyber-attackscyberattacks as well as due to possible third-party claims as a result of the cyber-attacks. The notice suggested that aggregate losses attributable to these losses and future claims could exceed $3,000,000.$3.0 million. On October 17, 2022, PriceSmart received a letter from Click USA Inc. supplementing its August 5, 2022 notice with additional information concerning Click USA Inc.’s direct losses and the existence or likelihood of third-party claims and potential related losses. Click USA Inc.’s letter estimates its total losses for direct and third-party claims at $2.9 million. Per the express terms of the agreement, the maximum amount of all losses for which PriceSmart may be liable for claims arising out of allegations concerning the above-referenced representations and warranties is $4,000,000.$4.0 million. In its October 17, 2022 letter, Click USA Inc. notified PriceSmart of a separate and unrelated claim for breach of representations and warranties in the Stock Purchase Agreement relating to the alleged misclassification of an employee in Costa Rica. Click USA Inc. alleges that the amount of possible loss relating to this claim is approximately $300,000. PriceSmart intends to vigorously defend itself against all of Click USA Inc.’s claims and, as such, we have concluded that a loss related to this matter is not probable and any potential loss is not reasonably estimable; therefore, we have not accrued a liability for this matter. –we estimatethe Company uses an estimated annual effective tax rate (AETR) to calculate income tax expense. Our 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. 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 ourits ability to recover our deferred tax assets in the jurisdictionjurisdictions 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 results of discontinued operations and incorporateincorporates 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 manage the underlying businesses. In evaluating the objective evidence that historical results provide, we considerthe Company considers three years of cumulative operating income (loss).threesix months ended November 30, 2022.November 30, 2022February 28, 2023 and August 31, 2022, the Company has recorded within other accrued expenses and other current liabilities a total of $1.4 million and $1.1 million, respectively, for various non-income tax related tax contingencies.$11.2$11.3 million and $11.0 million, as of February 28, 2023 and August 31, 2022, respectively, and deferred tax assets of $3.7$4.0 million and $3.5 million as of November 30, 2022February 28, 2023 and August 31, 2022, respectively, in these countries. While the rules related to 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.November 30, 2022February 28, 2023 and August 31, 2022, the Company had approximately $15.8$14.4 million and $16.5 million, respectively, in contractual obligations for construction services not yet rendered.November 30, 2022,February 28, 2023, the Company had entered into three land purchase agreements for new warehouse clubs that, if completed, would result in the use of approximately $9.7$10.6 million in cash. Lastly, the Company has one lease option agreement for one additional warehouse club. One of the land purchase agreements and the lease option described above were executed after February 28, 2023, but prior to issuance of these financial statements. Refer to "Note 10 – Subsequent Events" for more information.November 30, 2022February 28, 2023 (in thousands):Entity %
OwnershipInitial
InvestmentAdditional
InvestmentsNet Income (Loss)
Inception to
DateCompany’s
Variable
Interest
in EntityGolfPark Plaza, S.A. 50 % $ 4,616 $ 2,402 $ (96) $ 6,922 $ 99 $ 7,021 Price Plaza Alajuela PPA, S.A. 50 % 2,193 1,236 109 3,538 785 4,323 Total $ 6,809 $ 3,638 $ 13 $ 10,460 $ 884 $ 11,344
Ownership
Investment
Investments
Inception to
Date
Variable
Interest
in Entity
to Future
Additional
Investments(1)
Maximum
Exposure
to Loss in
Entity(2)
Facilities Used February 28, 2023 - Committed $ 75,000 $ — $ 151 $ 74,849 — % February 28, 2023 - Uncommitted 91,000 10,133 — 80,867 12.7 February 28, 2023 - Total $ 166,000 $ 10,133 $ 151 $ 155,716 12.7 % August 31, 2022 - Committed $ 75,000 — 73 $ 74,927 — % August 31, 2022 - Uncommitted 91,000 10,608 — 80,392 5.3 August 31, 2022 - Total $ 166,000 $ 10,608 $ 73 $ 155,319 5.3 % NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)November 30, 2022February 28, 2023 and August 31, 2022, the Company was in compliance with all covenants or amended covenants for each of its short-term facility agreements. These facilities generally expire annually or bi-annually and are normally renewed. One of these facilities is a committed credit agreement with one bank for $75.0 million. In exchange for the bank’s commitment to fund any drawdowns the Company requests, the Company pays an annual commitment fee of 0.25%, payable quarterly, on any unused portion of this facility. Additionally, the Company has uncommitted facilities in most of the countries where it operates, with drawdown requests subject to approval by the individual banks each time a drawdown is requested.threesix months ended November 30, 2022:(Amounts in thousands) Current
portion of
long-term debtLong-term
debt (net of current portion)Total Balances as of August 31, 2022 $ 33,715 $ 103,556 $ 137,271 (1) Proceeds from long-term debt incurred during the period: Guatemala subsidiary — 12,454 12,454 Barbados subsidiary — 7,460 7,460 Honduras subsidiary 1,002 12,796 13,798 Total proceeds from long-term debt incurred during the period 1,002 32,710 33,712 Repayments of long-term debt: (8,175) (8,819) (16,994) Reclassifications of long-term debt due in the next 12 months 868 (868) — 11 (196) (185) Balances as of February 28, 2023 $ 27,421 $ 126,383 $ 153,804 (3)
portion of
long-term debt
debt (net of current portion)$179.6$172.0 million. The carrying amount of cash assets assigned as collateral for these loans was $4.9$4.4 million.November 30, 2022February 28, 2023 and August 31, 2022, the Company had approximately $113.9$102.9 million and $110.7 million, respectively, of long-term loans held in the U.S. entity and in several foreign subsidiaries, thatwhich require these subsidiariesentities to comply with certain annual or quarterly financial covenants, which include debt service and leverage ratios. The Company was in compliance with all covenants or amended covenants for both periods.Twelve Months Ended February 28, Amount 2024 $ 27,421 2025 37,926 2026 15,534 2027 13,288 2028 43,483 Thereafter 16,152 Total $ 153,804 — (Continued)— (Continued)November 30, 2022,February 28, 2023, all of the Company’s interest rate swap and cross-currency interest rate swap derivative financial instruments are designated and qualify as cash flow hedges. The Company formally documents the hedging relationships for its derivative instruments that qualify for hedge accounting.threesix months ended November 30, 2022:
Entered
into
Financial
Counter-
party
Financial
Instruments
US$
Notional
Amount
US$
loan
Held
with
(swap
counter-party)
for PSMT
Subsidiary
Dates
Period of swap
September 24, 2024
May 3, 2027
November 18, 2024
December 3, 2024
November 27, 2024
March 23, 2023
February 24, 2023
March 1, 2027
Entity Date
Entered
intoDerivative
Financial
Counter-
partyDerivative
Financial
InstrumentsInitial
US$
Notional
AmountBank
US$
loan
Held
withFloating Leg
(swap
counter-party)Fixed Rate
for PSMT
SubsidiarySettlement
DatesEffective
Period of swapColombia subsidiary 26-Sep-22 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 12,500,000 PriceSmart, Inc. 3.00% 10.35 % 24th day of each December, March, June and September beginning December 26, 2022 September 26, 2022 - September 24, 2024 Colombia subsidiary 3-May-22 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 10,000,000 PriceSmart, Inc. 3.00% 9.04 % 3rd day of each May, August, November and February, beginning on August 3, 2022 May 3, 2022 - May 3, 2027 Colombia subsidiary 17-Nov-21 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 10,000,000 PriceSmart, Inc. 3.00% 8.40 % 17th day of each February, May, August, and November, beginning on February 17, 2022 November 17, 2021 - November 18, 2024 Colombia subsidiary 3-Dec-19 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 7,875,000 Citibank, N.A. Variable rate 3-month Libor plus 2.45% 7.87 % 3rd day of each December, March, June and September beginning March 3, 2020 December 3, 2019 - December 3, 2024 Colombia subsidiary 27-Nov-19 Citibank, N.A. ("Citi") Cross currency interest rate swap $ 25,000,000 Citibank, N.A. Variable rate 3-month Libor plus 2.45% 7.93 % 27th day of each November, February, May and August beginning February 27, 2020 November 27, 2019 - November 27, 2024 Panama subsidiary 25-Jun-18 Bank of Nova Scotia ("Scotiabank") Interest rate swap $ 14,625,000 Bank of Nova Scotia Variable rate 3-month Libor plus 3.0% 5.99 % 23rd day of each month beginning on July 23, 2018 June 25, 2018 - March 23, 2023 PriceSmart, Inc. 7-Nov-16 MUFG Union Bank, N.A. ("Union Bank") Interest rate swap $ 35,700,000 Union Bank Variable rate 3-month Libor plus 1.70% 3.65 % 1st day of each month beginning on April 1, 2017 March 1, 2017 - March 1, 2027 — (Continued)November 30,February 28, 2023 and February 28, 2022, and November 30, 2021, 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 Total Interest expense for the three months ended February 28, 2023 $ 1,327 $ 190 $ 1,517 Interest expense for the three months ended February 28, 2022 $ 544 $ 908 $ 1,452 Interest expense for the six months ended, February 28, 2023 $ 2,430 $ 537 $ 2,967 Interest expense for the six months ended February 28, 2022 $ 1,101 $ 1,757 $ 2,858
expense on
borrowings(1)
swaps (2) Notional Amount as of Floating Rate Payer (Swap Counterparty) February 28,
2023August 31,
2022Union Bank $ 30,706 $ 31,344 Citibank N.A. 57,263 66,353 Scotiabank 7,875 8,625 Total $ 95,844 $ 106,322 February 28, 2023 August 31, 2022 Derivatives designated as cash flow hedging instruments Balance Sheet
ClassificationFair
ValueNet Tax
EffectNet
OCIFair
ValueNet Tax
EffectNet
OCICross-currency interest rate swaps $ 41 $ (11) $ 30 $ 2,736 $ (348) $ 2,388 Cross-currency interest rate swaps 13,550 (4,742) 8,808 10,289 (4,559) 5,730 Cross-currency interest rate swaps — — — (82) 25 (57) Interest rate swaps 2,444 (540) 1,904 1,596 (6) 1,590 Net fair value of derivatives designated as hedging instruments $ 16,035 $ (5,293) $ 10,742 $ 14,539 $ (4,888) $ 9,651 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
Classification
Value
Effect
OCI
Value
Effect
OCI
November 30, 2022.
(Counterparty)
Entered into (Range)
entered intoFinancialDerivative Financial
Instrument
(Counterparty)DerivativeTotal NotionalFinancialAmountsInstrumentNotional
Amount(in thousands)
Dates (Range)
DateEffective Period
of ForwardColombia17-Aug-2211-Jan-2023 - 17-Feb-2023 Forward foreign exchange contracts (USD)
1,50030-Dec-22August 17, 202217-Apr-2023 - December 30, 202214-Nov-2023Colombia30-Aug-2218-Jan-2023 - 23-Feb-2023 Forward foreign exchange contracts (USD)
1,50011-Jan-23August 30, 202219-May-2023 - January 11, 202316-Nov-2023ColombiaBanco Ficohsa24-Oct-22HondurasCitibank, N.A.22-Feb-2023 - 28-Feb-2023exchange contracts (USD)
2,00017-Feb-23October 24, 2022 -
February 17, 2023monthsand six month periods ended November 30, 2022February 28, 2023 and November 30, 2021. and the Company's chief operating decision maker in setting up management lines of responsibility, providing support services, and making operational decisions and assessments of financial performance. Segment amounts are presented after converting to U.S. dollars and consolidating eliminations. Certain revenues, operating costs and inter-company charges included in the United States segment are not allocated to the segments within this presentation, as it is impractical to do so, and they appear as reconciling items to reflect the amount eliminated on consolidation of intersegment transactions. From time to time, the Company revises the measurement of each segment's operating income and net income, including certain corporate overhead allocations, and other measures as determined by the information regularly reviewed by the Company's chief operating decision maker.management. When the Company does so, the previous period amounts and balances are reclassified to conform to the current period’speriod's presentation.— (Continued)United
States
OperationsCentral
American
OperationsColombia Operations Total Three Months Ended February 28, 2023 Revenue from external customers $ 6,882 $ 694,210 $ 332,306 $ 108,791 $ — $ 1,142,189 Intersegment revenues 365,177 6,801 1,137 1,175 (374,290) — Depreciation, Property and equipment 1,478 8,925 4,792 2,299 — 17,494 Amortization, Intangibles 381 — — — — 381 Operating income (loss) 6,964 56,633 25,474 4,662 (39,933) 53,800 Net income (loss) attributable to PriceSmart, Inc. 1,279 46,442 20,424 3,135 (39,933) 31,347 Capital expenditures, net 3,338 16,067 3,968 5,031 — 28,404 Six Months Ended February 28, 2023 Revenue from external customers $ 17,340 $ 1,323,289 $ 639,831 $ 216,535 $ — $ 2,196,995 Intersegment revenues 772,817 13,383 2,651 1,880 (790,731) — Depreciation, Property and equipment 2,856 17,724 9,423 4,675 — 34,678 Amortization, Intangibles 765 — — — — 765 Operating income (loss) 20,556 106,763 49,977 9,530 (77,499) 109,327 Net income (loss) attributable to PriceSmart, Inc. 7,104 88,448 39,708 6,491 (77,499) 64,252 Long-lived assets (other than deferred tax assets) 74,226 524,474 209,684 169,934 — 978,318 Goodwill 8,981 24,149 10,055 — — 43,185 Total assets 221,076 959,064 474,637 231,395 — 1,886,172 Capital expenditures, net 8,829 28,311 7,369 9,314 — 53,823 Three Months Ended February 28, 2022 Revenue from external customers $ 8,722 $ 614,381 $ 293,680 $ 121,774 $ — $ 1,038,557 Intersegment revenues 372,536 5,030 1,333 779 (379,678) — Depreciation, Property and equipment 1,541 8,598 4,023 2,556 — 16,718 Amortization, Intangibles 380 — — — — 380 Operating income (loss) 8,299 46,052 21,755 6,124 (33,908) 48,322 Net income (loss) attributable to PriceSmart, Inc. 3,176 38,750 17,624 5,819 (33,908) 31,461 Capital expenditures, net 1,298 13,361 14,974 3,702 — 33,335 Six Months Ended February 28, 2022 Revenue from external customers $ 22,706 $ 1,185,885 $ 566,168 $ 239,154 $ — $ 2,013,913 Intersegment revenues 786,879 10,028 2,777 1,601 (801,285) — Depreciation, Property and equipment 2,006 16,898 8,041 4,920 — 31,865 Amortization, Intangibles 836 — — — — 836 Operating income (loss) 14,556 89,431 41,633 12,502 (63,783) 94,339 Net income (loss) attributable to PriceSmart, Inc. 6,548 74,650 34,074 10,502 (63,802) 61,972 Long-lived assets (other than deferred tax assets) 75,543 497,585 212,418 176,911 — 962,457 Goodwill 8,982 24,309 10,043 — — 43,334 Total assets 191,677 860,718 463,236 257,699 — 1,773,330 Capital expenditures, net 3,207 26,051 22,047 16,085 — 67,390 As of August 31, 2022 Long-lived assets (other than deferred tax assets) $ 71,743 $ 498,204 $ 218,021 $ 175,194 $ — $ 963,162 Goodwill 8,981 24,250 10,072 — — 43,303 Investment in unconsolidated affiliates — 10,534 — — — 10,534 Total assets 230,411 867,898 474,411 235,680 — 1,808,400
States
Operations
American
Operations
Operations(1)
Items(2)— (Continued)November 30, 2022February 28, 2023 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.December 9, 2022,March 10, 2023, the Company announced that Sherry Bahrambeyguiexecuted a lease agreement for land in Escuintla, Guatemala for the purpose of constructing a new warehouse club, which it expects to open in the fall of 2023. The lease agreement will be resigning as Chief Executive Officer, effective February 3, 2023. Robert Price,result in the recognition of a Company founderlease liability and Chairmanright-of-use asset of the Board, will become Interim Chief Executive Officer. Ms. Bahrambeygui will continue serving as a member of the Board of Directors of the Company. In connection with her departure,approximately $1.5 million.recognize a one-time pre-tax separation charge of approximately $7.7 million (reducing Earnings per share, on an after tax basis, by approximately $0.23)open in the second quarter of fiscal year 2023. This amount consists of approximately $4.2 million of non-cash charges related to the net cost of the acceleration of certain equity awards and approximately $3.5 million of other separation costs.early 2024."we""our") anticipated future revenues and earnings, adequacy of future cash flows, omni-channel initiatives, proposed warehouse club openings, the Company's performance relative to competitors and related matters. These forward-looking statements include, but are not limited to, statements containing the words “expect,” “believe,” “will,” “may,” “should,” “project,” “estimate,” “anticipated,” “scheduled,” “intend,” and like expressions, and the negative thereof. These statements are only as of the date they are made, and we do not undertake to update these statements, except as required by law. These statements are subject to risks and uncertainties that could cause actual results to differ materially including, but not limited to, the risks detailed in this Quarterly Report under the heading “Part II. Item 1A. Risk Factors” and in the Annual Report on Form 10-K under the heading “Part I. Item 1A. Risk Factors” and “Part I Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022 filed with the United States Securities and Exchange Commission (“SEC”) on October 31, 2022. These risk factors may be updated from time to time in our other filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Forward-looking statements speak only as of the date that they are made, and 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.November 30, 2022,February 28, 2023, PriceSmart had in excessalmost 1.8 millionmembership accounts. Our Diamond Members generally pay an annual membership fee of 1.7 million membership accounts, with the average Member paying approximatelyapproximately $35 and our Platinum Members generally pay $75 per year, in membership fees.exchange for an annual 2% cash-back rebate. These membership fees are applied to lowering the price of the products we sell. We believe membership also provides a sense of identity and loyalty that, in turn, reduces the need for PriceSmart to spend money on advertising.significantly lesslower than the comparable national brands. Similar to other warehouse clubs, PriceSmart has food courts at all locations with the traditional selection of hot dogs and pizza, along with other items. Unique to many of our PriceSmart clubs are our coffee bars selling coffee and coffee specialties, with coffee sourced from the coffee growing regions in our markets. PriceSmart also offers an extensive line of bakery products, which are produced by our bakeries.Members.Members and their shopping preferences. We now provide digital membership and auto-renewal for the convenience of our Members. Additionally, technology is fundamental to providing a platform for our members to shop online.operators.operators in our markets. However, we do face competition from various local and international retail formats such as hypermarkets, supermarkets, cash and carry outlets, hard discounters, home improvement centers, electronic retailers, specialty stores, convenience stores, traditional wholesale distribution and online sales.Country/Territory Number of
Warehouse Clubs
in Operation as of February 28, 2022Number of
Warehouse Clubs
in Operation as of February 28, 2023Anticipated Warehouse Club Openings in Calendar Year 2023 Anticipated Warehouse Club Openings in Calendar Year 2024 Colombia 9 9 1 — Costa Rica 8 8 — — Panama 7 7 — — Dominican Republic 5 5 — — Guatemala 5 5 1 — Trinidad 4 4 — — Honduras 3 3 — — El Salvador 2 2 1 1 Nicaragua 2 2 — — Jamaica 1 2 — — Aruba 1 1 — — Barbados 1 1 — — U.S. Virgin Islands 1 1 — — Totals 49 50 3 1 smaller format warehouse club in the Hacienda San Andrés area of San Miguel, El Salvador, approximately 100 miles east of the capital city San Salvador, which is anticipated to open in the spring ofMay 2023. It will be our third club in El Salvador. We have also purchased land and plan to open our fourth warehouse club in El Salvador, located in Santa Ana, approximately 40 miles west from the nearest club in the capital of San Salvador. The club will be built on a five-acre property and is anticipated to open in early 2024. In addition, we are proceeding with the construction of a smaller format warehouse club in the affluent El Poblado area of Medellín, Colombia. We expect to open this warehouse club, which will be our second club in Medellín and the Company’s tenth warehouse club in Colombia, in 2023. We have recently leased land and have plans to open our sixth warehouse club in Guatemala, located in Escuintla, approximately 40 miles south of the summernearest club in the capital of Guatemala City. The club will be built on a five-acre property and is anticipated to open in the fall of 2023. Once these twofour new clubs are open, we will operate 5254 warehouse clubs.We continue to encounter operational challenges directly or indirectly related to the COVID-19 pandemic, including increased supply chain pressures, inflation, and foreign currency fluctuations relative to the U.S. dollar. The COVID-19 pandemic may continue to affect consumer purchasing behavior as it evolves, and we might not be able to meet unanticipated shifts in consumer demand. The pandemic could also give rise to additional operating costs that could have long-term impacts on our financial condition and results of operations. For additional information, refer to the risk factors discussed in “Part I. Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended August 31, 2022.However, the COVID pandemic also has presented us opportunities to improve how we do business, how we serve our Members and how we treat our employees. In response to the pandemic, we:Increased our focus on expanding local sourcing and near-shoring of goods that we offer,Expedited our efforts to engage with Members online, including the launch of PriceSmart.com, andHighlighted the importance of employee well-being and accelerated our decision to ensure health coverage for all employees in our Company. We also are establishing flexible schedules and hybrid work environments for office employees in order to maximize efficiencies and provide opportunity for balance in our employees’ lives.firstsecond quarter of fiscal year 2023, inflation in all of our markets and devaluations of foreign currency, especially in Colombia, were significant headwinds. However, some markets, likeespecially Costa Rica, benefited from currency appreciation.appreciation which off-set most of the currency devaluations experienced in our other countries. Substantial product cost increases due to inflation or commodity price increases have and could continue to impact our financial results and could lead to reduced sales, fewer units sold, and/or margin pressure. Events directly or indirectly related to COVID-19 have resulted in market and supply-chain disruptions.disruptions. These factors have increased the complexity of managing our inventory flow and business; however, during the first quarter six months of fiscal year 2023, when compared to the fourth quarter of fiscal year 2022, we saw a general improvement in transit days and a reduction in freight rates of our shipping containers. We are working to hold down and/or mitigate the price increases passed on to our Members while maintaining the right inventory mix to grow sales. OneOne key mitigating factor has been our expanded network of distribution centers, which has facilitated alternative routings of shipments,shipping routes, increased throughput, and provided flexibility to mitigate our supply-chain challenges and risks more effectively. Our Colombian market has experienced a foreign currency devaluation against the U.S. dollar of approximately 20% as of November 30, 2022 compared to November 30, 2021. This devaluation increases the cost of imported merchandise to the Member, negatively impacts sales volume and may result in margin pressure.quartersix months of fiscal year 2023 and 2022, approximately 78.5%78.8% and 77.9%, respectively, of our net merchandise sales were in currencies other than the U.S. dollar. Of those sales, 49.2%48.9% and 48.7% consisted of sales of products we purchased in U.S. dollars.dollars for each period, respectively.20%23% as of November 30, 2022February 28, 2023 compared to November 30, 2021. ThisFebruary 28, 2022. Raising prices to keep pace with inflation and offset currency devaluations can increase the effective cost of imported merchandise to the Member and negatively impact sales volume. As a result, beginning later in the second quarter of fiscal year 2023, we are considering actions, such as strategically holdingheld pricing steady on certain keycommodity and high volume items in our U.S. importsFoods and U.S. Fresh categories imported to Colombia, instead of increasing the prices to reflect the rising costs of these items. This wouldWe expect that this action will begin to adversely impact our total gross margin percentage for our Colombia segment and our Company overall. We see Colombia as a key market for growth, and we believe this strategy will enable us to provide value for the Member during a particularly difficult economic period of high inflation and significant currency devaluation. Information about the effect of local currency devaluations is discussed further in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net Merchandise Sales and Comparable Sales.”November 30, 2022February 28, 2023 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars was $25.6$14.7 million, a decrease of $74.9$85.8 million from the peak of $100.5 million as of November 30, 2020.However, as the Trinidad central bank strictly manages the exchange rate of the Trinidad dollar with the U.S. dollar and affects the level of USU.S. Dollar liquidity in the market through its interventions, we are subject to continued challenges in converting our Trinidad dollars to U.S. dollars, as well as being exposed to the risk of a potential devaluation of the currency.•Invest in Remodeling Current PriceSmart Clubs, Adding New PriceSmart Locations and Opening More Distribution Centers•Increase Membership Value•Drive Incremental Sales via PriceSmart.com and Enhanced Online, Digital and Technological CapabilitiesCenters. Centers. We believe that one of the quickest and most effective ways to increase sales and profitability is to increase the size and number of parking spaces in our high-volume locations. For instance, we are currently preparing to remodelremodeling and expandexpanding one of our clubs in San Salvador, El Salvador. We continue to pursue warehouse club growth opportunities in our markets and to assess opportunities in new markets. For example,Currently our pipeline of new clubs includes plans to open two warehouse clubs in El Salvador, one located in San Miguel and the other in Santa Ana, which we expect to open in May 2023 and in early 2024, respectively. Currently under construction is our second warehouse club in Medellin, Colombia, which we expect to open before the close of calendar year 2023. Additionally, we plan to open aour sixth warehouse club in El Salvador,Guatemala, located in the city of San MiguelEscuintla, which we expect to open in the springfall of 2023 and to add a second warehouse club in the city of Medellin, Colombia, in late summer 2023. Our distribution network currently consists of major distribution centers in Miami and Costa Rica, complemented by varying distribution activities in our other markets. Based on our experience with our Costa Rica distribution center, we believe that investing in similar distribution centers in other major markets will play a strategic role in a variety of ways. Configuring these distribution centers to effectively operate as cross-docking facilities, helps us more efficiently manage the high volumes of locally sourced and imported merchandise for our club business. Distribution centers are also strategically important in providing the infrastructure to support PriceSmart.com online sales to both our business and our family Members. In addition to major distribution centers, PriceSmart has been investing in what we call Produce Distribution Centers, which enable us to purchase, productprocess and package produce directly from farms both in our markets, as well as for imported produce.frames;frames, Audiology services with free hearing exams and deeply discounted hearing aids;aids, and, in some of our markets, Pharmacy, which provides a significant convenience to our Members. Another way we enhance Membership value is through our private label offering, “Member’s Selection®,” a brand whichthat is available only to PriceSmart Members. We believe the Member’s Selection® brand carries goodwill and is recognized in our markets for value. Private label also provides us the opportunity to source quality items locally when appropriate. Select local sourcing has multiple benefits, including support of local communities in which we operate by enhancing business activity and creating direct and indirect jobs, mitigation of foreign currency exchange risk, and reduced supply chain exposure. These initiatives offer additional benefits and services for our Members, whether they choose to shop on-line, in-club, or both. OurDuring the first six months of fiscal 2023, our private label sales penetration grew torepresented 25.9% of total merchandise sales, in the first quarter of fiscal 2023,up from 23.6% in the same period of23.5% for fiscal year 2022, and we plan to continue to invest in the development of additional private label products under the “Member’s Selection®” brand.Salessales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities. We recognize the growing expectation of consumers in our markets for alternative ways of shopping.convenience. As a result, we continue to improve the functionality and content of PriceSmart.com and to expand our product offerings and related content available online. We also build and apply technological tools to continue to learn more about and strengthen our relationships with each of our Members. Using data analytics, we believe we have been able to provide our Members with enhancements to the membership experience. PriceSmart.com and these tools 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. Our PriceSmart.com offering also provides data that informs us regarding the potential viability of new clubs in new areas and offers us options to serve and expand into new markets without the need for a traditional brick & mortar club location. We also invest in technology to capture operational efficiencies and enhance our decision-making for the increasingly dynamic environment we are inin..firstsecond quarter of fiscal year 2023 included:•Total revenues increased 8.1%10.0% over the comparable prior year period.•Net merchandise sales increased 8.6%10.3% over the comparable prior year period. We ended the quarter with 50 warehouse clubs compared to 49 warehouse clubs at the end of the firstsecond quarter of fiscal year 2022. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by 2.3%0.2% versus the same three-month period in the prior year.•Comparable net merchandise sales (that is, sales in the 4749 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 13 weeks ended December 4, 2022March 5, 2023 increased 5.0%8.5%. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by 2.1%0.2%.•Membership income for the firstsecond quarter of fiscal year 2023 increased 7.5%7.3% to $15.9$16.2 million over the comparable prior year period.•Total gross margins (net merchandise sales less associated cost of goods sold) increased 10.3%12.8% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 16.2%16.0%, an increase of 2040 basis points (0.2%)or 0.4% from the same period in the prior year.•Selling, general and administrative expenses increased 12.4% primarily due to a one-time $7.7 million severance charge for the departure of the Company's former Chief Executive Officer.firstsecond quarter of fiscal year 2023 was $55.5$53.8 million, an increase of 20.7%11.3%, or $9.5$5.5 million, compared to the firstsecond quarter of fiscal year 2022.•We recorded a $4.6$5.3 million net loss in other income (expense), net primarily from currency transactions in the firstsecond quarter of fiscal year 2023 compared to a $1.9$0.8 million net currency loss primarily from currency transactions in the same period last year.•Our effective tax rate decreased inincreased for the first quartersix months of fiscal year 2023 to 33.3%33.7% from 34.1%32.6% in the first quartersix months of fiscal year 2022. The decrease in the effective tax rate is2022, primarily related to separation costs associated with the favorable impact from fewer valuation allowances we took on foreign tax credits that are no longer deemed recoverable and changes in uncertain tax positions.departure of our former Chief Executive Officer.•Net income attributable to PriceSmart for the first quartersix months of fiscal year 2023 was $32.9$64.3 million, or $1.05$2.07 per diluted share, compared to $30.5$62.0 million, or $0.98$2.01 per diluted share, in the comparable prior year period.Three Months Ended Six Months Ended February 28,
2023February 28,
2022February 28,
2023February 28,
2022Net income as reported $ 31,347 $ 31,461 $ 64,252 $ 61,972 Adjustments: 7,747 — 7,747 — — — — (2,736) (550) — (550) 1,280 Adjusted net income $ 38,544 $ 31,461 $ 71,449 $ 60,516 Net income per diluted share $ 1.02 $ 1.03 $ 2.07 $ 2.01 0.23 — 0.23 — — — — (0.05) Adjusted net income per diluted share $ 1.25 $ 1.03 $ 2.30 $ 1.96 year 2022.three months ended NOVEMBER 30,THREE AND SIX MONTHS ENDED FEBRUARY 28, 2023 AND 2022 and 2021periodand six-month periods ended on November 30, 2022February 28, 2023 with the three-month periodand six month-periods ended on November 30, 2021February 28, 2022 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.November 30, 2022February 28, 2023 and November 30, 2021.February 28, 2022:Three Months Ended February 28, 2023 February 28, 2022 Amount % of net
salesIncrease/ (Decrease) from prior year Change Amount % of net
salesCentral America $ 681,667 61.1 % $ 78,630 13.0 % $ 603,037 59.6 % Caribbean 327,754 29.4 38,323 13.2 289,431 28.6 Colombia 106,578 9.5 (12,850) (10.8) 119,428 11.8 Net merchandise sales $ 1,115,999 100.0 % $ 104,103 10.3 % $ 1,011,896 100.0 % Six Months Ended February 28, 2023 February 28, 2022
sales
salesAmount % of net
salesIncrease/ (Decrease) from prior year Change Amount % of net
salesCentral America $ 1,298,719 60.6 % $ 135,086 11.6 % $ 1,163,633 59.5 % Caribbean 630,618 29.5 72,854 13.1 557,764 28.5 Colombia 212,125 9.9 (22,417) (9.6) 234,542 12.0 Net merchandise sales $ 2,141,462 100.0 % $ 185,523 9.5 % $ 1,955,939 100.0 % November 30,February 28, 2023 and 2022 and November 30, 2021by 8.6%10.3% for the firstsecond quarter of fiscal year 2023 compared toand 9.5% for the firstsix-month period ended February 28, 2023. The second quarter of fiscal year 2022, driven byincrease resulted from a 3.0%3.8% increase in transactions and a 5.5%6.2% increase in average ticket. For the six-month period, the increase resulted from a 3.4% increase in transactions and a 5.9% increase in average ticket. Transactions represent the total number of visits our Members make to our warehouse clubs plus the number of Click & Go™and PriceSmart.com curbside pickup and delivery service transactions. Average ticket represents the amount our Members spend on each visit or Click & Go™PriceSmart.com order. WeWe had 50 clubs in operation as of November 30, 2022February 28, 2023 compared to 49 clubs as of November 30, 2021.February 28, 2022.10.1% during13.0% and 11.6% for the firstsecond quarter of fiscal year 2023. This increaseand six-months ended February 28, 2023, respectively. These increases had a 600780 basis point (6.0%(7.8%) and 690 basis point (6.9%) positive impact on total net merchandise sales growth. All markets within this segment showed increasedhad positive net merchandise sales duringgrowth for the first quarter of fiscal yearthree and six-month periods ended February 28, 2023.12.9% during13.2% and 13.1%, respectively, for the firstsecond quarter of fiscal yearand the six-months ended February 28, 2023. ThisThe increase for the quarter had a 360380 basis point (3.6%(3.8%) positive impact on totalnet merchandise sales growth and the increase for the six-months had a 370 basis point (3.7%) positive impact on net merchandise sales growth. All of our markets in this segment had positive net merchandise sales growth. Our Dominican Republic market continued its strong performance in the quarter with 19.6% growth. We added one new club to the segment when compared to the comparable prior-year period. We opened our second warehouse club in Jamaica in April 2022.8.3% during 10.8% and 9.6% for the firstsecond quarter of fiscal year 2023.and the six-months ended February 28, 2023, respectively. This decrease had a 100130 basis point (1.0%(1.3%) and 110 basis point (1.1%) negative impact on total net merchandise sales growth. The primary driver of the decreased salesrevenue for the quarter was due to the significant devaluation of the Colombian peso during the past several months,current fiscal year, which has negatively impacted sales in the firstsecond quarter of fiscal year 20232023.three-monththree and six-month period ended November 30, 2022.February 28, 2023. The term “currency exchange rates” refers to the currency exchange rates we use to convert net merchandise and comparable net merchandise sales for all countries where the functional currency is not the U.S. dollar into U.S. dollars. We calculate the effect of changes in 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 effects of currency exchange rate fluctuations on our results permits investors to understand better the Company’s underlying performance.Amount % change Central America $ 16,245 2.6 % Caribbean 2,952 1.0 Colombia (21,513) (18.1) Net merchandise sales $ (2,316) (0.2) % Amount % change Central America $ 13,933 1.2 % Caribbean 7,615 1.4 Colombia (45,082) (19.3) Net merchandise sales $ (23,534) (1.2) % an approximately $21.2$2.3 million and $23.5 million, or 23020 basis point (2.3%(0.2%) and 120 basis points (1.2%), negative impact on net merchandise sales for the three-monthsquarter and six-months ended November 30, 2022.$2.3$16.2 million and $13.9 million, or 40260 basis point (0.4%(2.6%) and 120 basis point (1.2%), negativepositive impact on net merchandise sales in our Central America segment for the three monthsquarter and six-months ended November 30, 2022.February 28, 2023. These currency fluctuations contributed approximately 30140 basis points (0.3%(1.4%) and 70 basis points (0.7%) of negativethe positive impact on total net merchandise sales for the quarter and six-months ended November 30, 2022.February 28, 2023. The Honduran Lempira and Guatemalan Quetzal devaluedCosta Rica Colón appreciated significantly against the US dollar. This devaluationdollar as compared to the same three-month and six-month period a year ago, and was partially offset by an appreciationa significant factor in the Costa Rica Colón.$4.7$3.0 million and $7.6 million, or 180100 basis point (1.8%(1.0%) and 140 basis point (1.4%), positive impact on net merchandise sales in our Caribbean segment for the three monthsquarter and six-months ended November 30, 2022.February 28, 2023. These currency fluctuations contributed approximately 5030 basis points (0.5%(0.3%) and 40 basis points (0.4%) of positive impact on total net merchandise sales, growth forrespectively. This positive impact was primarily driven by the period. Theappreciation of the Dominican Republic market experienced currency appreciation whenPeso as compared to the same three-month and six-month period last year.$23.6$21.5 million and $45.1 million, or 2,0501,810 basis point (20.5%(18.1%) and 1,930 basis point (19.3%), negative impact on net merchandise sales in our Colombia segment for the three monthsquarter and six-months ended November 30, 2022.February 28, 2023. These currency fluctuations contributed approximately 260190 basis points (2.6%(1.9%) and 230 basis points (2.3%) of the total negative impact on total net merchandise sales for the current quarter and six-months ended February 28, 2023.���same“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 merchandise club sales on the weekends. 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. As a result, sales related to threeone of our warehouse clubs opened during fiscal year 2022 will not be used in the calculation of comparable sales until they haveit has been open for at least 13 ½ months. Therefore, comparable net merchandise sales includes 4749 warehouse clubs for the thirteen-week period ended December 4, 2022.thirteen-week periodthirteen and twenty-six week periods ended December 4,March 5, 2023 and February 27, 2022 and November 28, 2021 compared to the prior year.Thirteen Weeks Ended March 5, 2023 February 27, 2022 % Increase/(Decrease)
in comparable
net merchandise sales% Increase
in comparable
net merchandise salesCentral America 13.1 % 10.6 % Caribbean 6.9 13.1 Colombia (10.6) 1.7 Consolidated comparable net merchandise sales 8.5 % 10.3 % Twenty-Six Weeks Ended March 5, 2023 February 27, 2022 % Increase/(Decrease)
in comparable
net merchandise sales% Increase/(Decrease)
in comparable
net merchandise salesCentral America 10.6 % 12.3 % Caribbean 6.8 9.1 Colombia (11.9) (0.5) Consolidated comparable net merchandise sales 6.8 % 9.9 % Thirteen-WeekThirteen and Twenty-Six-Week Periods Ended December 4,March 5, 2023 and February 27, 2022 and November 28, 2021December 4, 2022March 5, 2023 increased 5.0%8.5%.8.0%13.1% and 10.6% for the thirteen-week periodand twenty-six week periods ended December 4, 2022.March 5, 2023, respectively. All of our markets in Central America had positive comparable net merchandise sales growth for the thirteen-week and this increasetwenty-six week periods ended March 5, 2023. The positive comparable net merchandise sales growth for our Central America segment contributed approximately 470770 basis points (4.7%(7.7%) and 630 basis points (6.3%) of positive impact in total comparable merchandise sales for the period.thirteen-week and twenty-six week periods ended March 5, 2023, respectively.6.6%6.9% and 6.8% for the thirteen-week periodand twenty-six week periods ended December 4, 2022. The increaseMarch 5, 2023. These increases contributed approximately 200 basis points (2.0%) and 190 basis points (1.9%) of positive impact on total comparable merchandise sales for the period.thirteen-week and twenty-six week periods ended March 5, 2023, respectively.periodand twenty-six week periods ended March 5, 2023, with 19.2%15.1% and 17.1% comparable sales growth. Our U.S. Virgin Islands and Barbados markets also showed strong performance this quarter with 4.3% and 3.4% comparablenet merchandise sales growth, respectively. This strong performance was offset by our Jamaica market, which declined in comparable net merchandise sales by 6.9%5.0% and 6.0% for the thirteen-week periodand twenty-six week periods ended March 5, 2023, respectively, due to sales transfers from the existing club included in the comparable net merchandise sales calculation to the new clubsclub not included in the calculation.13.1%10.6% and 11.9% for the thirteen-week periodand twenty-six week periods ended December 4, 2022. This decreaseMarch 5, 2023, respectively. These decreases contributed approximately 160120 basis points (1.6%(1.2%) and 140 basis points (1.4%) of negative impact in total comparable merchandise sales for the period.thirteen-week and twenty-six week periods ended March 5, 2023, respectively. The decrease in Colombia during the current quarterthirteen-week and twenty-six week period was primarily due to the foreign currency devaluation and sales transfers from existing clubs included in the comparable net merchandise sales calculation to a new club not included in the calculation.periodand twenty-six week periods ended December 4, 2022.Currency Exchange Rate Fluctuations for the Thirteen Weeks Ended March 5, 2023 Amount % change Central America $ 16,846 2.8 % Caribbean 2,667 0.9 Colombia (21,292) (18.2) Consolidated comparable net merchandise sales $ (1,779) (0.2) % Amount Central America $ 15,305 1.3 % Caribbean 7,445 1.4 Colombia (44,055) (18.9) Consolidated comparable net merchandise sales $ (21,305) (1.1) % $19.5$1.8 million and $21.3 million, or 21020 basis point (2.1%(0.2%) and 110 basis point (1.1%), negative impact on comparable net merchandise sales for the thirteen-week periodthirteen and twenty-six week periods ended December 4, 2022.contributedaccounted for approximately 20190 basis points (0.2%(1.9%) and 80 basis points (0.8%) of negativepositive impact inon total comparable merchandise sales for the thirteen-week period.thirteen and twenty-six week period, respectively. Our Honduras and Guatemala markets experienced currency devaluation, which was partially offset by our Costa Rica market which experienced currency appreciation when compared towas the same period last year.Currency fluctuations within our Caribbean segment contributed approximately 50 basis points (0.5%) points of positive impact in total comparable merchandise sales formain contributor as the thirteen-week period. Our Dominican Republic market experienced currency appreciation when compared to the same periodperiods last year.contributedaccounted for approximately 240 basis points (2.4%) and 230 basis points (2.3%) of negative impact inon total comparable merchandise sales for the thirteen-week period.thirteen and twenty-six week period, respectively. This reflects the devaluation of the Colombian peso’s foreign currency exchange ratepeso when compared to the same periodperiods a year ago.Three Months Ended February 28, 2023 February 28, 2022 Amount Increase/ (Decrease) from prior year % Change Amount Membership income - Central America $ 9,854 $ 874 9.7 % 1.4 % $ 8,980 Membership income - Caribbean 4,338 344 8.6 1.3 3,994 Membership income - Colombia 1,984 (113) (5.4) 1.9 2,097 Membership income - Total $ 16,176 $ 1,105 7.3 % 1.4 % $ 15,071 Six Months Ended February 28, 2023 February 28, 2022 Amount Increase/ (Decrease) from prior year % Change Amount Membership income - Central America $ 19,379 $ 1,624 9.1 % 1.5 % $ 17,755 Membership income - Caribbean 8,753 786 9.9 1.4 7,967 Membership income - Colombia 3,939 (201) (4.9) 1.9 4,140 Membership income - Total $ 32,071 $ 2,209 7.4 % 1.5 % $ 29,862 Number of accounts - Central America 967,406 36,890 4.0 % 930,516 Number of accounts - Caribbean 460,855 23,790 5.4 437,065 Number of accounts - Colombia 339,295 (5,213) (1.5) 344,508 Number of accounts - Total 1,767,556 55,467 3.2 % 1,712,089 November 30, 2022 and November 30, 2021Membermember accounts as of November 30, 2022 February 28, 2023 was 3.9%3.2% higher than the prior year period.number of accounts as of February 28, 2022. Membership income increased 7.5%7.3% and 7.4% over the three-month periodthree and six-month periods ended November 30, 2022,February 28, 2023, respectively, compared to the same prior-year period.acrossin our Central America and Caribbean segments and decreased in our Colombia segment forin the three monthsand six-month periods ended November 30, 2022.February 28, 2023. The consolidated increase in membership income is due to an increasingincrease in the membership base since the comparable prior year period. The Caribbean had the largest increase in membership base in the first three months of fiscal year 2023 compared to the comparable prior year period with 5.5% growth, followed by Central America with a 3.9% increase and Colombia with a 1.9% increase. Since August 31, 2022, our Central America and Caribbean segments have increased their membership base and our Colombia segment has faced a decline in its membership base. Inflation and significant foreign currency devaluation have adversely impacted our Members in that market.were 7.9%are 8.2% of our total membership base as of November 30, 2022,February 28, 2023, an increase from 6.5%6.8% as of November 30, 2021.February 28, 2022. Platinum Members tend to have higher renewal rates than our Diamond Members.87.9%88.0% and 89.0%89.8% for the periods ended November 30,February 28, 2023 and February 28, 2022, and November 30, 2021, respectively.Three Months Ended February 28, 2023 February 28, 2022 Amount Increase/ (Decrease) from prior year % Change Amount Miscellaneous income $ 2,619 $ 349 15.4 $ 2,270 Rental income 513 (133) (20.6) 646 Other revenue $ 3,132 $ 216 7.4 % $ 2,916 Six Months Ended February 28, 2023 February 28, 2022 Amount Increase/ (Decrease) from prior year % Change Amount Non-merchandise revenue $ — $ (3,307) (100.0) % $ 3,307 Miscellaneous income 5,016 699 16.2 4,317 Rental income 1,106 (174) (13.6) 1,280 Other revenue $ 6,122 $ (2,782) (31.2) % $ 8,904 November 30,February 28, 2023 and February 28, 2022 and November 30, 2021quarter is due tosix-months ended February 28, 2023 was the sale of our Aeropost subsidiary and its marketplace and casillero operations on October 1, 2021.Three Months Ended Results of Operations Consolidated February 28, 2023 February 28, 2022 Increase/ (Decrease) (Amounts in thousands, except percentages and number of warehouse clubs) Net merchandise sales Net merchandise sales $ 1,115,999 $ 1,011,896 $ 104,103 Total gross margin $ 178,537 $ 158,263 $ 20,274 Total gross margin percentage 16.0% 15.6% 0.4% Revenues Total revenues $ 1,142,189 $ 1,038,557 $ 103,632 Percentage change from prior period 10.0% Comparable net merchandise sales Total comparable net merchandise sales increase/(decrease) 8.5% 10.3% (1.8)% Total revenue margin Total revenue margin $ 198,164 $ 176,709 $ 21,455 Total revenue margin percentage 17.3% 17.0% 0.3% Selling, general and administrative Selling, general and administrative $ 144,364 $ 128,387 $ 15,977 Selling, general and administrative percentage of total revenues 12.6% 12.4% 0.2 % Three Months Ended Results of Operations Consolidated February 28,
2023February 28,
2022Operating income- by segment Central America $ 56,633 5.0 % $ 46,052 4.4 % Caribbean 25,474 2.2 21,755 2.1 Colombia 4,662 0.4 6,124 0.6 United States 6,964 0.6 8,299 0.8 (39,933) (3.5) (33,908) (3.3) Operating income - Total $ 53,800 4.7 % $ 48,322 4.7 % Six Months Ended Results of Operations Consolidated February 28, 2023 February 28, 2022 Increase/ (Decrease) (Amounts in thousands, except percentages and number of warehouse clubs) Net merchandise sales Net merchandise sales $ 2,141,462 $ 1,955,939 $ 185,523 Total gross margin $ 344,932 $ 309,113 $ 35,819 Total gross margin percentage 16.1% 15.8% 0.3% Revenues Total revenues $ 2,196,995 $ 2,013,913 $ 183,082 Percentage change from comparable period 9.1% Comparable net merchandise sales Total comparable net merchandise sales increase/(decrease) 6.8% 9.9% (3.1)% Total revenue margin Total revenue margin $ 383,913 $ 346,996 $ 36,917 Total revenue margin percentage 17.5% 17.2% 0.3% Selling, general and administrative Selling, general and administrative $ 274,586 $ 252,657 $ 21,929 Selling, general and administrative percentage of total revenues 12.5% 12.5% — % Warehouse clubs Warehouse clubs at period end 50 49 1 Warehouse club sales floor square feet at period end 2,484 2,438 46 Six Months Ended Results of Operations Consolidated February 28,
2023February 28,
2022Operating income- by segment Central America $ 106,763 4.9 % $ 89,431 4.4 % Caribbean 49,977 2.3 41,633 2.1 Colombia 9,530 0.4 12,502 0.6 United States 20,556 0.9 14,556 0.7 (77,499) (3.5) (63,783) (3.2) Operating income - Total $ 109,327 5.0 % $ 94,339 4.6 % disclosed.February 28,
2023February 28,
2022Warehouse club and other operations $ 103,630 9.1 % $ 93,993 9.1 % General and administrative 32,759 2.8 33,951 3.3 Separation costs associated with Chief Executive Officer departure 7,747 0.7 — — Pre-opening expenses 89 — 130 — Loss on disposal of assets 139 — 313 — Total Selling, general and administrative $ 144,364 12.6 % $ 128,387 12.4 % Six Months Ended February 28,
2023February 28,
2022Warehouse club and other operations $ 200,522 9.1 % $ 185,189 9.2 % General and administrative 65,931 3.0 65,644 3.3 Separation costs associated with Chief Executive Officer departure Separation costs associated with Chief Executive Officer departure 7,747 0.4 — — Pre-opening expenses 89 — 1,100 — Loss on disposal of assets 297 — 724 — Total Selling, general and administrative $ 274,586 12.5 % $ 252,657 12.5 % November 30,February 28, 2023 and February 28, 2022 and November 30, 2021lessand 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.November 30, 2022February 28, 2023 was 16.2%16.0% and 16.1%, 2040 basis points (0.2%(0.4%) and 30 basis points (0.3%) higher than the comparable prior year period.period, respectively. This increase was primarily due to general margin improvement across most of our sales categories, particularly from our other business services, such as our food serviceservices and bakery, and from favorable freight costs.improved front end margin.2030 basis points (0.2%(0.3%) for the three months ended November 30, 2022,February 28, 2023 compared to the prior-year period, which is primarily due to improvedthe result of the higher total gross marginsmargin percentage of 2040 basis points (0.2%(0.4%).$6.0$16.0 million compared to the prior year, and increased as a percentage of total revenue, increasing by 20 basis points (0.2%) to 12.6% of total revenue for the second quarter of fiscal year 2023 compared to 12.4% of total revenues for the second quarter of fiscal year 2022. Selling, general and administrative expenses increased $21.9 million compared to the prior year but decreasedremained unchanged as a percentage12.5% of total revenue declining 40 basis points (0.4%) to 12.3%for the first six months of total revenue compared to 12.7%fiscal year 2023 and 2022. the first quarter of fiscal year 2022. We expect selling, general, and administrative expenses to increase in the second quarter of fiscal year 2023 due to severance costs. Please refer to “Item 1. Financial Statements: Notes to Consolidated Financial Statements, Note 10 – Subsequent Events” for further discussion.9.2%9.1% of total revenues for the first quartersix months of fiscal year 2023 compared to 9.4%9.2% for the first quarter of fiscal year 2022,prior-year period. This was primarily due to 10 basis points (0.1%) of lower operations expenses associated withfrom our casillero and marketplace business due to the sale of Aeropost on October 1, 2021. The 10 basis point savings resulting from the Aeropost sale was supplemented by reduced warehouse club and other operations expenses as a percentage of revenue in our Colombia market, which decreased 10 basis points (0.1%) primarily due to the devaluation of the Colombian peso.3.1%2.8% of total revenues for the currentsecond quarter of fiscal year 2023 compared to 3.2%3.3% for the firstsecond quarter of fiscal year 2022. The 1050 basis point (0.1%(0.5%) decrease is primarily due to a 10 basis point (0.1%) decrease from the reduction inleveraging of general and administrative expenses when compared to increased total revenues and the approximately $2.2 million, or $0.06 per diluted share, impact of compensation expense savings from the absence of compensation for our former Chief Executive Officer and our Interim Chief Executive Officer's election not to receive compensation.saleleveraging of Aeropost.general and administrative expenses.firstsecond quarter of fiscal year 2023 increased to $55.5$53.8 million (5.3%(4.7% of total revenue) compared to $46.0$48.3 million (4.7% of total revenue) for the same period last year. This reflects the increase in total revenue margin of 30 basis points (0.3%), partially offset by a 20 basis pointspoint (0.2%), along with a 40 basis point (0.4%) increase due to leveragingin deleveraging of selling, general and administrative expenses over the comparable prior-year period.
and distribution centers, the capital requirements of warehouse clubclubs and other operations, increase U.S. dollar liquidity in our Trinidad subsidiary and ongoing working capital requirements.Three Months Ended February 28,
2023February 28,
2022Amount Change Amount Interest expense on loans $ 3,064 $ 1,261 $ 1,803 Interest expense related to hedging activity 190 (718) 908 Less: Capitalized interest (440) (167) (273) Net interest expense $ 2,814 $ 376 $ 2,438 Six Months Ended February 28,
2023February 28,
2022Amount Change Amount Interest expense on loans $ 5,717 $ 2,577 $ 3,140 Interest expense related to hedging activity 537 (1,220) 1,757 Less: Capitalized interest (691) 178 (869) Net interest expense $ 5,563 $ 1,535 $ 4,028 November 30,February 28, 2023 and February 28, 2022 and November 30, 2021November 30, 2022,February 28, 2023 primarily due to the increase inhigher interest rates and higher long-term borrowings in our Trinidad market to facilitate conversion of Trinidad dollars to US dollars and a decrease in capitalized interest from fewer construction projectsoutstanding when compared to the comparable prior year.retirement plans and other items considered to be non-operating in nature.Three Months Ended February 28,
2023February 28,
2022Amount Change % Change Amount Other Expense, net $ (5,344) $ (4,525) 552.5 % $ (819) Six Months Ended February 28,
2023February 28,
2022Amount Change % Change Amount Other Income (Expense), net $ (9,910) $ (10,500) (1,779.7)% $ 590 November 30,February 28, 2023 and 2022 and 2021three-monthsthree and six-months ended November 30, 2022,February 28, 2023 the primary driver of otherOther income (expense), net was $3.2included a $3.9 million of foreign currency lossesand $7.4 million loss, respectively, due to revaluation of monetary assets and liabilities (primarily U.S. dollars) in several of our markets. Of those amounts, Costa Rica contributed a $1.9 million and $2.8 million revaluation loss, respectively, due to the impact of the appreciation of the Costa Rican Colón on our U.S. dollar monetary net assets in Costa Rica. In addition, we had higher transaction costs of $1.1$1.6 million and $2.7 million during the quarter and six months ended February 28, 2023, respectively, associated with converting Trinidad dollars into available tradeabletradable currencies, such as euros or Canadian dollars, before converting them to U.S. dollars.Three Months Ended February 28,
2023February 28,
2022Amount Change Amount Provision for income taxes $ 16,202 $ 2,063 $ 14,139 Effective tax rate 34.0% 31.0% Six Months Ended February 28,
2023February 28,
2022Amount Change Amount Provision for income taxes $ 32,628 $ 2,675 $ 29,953 Effective tax rate 33.7% 32.6% November 30,February 28, 2023 and February 28, 2022 and November 30, 2021November 30, 2022,February 28, 2023, the effective tax rate was 33.3%34.0% compared to 34.1%31.0% for the prior year period. The decreaseincrease in the effective tax rate versus the prior year was primarily attributable to the following factors:•A comparably favorable benefitnet tax impact from recurring items of 0.5%1.0%, primarily resulting from fewer 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 4.0%, primarily related to separation costs associated with the departure of our former Chief Executive Officer.0.4%2.1%, primarily related to changes in uncertain tax positions.separation costs associated with the departure of our former Chief Executive Officer.Three Months Ended February 28,
2023February 28,
2022Amount Change % Change Amount Other Comprehensive Income $ 12,434 $ 8,208 194.2 % $ 4,226 Six Months Ended February 28,
2023February 28,
2022Amount Change % Change Amount Other Comprehensive Income (Loss) $ 11,883 $ 13,788 723.8% $ (1,905) November 30,February 28, 2023 and February 28, 2022 and November 30, 2021lossincome of approximately $0.6$12.4 million for the firstsecond quarter of fiscal year 2023 resulted primarily from the comprehensive lossgain of approximately $0.9$12.2 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. Duringdollar, accompanied by approximately $0.2 million related to unrealized gains on changes in our derivative obligations. Other comprehensive income for the first three monthssix-months ended February 28, 2023 of fiscal year 2023,approximately $11.9 million was primarily the result of the comprehensive gain of $11.3 million from foreign currency translation adjustments along with approximately $0.6 million related to unrealized gains on changes in the fair value of our derivative obligations. For the quarter, the largest translation adjustments were related to the devaluationappreciation of the local currenciescurrency against the U.S. dollar for our Colombia, Dominican Republic and Jamaica subsidiaries, partially offset byCosta Rica subsidiary. For the six-month period, the largest translation adjustment foradjustments were related to the appreciation of the local currency against the U.S. dollar of our Costa Rica subsidiary. These losses weresubsidiary, partially offset by approximately $0.3 million related to unrealized gains on changes in the valuedevaluation of the local currencies against the U.S. dollar for our derivative obligations.consistsconsist 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 operations while allowing us to invest in activities that support the long-term growth of our operations and to pay dividends on our common stock. We evaluate our funding requirements on a regular basis to cover any shortfall in our ability to generate sufficient cash from operations to meet our capital requirements. We may consider funding alternatives to provide additional liquidity if necessary. Refer to “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.February 28,
2023August 31,
2022Amounts held by foreign subsidiaries $ 241,013 $ 203,952 Amounts held domestically 39,539 47,421 Total cash and cash equivalents, including restricted cash $ 280,552 $ 251,373 February 28,
2023August 31,
2022Amounts held by foreign subsidiaries $ 24,322 $ 11,160 Amounts held domestically 30,000 — Total short-term investments $ 54,322 $ 11,160 November 30, 2022February 28, 2023 and August 31, 2022, there were no certificates of deposit with a maturity of over a year held by our foreign subsidiaries andor domestically.Six Months Ended February 28,
2023February 28,
2022Change Net cash provided by (used in) operating activities $ 116,681 $ (7,920) $ 124,601 Net cash used in investing activities (96,078) (30,531) (65,547) Net cash provided by (used in) financing activities Net cash provided by (used in) financing activities (3,060) 17,843 (20,903) Effect of exchange rates 11,636 42 11,594 Net increase (decrease) in cash and cash equivalents $ 29,179 $ (20,566) $ 49,745 $30.5$116.7 million and net cash used in operating activities totaled $13.3$7.9 million for the threesix months ended November 30,February 28, 2023 and February 28, 2022, and November 30, 2021, respectively. ShiftsFor the six-months ended February 28, 2023, cash provided by operating activities increased primarily due to shifts in working capital generated from changes in our merchandise inventory and accounts payable positions, for the three months ended November 30, 2022which contributed $29.0$103.1 million, toand a positive net cash provided bychange in our other various operating activitiesassets and liabilities when compared to the samesix-months ended February 28, 2022. The net use of cash in operating activities in the prior year three-month period ended November 30, 2021. The prior yearresulted primarily from an increase in inventory reflected our efforts to increase inventory to accommodate pandemic influencedpandemic-influenced consumer preferences and to mitigate out-of-stocks due to supply-chain disruptions during that period. Our inventory buildup for the holiday season this fiscal year was lower as we set our inventory position to align more with our historical days-on-hand, and we have rebalanced our inventory mix to reflect current and anticipated consumer demand and preferences.This net positive change was supplemented by another net positive changeTable of $11.3 million in various current and non-current assets and liabilities, primarily driven by less prepaid VAT and fewer security deposits as the build-up of inventory was significantly less for these periods, comparatively.Contents$21.5$96.1 million and $12.1$30.5 million for the threesix months ended November 30,February 28, 2023 and February 28, 2022, and November 30, 2021.respectively. The $9.4$65.5 million increase in cash used in investing activities is primarily the result of a net $13.3 million decrease in proceeds from settlements of short-term investments with a $4.3 million decreaseand an increase in purchases of short-term investments, compared to the same three-monthsix-month period a year-ago. The decrease in proceeds from settlements and purchases of short-term investments is primarily due to the overall net decrease of short-term investments in Trinidad as fewer of those investments settled comparatively and we are investing our Trinidadexcess U.S. dollar balances are comparably lower than the prior year period.$14.7 million and $1.2$17.8 million for the threesix months ended November 30,February 28, 2023 and February 28, 2022, and 2021, 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 $13.5$20.9 million increase inshift from cash provided by, to cash used in, financing activities is primarily due to the net $16.7 million increase in long-term bank proceeds and repayments, partially offset byresult of a $4.3 million net decrease between theof proceeds and repayment offrom short-term borrowings compared to the same three-monthsix-month period a year-ago. Total proceeds from long-term debt received during the first quarter of fiscal year 2023 was $19.9 million compared to $4.2 million in the same period last year. Please refer to “Item 1. Financial Statements: Notes to Consolidated Financial Statements, Note 7 – Debt” for further discussion.yearyears 2023 and 2022 (amounts are per share):First Payment Second Payment
Date
Paid
Date
PaidDeclared Amount Record
DateDate
PaidDate
PayableAmount Record
DateDate
PaidDate
PayableAmount 2/3/2023 2/3/2023 $ 0.92 2/16/2023 2/28/2023 N/A $ 0.46 8/15/2023 N/A 8/31/2023 $ 0.46 2/3/2022 $ 0.86 2/15/2022 2/28/2022 N/A $ 0.43 8/15/2022 8/31/2022 N/A $ 0.43 DerivativesDerivativesthree-monthssix-months ended November 30, 2022,February 28, 2023, we reissued approximately approximately 7,0007,000 treasury shares.November 30, 2022.
complete.$11.2$11.3 million and $11.0 million as of November 30, 2022February 28, 2023 and August 31, 2022, respectively, and deferred tax assets of $3.7$4.0 million and $3.5 million as of November 30, 2022February 28, 2023 and August 31, 2022, respectively, in these countries. While the rules related to 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. Similarly, we have not placed any recoverability allowances on tax receivables that arise from payments we are required to make originating from tax assessments that we are appealing, as we believe it is more likely than not that we will ultimately prevail in the related appeals. There can be no assurance, however, that the Company will be successful in recovering all tax receivables or deferred tax assets.•Short-term VAT and Income tax receivables, recorded as 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.•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.firstsecond quarter of fiscal year 2023 related to the loss of legal ownership or title to assets; significant changes in the Company's strategic business objectives or utilization of assets; or the impact of significant negative industry or economic trends. Loss on disposal of assets recorded during the years reported resulted from improvements to operations and normal preventive maintenance.
ITEMNovember 30, 2022February 28, 2023 compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022.products.products and to otherwise redeploy these funds in our Company. Since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradeable currencies. We are working with our banks in Trinidad and Barbados to source tradeable currencies. We expect the 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.three-month periodthree and six-month periods ended November 30, 2022February 28, 2023 is disclosed in “Item 2. Management’s Discussion & Analysis – Other Expense, net”.three-month periodthree and six-month periods ended November 30, 2022February 28, 2023 is disclosed in “Item 1. Financial Statements: Notes to Consolidated Financial Statements, Note 8 – Derivative Instruments and Hedging Activities.”three-monththree and six-month period ended November 30, 2022February 28, 2023 is disclosed in “Item 2. Management’s Discussion & Analysis – Other Comprehensive Loss.”ITEMITEM 4. CONTROLS AND PROCEDURESPARTPART II—OTHER INFORMATIONITEMContingencies ”Contingencies” for additional information regarding our legal proceedings.ITEMus.the Company.will be resigningwould resign as Chief Executive Officer, effective February 3, 2023, the date of the Company’s annual stockholder meeting, in order to pursue new professional and philanthropic interests. As a result, Robert Price, a Company founder and Chairman of the Board, will becomebecame Interim Chief Executive Officer.Officer, John Hildebrandt has beenwas promoted to President and Chief Operating Officer.Officer and David Price has beenwas promoted to Executive Vice President, andinitially serving as Chief of Staff to the Chairman. When Robert Price becomes Interim Chief Executive Officer, David Price will be Executive Vice PresidentChairman and currently as Chief of Staff to the Interim CEO.Chief Executive Officer.Company, and is also included in the slate of directors for election at the 2023 Annual Meeting of Stockholders.Company. Prior to her tenure as CEO,Chief Executive Officer, she served on the Company’s Board as a director for eight years, including having served as Vice Chair and Chair of the Compensation Committee. Between now and February 3, 2023, Ms. Bahrambeygui will continue her employment and will work towards the orderly transition of her responsibilities. She has agreed to make herself available at the Company’s request for up to 100 hours of transition support during the twelve months following the date of her separation agreement.ITEMNovember 30, 2022,February 28, 2023, the Company repurchased 20,62161,224 shares in the indicated months. These were the only repurchases of equity securities made by the Company during the firstsecond quarter of fiscal year 2023. 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
ProgramsDecember 1, 2022 - December 31, 2022 — $ — — N/A January 1, 2023 - January 31, 2023 20,329 71.42 — N/A February 1, 2023 - February 28, 2023 40,895 75.00 — N/A Total 61,224 73.81 — —
Total Number
of Shares
Purchased
Average Price
Paid Per Share
Total Number
of Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
Maximum
Number of
Shares That
May Yet Be
Purchased
Under the
Plans or
ProgramsITEMITEM 3. DEFAULTS UPON SENIOR SECURITIESITEMITEMITEMITEM 6. EXHIBITS3.1(1)3.2(2)3.3(3)3.4(4)3.5(5)the CompanyPriceSmart, Inc.31.110.2**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.SIGNATURESJanuary 9,April 10, 2023SHERRY S. BAHRAMBEYGUIROBERT E. PRICESherry S. BahrambeyguiJanuary 9,April 10, 2023